ITO, Kotdwar V. Sh. Kalyan Singh Adhikari, Kotdwar

ITA 6231/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3554 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHAUDHURI
• Assessee Lawyers: SANKALP ANIL SHARMA
• Keywords: Unexplained investment; Capital asset
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.6231/DEL/2016 ASSESSMENT YEARS 2011-12 INCOME TAX OFFICER, KOTDWAR. PAN: AABCP 0275C VS. SHRI KALYAN SINGH ADHIKARI SHIVRAJPUR, MOTADHAK, KOTDWARA. PAN: AGIPA 9869K (APPELLANT) (RESPONDENT) ASSESSEE(S) BY : S/SHRI SANKALP ANIL SHARMA, ADV. REVENUE BY : MS. BEDOBANI CHAUDHURI, SR.D.R. / DATE OF HEARING : 18/04/2017 / DATE OF PRONOUNCEMENT: 20/04/2017 ORDER THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F LEARNED CIT(A), DEHRADUN, VIDE ORDER DATED 23.09.2016 FOR THE ASSES SMENT YEAR 2011-12. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS BY GIVING MORE IMPORTANCE TO THE UNREGISTERED AGREEMENT THAN TO TH E LEGAL REGISTERED DEEDS. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S BY DELETING THE ADDITION OF RS.11,66,616/- MADE BY THE AO ON ACCOUNT OF CAPI TAL GAIN WITHOUT APPRECIATING THE FACTS THAT THE LAND WAS SOLD BY MAKING SMALL RE SIDENTIAL PLOTS TO VARIOUS PARTIES BEFORE SALE THUS LOSING THE AGRICULTURAL NA TURE OF LAND. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.26,81,000/- BY NOT APPRECIATING THE FACTS THA T VARIOUS AMOUNTS WERE DEPOSITED/CREDITED IN THE ACCOUNT OF THE ASSESSEE M UCH BEFORE THE DATE OF SALE AND THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF WHOLE AMOUNT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAS MADE THE ADDITION ON ACCOUNT OF AGRICULTURAL LAND AMOUNTING TO RS.11,666 16/- AND ALSO WITH REGARD TO THE DEPOSITS BEFORE THE DATE OF SALE AMOU NTING TO RS.26,81,000/- WHICH WERE DELETED BY THE LEARNED CIT(A) AND THE RE VENUE IS IN APPEAL BEFORE ME. ITA NO.6231/DEL/2016 2 4. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. I HAVE GONE THROUGH THE ENTIRE ASSESSMENT ORDER AND T HE ORDER OF THE LEARNED CIT(A) WHICH IN FACT IS REPRODUCED HEREINBELOW: I HAVE DULY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE . THERE ARE T H REE ISSUES OF DISPUTE IN THIS APPEAL . THE FIRST IS RELATING TO THE INTRODUCTION OF CASH INTO THE BANK ACCOUNTS OF THE ASSESSEE, WH I CH THE ASSESSEE HAS EXPLAINED AS ARISING FROM THE SALE OF AGRICULTU RAL LAND BUT THE AO HAS TREATED TO BE UNEXPLAINED AS THE SAME WAS N OT EXPLAINED BY THE SALE DEEDS , WHICH WERE CONCLUDED FOR A LESSER VALUE . THE SECOND IS THE ADDITION ON ACCOUNT OF CAPITAL GAIN, WHICH THE ASSESSEE FIRST C ONCEDED BUT HAS NOW CHALLENGED IN APPEAL AND THE TH I RD IS ADDITION ON ACCOUNT OF APPLICATION OF SECTION 64 ON DEPOSITS BY THE ASSESSEE'S WIFE IN HE R ACCOUNT . I H AVE DEALT WITH THE FIRST TWO ISSUES IN MY ORDER IN APPEAL NUMBER 3 5/CIT(A)/DDN/1 3 - 14 FOR THE ASSESSMENT YEAR 2010-11. IN THAT ORDER I HAVE H ELD:- 'THE NEXT ADDITION IS WITH REGARD TO CREDIT OF RS. 22 LAKHS IN CASH INTO THE ASSESSEE'S ACCOUNT AT BANK OF INDIA MOTADH AK . THE A.O . HAS REJECTED THE SUBMISSION OF THE ASSESSEE ON THE GROUNDS THAT THE ASSESSEE DID NOT SELL HIS LANDS TO AP . SEMWAL AND SHAMIM AHMED BUT TO VARIOUS OTHERS AND THE SALE DEEDS FOR THE TO TAL AMOUNT ADDED UP TO ONLY RS . 30 LAKHS . HE HAS DISBELIEVED THE STATEMENT OF THE SHRI S. AHMED AND AP . SEMWAL T H A T ENTIRE TRANSACTION WAS DONE AS PE R THE WISHES OF SH RI TA JB AR SINGH B H AND ARI T O W HOM T H ESE PEOPLE SOLD T HEIR BENEFICIAL INTE R EST AT A P RI CE OF RS . 12 LAKHS PER BIGH A O N ACCO U NT OF THE FACT THAT SHRI TA J BA R SI N GH BHANDA R I HAS DENIE D ANY INVOL V EME N T I N THE MA T TE R AN D O N E OF THE PURCH ASE R HAS CO N FI RM ED PU RCHASING DIREC T L Y FROM TH E ASS E SSEE AT THE RE GIS TER ED PRI CE . HO W E VER, IT IS SEEN THAT BEFO R E USING THE E VI DE N CE PROVI D ED BY SHRI TAJBAR SINGH BHANDARI AND THE PURCHASER SHRI DHARME NDRA SINGH AGAINST THE ASSESSEE, THE ASSESSEE HAS NOT BEEN ACC ORDED THE BENEFIT OF FOR CROSS EXAMINING THEM. ACCORDINGLY, THEIR ST AT EMENT CANNOT BE USED AGAINST THE ASSESSEE . WHAT EMERGES FROM THE AGRE E MEN T F OR SA L E IS TH A T T H E ASSESSEE UP ON RECEIPT OF RS . 30 LAKHS , T RAN S F ERRED THE CONT R OL OF THE LAND TO SHRI S. AHMED AND SHRI AP. SEMWAL FOR T HE PURPOSES OF DEVELOPMENT OF PLOTS F R OM THE SAID LAND AND AGREED TO P R ESENT HIMSELF FOR REGISTRATION AS AND WHEN ASKED TO. THUS, THE LA NDS STOOD TRANS F ERRED AS PER SUB CLAUSE (V) OF CLAUSE (47) OF SECTION 2 OF THE I. T. ACT. THEREAFT ER THE BENEFIC IA L IN T ERES T ACQUIRE D B Y SHRI S . AH ME D AND SHRI AP . SEMWAL WAS APPARENTLY SOLD TO ONE SHRI TAJBAR SINGH BHANDARI RESIDENT OF KOTD W AR AND THE BALANCE MONEY WAS PAID IN CASH TO THE ASSESSEE. THE PAYMENT OF THIS MONEY HAS BEEN CONFIRMED BY SHRI AP . SEMWAL AND SHRI SHAMIM AHMED THROUGH WHOM IT WAS P AID. THEREAFTER, UPON INSTRUCTIONS THE REGISTRATIONS WE RE PERFORMED IN THE NAME OF CERTAIN DIFFERENT INDIVIDUALS . THE ENTIRE EXERCISE SEEMS TO HAVE TAKEN PLACE IN A MANNER TO EVADE PAYMENT OF STAMP DUTY , FIRST ON THE TRANSFER OF LAND TO SHRI A . P . SEMWAL AND SHRI S . AHMED AND THEN ITA NO.6231/DEL/2016 3 ON TRANSFER FROM A . P. SEMWAL AND S. AHMED TO TAJBAR SINGH BHANDARI . EVEN THE FINAL REGISTRATIONS HAVE BEEN DONE AT CIRC LE RATES FAR BELOW THE PRICES STATED IN THE AGREEMENT FOR SALE . THUS , THE ATTEMPT IS TO EVADE STAMP DUTY ON THE TRANSACTIONS. HOWEVER, AS A RESULT OF THE SAME , THERE IS NO CLEAR AUDIT TRAIL THAT COULD ACT AS PROOF OF THE SOURCE OF DEPOSIT IN THE SAID BANK ACCOUNTS. BE THAT AS IT MAY , THERE IS CIRCUMSTANTIAL EVIDENCE THAT WOU LD BACK UP THE ASSESSEE ' S STORY . THE ASSESSEE DID ENTER INTO AN AGREEMENT FOR SALE TO TRANSFER ITS LANDS AT A PARTICULAR RATE ; THE PERSONS WITH WHOM HE CONCLUDED THE AGREEMENT FOR SA LE HAVE CONFIRMED THIS AGREEMENT AND PAID ADVANCE BY CHEQUE ; THE ASSESSEE HAS DISCLOSED THE TOTAL QUANTUM OF SUCH RECEIPTS WHICH TAL L Y WITH THE AGREEMENT FO R SALE ; THE PEOPLE THROUGH WHOM HE HAS GOTTEN SUCH RECEIPTS HAS CONF I RMED THAT THEY ACTED AS CONDUITS FOR THE PAYMENT OF THIS QUANTUM OF MONEY TO THE ASSESSEE FOR THE SALE OF HIS LAND . MOREOVER WHEN AN AGREEMENT FOR SALE HAD BEEN CONCLU DED A T A PARTICULAR RATE, THERE WAS NO LOGICAL REASON FOR TH ERE TO BE A SUDDEN DROP IN THE PRICE OF LAND UNLESS THERE WAS A TITLE DISPUTE OR DISTRESS SALE . SINCE NEITHER WAS TRUE , THE THIRD EXPLANATION COULD ONLY BE UNDER STATEMENT OF PURCHASE C ONSIDER EVASION OF STAMP DUTY . IN T HE CIRCUMSTANCES , T H E A O . SHOULD NOT HAVE DISM I SSED THE ASSESSEE'S STORY OFF HAND BUT CONSIDERED THE FACT THAT LAND COULD HA VE BEEN P URCH ASED BY SH R I TAJB AR SIN G H BHANDARI AND THE FINAL BENEFICIA I R IES AT MUCH MORE THAN THE STATED , VALUE IN THE SALE DE E DS. FURTHERMORE , SHRI TAJBAR SINGH BHANDARI , BEING A S H ADOW PLAYER , W O U LD H AVE G ENERATED UNDISCLOSED INCOME BY WAY OF P ROFIT FROM SUCH TRAN SA CTION , WHICH COULD BE A REASON FOR HIM TO DEN Y THE TRANSACTION S ALTOGTHER. HAD SUCH A CONSIDERED VIEW BEEN TAKEN, IT WOULD BEC OME CLEAR THAT WHILE THE AMOUNT OVER AND ABOVE THE SALE DEEDS FOUN D CREDITED TO THE BANK ACCOUNTS OF THE ASSESSEE COULD NOT BE ADDED BA CK IN HIS HANDS, AS IT WAS NEITHER UNEXPLAINED NOR ACQUIRED OUT OF THE SALE OF A CAPITAL ASSET, THE AMOUNT ACTUALLY LIKELY TO HAVE BEEN INVE STED BY SHRI TAJBAR SINGH BHANDARI AND THE FINAL PURCHASERS IS COMPLETE LY OUTSIDE REGULAR CHANNELS END IN ALL LIKELIHOOD UNEXPLAINED INVESTME NT. ACCORDINGLY THE ADDITIONS OF RS. 15 LAKHS MADE ON A CCOUNT OF CASH DEPOSIT BY THE ASSESSEE IN BANK OF INDIA, MOTADHAK IS DELET ED. FURTHERMORE, THE ASSESSING OFFICER IS DIRECTED TO TAKE NECESSARY ACT ION AGAINST SHRI TAJBAR SINGH BHANDARI AND THE FINAL PURCHASERS, TO BRING T HE UNEXPLAINED INVESTMENT TO TAX IN THEIR HANDS. 28 . IT APPEARS THAT I N PURSUANCE OF SUC H FINDINGS AND DIRECTIONS , THE AO HAS T AKEN U P ENQUIRIES IN THE CASE OF SHRI TAJBAR SINGH BHANDA RI . IN T HE COURSE O F T HESE ENQUIR I ES THE STA T EMENT OF THE ASSESSEE H A S ALSO BEEN RECORDED ON 8 . 02 . 2 - 016. IT APPEARS F ROM PERUSAL OF QUESTION NUMBER 9 OF THE SAID STATEMENT , THAT SOME OF THE ULTIMATE PURCHASERS HAVE ADMITTED THAT THOUGH THE REGISTRATION WAS DONE AS PER THE CIRCLE RATE THE ACTUAL AMOUNT THAT WAS PAID WAS THREE TO FOUR TIMES THE AMOUNT . THEY HAVE ALSO APPARENT L Y CLAIMED THAT THEY PAID DIRECTLY TO THE ASSESSEE , WHILE THE ITA NO.6231/DEL/2016 4 ASSESSEE SAYS THAT HE RECEIVED IT THROUGH AYODHYA P RASAD SEMWAL AND SHAMIM AHMAD . THUS THE CLAIM OF THE ASSESSEE THA T THE MONEY CREDITED TO HIS BANK ACCO U NT WAS ACTUALL Y SALE PROCEEDS OF HIS AGRICULTURAL LAND AT SHIVRAJPU R, MOTADHAK, WHICH WAS EA R LIER C ORROBORATED BY SHRI AYODHYA PRASAD SEMWAL A ND SHRI SHAMIM AHMAD IS NO W STRE N GTHENED BY SUCH STATEMENT FROM TH E PURCHASERS ALSO. THE ONLY QUESTI ON IS WHETHER THE MIDDLEMEN NAMELY SH R I AYODHYA PRASAD SEM WA L AND SHA M I M AHMAD ENTERED INTO AN AGREEMENT WITH SHRI TAJBAR SING H BHANDARI OR NO. TO MY MIND THAT IS IMMATER I AL TO THE ASSESSEE'S CASE. ONCE THEY HAVE CONFIRMED THAT THE PAID THE MONEY TO THE ASSESSEE ON ACCOUNT O F THE SALE OF HIS LAND, THE SOURC E O F THE MONEY IS TO BE INVESTIGATED IN THEIR HANDS . AS FAR AS THE ASSESSEE IS CONCERNED , T HE SOURCE IS EXPLAINED. THEREFORE IT CANNOT BE REGARDED AS UNEXPLAINED INVESTMENT AND BROUGHT TO T AX AS SUCH . THEREFORE THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS UNSU STAINABLE. SIMILARLY, THE AO HAS MADE ADD I TION ON ACCOUNT OF MONEY STATED TO BE RECEIVED SON IN LAW SHRI RAKESH BISHT RS.300,000/- OF SUCH DEPOSIT HAS BEEN CONFIRMED BY SHRI R A KESH BISH T BY WAY OF AFFIDAVIT . SHRI RAKESH BISHT HAS ALSO FILED COPIES OF HIS IN C O M E TAX RET UR N S WHIC H HA VE B EEN EXAMINED BY THE AO. IN TH E CIRCUMSTANCES T H ERE DOES N O T SE EM T O B E AN Y OC C AS ION T O HOL D ANY PART OF TH E DEPOSIT MADE ON HIS ACCOUN T AS UNE XP LAIN ED O R TA XA B LE . A S REGA RD S THE REPAY M ENT LOAN FROM NEELAR N ADHI K A RI, I HAVE ALRE ADY P O INTE D OUT IN MY AP PE A L O RD ER F O R A.Y. 2010 - 11 , TH A T AS T H E SA M E IS QUITE C L E A R LY A R EP AY ME N T O F L OAN, I T I S N OT TAXABLE. IT IS SEEN THA T T H E BA NK H AS C E R TI FIED TH A T IT WAS THE HUSBAND OF S MT NE ELA M A DHIKAR I WHO H AD DE P OS IT ED T H E MONE Y . I T IS A L SO SE EN THAT T H IS WAS THE BA L A N CE AMOUNT OF THE LOAN TAK E N IN E ARLIER YEAR S . H EN C E N O ADDITION IS CALLED FOR ON TH I S COUNT . THAT LEAVES TH E M O N E Y S TATED TO BE DEPOSITED BY HIS WIFE OUT OF HER PIN MO NEY AND B Y THE ASSESSEE OUT OF WITHDRAWALS. IT IS SEEN THAT THE DE POSITS MADE ON 4/09 AND 25/11 ARE PRECEDED BY SUFFICIENT WITHDRAWALS BUT TH OSE MADE ON 8/04 AND 20/04 ARE NOT. FURTHERMORE THE ASSESSEE HAD MADE SU FFICIENT WITHDRAWALS TO EXPLAIN HIS WIFES DEPOSIT OF PIN MONEY. THUS TH E ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IS CONFIRMED TO T HE EXTENT OF RS.1,60,000/-. THE BALANCE IS DELETED. 29. ONCE IT IS ACCEPTED THAT THE BULK OF THE DEPOSI TS ARE F R OM SALE OF AGRICULTURAL L AND AT VI L LAGE SHIVRAJPU R NEAR KOTDWAR, THE QUESTION IS WHETHER THE PROFIT ARIS I NG OU T OF SUCH RECEIPTS WOULD BE TAXABLE AS CAPITAL GAINS . THIS IS RELEVANT BECAUSE FIRST THE ASSESSEE DID NOT OFFER THE SAME FOR TAX , AT THE TIME OF FILING OF RETURN, THEN OFFERED IT FOR TAX DURING ASSESSMENT AND NOW IN APPEAL HAS TAK EN A PLEA THAT THE AO WAS WRONG IN BRI N GING THE AMOUNT TO TAX AS CAPITAL GAINS AS THE SA M E WAS RECEIVED ON THE TRANSFER OF AGRICULTURAL LAND WHICH WAS NOT A CAPITAL ASSE T . THE AO HAS HELD THAT THE ASSESSEE OFFERED IT VOLUNTARILY , THOUGH THE TONE AND TENOR OF HIS COMMUNICATIONS WHICH HAVE ALSO BEEN REP R ODUCED B Y THE AO IN HIS SUBMISS I ON , HAS PLAYE D NO SMALL MEASURE IN THAT , BECAUSE EVEN AS HE OFFE R ED T HE PROCE ED S FOR TAX UNDER CA P ITA L GAINS, THE ASSESSEE PLEADED THAT IT SHOULD NOT BE CO N SIDERED UNEXPLAINED INVESTMENT . BE THAT AS IT MAY , AN A M OUNT CANNOT BE TAXED BEC A USE T HE ASSESSEE ITA NO.6231/DEL/2016 5 MAY OFFER IT FO R TAX AT A PART I CU L AR POINT OF TIME . IT CAN ONLY BE B R OUG HT T O T A X IF I T IS LEGAL L Y DUE TO BE BROUGH T TO TAX AND THIS BRINGS US T O AN E X A MINATI ON A S TO WHETHER THE PROFIT ON THE SALE OF LAND AT VILLAGE SHIVRAJPUR PATTI IS LIABLE FOR CAPI TAL G A INS TAX . I HAVE EXAMINED THE ISSUE IN THE APPEAL FOR THE ASSES SMENT YEAR 2010-1 1 AND IN THA T YEAR I HAVE HELD:- FINALLY , WITH REGARD TO THE COMPUTATION OF CAPITAL GAIN ON ACCOUNT O F SA L E O F PLOTS AT VII/AGE SHIVRAJPUR PATTI , AND THE SUBMISSION OF THE A . O . THAT THE SAME WAS TAXED ON ACCOUNT OF THE REQUEST OF THE ASSESSEE TO TREAT AS CAP I TAL GAINS AND T H E FACT THAT PLOTTI N G W AS DONE , IT IS SEEN THE LAND SOLD AS PLOTS WAS PART OF THE AGRICULTURAL LAND OF 8 BIGHAS THAT WAS TRANSFERRED AND THAT SHIV R AJP UR PA T T I IS M O RE TH AN 8 K MS . O U T SI D E M UNIC I PA L LI M IT S O F K O TD W AR MU NICIPA LITIE S PER T H E CERTI FICATES I SS U ED BY THE NA YAB TE H S I LD A R AND THE GRAM PANCHAYA T . IT I S ALSO SEEN THAT AS PER THE GOV T . RE CO RD S T HE LA N D W AS AG R ICULTURE LAND . I N THE CIRCUMSTANCES , THERE CANNO T B E ANY CAPITA L GA I N O N T H E S ALE O F T HIS LAN D BECAUSE IT IS NOT A CAPITA L A S SET . T HE ASSESSEE E VEN WHIL E S URR ENDER I N G T H E SAME , BEFO R E THE A.O . HAD SU BMITT ED THAT HE H A D NO T OFF E RED IT EA R L I E R BECA USE IT WA S AGR I CU LT U R A L L A N D AN D H E WAS U ND E R T H E IMP RESSIO N THAT S A LE OF AGRICU L TURAL LAND W AS NOT TAXA B LE. HE N CE TH E S URR EN D E R T AKEN B Y TH E A . O . WAS NOT AS PER THE LA W . A CCORD ING L Y, SI NCE T HE LAN D W AS AG R ICUL TU RA L LAND LO C A TED O UT S ID E 8 KMS. FR O M TH E M UNICI P AL LIMIT S , N O C APIT AL G A INS CAN B E LE VI E D O N ACC OU N T O F THE SA LE OF THI S L AND EVEN I F SOM E P L O TTIN G W AS D ONE BEF O RE I T S S A LE . ACCORDING L Y , THE ADDIT I O N OF R S . 3 , 09 , 300/ - IN THI S R EGA R D I S DELETED. THE VIEW OF THE ASSESSING O FF ICE R THAT ONCE T HE ASSESSEE BEGAN TO DO PLOTTING ON TH E LAN D I T CEASED TO BE AGRICULTURAL LAND WAS EXAMINED B Y ME IN GREAT DETAIL IN TH E CASE O F T HE ASSESSEE ' S BROTHER SHRI HARI SINGH ADHIKARI IN APPEAL NUMBER 532/CIT(A)/ODN/13-1 4, WHILE DISCUSSING LEVY OF CAPITAL GAINS TAX ON THE SAME LA ND , I HAVE HELD :- ' IT MAY BE PERTINENT TO NOTE WHAT THE HON'BLE COURTS HAVE TO SAY REGARDING THE NATURE O F LAND SITUATED OUTSIDE 8 KMS. OF MUNICIPAL LIMITS. IN THE CASE OF CIT VS. MADHUKUMAR N (HUF) ( 2012) 208 TAXMAN 394 (KAR . ) THE HON'BLE HIGH COURT HELD THAT SECTION 2(14)(III)(B) OF THE ACT COVERS THE SITUATION WHERE THE SUBJECT LAND WAS NOT ONLY LOCATED WITHIN THE DISTANCE OF 8 KMS , FROM THE LOCAL LIMITS BUT ALSO REQUIRES THE FULFILMENT THAT THE CE NTRAL GOVT . HAD ISSUED A NOTIFICATION UNDER THIS CLAUSE FOR THE PURPOSE OF INCLUDING THE AREA UPTO 8 KMS. FROM THE MUNICIPAL LIMITS , TO RENDER THE LAND AS A CAPITAL ASSET. IT CONCLUDED THAT IN THE ABSENCE OF A NOTIFI CATION ISSUED UNDER CLAUSE (B) TO SECTION 2(14)(III) , THE LAND COULD NOT BE HELD TO BE A C APITAL ASSET . IN THE INSTANT CASE , THE A . O. HAS ADMITTED THAT NO SUCH NOTIFICATION HAS BEEN ISSUED FOR KOTD W AR. HENCE , THE LAND COULD NOT BE CONSIDERED TO BE A CAPITAL ASSET IN THAT SENSE . HOWEVE R, THE A . O . HAS HELD THAT CAPITAL GAIN AROSE BECAUSE THE ASSESSEE W AS INVOLVED IN THE PLOTTING AND LAYOUT OF THE LAND . THE HON ' BLE AL1AHABAD HIGH COURT IN ITA NO.6231/DEL/2016 6 THE CASE OF CIT VS. SMT. SANJEEDA BEGUM (2006) 154 TAXAMAN 346 (ALL . ) HAD OCCASION TO CONSIDER A SI M ILAR CASE. IN THAT CASE THE ASSESSEE SOLD PART OF THE LAND MEASURING 2888 SQ . Y A R DS DURING THE ASSESSMENT YEAR IN QUESTION TO 12 DIFFERENT PERSONS AFTER DI V I DING T HE LANDS INTO PLOTS , EACH PLOT HAVING AN AREA OF ABOUT 200 SQ. YARDS AND TH E COLONY HAVING BEEN NAMED SHIV VIHAR COLONY . THE ASSESSEE'S CLAIM THAT THE LAND WAS AGRICULTURAL LAN D , WAS ALSO SITUATED OUTSIDE THE MUNICIPAL LIMITS AND IT WAS NOT COVERED BY THE NOTIFICATION OF THE GOVT. OF INDIA ISSUED UNDER SECTION 2(14)(III) ( B) OF THE OF THE I. T. ACT , 1961 AND THEREFORE , NO CAPITAL GAINS W E R E APPLICAB L E . HOWEVER , THE ASSESSING AUTHORITY DID NOT ACCEPT THE PLEA AS THE LAND WAS UNDER REGULATED AREA OF SAHARANPUR FOR WHICH THE ADDL. DISTI. MAGISTRATE HAD FIXED A CIRCLE RATE AND IT WAS SITUATED NEAR TO SAHARANPUR CITY AND WAS IN T HE PROXIMITY OF BUILD I NG AND BUILDING SITES . HE TOOK THE VIEW THAT AGRICULTURAL LAND HAD BEEN CO NVERTED INTO NON-AGRICULTURAL LAND BEFORE THE DATE OF AG R EEMENT TO SELL AND THEREFORE THE PROVISIONS REGARDING CAPITAL GAINS WE RE ATT R ACTED. IN APPEAL THE AAC , DEHRADUN ACCEP T ED T H E P LEA OF THE ASSESSEE AFTE R H E CAME TO THE CONCLUSION THAT THE LAND WAS NOT WIT H IN 8 KMS OF MUNICIPAL LIMITS AND WERE AGRICULTU R AL LANDS . THE ITAT UPHELD THE CONCLUSIO N DRAWN B Y THE AAC . THE MATTER C A ME BEFORE THE HON ' BLE HIGH COURT WHICH HELD TH A T 'ON THE FINDINGS RECORDED BY THE TRIBUNAL THAT THE LA N D WAS AGRICUL T URAL LA ND A N D STOOD BEYON D 8 KMS OF T H E MUNICIPAL LIMITS OF SA HAR ANPUR, IT W AS NO T INC L UD ED I N THE DEFIN I TIO N O F CAPITAL A S SE T S AS GIVEN IN SECTION 2(14)(III) OF TH E AC T . THUS , T HERE IS NO I NFIRMI T Y I N THE ORDER OF THE TRIBU N AL '. FURTHE R IN THE CA S E OF HA M I K S PARK P VT . L T D. V S. WA R D-2( 2 ) , HYDE R A B AD (201 4 ) 41 T A X M AN . C OM 10 9 (HYD- T RI BE ), TH E HONBLE ITA T, WHIL E EXAMININ G T HE C A S E OF A S S E S S EE WHO W A S E N G A GE D IN AGRICULTUR A L OPERATIO N ON LA N D C LASSIFIED AS A G RICULTURAL LAND IN RE V ENU E RE C ORDS AND TR A N S F E RRED S UCH L AND O N AS I S AND WH E RE IS BA S I S TO A DEV E LOPER HELD THAT SINC E T H E LA ND WAS S ITU A T E D IN RURAL AREA OUTSIDE THE MUNICIPAL LIMITS , A N D SINCE AGRI CU LT U R AL OPERATIONS W E R E B E ING CAR R IED OUT BY THE ASSESSEE ON T HE SAID LAND A N D SINCE IT WAS CLASSIF I ED AS AGRICULTURAL LAND IN REVENUE RECORDS , THE SA I D LAND D ID NOT COME WITHIN THE PURVIEW OF CAPITAL ASSET ULS 2(14) OF THE I . T . ACT, 1961 AND, THEREFORE, THE PROFIT EARNED ON THE SALE OF LAND WAS AGRICULTURAL INCOME OF THE ASSESSEE LIABLE TO BE EXEMPT FROM TAX . IN THE CASE OF MANIBHAI MOTIBHAI PATEL VS . CIT 131 ITR 120 (GUJ . ) , THE HON'BLE HIGH COURT HELD THAT IN A CASE WHERE THE LAND WAS USED FOR AGRICULTURAL PURPOSES RIGHT FROM THE BEGINNING , THE SALE OF LAND FOR HOUSE CONSTRUCTION AND THE PERSONS OF BUILDING PROJECTS IN THE VIC I NITY OF THE LAND WAS NOT MATERIAL . IT WAS HELD THAT THE LANDS WERE AGRICULTURAL LAND A T THE TIME OF SALE AND THEREFORE , PROFIT ON THE SALE OF LAND WAS COMPLETELY IMMATERIAL. IN CIT-I/, CH A NDIGARH VS. HARJIT SINGH SANGHA (2003) 217 TAXMAN 201 , THE PUNJAB & HARYANA HIGH COURT OBSERVED IN A CASE WHERE THE ASSESSEE SOLD HIS AGRICULTURE LAND I N SMALL SIZE PLOTS AND THE ASSESSING OFFICER CHARGED TAX ON THE PROFIT 'THE ITA NO.6231/DEL/2016 7 SAID ASSET BEING HELD BY THE ASSESSEE CANNOT BE SAI D TO BE A BUSINESS ASSET AND ITS SALE IN SMALL PLOTS OF LAND TO DIFFERENT PURCHASER IS NOT A ADVENTURE IN THE NATURE OF TRADE, IN THE ABSENCE OF THE ASSESSEE HAVING FLOATED THE SAME OR DIVIDED I T S LAND FOR THE PURPO S E O THER THAN AGRICULTURE LAND . FURTHER FOR CONVERTING THE USE , PRIOR PERMISSION IS REQUIRED FROM THE AUTHORITIES AND IN THE ABSENCE OF ANY PERMISSION BEING OBTAINED BY THE ASSESSEE FROM PUDA AUTHORITIE S IN RESPECT OF THE LA N D SOLD , MERELY BECAUSE THE LAND IS SOLD IN SMALLER PLOTS TO PERSONS , WHO INTENDED ITS RESIDENTIAL USE , DOES NOT CHANGE THE NATURE OF LAND SOLD IN THE HANDS OF THE ASSESSEE , AND IT ' S TAXABILITY . ' A SIMILAR ISSUE WAS CONSIDERED BY THE HON ' BLE CHANDIGARH BENCH OF ITAT IN THE CASE OF WEALTH TAX OFFICER VS . SUKHPAL SINGH (1989) 42 TAXMAN 119 (CHD). IN THE SAID CASE , THE ASSESSEE HAD CLAIMED THAT CERTAIN LAND O WN ED BY HIM WAS AGRICULTURAL LAND FOR THE PURPOSE OF COMPUTING HIS NET W EALTH . T H E RECORDS SHO W ED THAT AS LONG AS AS S ESSEE REMAINED THE O W NER OF THE LAND HE DID NOT USE THE LAND FOR ANY N ON AGR I CUL T URAL PURPOSES , ALTHOUG H HE CARVED AND SOLD O UT THE PLOTS OUT OF IT AND HAD MADE PROVISION FO R APPROACH ROADS AS PER OUTLAY WHICH HAD BEEN SEIZED DURING SEARCH OF HIS PREMISE S. THE HON ' BLE ITA T HELD THAT LAND BEING AGRICULTURAL IN FIRST INSTANCE A ND THE USE OF LAND NOT HAVING BEEN ACTUALLY CHANGED BY THE ASSESSEE IT SHOULD BE HELD TO BE AGRICULTURAL LAND IN HIS HANDS . IT FURTHER OBSERVED THAT THE PURCHASER INTENDE D TO EXPLOIT THE USE OF LAND FOR THE PURPOSE OF CONSTRUCTION , BU T IT W AS NOT THE ASSESSEE WHO WAS TO RAISE ANY BUILDING THEREON AND , THEREFORE , SO FAR AS THE AS S ESSEE WAS CONCERNED, IT NEVER CEASED TO BE AGRICULT URAL LAND AND BECAUSE THE AS S ESSEE SO LONG AS HE REMAINED THE OWNER OF THE LAND DID NOT USE IT FOR NON- AGRICULT U RAL PURPOSES , THE ASSESSEE'S LANDS COULD NOT BE TREATED AS NON AGRICULT U RAL LAND FOR T H E P U R POSE OF COMPUTING OF HIS NET WEALTH . IN THE CASE OF M.S . SRINIVAS NAICKE R V . ITO (2008) 169 TAXMAN 255 (MAD . ) , THE HON ' BLE HIGH COURT OF MADRAS OBSE R VED THAT THE CHARGEABILITY OF TA X ULS 4 5 ARISE ONLY IF ON THE DATE OF SALE , THE LAND IN QUESTION RETAINED IT CHAR A CTER AS A CAPITAL ASSET , WHICH MEANS , AN ASSET W HICH D I D N O T ANSWER TO THE DESCRIP TI O N O F CAPITAL ASSET AND WHICH IS AN AGR I C U LTU RA L L AN D FA LLIN G WITHI N TH E D E FINITION OF SE C T IO N 2( 14) WOUL D AUTOMAT I CALLY BE O UTS I DE O F TH E SE C T I O N 4 5. WH A T E MERGES FROM ALL TH E SE CASE LAWS IS T H AT O N CE I T IS ES T ABLISHED THA T TH E LAND IN QU EST I O N WAS H ELD OUTS I DE 8 KMS FROM M U NICIP A L L IMI TS OR EVE N W ITH I N 8 KMS B U T NO NOTI F ICA T IO N H AD BEEN I T THEN EVEN IF THE A SSE S SEE DI V IDED TH E LAND I N TO S MA LL PLOTS A ND SOLD I T , TH E THE NATURE OF THE LAND DID NOT CHANGE AS F AR A S T H E ASS E SS E E W AS CON C ERN E D AND SINCE IT W AS N O T A CAPITAL ASSET , C APITAL GAIN S T A X C OULD NOT BE CHARGED O N T H E S A M E . APPLYING T HE L OG I C OF THE S A ID JUDG E M E NT S , I T IS H E LD T HAT THE COMPUTATION O F CA P ITAL G A IN S O F R S . 10 , 59 , 411/- BY TH E A . O . ON THE GROUNDS THA T THE SA M E H A D B E EN D EC L A RED BY THE ASSESSEE IN T HE R ETURN IS N O T SU S TAINABLE BECA U SE TH E LAND W A S BOTH OUTSIDE 8 KM OF MUNICIPAL LIMITS AND NO NOTIFICATION HAD BEEN IS SUED FOR KOTDWAR PLUS THERE WAS EVIDENCE TO INDICATE AGRICULTURAL OP ERATION ON THE LAND. 3.1 IN THE CIRCUMSTANCES FOR THE DETAILED REASONS A S STATED ABOVE, ITA NO.6231/DEL/2016 8 THE ADDITION OF RS.11,66,616/- ON ACCOUNT OF LONG T ERM CAPITAL GAINS IS DELETED. 5. AFTER PERUSING THE ORDER, I FOUND THAT THE ORDER OF THE LEARNED CIT(A) IS QUITE REASONED ONE AND IS BASED ON THE ID ENTICAL ISSUE DEALT WITH BY THE LEARNED CIT(A) IN THE PRECEDING YEAR SI NCE THE ASSESSEE WAS NOT ACCORDED THE BENEFIT OF CROSS-EXAMINING THROUGH SHRI TAZBAR SINGH BHANDARI AND THE PURCHASER SHRI DHARMENDRA SINGH AN D SUCH STATEMENT CANNOT BE USED AGAINST THE ASSESSEE. THE ONLY QUEST ION IS WHETHER THE MIDDLEMEN, NAMELY, SHRI AYODHYA PRASAD SEMWAL AND S HAMIM AHMAD ENTERED INTO AN AGREEMENT WITH SHRI TAJBAR SINGH BH ANDARI OR NOT. IT IS IMMATERIAL TO THE ASSESSEES CASE. ONCE THEY HAVE C ONFIRMED THAT THEY PAID THE MONEY TO THE ASSESSEE ON ACCOUNT OF THE SA LE OF HIS LAND, THE SOURCE OF THE MONEY IS TO BE INVESTIGATED IN THEIR HANDS. AS FAR AS THE ASSESSEE IS CONCERNED, THE SOURCE IS EXPLAINED. THE REFORE, IT CANNOT BE REGARDED AS UNEXPLAINED INVESTMENT AND BROUGHT TO T AX AS SUCH. THEREFORE, THE ADDITION MADE BY THE AO ON THIS ACCO UNT IS UNSUSTAINABLE. I DO NOT FIND ANY INFIRMITY IN THE REASONING GIVEN BY THE LEARNED CIT(A) WHOSE ORDER IS GIVEN HEREINABOVE, THEREFORE, THE GR OUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 20 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 20/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S.