M/S. HARIHAR INFRASTUCTURE DEVELOPMENT CORPORATION LTD., Nagpur V. THE DY.CIT, CIRCLE- 1, Nagpur

ITA 60/NAG/2015

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2725 (ITAT-NAGPUR)
• Duration Of Justice: 7 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 22-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S. SHRIRAM; EXPENDING AN AMOUNT OF ONLY RS
• Keywords: Capital asset; Business income; Search and seizure; Rule of consistency
• Section: 28; 143(3); 2(14); 234B; 143(2); 72; 22

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ, नागप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, NAGPUR (Through Virtual Hearing at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 60/NAG/2015 Ǔनधा[रण वष[ / Assessment Year : 2010-11 M/s. Harihar Infrastructure Development Corporation Ltd.; G-3, Amar Palace, Opp. Patwardhan Ground, Dhantoli, Nagpur-12. PAN : AABCH9888H .......अपीलाथȸ / Appellant बनाम / V/s. The Deputy Commissioner of Income Tax, Circle-1, Nagpur. ......Ĥ×यथȸ / Respondent Assessee by : Shri S. Shriram, AR Revenue by : Shri Pradeep Headoo, DR 2 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 स ु नवाई कȧ तारȣख / Date of Hearing : 18.02.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 09.05.2022 आदेश/ ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-I, Nagpur, dated 03.11.2014, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) dated 25.03.2013 for assessment year 2010-11. Before us the assessee has assailed the impugned order on the following grounds of appeal : “1. The order passed by the AO under section 143(3) of I.T Act 1961 is illegal, invalid and bad in law and the ld. CIT(A) erred in confirming the same. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition made by the AO at Rs.31,45,251/- on account of sale of agricultural land treating the same as business income as against the claim of assessee that gain on sale of agricultural land is exempt u/s.2(1A) of I.T.Act, 1961. 3. The addition made by the AO at Rs.31,45,251/- in the assessment framed as business income is unjustified, unwarranted and bad in law. 3 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 4. In the facts and circumstances of the case, the ld. Lower authorities erred in holding that the assesee held the agricultural land as stock-in-trade. 5. The Ld. Lower authorities erred in not accepting the fact that the land sold by the assessee is agricultural land on which the assessee was doing agricultural operations and hence, any revenue/surplus derived from it is exempt under section 2(1A) of I.T. Act, 1961. 6. The Ld. Lower authorities ought to have accepted the claim of assessee made in the return under section 2(1A) of I T Act, 1961 on account of sale of agricultural land. 7. The Ld. Lower authorities ought to have accepted that the agricultural land held by assessee is not a capital asset under section 2(14) of I.T Act, 1961 and surplus on the sale of same is not exigible to income tax since the land is away from 8 km from the Nagpur Municipal Corporation. 8. On the facts and in the circumstances of the case, the ld. CIT(A) erred in not accepting the claim of assessee on account of agricultural income shown in the return of income. 9. The addition made by AO at Rs.9,50,000/- in the assessment framed by not accepting the agricultural income shown by assessee is unjustified, unwarranted and excessive. 10. The assessee denies liability to pay interest under section 234A, 234B& 234C of I T Act, 1961. Without prejudice, levy of penalty interest under section 234A, 234B & 234C of I T Act, 1961 is unjustified, unwarranted and excessive. 11. The assessee craves leave to add/alter any of the grounds of appeal at the time of hearing.” 2. Succinctly stated, the assessee company which is engaged in the business of developing housing projects had filed its return of income 4 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 for the assessment year 2010-11 on 02.10.2010, declaring an income of Rs.93,82,210/-. The return of income filed by the assessee company was processed as such u/s.143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee during the year under consideration had sold agricultural lands situated at Village Khairi Khurd (Kh. No. 81) and Village Mandhagohrad (Kh. No.146), and had claimed that as the said lands were not situated either within the municipal limits or the notified area limits as contemplated in Sec. 2(14)(ii) of the Act, therefore, the gain/surplus of Rs.31,45,251/- arising therefrom was not exigible to tax. However, the A.O. did not find favor with the aforesaid claim of the assessee. On a perusal of the 7/12 extracts of the lands that were sold by the assessee, it was observed by the A.O that out of 4.13 hectare of land at Khairi Khurd 3.97 hectare of land were shown as “Padit”, i.e fallow. Also, it was observed by the A.O that the assessee 5 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 had sold the aforesaid land at Village Khairi Khurd after holding the same for a short period of 17 months, i.e., 21.02.2008 to 30.07.2009. In so far the lands situated at Village Mandhagohrad were concerned, it was observed by the A.O that as it was the claim of the assessee before him that it had carried out agricultural activities on 20.9 hectare at Village Junewane and Village Salaimendha only, therefore, it could safely be inferred that it had not carried out any agricultural activities on the aforesaid land. Also, it was noticed by the A.O that the assessee company which was in the business of real estate was regularly in the normal course of its business carrying out purchase and sale of lands. On a perusal of the Memorandum of Association (MOA) of the assessee company, it was observed by the A.O that purchase and sale of agricultural/non-agricultural lands a/w. construction and building activities was the main object of the assessee company, while for carrying out of agricultural activities in no way figured either in the mainstream or its ancillary activities. Backed by the aforesaid facts, the A.O. called upon the assessee to explain as to why the gain/surplus on 6 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 the sale of the aforesaid land may not be brought to tax as its ‘business income u/s. 28 of the Act. 4. In reply, it was claimed by the assessee that though it was engaged in the business of real estate, but the agricultural lands in question were purchased and thereafter held by him as an investment. It was submitted by the assessee that its aforesaid claim could safely be gathered from a perusal of its balance sheet for the year under consideration. It was further submitted by the assessee that it had since inception acquired and thereafter held the agricultural lands in question, i.e, at Khairi Khurd (Kh. No. 81) and Mandhagohrad (Kh. No.146) as an investment, which fact could be gathered beyond doubt from a perusal of its financial statements for the preceding years. It was further submitted by the assessee that it had been exploiting the aforesaid agricultural lands in question for carrying out agricultural activities and the said fact was discernible from a perusal of the 7/12 extracts that were attached with the sale deed. In order to impress upon the A.O that the agricultural lands were held as an investment 7 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 and not as a trading asset, it was submitted by the assessee that the same could safely be gathered from the fact that it had not carried out any building or plotting or any development activities on the aforesaid agricultural lands in question. On the basis of his aforesaid contentions, it was the claim of the assessee that just as an assessee can maintain two portfolios, i.e, one of trading and another of investment, the assessee was also holding the properties in a similar manner, i.e., some as trading assets and the others as an investment on which it was carrying out agricultural operations. In order to dispel any doubt as regards its claim of carrying out of agricultural operations on certain lands, the assessee in the course of the assessment proceedings requested the A.O to depute any person to visit its agricultural land situated at Village: Hingna on which it was carrying out organic farming. On the basis of the aforesaid facts, it was claim of the assessee that as the gain/surplus of Rs. 31,45,281 had arisen on the sale of rural agricultural lands which did not fall within the meaning of a capital asset u/s.2(14)(ii) of the Act, therefore, the same was not exigible to tax. However, the A.O did not find favor with the aforesaid 8 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 claim of the assessee. It was observed by the AO that a perusal of the 7/12 extracts of 34 agricultural lands at Village Junewane, Village Khairi Khurd and Village Salaimenddha on which the assessee had claimed to have carried out agricultural activities revealed, that 22 lands out of the aforesaid lands were shown in the revenue records as “padit” i.e. fallow lands. It was noticed by the A.O that out of 75 hectarse of land only on 25 hectares of land agricultural activities were shown to have been carried out. Observing, that now when 50 hectares of agricultural lands owned by the assessee were shown as fallow in the 7/12 extracts, the A.O held a conviction that the claim of the assessee to have purchased the lands in question, i.e., at Village Khairi khurd and Village Mandhagohrad for agricultural purposes was belied beyond doubt. Also, it was noticed by the A.O that the treatment of the aforesaid agricultural lands in the books of account of the assessee, i.e., reflecting the same as an investment would not be decisive about the real state of affairs. In so far the claim of the assessee that it was carrying out organic farming was concerned, the A.O noticing that the same was not substantiated on the basis of any 9 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 supporting material, thus, rejected the same. Observing, that the assessee company in the earlier years too had purchased agricultural lands in villages near Nagpur and had exploited the same by carrying out development and plotting etc., the AO held a conviction that the assessee in the normal course of its business of real estate would create a huge land bank by cornering substantial part of the village lands with an intention to trade in the same. On the basis of his aforesaid deliberations, the A.O. was of the view that as the assessee had purchased the agricultural lands in question, i.e., at Village Mandhagohrad and Village Khairi Khurd with an intention to trade in the same and not for the purpose of carrying out agricultural activities, therefore, the same being in the nature of its trading asset i.e stock-in- trade, the gain/surplus of Rs. 31,45,281/- arising on the sale of the same was liable to be brought to tax as its business income u/s 28 of the Act. 5. Also, it was observed by the A.O that the assessee in its return of income for the year under consideration had shown agricultural income 10 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 of Rs.9.50 lacs. On being called upon to furnish details regarding its agricultural income the assessee placed on record a copy of account of agricultural income, copy of account of agricultural expenditure a/w. certain other details as were called for by the A.O. The assessee also filed a copy of the 7/12 extracts of the agricultural lands a/w details of its gross receipts and expenditure. On a perusal of the records, it was observed by the A.O that the assessee had credited cash amounting to Rs.9.50 lacs, i.e, its so claimed agriculture income on a single date on 10.08.2009. It was further noticed by him that the assessee had claimed to have incurred an expenditure of only Rs. 1,87,712/- in the course of its agricultural activities i.e. 16% of its agricultural receipts. On a perusal of the labour expenses which were claimed by the assessee to have been incurred towards its agricultural activities, it was observed by the A.O that the same were only to the tune of Rs.22,808/- (including the salary that was paid to one Shri Giridhar Behare of Rs.9000/-). Backed by the aforesaid facts, it was observed by the A.O that the agricultural expenditure claimed by the assessee did not inspire much of confidence, for the reason that in an area like 11 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 Vidharbha the same by no means could be less than 30% of the total receipts. It was observed by the AO that in a labour intensive agricultural economy of Vidharbha earning of agricultural income of Rs.10 lacs by the assessee by expending an amount of only Rs. 22,808/- towards labour expenses was beyond comprehension. Also, it was noticed by the A.O that the assessee in order to substantiate its claim of having earned agricultural income of Rs. 9.50 lacs had failed to place on record agricultural sale bills. It was noticed by the A.O that the assessee instead of placing on record sale bills had filed before him self-made vouchers. Adverting to the crops grown by the assessee, it was observed by the A.O that a perusal of the sale bills/vouchers filed by the assessee revealed that though it had shown sale of vegetables, brinjal, tomato, cucumber, spinach etc. a/w. bills of cotton and soyabean, but the same militated against its earlier claim wherein it was stated that following crops were grown on the agricultural lands : S. No. Kh. No. Name of the crop grown Area under cultivation/hector Quantity of crop product Quintal/kg Amount realized gross receipt 1137712 12 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 1 106 Salaimendha Soyabean 2 200 2 106 Salaimendha Soyabean 2 200 3 106 Salaimendha Cotton 1.5 4 109 Salaimendha Soyabean 0.4 50 5 109 Salaimendha Tuwar 0.1 6 122 Salaimendha Soyabean 4 400 7 114 Salaimendha Soyabean 0.09 8 92 Salaimendha Soyabean 2 400 9 94 Salaimendha Soyabean 1 200 10 96 Salaimendha Soyabean 2 200 11 101 Salaimendha Soyabean 2 200 12 101 Salaimendha Tuwar 0.3 13 104 Salaimendha Soyabean 1 100 14 71 Junewane Soyabean 0.7 15 71 Junewane Tuwar 0.1 16 72 Junewane Soyabean 0.8 17 72 Junewane Tuwar 0.1 20.09 1950 0 13 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 Observing, that the aforesaid claim of the assessee militated as against its earlier statement qua the crops that were being cultivated on the agricultural lands, the AO was of the view that the assessee by so doing had brought the genuineness of the same under a shadow of serious doubt. It was further observed by the A.O that though the assessee had claimed to have grown “Tuwar” but no sale bills in support thereof were placed on record. It was observed by the A.O that though the assessee had claimed to have cultivated various water intensive crops, however, the land of the assessee was a dry land (Jirayati). Also, it was noticed by the A.O. that the assessee had not placed on record any such material which would evidence availability of extensive irrigation facilities on the lands on which agricultural activities were claimed to have been carried out by it. On the basis of his aforesaid deliberations, it was observed by the A.O that the assessee’s claim of having carried out agricultural activities not being backed by any concrete evidence, thus, did not merit acceptance. Accordingly, the A.O declined the assessee’s claim for exemption of agricultural income of Rs.9.50 lacs u/s. 10(1) of the Act and added 14 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 back the same to its returned income. On the basis of his aforesaid observations, the A.O vide his order passed u/s. 143(3), dated 25.03.2013 assessed the income of assessee company at Rs.1,34,77,460/-. 6. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success. 7. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 8. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 9. We shall first deal with the claim of the assessee that both the lower authorities had grossly erred in law and on facts of the case in re-characterizing its agricultural income as income from “Other Source” 15 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 and therein, declining its claim for exemption u/s. 10(1) of the Act. As observed by us hereinabove, we find that the A.O had declined the assessee’s claim of having earned agricultural income of Rs.9.50 lac as the same was not backed by concrete evidence, for reasons which are culled out as under : i. Ledger account of agricultural income shows cash of Rs.9,50,000/- credited on a same day, ii. Agricultural expenses shown are very less. The labour expenditure is miniscule. iii. Contradiction in the submissions related to crops grown, sale bills of vegetables crops such as tomato and brinjal submitted. However, details of crop grown submitted earlier does not show any of vegetable crops mentioned in the same bills. iv. Main intention to treat agricultural lands as stock-in-trade. After having given a thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both the parties in the backdrop of the orders of the lower authorities, we are of a strong conviction that the assessee had failed to fully substantiate on the basis of clinching documentary evidence its claim of having earned agricultural income of Rs.9.50 lac during the year under consideration. However, we find, that as observed by the A.O, it is a matter of an 16 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 admitted fact that the assessee out of its nearly 75 hectares of land had been carrying out agricultural activities on about 25 hectares of land. For the sake of clarity the relevant observations of the A.O to the said effect are culled out as under : “However, on proper verification of above 7/12 extracts it was seen that 22 lands out of 34 lands are shown as ‘padit’ or fallow lands. Further, out of nearly 75 hectare of land, less then 25 hectare was showing any agricultural activity. Also, we cannot remain oblivious of the fact that the assessee vide its letter filed with the A.O had, inter alia, stated that it was carrying out organic farming and to dispel any doubt had even requested the A.O to depute any person to visit its agricultural lands at Village Hingna. However, we find that the aforesaid request of the assessee did not see the light of the day and was summarily discarded by the A.O. On a perusal of the assessment order, we find that it had once again reiterated by the A.O at Page 6.3 of his order that 7/12 extracts of nearly 20 hectares of land shows that there have been agricultural activities (though 53 hectares of land is fallow land). In fact, we find that the A.O had also observed that agricultural activities, if any, was 17 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 just an incidental or a stop gap arrangement of the assessee. Although, we concur with the view taken by the A.O that the assessee had not only failed to place on record supporting documentary evidence which would have irrefutably proved to the hilt its claim of having earned agricultural income of Rs.9.50 lacs, but also the documents/material filed by it in the course of assessment proceedings too do not inspire much of confidence as regards the genuineness and veracity of its claim of having earned an agriculture income of Rs. 9.50 lac during the year under consideration. At this stage, we may herein observe, that it is the claim of the assessee that it had during the year under consideration cultivated soyabean/cotton/jawar and in support thereof had drawn our attention to the 7/12 extracts, Page 70-89 of the APB. Our attention was also drawn by the Ld. AR to the copies of the sale bills of the agricultural produce, Page 101-103 of the APB. Before us, the Ld. AR in order to substantiate its claim of having earned an agricultural income of Rs.9.50 lacs submitted, that a similar disallowance of its claim of having earned an agricultural income of Rs. 13,44,840/- in AY 2008-09 and of Rs.11,87,120/- in AY.2011-12 that 18 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 was made by the AO had thereafter been vacated by the CIT(Appeals), and the same was held by him to be genuine in the said respective orders. In order to fortify his aforesaid contention the Ld. AR had taken us through the copy of the orders of the CIT(Appeals) for the aforementioned years at Page 154 to 178 of APB. Rebutting the observations of the A.O that carrying out of agricultural activities did never form part of either the mainstream or, the incidental activities of the assessee company, the Ld. AR took us through the object Clause of the assessee company, i.e., Clause 46 of MOA, at Page 2 of APB, wherein carrying out of agricultural activities by the assessee company was clearly stated to be one of its objects. 10. On the basis of aforesaid facts, we find that it has been the claim of the assessee before the lower authorities as well as before us, that no adverse inferences as regards its claim of having earned agriculture income of Rs. 9.50 lac during the year under consideration was liable to be drawn. As observed by us herein above, as per the principle of consistency that have been pressed into service by the Ld. 19 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 AR, i.e., by relying upon the fact that in the immediately preceding and succeeding year, i.e., AY 2008-09 and AY 2011-12 respectively its claim of agriculture income had been accepted by the CIT(Appeals), it is the claim of the assessee before us that by adopting a consistent approach, specifically when there is no change in the facts during the year under consideration as in comparison to those for the aforesaid preceding and succeeding year, the agriculture income of Rs. 9.50 lac so disclosed by it during the year under consideration should be accepted. Although, we are in agreement with the claim of the Ld. AR that as per the rule of consistency a different view on the basis of same set of facts is not permissible on the part of the department, but we cannot also remain oblivious of the fact that the said rule would come into play only in a case where the facts in both the years had remained same and unchanged. In the case before us the assessee had not only failed to substantiate its claim of having earned an agriculture income of Rs.9.50 lacs during the year under consideration before the lower authorities on the basis of clinching documentary evidence, but also certain infirmities as regards the details filed by him 20 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 in the course of the assessment proceedings had been brought on record by the AO, i.e contradictory claim as regards the crops cultivated; incurring of low expenditure in the course of its agricultural activities; claim of having cultivated various water intensive crops while for the land of the assessee was a dry land (Jirayati); non-production of sale bills of its agriculture produce; claim of having deposited the entire agriculture income of Rs. 9.50 lac on a single day i.e on 10.08.2009 etc., which raises serious doubts as regards the genuineness of the aforesaid claim of the assessee. Apart from that, we find that the observation of the AO that a perusal of the 7/12 extracts revealed that out of 34 lands of the assessee 22 lands were “padit” i.e fallow and thus, out of nearly 75 hectares of land agricultural activity was shown only on 25 hectares, was not there in the case of the assessee for the aforementioned years, i.e, AY 2008-09 and AY 2011-12. In the backdrop of our aforesaid observations, we are of the considered view that the rule of consistency would noy strictly assist the case of the assessee before us. 21 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 11. Be that as it may, in our considered view, in the totality of facts involved in the case before us read a/w. past history of the asessee, and taking cognizance of the fact that the A.O. himself had admitted that a perusal of the revenue records revealed carrying out of agricultural activities on nearly 25 hectare on land, the rejection by the lower authorities of the entire claim of agriculture income of Rs. 9.50 lac shown by the assessee does not merit acceptance. Considering the observation of the AO that a perusal of 7/12 extracts revealed that agricultural activities were being carried on nearly 25 hectare of land (out of 75 hectare of land), we herein in the backdrop of the facts involved in the case before us in all fairness restrict the assessee’s claim of agriculture income on a pro-rata basis of its agricultural holding under cultivation as against its total agricultural holding to an amount of Rs.3,20,000/- (out of Rs.9.50 lac). Accordingly, the Grounds of appeal No.(s) 8 and 9 raised by the assessee are partly allowed in terms of our aforesaid observations. 22 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 12. We shall now advert to the claim of the assessee that both the lower authorities had erred in declining its claim that the gain/surplus arising from sale of rural agricultural lands, i.e., non-capital assets within the meaning of section 2(14) of the Act was not exigible to tax. As observed by us hereinabove, the assessee had sold lands situated at Village Khairi Khurd (Kh. No. 81) and Village Mandhagohrad (Kh. No.146) and had claimed the gain/surplus of Rs.31,45,251/- arising therefrom as not exigible to tax, for the reason that the rural agricultural lands in question were not a capital asset within the meaning of Sec. 2(14) of the Act. However, the aforesaid claim of the assessee was declined by the A.O for reasons which have been culled out by us at length hereinabove. Accordingly, the A.O treating the sale of the aforesaid lands as a business activity of the assessee therein, brought the gain/surplus of Rs.31,45,251/- (supra) to tax in its hands as its business income. 13. We have given a thoughtful consideration to the aforesaid issue, and also considered the contentions advanced by the Ld. AR for 23 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 both the parties in the backdrop of the orders of the lower authorities. As observed by the A.O, and rightly so, the fact as to whether the land in question was purchased by the assessee as a part of its business or, as an investment can safely be gathered on the basis of its intention at the time of making such purchase. Also, the subsequent treatment of the assessee, i.e., carrying out of any such activities which would reveal that the aforesaid asset was purchased with an intent to commercially exploit the same and make profit or, to hold the same as an investment, would also have bearing on characterization of the subsequent transaction of sale of the same, i.e., as a business transaction or sale of a capital asset. Although, we are in agreement with the A.O that the treatment of the asset purchased by the assessee in its books of account would not on a standalone basis be decisive for determining as to whether the gain/surplus arising on subsequent sale of the same is to be brought to tax under the head business income or is to be considered as capital gain, but at the same time we cannot also remain oblivion of the fact that a conjoint perusal of such treatment by of the purchase transaction by the assessee in 24 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 its books of account a/w with other factors would undeniably have a crucial role in adjudicating the aforesaid issue. Admittedly, it is a matter of fact borne from record that the assessee since inception had accounted for the aforesaid agricultural lands in question, i.e., at Village Khairi Khurd (Kh. No. 81) and Village Mandhagohrad (Kh. No.146) as an investment in its books of account. Although, the period of holding of the lands to some extent would have bearing on determining as to whether the same were held by the assessee as a business asset or as a capital asset, but the same too on a standalone basis cannot be decisive for determining of such characterization. We, say so, for the reason that legislature in all its wisdom had also contemplated subjecting to tax gain/surplus arising on transfer of a capital asset which is sold after holding the same by an assessee for period less than 12/36 months under the head short term capital gain (for short ‘STCG’). 14. On a perusal of the records, we find that although the assessee is engaged in the business of purchasing lands for commercial 25 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 exploitation, i.e trading in the same after carrying out development, plotting etc., however, qua the agricultural lands in question no such development, plotting etc. had been carried out by it. In sum and substance, the agricultural lands under consideration had been sold by the assessee in the same form as they were purchased. Nothing has been brought to our notice much the less placed on our record which would evidence that the lands in question were either purchased by the assessee company for the purpose of trading in the same as such or after commercially exploiting the same by carrying out development, plotting etc. In the backdrop of the aforesaid facts, we are of the considered view that the assessee had purchased the aforementioned agricultural lands, i.e., situated at Village Khairi Khurd and Village Mandhagohrad with an intention to hold the same as a capital asset, and for the said reason were reflected as an investment in its books of accounts. On the basis of our aforesaid deliberations, we are unable to persuade ourselves to subscribe to the claim of the lower authorities that as the assessee is engaged in real estate business, therefore, for the said standalone reason the aforesaid transaction of purchase/sale 26 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 of agricultural lands carried out by it was to be given the color and character as that of a business transaction, discarding the fact that the same since inception was shown by the assessee as an investment in its books of account. Also, the fact that the assessee company had not carried out any development activity, plotting etc. on the aforesaifd lands and have sold the same as such further lends credence to its claim that the same was purchased and held by it as an investment i.e as a capital asset. In so far the observation of the AO that the assessee in the normal course of its business of real estate would create a huge land bank by cornering substantial part of the village land with an intention to trade in the same, therefore, the purchase/sale of the lands in question by it, i.e, situated at Village Khairi Khurd and Village Mandhagohrad was to be brought within the realm of its business transactions is concerned, we are afraid that the said observation of the AO would have no bearing on the characterization of the purchase/sale of the aforesaid lands in question, for the reason that the same had not been shown to have formed a part of any land bank which would have thereafter been 27 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 commercially exploited by carrying out carving out of plots etc. On the basis of our aforesaid observations, we are unable to concur with the view taken by the lower authorities that the gain/surplus arising from the sale of agricultural lands in question was to be given the color and character as that of a business transaction of the assessee company. 15. Be that as it may, even if it is to be presumed that he assessee after purchasing the aforesaid agricultural lands as a capital asset, had thereafter decided to treat the same as a trading asset/stock-in-trade of its business of real estate, then, the gain/surplus arising therefrom would have to be assessed as per the provisions of sub-section (2) of Section 45 of the Act and not otherwise. However, as the assesee had purchased and held the aforesaid agricultural lands in question as a capital asset and had reflected the same as an investment in its books of accounts, therefore, in the absence of any subsequent development activity, plotting etc. having been carried out by the assessee on the same there was no justification on the part of the department to have whimsically held the same as a trading asset. We, thus, in terms of our 28 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 aforesaid observations not being able to persuade ourselves to subscribe to the view taken by the lower authorities set-aside the order of the CIT(Appeals) and vacate the view taken by the A.O who had brought the gain/surplus on the sale of the agricultural lands in question to tax in the hands of the assessee as its business income. Thus, the Grounds of appeal No.(s) 2 to 7 are allowed in terms of our aforesaid observations. 16. The Grounds of appeal No.(s) 1, 10 and 11 being general in nature are dismissed as not pressed. 17. In the result, appeal of the assessee is partly allowed in terms of our aforesaid observations. Order pronounced in open Court on 09 th day of May, 2022. Sd/- Sd/- JAMLAPPA D. BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 09 th May, 2022 SB 29 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Nagpur. 4. The CIT-II, Nagpur. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, नागप ु र/ DR, ITAT, Nagpur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 30 M/s. Harihar Infrastructure Development Corporation Ltd. Vs. DCIT, Circle-1, Nagpur ITA No. 60/NAG/2015 Date 1 Draft dictated on 26.04.2021 Sr.PS/PS 2 Draft placed before author 30.04.2021 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order