The DCIT,Circle-1(1), Visakhapatnam, Visakhapatnam V. Sri Suresh Kumar Jain, Visakhapatnam

ITA 349/VIZ/2011

• Counselvise Citation: 34925314 RSA 2011
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Keywords: Capital asset; Business income
• Section: 2(14)

Judgement Text

ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.349/VIZAG/2011 ASSESSMENT YEAR : 2007-08 DCIT CIRCLE-1(1) VISAKHAPATNAM VS. SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ADZPJ 5028K ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI R.K. SINGH, DR. DATE OF HEARING : 28.02.2014 DATE OF PRONOUNCEMENT : 06.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 26.8.2011 PASSED BY THE CIT(A) VISAKHAPATNAM PERTAI NING TO THE ASSESSMENT YEAR 2007-08. THE DEPARTMENT HAS RAISED THE FOLLOW ING EFFECTIVE GROUNDS: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS CORRECT IN VIEW OF THE SUPREME COURT DECISION WH ERE IT WAS HELD THAT LAND WOULD BE NON-AGRICULTURAL LAND OR NOT WOU LD DEPEND ON THE PRICE IT FETCHES IF SOLD AS AGRICULTURAL LAND. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS CORRECT AS SUPREME COURT HELD THAT FOR A LAND TO BECOME AGRICULTURAL LAND, IT MUST BE AGRICULTURAL LAND AT THE TIME OF SALE. 2. BRIEFLY STATED, THE ASSESSEE IS AN INDIVIDUAL DO ING BUSINESS IN GOLD ORNAMENTS. FOR THE ASSESSMENT YEAR UNDER DISPUTE T HE ASSESSEE FILED HIS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCO ME OF RS.70,85,980/-. IN COURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFI CER NOTICED THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER DISPUTE 7 PERSONS, 6 OF THEM BEING FAMILY MEMBERS OR CLOSE RELATIVES OF THE ASSESSEE, HAD PURCHASED 27.02 ACRES OF LAND ON KONDAKARLA VILLAGE OF ACHUTAPURAM MANDAL. ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 2 THE ASSESSEE ON 18.11.2006 HAS PURCHASED THE SHARE BELONGING TO ONE OF THE CO-OWNERS OF THE AFORESAID PROPERTY NAMELY SRI ANAN TARAMAN VENKATESH FOR A CONSIDERATION OF RS.3,38,000/- WHICH WORKS OUT TO RS.1 LAKH PER ACRE THE ENTIRE PROPERTY OF 27.02 ACRES WAS LATER SOLD TO M/ S.RAHUL AND BINDU PROPERTY DEVELOPERS PVT. LTD. FOR A CONSIDERATION OF RS.5.6 CRORES. OUT OF WHICH THE ASSESSEE RECEIVED AN AMOUNT OF RS.70 LAKHS BEING HI S SHARE OF 12.5%. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED THE ENTIRE SALE CONSIDERATION AS EXEMPT FROM CAPITAL GAINS ON THE P LEA THAT IT IS AN AGRICULTURAL LAND. THE ASSESSING OFFICER WHILE CON DUCTING ENQUIRY IN THE OFFICE OF MRO ATCHUTAPURAM WAS INFORMED THAT THE ENTIRE LA ND WAS KEPT VACANT AND THE LAND OWNERS HAVE NOT PAID SINGLE PAISA TOWARDS LAND REVENUE FROM FINANCIAL YEAR 2004-05 TO FINANCIAL 2007-08. HE AL SO CLARIFIED THAT THERE IS NO CULTIVATION IN THE ABOVE LAND SINCE 2004. THE ASSE SSING OFFICER THEREFORE OBSERVED THAT THE LAND WHICH WAS PURCHASED IN FEBR UARY, 2006 AND WAS SOLD IN NOVEMBER, 2006 AT AN ASTRONOMICAL PRICE OF RS.20 .71 LAKHS PER ACRE CANNOT BE IN THE NATURE OF AGRICULTURAL LAND. THE ASSESSI NG OFFICER NOTED THAT IN THE REGISTERED SALE DEED DATED 18.11.2006 UNDER WHICH T HE ASSESSEE HAD PURCHASED THE LAND FROM SRI ANANTARAMAN VENKATESH C LEARLY MENTIONS THE MARKET VALUE OF THE LAND AS RS.1 LAKH PER ACRE. TH E ASSESSING OFFICER THEREFORE CALLED UPON THE ASSESSEE TO EXPLAIN WHY T HE SALE TRANSACTION SHOULD NOT BE TREATED AS VENDOR IN THE NATURE OF TRADE AND BROUGHT TO TAX AS SHORT TERM CAPITAL GAIN. THE ASSESSEE IN ITS REPLY RELYI NG UPON SOME JUDICIAL PRONOUNCEMENTS SUBMITTED A DETAILED SUBMISSION BY C ONTENDING AS UNDER: SIR, BASING ON THE ABOVE MATTER DECIDED BY THE HON 'BLE SUPREME COURT IN SARIFABIBI, I FEEL, TO MY KNOWLEDGE AND INF ORMATION FROM THE CASE LAWS GONE THROUGH, THE FOLLOWING FACTORS ARE R ELEVANT AS FAR AS MY CASE IS CONCERNED: I. THE AGRICULTURAL LANDS HAVE BEEN RECORDED AS SUCH I N THE LAND REVENUE RECORDS AND NO APPLICATION HAS BEEN MADE TI LL THE DATE OF TRANSFER SEEKING PERMISSION FOR CONVERSION OF THE L ANDS TO A NON- AGRICULTURAL OR COMMERCIAL PURPOSE: II. THE FACT THAT THE LAND REVENUE TAXES WERE NOT PAID FOR SOME YEARS DOES NOT CHANGE THE CHARACTER OF THE SUBJECT LAND; ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 3 III. EVEN TO ASSUME FOR A MOVEMENT THAT NO AGRICULTURE WAS CARRIED ON IN THE SUBJECT LANDS AND THE SAME WAS LEFT FALLOW F OR SOME YEARS WOULD NOT CHANGE THE CHARACTER OF THE LAND; IV. NO PERMISSION FOR THE CONVERSION OF THE LAND FOR A NON-AGRICULTURAL OR COMMERCIAL PURPOSE WAS EVER SOUGHT; V. THE SUBJECT LAND WAS NOT PLANNED FOR PLOTTING AND D EVELOPING OTHER RELEVANT INFRASTRUCTURE THEREIN AS A LAYOUT O R OTHER COMMERCIAL PURPOSES; VI. NO PART OF THE SUBJECT LAND WAS EVER SOLD IN PARTS AND THE TOTAL EXTENT OF THE LAND AS IT WAS PURCHASED WAS SOLD AWA Y IN ITS ENTIRETY; VII. THE LAND IS NOT SITUATED IN A DEVELOPED AREA BUT IS SITUATED IN A REMOTE VILLAGE, SATISFYING THE CONDITIONS PROVIDED FOR THE EXEMPTION BY SECTION 2(14)(III) OF THE ACT, AND PRE SENTLY, ITS PHYSICAL CHARACTER, SURROUNDING SITUATION AND THE U SE OF THE LANDS IN THE ADJOINING AREA WERE SUCH AS TO INDICATE THAT THE LAND IS AGRICULTURAL; VIII. BOTH AT THE TIME OF ACQUISITION AND THE SALE THEREO F OF THE SUBJECT AGRICULTURAL LAND WAS RECORDED AND REGISTER ED BEFORE THE REGISTERING AUTHORITIES IN TERMS OF ACREAGE ONLY AN D NEVER IN YARDS BASIS AND FURTHER THAT THE SITUATION OF THE LANDS W ERE IDENTIFIED IN TERMS OF SURVEY NUMBERS AND IN NOT (MUNICIPAL) DOOR NUMBERS, THUS, IT IS PROVED BEYOND ANY DOUBT THAT THE SAID L ANDS ARE AGRICULTURAL IN NATURE. IN THE CIRCUMSTANCES NARRATED AS ABOVE SIR, THE LAN DS ACQUIRED BY ME ALONG WITH OTHERS AND NOW SOLD HAVE BEEN AGRICULTUR AL LANDS ONLY, IN ALL RESPECTS, AND MORE SO THE TWO REQUIREMENTS AS PER S ECTION 2(14)(III) OF THE ACT WERE SATISFIED, THE GAIN ARISING ON THE SAL E OF THESE AGRICULTURAL LANDS IS NOT SUBJECTED TO AND IS EXEMP TED FROM CAPITAL GAINS TAX.' 3. THE ASSESSING OFFICER AFTER GOING THROUGH THE SU BMISSIONS OF THE ASSESSEE AND APPLYING THE TEST LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF SHARIFABIBI MOHD. IBRAHIM VS. CIT 204 IT R 631 (SC) CONCLUDED THAT THE ASSESSEE DID NOT INTEND TO USE THE LAND FO R AGRICULTURAL PURPOSE AND THE LAND WAS KEPT AS STOP GAP BY THE ASSESSEE AS A BUSINESS ASSET EXPECTING TO SELL THE SAME FOR PROFIT. HE FURTHER OBSERVED T HAT THE ASSESSEE NEVER EVEN APPLIED FOR TRANSFER OF OWNERSHIP OF LAND TO HIS NA ME IN THE REVENUE RECORD AND ALSO NOT PAID THE LAND REVENUE TAX. THE ASSESS EE SOLD THE ENTIRE LAND FOR HUGE CONSIDERATION BEFORE PAYING LAND REVENUE TAX A ND GETTING THE LAND ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 4 TRANSFERRED IN HIS NAME. ON THE BASIS OF THE AFORE SAID FACT, THE ASSESSING OFFICER CONCLUDED THAT THE SOLE INTENTION OF THE AS SESSEE FOR ENTERING INTO THE TRANSACTION IS TO MAKE PROFIT. THE ASSESSING OFFIC ER THEREFORE RELYING UPON THE RATIO OF THE HONBLE SUPREME COURT IN CASE OF G. VE NKATASWAMI NAIDU & CO VS. CIT 35 ITR 594 (SC) HELD THAT SUCH TRANSACTION HAS TO BE CONSIDERED AS ADVENTURE IN THE NATURE OF TRADE AND PROFITS HAVE T O BE TAXED AS BUSINESS INCOME WHILE COMPLETING THE ASSESSMENT, THE ASSESS ING OFFICER ULTIMATELY HELD THAT THE LAND PURCHASED BY THE ASSESSEE IS AN INVESTMENT AND SHOULD BE TREATED AS CAPITAL ASSET AND ACCORDINGLY BROUGHT TH E SALE CONSIDERATION TO TAX AS SHORT TERM CAPITAL GAIN. BEING AGGRIEVED OF THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). AS SAILING THE ORDER PASSED BY THE ASSESSING OFFICER ON VARIOUS GROUNDS, THE AS SESSEE ADVANCED ELABORATE ARGUMENT BEFORE THE CIT(A) AND RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS TO IMPRESS UPON THE FACT THAT THE AS SET SOLD BEING AN AGRICULTURAL LAND CANNOT BE TREATED AS A CAPITAL AS SET WITHIN THE MEANING ASCRIBED U/S 2(14) OF THE INCOME-TAX ACT. THE CONTE NTIONS OF THE ASSESSEE AS SUMMED UP BY THE CIT(A) ARE AS UNDER: 5.5 TO SUM-UP, IT IS STATED BY THE ASSESSEE T HAT: A) THE SAID LANDS ARE AGRICULTURAL LANDS AND THEY ARE RECORDED AS AGRICULTURAL LANDS IN THE REVENUE RECORDS; B) THE ASSESSEE, ALONG WITH CO-OWNERS PURCHASED THE LA NDS WITH AN INTENTION TO CARRY OUT AGRICULTURE/DEVELOPMENT OF M ECHANIZED AGRICULTURAL FARMS; C) THE ASSESSEE HAD TO PURCHASE THE SHARE OF SRI ANANT ARAMAN VENKATESH ONLY WITH AN INTENTION TO AVOID 3 RD PARTY ENTERING INTO THE FAMILY LAND; D) THE LANDS IN THE INTERREGNUM PERIOD WAS LEASED OUT AND THE RESULTANT INCOME IS DECLARED IN THE INCOME-TAX RETURNS AS AGRICULTURAL INCOME; E) THE NON-PAYMENT OF LAND REVENUE TAX CANNOT BE HELD AGAINST THE ASSESSEE AND IT CANNOT BE THE SOLE REASON FOR TREATING THE LAND AS NON AGRICULTURAL LAND, ESPECIALLY, WHEN THE DRY LANDS ARE EXEMPT FROM THE LAND REVENUE TAX PAYMENT; F) THE ASSESSEE, ALONG WITH CO-OWNERS INTENDED TO RETA IN THE LANDS. HOWEVER, HE HAD TO SELL THE LANDS BECAUSE OF RUMORS OF LANDS AC QUISITION FOR INTERNATIONAL AIR PORT; ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 5 G) HAD THE ASSESSEE INTENDED TO MAKE BUSINESS OUT OF T HE SAID LAND HE WOULD HAVE RETAINED THE SAME IN ANTICIPATION OF PRICE ESCALATI ON AS A RESULT OF AIRPORT PROJECT. HE SOLD OFF THE LANDS AS HE DID NOT WANT TO TAKE RI SK OF GOVT. ACQUISITION THOUGH THERE IS POSSIBILITY OF FUTURE GROWTH IN THAT AREA. H) THE FACT THAT THE LANDS ARE OUT OF 8 KMS FROM THE M UNICIPAL LIMITS AND DO NOT COME UNDER THE DEFINITION OF CAPITAL ASSET AS PER T HE INCOME TAX ACT IS COMPLETELY IGNORED BY THE AO. I) THE ASSESSEE'S INTENTION WAS ALWAYS TO HOLD THE LAN D WHICH HE HAD TO SELL UNDER PECULIAR CIRCUMSTANCES AND WHEN GOOD PRICE IS OFFER ED. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E IN THE LIGHT OF THE JUDICIAL PRECEDENTS RELIED UPON BY THE ASSESSEE THE CIT(A) NOTED THAT THE ASSESSEE IS IN THE LINE OF JEWELLERY BUSINESS AND I S NOT A REGULAR DEALER ON LANDS AND REAL ESTATE. WHAT THE ASSESSEE PURCHASED IS ONLY 1/8 TH OF 27.02 ACRES I.E. 3.3 ACRES WHICH BY NO STRETCH OF IMAGINA TION CAN BE TREATED AS VERY BIG LAND TRANSACTION. AGAIN ASSESSEE PURCHASED THE LAND OUT OF HIS SURPLUS MONEY AND NOT OUT OF OPERATIVE FUNDS. THE ASSESSIN G OFFICER DID NOT BRING ON RECORD THAT THIS TRANSACTION IS PART OF A SERIES OF TRANSACTIONS DONE BY THE EITHER PREVIOUSLY OR SUBSEQUENTLY. HE FURTHER NOTED THE FACT THAT GENERALLY AGRICULTURAL LAND IS PURCHASED AS A MATTER OF PRIDE OF POSSESSION WHICH FACT IS NOT DISPUTED BY THE ASSESSING OFFICER. THAT APART THE ASSESSEE DID NOT PURCHASE THE PROPERTY INITIALLY BUT HE PURCHASED ON E OF THE CO-OWNERS SHARE AS IT IS DETRIMENTAL TO THE FAMILY INTEREST IF THAT SHARE IS ACQUIRED BY SOME OUTSIDER. HE THEREFORE CONCLUDED THAT THE TRANSACT ION CANNOT BE HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE AS THIS IS AN I SOLATED TRANSACTION AND THE CIRCUMSTANCES OF THE PURCHASE AND SALE DO NOT SHOW THAT THE ASSESSEES SOLE INTENTION WAS TO TRADE IN THE LAND. SO FAR AS THE ASSESSEES CONTENTION THAT THE LAND SOLD BEING AN AGRICULTURAL LAND WILL NOT C OME WITHIN THE DEFINITION OF CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT, TH E CIT(A) AFTER EXAMINING THE MATERIALS ON RECORD NOTED THAT THE NATURE OF LAND I N THE REVENUE RECORDS APPEARS AS AN AGRICULTURAL LAND. SIMILARLY, HE OBS ERVED THAT PAYMENT OF LAND REVENUE IS A REQUIREMENT AS PER STATE LAWS AND THE PAYMENT OR NON-PAYMENT OF LAND REVENUE IS NOT RELEVANT IN DECIDING THE CHA RACTER OF LAND AS PER INCOME-TAX LAW. HE ALSO CONSIDERED THE CONTENTION OF THE ASSESSEE THAT FOR ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 6 THIS PARTICULAR LAND (DRY LAND) THERE IS NO REQUIRE MENT OF LAND REVENUE TAX PAYMENT AND THERE WAS NO DEMAND FROM LAND REVENUE A UTHORITIES FOR LAND TAX PAYMENT. HE ALSO NOTED THAT THE ASSESSING OFFICER HAS NOT SAID THAT THE ASSESSEE HAS CONVERTED THE LAND FROM AGRICULTURAL T O NON-AGRICULTURAL PURPOSES. HE FURTHER NEGATED THE AOS FINDING THAT ASSESSEE DID NOT GET THE LAND TRANSFERRED TO HIS NAME BY OBSERVING THAT IT I S NOT A VERY RELEVANT FACTOR TO DETERMINE THE NATURE OF LAND. HOWEVER, IN THIS CONTEXT, THE CIT(A) NOTED THE CONTENTION OF THE ASSESSEE THAT HE ALONG WITH A LL CO-OWNERS HAVE APPLIED TO THE MRO FOR INCLUSION OF THEIR NAMES IN PATTADAR PASS BOOKS IMMEDIATELY AFTER PURCHASE OF THE LAND AND THE ASSESSEE WHO PUR CHASED IT FROM ONE OF THE CO-OWNERS DID NOT AGAIN APPLY FOR INCLUSION OF HIS NAME AS THE EARLIER APPLICATION IS PENDING WITH THE MRO. HE NOTED THAT THE PERIOD OF HOLDING BY THE ASSESSEE WAS NOT SUFFICIENT TO EARN AGRICULTURA L INCOME AND THE PREVIOUS CO-OWNERS FROM WHOM THE ASSESSEES PURCHASED LAND DE CLARED AGRICULTURAL INCOME OUT OF THE LAND. HE FURTHER NOTED THAT THE REMAINING CO-OWNERS OF THE LAND HAVE DECLARED INCOME FROM LEASE OF THE SAI D LAND AS AGRICULTURAL INCOME. THE CIT(A) ON APPLYING THE TESTS LAID DOWN IN CASE OF SHARIFABIBI MOHD. IBRAHIM VS. CIT (SUPRA) TO THE FACTS OF THE AS SESSEES CASE ALLOWED THE APPEAL BY CONCLUDING AS UNDER: 9.1 THE INDICATORS THAT ARE IN FAVOUR OF THE ASSES SEE ARE A) THE LAND IS CLASSIFIED AS AGRICULTURAL LAND IN R EVENUE RECORDS; B) THE LAND IS ORDINARILY USED FOR AGRICULTURAL PUR POSES SINCE LONG THOUGH AT THE RELEVANT TIME THE LAND IS KEPT FALLOW; C) SUCH USER OF LAND WAS FOR A LONG PERIOD AND IT I S NOT TEMPORARILY CONVERTED INTO AGRICULTURAL LAND BY WAY OF STOP-GAP ARRANGEMENT. D) NO PERMISSION TO CONVERT LAND TO NON-AGRICULTURA L USE IS EVER SOUGHT OR OBTAINED; E) THE LAND HAD BEEN USED FOR AGRICULTURAL PURPOSES . IT IS NOT THE CASE OF AO THAT THE LAND HAD NEVER BEEN PLOUGHED OR TILLED. F) LAND IS NOT SITUATED IN DEVELOPED AREA. IT IS S ITUATED AT AROUND 18 KMS AWAY FROM THE MUNICIPAL LIMITS IN A VILLAGE HAVING 3800 POPULATIO N. GJ THE LAND WAS NOT DEVELOPED BY PLOTTING AND PROVI DING ROADS AND OTHER FACILITIES; ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 7 H) THERE WERE NO PREVIOUS SALES OF PORTIONS OF LAND FOR NON-AGRICULTURAL USE; I) LAND WAS SOLD IN ACREAGE AND NOT IN YARDAGE; J)THE ASSESSEE HIMSELF PURCHASED IT AT A PRICE AN A GRICULTURIST WOULD HAVE PURCHASED I.E, APPROXIMATELY AT RS.L LAKH /ACRE. 9.2 THE INDICATORS THAT ARE AGAINST THE ASSESSEE AR E A) AT THE RELEVANT DATE THE LAND WAS NOT BEING PUT TO AGRICULTURAL USE THOUGH THE ASSESSEE SAYS THAT HIS INTENTION WAS TO PUT IT TO A GRICULTURAL USE; B) THE INCOME DERIVED BY LEASING THE LAND DID NOT B EAR ANY RATIONAL PROPORTION TO THE INVESTMENT MADE. AS PER ASSESSEE'S OWN ADMISSION TH E INVESTMENT MADE IN LAND IS RS.L LAKH /ACRE AND THE LEASE INCOME SAID TO BE DER IVED IS APPROXIMATELY RS.2,700/- PER ACRE. C) LAND IS SOLD AT VERY HIGH PRICE; D) THE INTENDED USE OF ULTIMATE PURCHASER IS NOT AG RICULTURAL AS THE LAND IS ULTIMATELY SOLD TO REAL ESTATE FIRM; E) THE LAND WAS NOT PUT TO CULTIVATION AND LEFT FAL LOW FOR LAST 4 YEARS FROM THE ABOVE ANALYSIS, IT CAN BE SEEN THAT SOME O F THE TESTS ARE IN FAVOUR OF ASSESSEE'S STAND AND SOME ARE AGAINST HIM. HOWEVER IN MY OPINION THE FACTORS THAT WOULD CLINCH THE ISSUE IN FAVOUR OF ASSESSEE ARE FA CTOR OF DISTANCE FROM THE MUNICIPAL LIMITS AND THAT THE ASSESSEE DID NOT DO ANY DEVELOP MENTAL ACTIVITY LIKE PLOTTING ETC ON THE LAND. THE PECULIAR CIRCUMSTANCES OF ASSESSEE'S ACQUISITION OF THE LAND WHICH IS NECESSITATED BY ONE OF THE CO-OWNERS WITHDRAWAL OF INVESTMENT AND ALSO THE CIRCUMSTANCES UNDER WHICH THE LAND WAS ULTIMATELY S OLD ALSO ARE THE FACTORS TO BE LOOKED IT IS ALSO NOT UNCOMMON FOR SOMEBODY TO PURC HASE LAND WITH AN INTENTION TO DEVELOP ORCHARD. THE PRICE AT WHICH THE LAND IS PUR CHASED BY ASSESSEE IS ALSO NOT VERY HIGH. CONSIDERING THESE FACTORS AND ON OVERALL CONSIDERA TION OF THE ABOVE CIRCUMSTANCES, IT CAN BE HELD THAT THE ASSESSEE HAD TO PURCHASE A PORTION OF LAND FROM THE PREVIOUS OWNER AS THE REMAINING PORTION OF LAND IS HELD BY F AMILY MEMBERS. THERE IS NOTHING BROUGHT ON RECORD BY THE AO TO SHOW THAT NEITHER THE ASSESSEE NOR THE PREVIOUS OWNER INTENDED IT FOR NON AGRICULTURAL USE . ASSESSEE DID NOT DO ANY DEVELOPMENT ACTIVITY ON THE PROPERTY, SALE WAS ALSO DONE WITH AN INTENTION TO AVOID THE ACQUISITION OF THE LAND BY THE GOVERNMENT AND THE LAND ITSELF IS SITUATED IN A VILLAGE WHOSE POPULATION IS BELOW TEN THOUSAND AND THE LAND IS SITUATED MORE THAN 18 KILOMETERS FROM THE MUNICIPAL LIMITS OF EXTENDED GR EATER VISAKHAPATNAM MUNICIPAL CORPORATION (GVMC). IN VIEW OF THE ABOVE, I AM OF T HE OPINION THAT THE LAND DOES NOT COME UNDER THE PURVIEW OF CAPITAL ASSET AS DEFINED IN THE ACT AND HENCE THE ACTION OF THE AO IN TREATING THE LAND AS CAPITAL ASSET BY FOL LOWING THE DECISION OF MADRAS HIGH COURT IS NOT CORRECT. ALTERNATIVELY, THE TRANSACTI ON ALSO DOES NOT FIT INTO THE CRITERIA OF ADVENTURE IN THE NATURE OF TRADE WHICH PROBABLY IS THE REASON FOR THE AO NOT TREATING IT ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 8 AS BUSINESS TRANSACTION. THUS, I AM OF THE CONSIDE RED OPINION THAT THE TRANSACTION AND RESULTANT GAINS THEREOF CANNOT BE ASSESSED EITHER U NDER CAPITAL GAINS OR UNDER BUSINESS INCOME AND HENCE I DIRECT THE AO TO DELETE THE ADDI TION MADE. 10. IN THE RESULT, APPEAL IS ALLOWED. 5. WE HAVE HEARD THE PARTIES PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISION RELIED UPON BY THE PARTIES. IT IS THE CONTENTION OF THE LD. D.R. THAT THE ASSESSEE HAD PU RCHASED THE LAND AT RS.1 LAKH PER ACRE AND ONLY AFTER 9 MONTHS HAS SOLD IT A T MORE THAN RS.20 LAKHS PER ACRE WHICH CANNOT BE THE PRICE FOR WHICH AN AGR ICULTURIST WOULD HAVE PURCHASED THE LAND FOR AGRICULTURAL PURPOSE. HE SU BMITTED THAT TAKING INTO CONSIDERATION HUMAN PROBABILITY, IT IS NOT CONCEIVA BLE THAT THE ASSESSEE WHO IS IN JEWELLERY BUSINESS WOULD BE PURCHASING A LAND FOR DEVELOPING AN ORCHARD. IT WAS SUBMITTED THAT NEITHER THE ASSESSE E HAD CARRIED ON ANY AGRICULTURAL ACTIVITY IN THE LAND NOR THERE IS ANY INTENTION ON THE PART OF THE ASSESSEE TO CARRY ON SUCH ACTIVITY. THEREFORE, MER ELY BECAUSE IT IS RECORDED AS AN AGRICULTURAL LAND IN THE REVENUE RECORDS, IT CANNOT BE CONSIDERED TO BE AN AGRICULTURAL LAND. IT WAS SUBMITTED THAT THE VER Y FACT THAT THE ASSESSEE SOLD THE LAND ONLY AFTER HOLDING IT FOR A FEW MONTH S, SHOWS THE INTENTION OF THE ASSESSEE NOT TO CARRY OUT ANY AGRICULTURAL OPER ATION IN THE SAID LAND. IT WAS THEREFORE CONTENDED BY THE LD. D.R. THAT IN SUC H TYPE OF TRANSACTIONS IT IS THE DUTY OF THE COURT TO LIFT THE VEIL TO FIND O UT THE REAL NATURE OF THE TRANSACTION. IN SUPPORT OF SUCH CONTENTION, THE LD. D.R. RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF CI T VS. DURGA PRASAD MORE 82 ITR 540 AND SUMATI DAYAL VS. CIT 214 ITR 801. 6. THE LD. A.R. ON THE OTHER HAND STRONGLY SUPPORTI NG THE ORDER OF THE CIT(A) SUBMITTED THAT THE LAND IN QUESTION HAVING S ATISFIED ALL THE TESTS OF AN AGRICULTURAL LAND CANNOT BE TREATED AS A CAPITAL AS SET COMING WITHIN THE PURVIEW OF THE SECTION 2(14) OF THE ACT. ON THE CO NTRARY, IT IS THE SUBMISSION OF THE LD. A.R. THAT THE NATURE AND CHARACTER OF TH E LAND BEING PURELY AGRICULTURAL AND NOT COMING WITHIN THE EXCEPTIONS P ROVIDED U/S ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 9 2(14)(III)(A)2(B) OF THE ACT NO CAPITAL GAIN TAX CA N BE LEVIED ON SALE OF SUCH LAND. 7. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS AND FACTS AND MATERIALS ON RECORD, WE ARE OF THE VIEW THAT THE CONCLUSION DRAWN BY THE CIT(A) IS WEL L FOUNDED AND DO NOT CALL FOR ANY INTERFERENCE. IT IS NOT DISPUTED THAT THE L AND IN QUESTION IS 18 KMS. AWAY FROM THE BOUNDARY OF THE NEAREST MUNICIPALITY. IT IS ALSO A FACT ON RECORD THAT IN THE LAND REVENUE RECORDS, THE NATURE OF LAND IS RECORDED AS AGRICULTURAL LAND. THE ASSESSEE HAS ALSO NOT APPLI ED FOR CONVERSION OF THE LAND TO NON AGRICULTURAL USE. NO DEVELOPMENT ACTIV ITY HAS ALSO BEEN UNDERTAKEN BY THE ASSESSEE ON THE LAND. NEITHER TH ERE IS ANY DEVELOPMENT ACTIVITIES IN THE SURROUNDING LAND WHICH HAS BEEN B ROUGHT ON RECORD BY THE ASSESSING OFFICER. ONLY BECAUSE THE ASSESSEE HAS S OLD THE LAND AFTER A GAP OF 9 MONTHS OR THE FACT THAT IT IS SOLD FOR A HIGH PRI CE WOULD NOT CHANGE THE NATURE AND CHARACTER OF THE LAND. IT IS ALSO NOT R ELEVANT THAT THE LAND WOULD BE UTILIZED FOR NON-BUSINESS PURPOSE IN THE FUTURE. WHAT IS RELEVANT IS NATURE AND CHARACTER OF LAND WHEN IT IS SOLD. AS HAS BEEN ELABORATELY DISCUSSED BY THE CIT(A), THERE ARE ENOUGH MATERIAL ON RECORD WHI CH ARE INDICATIVE OF THE FACT THAT THE NATURE AND CHARACTER OF LAND AT THE T IME OF PURCHASE BY THE ASSESSEE AS WELL AS AT THE TIME OF SALE IS THE SAME I.E. AGRICULTURAL LAND. THE REASON SHOWN BY THE ASSESSEE FOR SALE OF THE PROPER TY AFTER 9 MONTHS OF PURCHASE ALSO CANNOT BE SAID TO BE NOT BELIEVABLE. SIMILARLY, IT IS ALSO A FACT THAT INITIALLY THE ASSESSEE HAD NOT ENTERED INTO TH E TRANSACTION. ONLY AFTER ONE OF THE CO-OWNERS EXPRESSED HIS INTENTION TO SEL L OFF HIS SHARE OF LAND, THE ASSESSEES CAME FORWARD TO PURCHASE THE LAND SINCE T HE REST OF THE PORTIONS WERE PURCHASED BY THE FAMILY MEMBERS OF THE ASSESSE ES OR CLOSE RELATIVES AND THEY DID NOT WANT ANY STRANGER TO PURCHASE A P ORTION OF THE PROPERTY. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES OF THE CASE, AND APPLYING THE TESTS LAID DOWN BY THE HONBLE SUP REME COURT IN CASE OF SHARIFABIBI MOHD. IBRAHIM VS. CIT (SUPRA), WE ARE OF THE VIEW THAT THE CIT(A) WAS JUSTIFIED IN ACCEPTING THE ASSESSEES CONTENTIO N THAT THE LAND BEING AN AGRICULTURAL LAND CANNOT BE SUBJECT TO CAPITAL GAIN S TAX. SO FAR AS THE ITA NO.349/VIZAG/2011 SRI SURESH KUMAR JAIN PROP: HIRA PANNA JEWELLERS, VSKP 10 ADDITIONAL GROUND RAISED BY THE DEPARTMENT WITH REG ARD TO THE CIT(A)S OBSERVATION AS TO WHETHER THE INCOME IS TO BE TREAT ED UNDER THE HEAD BUSINESS OR CAPITAL GAINS, IN OUR VIEW, THE ISS UE RAISED IS TOTALLY IRRELEVANT CONSIDERING THE FACT THAT THE ASSESSING OFFICER THO UGH INITIALLY HAD OBSERVED THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE I S ADVENTURE IN THE NATURE OF TRADE BUT ULTIMATELY TREATED IT AS INVESTMENT BY BRINGING THE SALE CONSIDERATION TO TAX AS SHORT TERM CAPITAL GAIN. T HAT BEING THE CASE, THE GROUND RAISED BY THE DEPARTMENT DESERVES TO BE DISM ISSED. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 6 TH MAR14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 6 TH MARCH, 2014 COPY TO 1 DCIT CIRCLE-1(1), VISAKHPATNAM 2 SURESH KUMAR JAIN, PROP: HIRA PANNA JEWELLERS, 48 -19-5, MVR COMPLEX, VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM