M/s Blue Coast Infrastructure Development P. Ltd., Solan V. DCIT, Parwanoo

ITA 652/CHANDI/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1116 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 07-08-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Principle of natural justice; Tangible material; Reason to believe; Capital Gains
• Section: 2(14); 133A; 13; 147; 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 652/CHD/2017 ! / ASSESSMENT YEAR : 2008-09 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, SHOPPING COMPLEX, SECTOR-1, PARWANOO, DISTT. SOLAN, H.P. VS. '# DY. COMMISSIONER OF INCOME TAX, CIRCLE, PARWANOO $% ./ PAN NO: AABMC4010E $&/ APPELLANT ()$& / RESPONDENT *+,- /ASSESSEE BY : SHRI SUDHIR SEHGAL, ADVOCATE ,- / REVENUE BY : SHRI CHANDRAJIT SINGH, CIT-DR . /,+0% /DATE OF HEARING : 11.11.2019 12! ,+0% / DATE OF PRONOUNCEMENT : 11 .12.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 13.02.2017 OF THE COMMISSIONER OF INCOM E TAX (APPEALS), SHIMLA, H. P. [HEREINAFTER REFERRED TO AS CIT(A)] . 2. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT T HE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING ITS INCOME FOR THE YEAR UNDER CONSIDERATION AT RS. 57,000/-. THE ASSES SING OFFICER (IN SHORT AO), SUBSEQUENTLY GATHERED INFORMATION THAT THE A SSESSEE HAD PURCHASED A LAND IN GOA IN THE F.Y. 2001-02, WHICH WAS SOLD DURING THE ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 2 F.Y. 2007-08 RELEVANT ASSESSMENT YEAR 2008-09, BUT THE ASSESSEE HAD NOT OFFERED ANY CAPITAL GAINS ON THE ABOVE SAID TRANSAC TION. THE A.O., THEREFORE, REOPENED THE ASSESSMENT FOR THE YEAR UND ER CONSIDERATION AY 2008-09. 3. DURING THE REOPENED ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE COMPANY HAD PURCHASED LAND MEASURING 1 31425 SQ. MTRS IN SURVEY NO. 87/1A AT VAREM, REIS MAGOS, GOA FROM M/ S REIS MAGOS ESTATES PVT. LTD. ON 26.07.2001 VIDE REGD. SALE DEE D FOR A CONSIDERATION OF RS. 9,76,00,000/- . THE ASSESSEE COMPANY KEPT T HIS LAND WITH IT FOR A PERIOD OF SIX YEARS. THE COMPANY FURTHER SOLD THE S AID LAND FOR A CONSIDERATION OF RS.60 CRORES TO M/S DELANCO HOME & RESORTS PVT. LTD. ON 09.04.2007. ON BEING ASKED TO EXPLAIN BY THE AO AS TO WHY NO CAPITAL GAINS WERE RETURNED IN THE INCOME-TAX RETUR N IN RESPECT OF THE ABOVE SAID TRANSACTION, THE ASSESSEE COMPANY EXPLAI NED THAT THE LAND IN QUESTION WAS AN AGRICULTURAL LAND SITUATED AT A DIS TANCE OF MORE THAN 8 K.M. FROM THE MUNICIPAL LIMITS OF PANAJI AND FALLS IN THE REVENUE JURISDICTION OF VILLAGE REIS MAGOS, HAVING POPULATI ON OF LESS THAN TEN THOUSANDS. IT WAS, THEREFORE, CONTENDED THAT THE S AID LAND DID NOT FALL IN THE DEFINITION OF CAPITAL ASSET, HENCE, WAS EXEMPT FROM CAPITAL GAINS TAX AS PER THE PROVISIONS OF SECTION 2(14) OF THE INCOM E TAX ACT, 1961 (IN SHORT 'THE ACT'). 4. THE ASSESSING OFFICER, HOWEVER, DID NOT AGREE WI TH THE ABOVE CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THE LA ND IN QUESTION WAS ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 3 CLASSIFIED AS RESIDENTIAL LAND BY THE DISTRICT ADMI NISTRATION/LAND REVENUE AUTHORITIES IN THE YEAR 1994. THAT THE VILL AGE PANCHAYAT OF REIS MAGOS HAD ISSUED PERMISSION FOR CONSTRUCTION O F RESIDENTIAL COMPLEX ON THE AFORESAID LAND IN THE YEAR 1995-96 I .E. PRIOR TO THE PURCHASE OF LAND BY THE ASSESSEE AND THAT EVEN THE SAID PERMISSION WAS RENEWED FROM TIME TO TIME UP TO YEAR 2009. THE AO F URTHER OBSERVED THAT THE INTENTION OF THE ASSESSEE COMPANY WAS NEVE R TO USE THE LAND FOR AGRICULTURAL PURPOSES. THAT THE ASSESSEE COMPANY WA S IN THE BUSINESS OF REAL ESTATE AND THE LAND WAS PURCHASED BY THE ASSES SEE COMPANY FOR DEVELOPMENT OF HOTEL PROJECT / HOUSING PROJECT. THE A.O. IN THIS RESPECT RELIED UPON THE CLAUSES OF AGREEMENT TO SALE. THE A O FURTHER OBSERVED THAT EVEN THE ASSESSEE COMPANY COULD NOT PROVE WITH CONVINCING EVIDENCE THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT ON THE SAID LAND. THE AO FURTHER OBSERVED THAT EVEN THE SAID LAND WAS WITHIN 8 K.M. OF THE MUNICIPAL LIMITS OF PANAJI AND THAT THE POPULAT ION OF PANAJI WAS MORE THAN TEN THOUSAND PERSONS AS PER CENSUS OF 200 1. HE, THEREFORE, OBSERVED THAT THE LAND IN QUESTION WAS NOT EXEMPT F ROM TAXATION AS PER THE PROVISIONS OF SECTION 2(14) OF THE INCOME TAX A CT. HE FURTHER OBSERVED THAT THOUGH THE POPULATION OF VILLAGE REIS MAGOS WAS LESS THAN TEN THOUSANDS BUT SINCE THE LAND FELL WITHIN 8 K.M. OF MUNICIPAL LIMITS OF PANAJI , HENCE, THE CONTENTION OF THE ASSESSEE T HAT THE LAND DID NOT FALL WITHIN THE DEFINITION OF THE CAPITAL ASSET AS PER S ECTION 2(14)(III) OF THE ACT WAS NOT FACTUALLY CORRECT. HE FURTHER OBSERVED THAT THE CONTENTION OF THE ASSESSEE COMPANY THAT THE DISTANCE WAS TO BE ME ASURED BY ROAD WAS ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 4 ERRONEOUS. HE HELD THAT THE DISTANCE CAN BE MEASURE D EITHER BY METTLED (PUCCA) ROAD OR BY AN UNMETTLED ROAD (KUCHCHA ROAD) . HE FURTHER OBSERVED THAT EVEN NEITHER THE ASSESSEE NOR THE BUY ER OF THE LAND WERE AGRICULTURIST. THAT MERE PURCHASING OF AGRICULTURAL LAND WOULD NOT MAKE THE ASSESSEE AN AGRICULTURIST. HE, THEREFORE, CONCL UDED THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE LAND IN QUESTION WAS N OT CHARGEABLE CAPITAL GAINS TAX. HE, ACCORDINGLY COMPUTED THE CAPITAL GAI NS AND MADE THE IMPUGNED ADDITION TO THE INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER, THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) BUT REM AINED UNSUCCESSFUL. HENCE, THE ASSESSEE HAS COME IN APPEAL BEFORE THIS TRIBUNAL RAISING THE FOLLOWINGS CONCISE GROUNDS OF APPEAL: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO REOPENING OF THE CASE U/S 148. 2. A). THAT THERE WAS NO REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND FURTHER, TH ERE WAS NO COGENT MATERIAL WITH THE ASSESSING OFFICER FOR F ORMING THE BELIEF FOR THE PURPOSE OF REOPENING OF THE CASE U/S 148. B). THAT THE REASONS IN ITSELF AS RECORDED BY THE A SSESSING OFFICER ARE VAGUE AND WITHOUT ANY SUBSTANCE FOR THE PURPOSE OF TAKING RECOURSE TO SECTION 148 OF THE INCOME TAX ACT, 1961 3. NOTWITHSTANDING ABOVE SAID GROUND OF APPEAL, TH E LD. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER THAT THE LAND IN QUESTION, AS SOLD BY THE ASSESSEE CANNO T BE CLASSIFIED AS AGRICULTURAL LAND SINCE AS PER REVENUE RECORDS, IT IS AN ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 5 AGRICULTURAL LAND AND AGRICULTURAL OPERATIONS HAVE BEEN CARRIED OUT AND FURTHER NO CONSTRUCTION ACTIVITY HAD BEEN C ARRIED OUT ON THE SAID LAND BY THE ASSESSEE, TILL ITS SALE AFTER SIX YEARS OF PURCHASE TO THE OTHER PARTY. 4. THAT THE RELIANCE BY THE ASSESSING OFFICER AND C IT (A) ON THE STATEMENT OF SH. SURESH PARULEKAR RECORDED AT THE B ACK OF THE ASSESSEE, IS TOTALLY UNJUST AND AGAINST THE PRINCIP LES OF NATURAL JUSTICE AND ALSO AGAINST THE PRINCIPLES LAID DOWN B Y THE HON'BLE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM AS REPORTED IN 125 ITR 713 AND IN THE CASE OF TEK RAM AS REPORTED IN 357 ITR 133 (SC). 5. THAT THE NUMEROUS DETAILS AND DOCUMENTARY EVIDE NCES IN THE FORM OF VARIOUS CERTIFICATES FROM VILLAGE PANCHAYAT AND OFFICE OF THE MAMLATDAR, AFFIDAVIT OF REGISTERED LAND VALUER AND NUMEROUS OTHER EVIDENCES HAD BEEN FURNISHED, WHICH CONFIRMS THAT THE LAND IN QUESTION WAS MORE THAN 10 KILOMETE RS AWAY FROM THE LIMITS OF THE 'PANAJI' AND, AS SUCH, THE C IT (A) HAVING CONSIDERED AND EXAMINED ALL SUCH DOCUMENTARY EVIDEN CE SHOULD HAVE GIVEN CATEGORICAL FINDING THAT THE LAND IN QUE STION WAS MORE THAN 10 KILOMETERS AWAY FROM MUNICIPAL COMMITT EE, RATHER THAN HOLDING THAT THE ISSUE IS ONLY AN ACADE MIC AS NOTHING ADVERSE HAS BEEN POINTED OUT BY THE CIT(A) AGAINST SUCH DOCUMENTARY EVIDENCES. 6. THAT ALL SUCH EVIDENCES CONFIRM THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND AND IS MORE THAN 10 KILOMETERS AW AY FROM MUNICIPAL COMMITTEE AND, AS SUCH, THE CIT (A) HAS E RRED IN HOLDING THAT THE LAND WAS CAPITAL ASSET, WHICH IS A GAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOS ED OFF. 6. WE HAVE HEARD THE RIVAL CONTENTION AND HAVE ALSO GONE THROUGH THE RECORD. OUR FINDING IN RESPECT OF THE ISSUES RAISED IN THIS APPEAL IS AS UNDER. FIRSTLY, WE TAKE UP THE LEGAL ISSUE RAISED V IDE GROUNDS NO. 1 & 2. ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 6 GROUND NO. 1 & 2 7. THE ASSESSEE THROUGH ABOVE GROUNDS OF APPEAL HAS CONTESTED THE VALIDITY OF THE REOPENING OF THE ASSESSMENT U/S 147 READ WITH SECTION 148 OF THE INCOME TAX ACT. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS INVITED OUR ATTENTION TO THE REASONS RE CORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT, WHICH READ AS UNDER: M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT LTD., 7, SHOPPING COMPLEX, SECTOR-1, PARWANOO ASST YEAR 2008-09 REASONS: DATED : 08.05.2012 IN THIS CASE, INFORMATION WAS RECEIVED FROM THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PANAJI THAT A SEARCH WAS CARRIED OUT AT THE RESIDENCE OF SH. SURESH V. PARUL EKAR ON 17.11.2009, WHEREIN A COPY OF SALE DEED BETWEEN M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT LTD. AND M/S DELANCO HOME & RESORTS PVT . LTD. WAS FOUND. DURING SEARCH OPERATION, IT WAS STATED BY SH . PARULEKAR THAT HIS COMPANY M/S REIS MAGOS ESTATES PVT LTD., HAD SOLD L AND OF 131425 SQ. MTRS. IN SURVEY NO.87/1- A, VEREM, REIS MAGOS, GAO TO M/S MOREPEN HOLIDAY RESORTS LTD. (NOW M/S. BLUE COAST INFRASTRUCTURE DEVELOPMENT LTD.) ON 26.07.2001 FOR A CONSIDERATION OF RS. 9,76 ,00,000/-. WHICH WAS SUBSEQUENTLY SOLD TO M/S. DELANCO HOME.& RESORTS PV T. LTD. ON 09.04.2007 FOR A CONSIDERATION OF RS.60,00,00 000/- . ACCORDING TO ARTICLE 4.1(1) OF THE SALE DEED, THE A BOVE SAID LAND FALLS UNDER S2 ZONE AS PER THE MASTER DEVELOPMENT P LAN OF GOA WHICH IS APPROVED FOR RESIDENTIAL PURPOSES. ON ENQUIRING THE STATUS OF THE LAND, IT WAS GATHERED THAT NO AGRICULTURAL OPERATIO NS HAD BEEN CARRIED ON THE SAID LAND FOR THE LAST 20-30 YEARS AND THE L AND IS SITUATED WITHIN FOUR KILOMETERS OF THE PANAJI MUNICIPALITY. FURTHE R, IT HAS BEEN NOTICED THAT THE ASSESSEE COMPANY IS IN THE BUSINESS-OF INF RASTRUCTURE DEVELOPMENT FOR THE HOSPITALITY SECTOR AND CARRYING OUT AGRICULTURAL OPERATION IS NOT ITS OBJECTIVE. FURTHER, THE COMPAN Y HAD ALSO NOT DISCLOSED ANY AGRICULTURE INCOME FROM THE SAID LAND IN ITS RETURNS OF INCOME FILED AFTER PURCHASE OF THE LAND. ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 7 THE ASSESSEE COMPANY HAD FILED ITS RETURNS FOR THE A.Y 2008-09 (RELEVANT TO THE PERIOD DURING WHICH THE SAID LAND WAS SOLD) ON 30.09.2008, HOWEVER, THE INCOME OF RS.60,00,00,000/ - HAS NOT BEEN REFLECTED. IN THE GIVEN FACTS & CIRCUMSTANCES OF THE CASE, 1 H AVE REASONS TO BELIEVE THAT DUE TO FAILURE ON THE PART OF THE ASSE SSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT OF ITS TOTAL INCOME FOR THE A.Y. 2008-09, INCOME TO THE EXTENT OF RS.60 CRORES HAS ESCAPED ASSESSMENT FOR WHICH PROCEEDINGS U/S 147 ARE BEING INITIATED. ISSUE NOTICE U/S 148 FOR THE A.Y. 2008-09. SD/- (ANSHUMAN SHARMA) DY. COMMISSIONER OF INCOME TAX CIRCLE, PARWANOO 8. A PERUSAL OF THE ABOVE REASONS RECORDED BY THE A SSESSING OFFICER FOR REOPENING OF THE ASSESSMENT REVEALS THAT THE AS SESSING OFFICER HAD RECEIVED INFORMATION FROM THE DY. C.I.T., CENTRAL C IRCLE, PANAJI THAT DURING THE SEARCH ACTION CARRIED OUT AT HIS RESIDEN CE OF SH. SURESH V. PARULEKAR, A COPY OF SALE DEED OF LAND BETWEEN M/S DELANCO HOME & RESORTS PVT. LTD. AND THE ASSESSEE WAS FOUND. IN HI S STATEMENT SH. PARULEKAR STATED THAT HIS COMPANY M/S REIS MAGOS ES TATE PVT. LTD. HAD SOLD THE AFORESAID LAND TO THE ASSESSEE COMPANY FOR RS.9,76,0,000/- WHICH WAS SUBSEQUENTLY SOLD TO M/S DELANCO HOME & R ESORTS PVT. LTD. ON 09.04.2007 FOR A CONSIDERATION OF RS.60 CRORES. THE ASSESSING OFFICER, HOWEVER, HAS REPRODUCED THE RELEVANT PART OF THE STATEMENT OF SH. S. V. PARULEKAR IN THE ASSESSMENT ORDER WHICH I S FURTHER REPRODUCED AS UNDER: RELEVANT PORTION OF THE STATEMENT OF MR. SURESH PA RULEKAR RECORDED ON 26.02.2010 IS EXTRACTED AS UNDER: ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 8 'Q NO. 3 PLEASE FURNISH DETAILS OF TRANSACTION WIT H MS MOREPEN HOLIDAY RESORTS LTD., WHICH IS NOW RENAMED AS M/S B LUE COAST INFRASTRUCTURE LTD. ANS: M/S REIS MAGOS ESTATES PVT. LTD HAS SOLD LAND OF APPROXIMATELY 1,30,000 SQ. MTRS IN SURVEY NO. 87 IA AT REIS MAGOS, BARDEZ TALUKA, GOA TO THE ABOVE COMPANY. THE SALE DEED WAS REGISTERED IN 2002 OR THERE ABOUT IN THEIR NAME. THIS COMPANY BELONGS TO THE GROUP OF M/S PARK HYATT HOTELS. Q. NO. 4 PLEASE FURNISH DETAILS OF THE ACQUISITION OF THE ABOVE LAND BY M/S REIS MAGOS ESTATES PVT. LTD. ANS. M/S REIS MAGOS ESTATES PVT. LTD HAS PURCHASED THIS LAND IN THE YEAR 1994. THE LAND IN SURVEY NO. 87/1A WAS ABOUT 1,30,000 SQ. MTRS WAS SOLD TO M/S MOREPEN HOLIDAY RESORTS LTD., WHICH IS NOW RENAMED AS M/S BLUE COAST INFRASTRUCTURE LTD. Q. NO. 5 PLEASE FURNISH THE DETAILS OF ALL THE AGRI CULTURAL OPERATIONS CURRIED ON BY THE M/S REIS MAGOS ESTATES PVT. LTD., PRIOR TO ITS SALE TO M/S MOREPEN HOLIDAY RESORTS LTD., WHICH IS NOW RENA MED AS M/S BLUE COAST INFRASTRUCTURE LTD. ANS. THE ABOVE LAND WHICH IS SOLD IS SLOPPY AND TER RAIN IS HILLY. APPROXIMATELY IN THE YEAR 1995-96, THIS LAND WAS CO NVERTED INTO SETTLEMENT ZONE FOR THE RESIDENTIAL PURPOSE. HAVE NOT CARRIED OUT ANY AGRICULTURAL OPERATION AT ANY LIME ON THE ABOVE LAN D WHICH IS SOLD TO M/S MOREPEN HOLIDAY RESORTS LTD., WHICH IS NOW RENA MED AS M/S BLUE COAST INFRASTRUCTURE LTD.. WE HAVE SOLD THE CONVERT ED LAND ALONG WITH ALL THE CONVERSION APPROVALS TO M/S MOREPEN GROUP. Q. NO. 6 HAVE YOU CLAIMED ANY EXEMPTION ON THE PROF IT FROM SALE OF LAND TO M/S MOREPEN GROUP. ANS. NOW WE HAVE DECLARED THE PROFIT ON THE SALE OF ABOVE LAND AT REIS MAGOS AS BUSINESS INCOME AND PAID TAX. Q. NO. 7 PLEASE FURNISH THE DETAILS OF THE PRESENT STATUS OF THE LAND. ANS. THIS LAND IS ADJACENT TO INS MANADOVI. I HEARD THAT IT WAS SUBSEQUENTLY SOLD TO M/S DLF GROUP. 9. A PERUSAL OF THE ABOVE STATEMENT RECORDED OF MR. SURESH PERULEKAR, DIRECTOR OF M/S REIS MAGOS ESTATES PVT. LTD. REVEAL S THAT DURING THE SEARCH ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 9 ACTION AT THEIR PREMISES WHAT WAS FOUND WAS THE COP Y OF THE SALE DEED EXECUTED BETWEEN M/S REIS MAGOS ESTATES PVT. LTD. A ND THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER IN THE REASONS RECOR DED FOR REOPENING OF THE ASSESSMENT HAS MENTIONED THAT DURING THE SEARCH ACT ION EXECUTED BETWEEN ASSESSEE AND M/S DELANCO HOME AND RESORTS PRIVATE L IMITED WAS FOUND. THIS FACT MENTIONED BY THE ASSESSING OFFICER IS CONTRARY TO THE EFFECT COMING OUT OF THE STATEMENT OF MR. PERULEKAR . IN HIS REPLY TO QUESTION NO. 7, MR. PERULEKAR HAS STATED THAT HE HAS HEARD THAT THE LAND HAS BEEN SUBSEQUENTLY SOLD BY THE ASSESSEE TO M/S. DLF GROUP. MR.PERULEKAR DID NOT SH OW ANY DIRECT OR SPECIFIC KNOWLEDGE ABOUT THE FACT THE SALE OF LAND OR AS TO THE TERMS OF THE SALE DEED OF SALE CONSIDERATION SETTLED . FROM THE ABOVE FACTS, IT IS APPARENT THAT THE ASSESSING OFFICER HAS WRONGLY MENTIONED THAT DURING RESEARCH ACTION A COPY OF THE SALE DEED BETWEEN THE ASSESSEE AND M/S. DELANCO HOME AND RESORTS PRIVATE LIMITED WAS FOUND OR THAT MR. PERUL EKAR IN HIS STATEMENT HAD STATED THAT THE ASSESSEE HAD SOLD THE LAND AT A SALE CONSIDERATION OF RS. 60 CRORES TO M/S. DELANCO HOME AND RESORTS PVT. LTD. HENCE, THE VERY BASIS OF INFORMATION LEADING THE ASSESSING OFF ICER TO FORM BELIEF THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSM ENT IS WRONGLY AND FALSELY MENTIONED BY THE ASSESSING OFFICER. NOW THE QUESTION THAT ARISES AS TO IF THE ASSESSING OFFICER DID NOT FORM HIS BELIEF FROM THE INFORMATION, IF ANY RECEIV ED FROM THE DCIT, PANAJI, AS ALLEGED IN THE REASONS RECORDED, THEN WH AT WAS THE SOURCE OF INFORMATION TO THE ASSESSING OFFICER OF THE SALE DE ED ENTERED INTO BY THE ASSESSEE WITH M/S DELANCO HOME AND RESORTS PVT. LTD . THE LD. COUNSEL ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 10 FOR THE ASSESSEE IN THIS RESPECT HAS INVITED OUR AT TENTION TO THE EARLIER CORRESPONDENCE OF THE ASSESSEE WITH THE OTHER INCOM E TAX AUTHORITIES. AT PAGE 25 OF THE PAPER BOOK, THERE IS A COPY OF THE LETTER DATED 04/03/2010 ISSUED BY DCIT, CIRCLE PARWANOO, (ASSSEE SSING OFFICER) WHEREIN, IT HAS BEEN MENTIONED THAT A SURVEY ACTION UNDER SECTION 133A OF THE INCOME-TAX ACT WAS CARRIED OUT AT THE PREMIS ES OF THE ASSESSEE DURING THE COURSE OF WHICH SOME DOCUMENTS REGARDING THE SALE OF LAND BY THE ASSESSEE M/S. DELANCO HOME RESORTS PRIVATE L IMITED HAVE BEEN FOUND. THE ASSESSING OFFICER, ACCORDINGLY, THROUGH THIS LETTER CALLED FOR INFORMATION REGARDING THE ABOVE AFORESAID SALE DEED ASKING THE ASSESSEE TO FURNISH THE DATE OF PURCHASE AND THE NAME OF PAR TY FROM WHOM THE LAND WAS PURCHASED, THE AREA OF THE LAND, THE COPY OF THE SALE DEED, AMOUNT OF SALE CONSIDERATION RECEIVED, WHETHER ANY CAPITAL GAINS TAX HAS BEEN PAID IN RESPECT OF THE AFORESAID SALE TRANSACT ION AND FURTHER THE RELEVANT DOCUMENTS LIKE INCOME TAX RETURN, P&L ACCO UNT, BALANCE SHEET ETC. ALONG WITH OTHER RELATED DETAILS AND INFORMATI ON. THE ASSESSEE VIDE LETTER DATED 04/03/2010 REPLIED TO THE QUERIES RAI SED BY ASSESSING OFFICER, WHEREBY, IT WAS EXPLAINED THAT THE LAND IN QUESTION BEING RURAL AGRICULTURAL LAND NOT FALLING IN THE DEFINITION OF CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT, AND HENCE, THE INCOME EARNED FROM THE SALE OF SAID LAND WAS NOT EXIGIBLE TO CAPITAL GAINS TAX. HENCE, NO CAPITAL GAINS TAX HAD BEEN PAID. A CERTIFICATE FROM THE OFFICE OF TAL ATHI OF REIS MAGOS WAS ALSO ENCLOSED TO THE EFFECT THAT THE LAND WAS B EYOND 8 KMS OF THE LIMITS OF NEAREST MUNICIPAL COUNCIL OF PANAJI. NO F URTHER CORRESPONDENCE ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 11 IN CONTINUATION OF THE AFORESAID CORRESPONDENCE BET WEEN THE ASSESSEE AND THE DCIT, PARWANOO (ASSESSING OFFICER) HAS BEE N BROUGHT ON RECORD BY EITHER OF THE PARTIES. THE LD. COUNSEL FO R THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO PAGE 30 OF THE PAP ER BOOK, WHICH IS A COPY OF LETTER DATED 17/05/2010 ISSUED BY THE OFFIC E OF DEPUTY DIRECTOR OF INCOME TAX ( INV.), H.P., SHIMLA, WHEREBY, THE ASSESSEE HAS BEEN ASKED TO ATTEND TO THE PROCEEDINGS BEFORE HIM AND P RODUCE THE NECESSARY DOCUMENTS AND DETAILS AS ASKED FOR. A COPY OF LETTE R DATED 03/09/2010 HAS BEEN PLACED ON THE FILE WHEREBY DEPUTY DIRECTOR OF INCOME TAX (INV.), H.P., SHIMLA, HAS ASKED THE ASSESSEE TO FUR NISH THE REQUIRED DETAILS RELATING TO THE PURCHASE AND SALE OF LAND I N QUESTION. THE ASSESSEE HAS ALSO BEEN ASKED TO EXPLAIN AS TO WHY N OT ANY CAPITAL GAINS TAX HAS BEEN PAID ON THE SALE OF THE LAND IN QUESTI ON. THE PERUSAL OF THE ABOVE AFORESAID LETTER DATED 30/09/2010 REVEALS THA T THE LD. DEPUTY DIRECTOR OF INCOME TAX (INV.), H.P., SHIMLA, HAS RA ISED ALL THE QUERIES AND DOUBTS THAT HAVE BEEN MENTIONED BY THE ASSESSIN G OFFICER IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT AN D HAS ASKED THE ASSESSEE TO GIVE HIS EXPLANATION ABOUT THE SAME . T HE CONTENTS OF THE LETTER DATED 03/09/2010 OF THE DEPUTY DIRECTOR OF I NCOME TAX ( INV.), H.P., SHIMLA, FOR THE SAKE OF READY REFERENCE, ARE REPRODUCED AS UNDER:- SUB:- ENQUIRY PROCEEDINGS - REGARDING PLEASE REFER TO YOUR LETTER DATED JUNE 15, 2010. IN YOUR ABOVE LETTER IT WAS MENTIONED THAT A SURVEY U/S 133A OF THE ACT WAS CONDUCTED BY AO PARWANOO AND DURING THE SURVEY PROCEEDINGS ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 12 THE AO HAD CALLED FOR INFORMATION ON VARIOUS POINTS INCLUDING DETAILS OF YOUR ,BANK STATEMENTS WHICH WERE FURNISHED TO HI M. THIS OFFICE HAS OBTAINED COPIES OF THE RECORDS PERT AINING TO SURVEY ACTION CONDUCTED U/S 133 A OF THE INCOME TAX ACT 19 61 FROM THE OFFICE OF DCIT PARWANOO. IT HAS BEEN GATHERED THAT YOU HAD PURCHASED THE LAND MEASURING 1,31,425 SQ. MTRS OUT OF 1,48,150 SQ . MTRS IN SURVEY NO. 87/1-A, VEREM, REIS MAGOS, GOA FROM M/S REIS MA GOS ESTATES PVT. LTD ON 26. F 07.2001 BY WAY OF REGISTERED SALE DEED FOR A SALE CONSIDERATION OF RS. 9,7600,000/- AND LAND WAS SU BSEQUENTLY SOLD BY YOU TO M/S DELANCO HOME & RESORTS PVT. LTD. ON 9.4. 2007 BY WAY OF REGISTERED SALE DEED FOR A CONSIDERATION OF RS. 60, 00,00,000. AS IT IS GATHERED, THAT YOU HAVE NOT PAID THE TAX ON CAPITAL GAIN ON THE SALE OF THE SAID LAND. IT WAS CLAIMED BY YOU THAT IT WAS AN AGRICULTURAL L AND AND THE PROFIT ON THE SALE OF THE ABOVE LAND ARE EXEMPT. HOWEVER, YOU HAVE NOT BEEN ABLE TO SUBSTANTIATE YOUR CLAIM OF THE SALE DEED T HE ABOVE LAND FALLS. UNDER S2 DEVELOPMENT ZONE AS PER THE MASTER DEVELOPMENT PLAN OF GOA AND THE ABOVE LAND IS APPROVED FOR RESIDENTIAL PURPOSES. THE LAND IS SITUATED WITH IN FOUR KILOMETRES OF THE PAN AJI MUNICIPALITY AND IS IN A DEVELOPED AREA. THE PROVISIONS OF SECTION 4 5 OF THE INCOME TAX ACT 1961 ARE ATTRACTED IN YOUR CASE SINCE THE SALE OF THIS LAND AMOUNTS TO TRANSFER OF CAPITAL ASSETS. AS PER SECTION 2(14) OF THE INCOME TAX ACT 1961, CAPITAL ASSET HAS BEEN DEFINED AS 'CAPITA L ASSET MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLU DE- ..........................(III) AGRICULTURAL LAND I N INDIA, NOT BEING LAND SITUATE- (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICT ION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION NOTIFIED AREA COMMITTEE, TOWN COMMITTEE OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR , OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE TH AN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CE NTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 13 URBANISATION OF THAT AREA AND OTHER RELEVANT CONSID ERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFIC IAL GAZETTE.... THE FOLLOWING POINTS ARE ALSO BROUGHT INTO YOUR KIN D NOTICE: - A) THE LAND OF 1, ,31,425 SQ. MTRS IN SURVEY NO 87/ 1- A AT VEREM REIS MAGOS IS CLASSIFIED AS RESIDENTIAL LAND BY TH E DISTRICT REVENUE ADMINISTRATION IN 1994. B) THE VILLAGE PANCHAYAT REIS MAGOS ISSUED PERMISSI ON FOR CONSTRUCTING RESIDENTIAL COMPLEXES ON THE ABOVE L AND IN 1995-96 AND RENEWED THE SAME FROM TIME TO TIME UN TO THE YEAR 2009. C) THE EARLIER OWNER OF THE ABOVE LAND M/S REIS MAG OS ESTATES PVT. LTD (WHICH HELD THE LAND FOR 7 YEARS) HAS CLAIMED THAT THE LAND IS NON-AGRICULTURAL AND HAS NOT CLAIMED AND EXEMPT ION ON THE PROFIT ON SALE OF THE ABOVE LAND. D) YOU HAVE NOT ACTUALLY CARRIED OUT AGRICULTURAL OPERATIONS ON THE ABOVE LAND AND THERE IS NO DOCUMENTARY EVIDENCE TO PROVE THAT ACTUAL AGRICULTURAL OPERATIONS WERE CARRIED OU T. E) YOU HAVE NOT DECLARED ANY AGRICULTURAL INCOME I N YOUR RETURNS OF INCOME FILED BEFORE THE DEPARTMENT FOR ANY ASSES SMENT YEAR. EVEN THE CONSIDERATION RECEIVED AND PROFIT ON SALE OF THE LAND WERE NOT DISCLOSED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING 31.03.2008. THEY WERE ROUTED THROUGH THE BAL ANCE SHEET ONLY. F) THE PURCHASE CONSIDERATION OF RS. 9,76, 00,000 /- IS NOT PAID FOR THE PURCHASE OF THE AGRICULTURAL LAND BUT WAS A CTUALLY PAID FOR THE RESIDENTIAL LAND. YOU HAVE NOT PURCHASED TH E ABOVE LAND FOR AGRICULTURAL PURPOSES. G) THE SALE CONSIDERATION OF RS. 60 CRORES CANNOT BE PAID FOR AN AGRICULTURAL LAND. THE BUYER M/S DELANCO HOME & RES ORTS PVT. LTD. HAS NOT PURCHASED THE ABOVE LAND FOR AGRICULT URAL PURPOSES. ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 14 H) THE LAND IS SITUATED WITHIN 4 KILOMETRES OF THE PANAJI MUNICIPALITY AND IS IN A DEVELOPED AREA. I) NEITHER YOU NOR M/S DELANCO HOME & RESORTS PVT. LTD . I.E. NEITHER THE SELLER NOR THE BUYER OF THE ABOVE LAND ARE AGRICULTURALISTS. IN VIEW OF THE ABOVE DISCUSSION, YOU ARE HEREBY REQ UIRED TO SHOW- CAUSE WHY THE CLAIM OF EXEMPTION BE NOT REJECTED AN D THE CAPITAL GAINS BE COMPUTED AS UNDER FOR THE A.Y. 2008-09. SALE CONSIDERATION 60,00,0,000 LESS INDEXED COST OF THE LAND 13,88,62,347 10,73,60,000*551/426 LONG TERM CAPITAL GAINS 476,11,37,653 YOUR CASE IS FIXED FOR HEARING ON 18.10.2010. SD/- (SHASHI SAKLANI) DY. DIRECTOR OF INCOME-TAX (INV.) SHIMLA 10. THE ASSESSEE VIDE ITS LETTER DATED 13/10/2010 R EPLIED TO THE ENQUIRIES AND DOUBTS RAISED BY DEPUTY DIRECTOR OF I NCOME TAX ( INV.), H.P., SHIMLA. THE ASSESSEE IN SUPPORT OF ITS CLAIM ALSO FURNISHED COPIES OF THE OFFICIAL LAND REVENUE RECORDS. NO DOCUMENT H AS BEEN BROUGHT ON THE FILE TO SHOW THAT IF ANY FURTHER ACTION WAS TAK EN IN RESPECT OF THE MATTER BY DEPUTY DIRECTOR OF ICOME TAX ( INV.), H.P ., SHIMLA. HOWEVER, THEREAFTER THE ASSESSING OFFICER ON 08/05/ 2012 RECORDED THE REASONS FOR REOPENING OF THE ASSESSMENT MENTION ING THE SAME GROUNDS THAT HAVE BEEN MENTIONED IN DETAIL IN THE L ETTER DATED ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 15 30/09/2010 OF THE DEPUTY DIRECTOR OF INCOME TAX ( I NV.), H.P., SHIMLA. FROM THE ABOVE FACTS COMING OUT OF THE DOCUMENTS ME NTIONED ABOVE, IT APPEARS THAT AFTER CONSIDERING THE REPLY OF THE ASS ESSEE DEPUTY DIRECTOR OF INCOME TAX ( INV.), H.P., SHIMLA DROPPED FURTHER PROCEEDINGS IN RESPECT OF THE MATTER. EVEN IF IT IS ASSUMED THAT D EPUTY DIRECTOR OF INCOME TAX (INV.), H.P., SHIMLA, FURTHER REFERRED T HE MATTER TO THE ASSESSING OFFICER OF THE ASSESSEE, IT IS NOT CLEAR AS TO WHAT PREVENTED THE ASSESSING OFFICER FOR NOT MENTIONING ABOUT THE REPO RT OR REFERENCE RECEIVED BY HIM IN THIS RESPECT FROM THE OFFICE OF DEPUTY DIRECTOR OF INCOME TAX ( INV.), H.P., SHIMLA. THOUGH, THE ASSES SING OFFICER IN THE REASONS RECORDED HAS MENTIONED ALL THE FACTS, CIRCU MSTANCES, REASONS AND DOUBTS AS HAVE BEEN RAISED BY DEPUTY DIRECTOR OF IN COME TAX ( INV.), H.P., SHIMLA, HOWEVER, THE ASSESSING OFFICER HAS ME NTIONED THE BASIS OF INFORMATION AS INFORMATION RECEIVED FROM THE DCIT, CENTRAL CIRCLE, PANAJI, WITHOUT ANY REFERENCE TO THE SURVEY ACTION CARRIED OUT AT THE PREMISES OF THE ASSESSEE AND FURTHER CORRESPONDENCE MADE BY HIS PREDECESSOR ABOUT THE SALE DEED IN QUESTION VIDE HI S LETTER DATED 4.3.2010(SUPRA) AND THE REPLY OF THE ASSESSEE THERE TO VIDE LETTER DATED 4.4.2010. THE FACTS ON THE FILE REVEAL THAT AFTER THE RECEIPT OF INFORMATION FROM DCIT, PANAJI, A SURVEY ACTION WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE FROM WHERE THE SALE DEED I N QUESTION WAS FOUND. THEREAFTER, NOT ONLY THE ASSESSING OFFICER, AS DISCUSSED ABOVE, BUT ALSO THE DEPUTY DIRECTOR OF INCOME TAX (INV.), H.P. , SHIMLA, CARRIED OUT INVESTIGATION IN RESPECT OF THE MATTER. HOWEVER, T HE ASSESSING OFFICER ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 16 HAS CONVENIENTLY OVERLOOKED OR TO SAY SKIPPED THE ABOVE FACTS AND EVENTS IN THE REASONS RECORDED. HAD THE ASSESSING O FFICER MENTIONED ABOUT THE AFORESAID FACT AND EVENTS OF INVESTIGATIO N BY HIS OFFICE AS WELL BY THE OFFICE OF DEPUTY DIRECTOR OF INCOME TAX ( IN V.), H.P., SHIMLA, HE SHOULD HAVE BEEN REQUIRED TO MEET OR TO SAY DEAL W ITH THE REPLY AND EXPLANATIONS FURNISHED BY THE ASSESSEE TO HIS PREDE CESSOR ASSESSING OFFICER AS WELL AS WITH THE RESULT / REPORT ON THE INVESTIGATION CARRIED OUT BY DEPUTY DIRECTOR OF INCOME TAX ( INV.), H.P., SHI MLA, AND HAD TO POINT OUT AS TO WHY HE WAS NOT SATISFIED WITH THE REPLY A ND EXPLANATIONS FURNISHED BY THE ASSESSEE AND THE REPORT THEREOF , IF ANY, OF HIS PREDECESSOR (ASSESSING OFFICER) AND ALSO WITH THE REPORT OF THE DEPUTY DIRECTOR (SUPRA), IF ANY, ON THE INVESTIGATION CARR IED OUT BY HIM IN RESPECT OF THE MATTER. HOWEVER, THE ASSESSING OFFIC ER IN THE REASONS RECORDED SIMPLY PICKED UP THE CONTENTS OF THE LETTE R DATED 30/09/2010 EVEN WITHOUT MAKING ANY REFERENCE OF THE SAID LETTE R. UNDER THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. WITHOUT MEETING WITH THE REPLY AND EXPLANATION OF THE ASSES SEE IN RESPECT OF THE MATTER AS WELL AS WITH THE REPORT/OPINION OF HIS PR EDECESSOR AS WELL THAT OF THE DEPUTY DIRECTOR OF INCOME TAX ( INV.), H.P., SHIMLA, THE ASSESSING OFFICER SIMPLY REOPENED THE ASSESSMENT, W HICH ACTION IN OUR VIEW, NEITHER CAN BE HELD TO BE LEGALLY VALID NOR J USTIFIED. AS PER THE PROVISIONS OF SECTION 147 OF THE ACT, THE AO IS AUT HORIZED TO REOPEN THE ASSESSMENT PROCEEDINGS, IF HE HAS REASON TO BELIEVE THAT ANY INCOME ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 17 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE COURT S OF LAW HAVE TIME AND AGAIN HELD THAT SUCH A REASON TO BELIEVE THAT T HE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT SHOULD BE BASED ON SOME TANGIBLE MATERIAL WHICH COMES TO THE KNOWLEDGE OF THE AO. AN ASSESSMENT CANNOT BE REOPENED UNDER SECTION 147 OF THE ACT ON THE BASIS OF MERE SUSPICION. IT IS A WELL SETTLED PROPOSITION THAT RE ASON TO BELIEVE MUST HAVE A MATERIAL BEARING ON THE QUESTION OF ESCAPEME NT OF INCOME. IT DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION OF T HE ASSESSING AUTHORITY, SUCH REASON SHOULD BE HELD IN GOOD FAITH AND CANNOT MERELY BE A PRETENSE. FURTHERMORE, THE REASONS TO BELIEVE MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATIO N OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF T HE ASSESSING OFFICER AND THE FORMATION OF BELIEF REGARDING ESCAPEMENT OF INCOME. THE POWERS OF ASSESSING OFFICER TO REOPEN AN ASSESSMENT, THOUG H WIDE, ARE NOT PLENARY. THE WORDS OF THE STATUTE ARE 'REASON TO B ELIEVE' AND NOT 'REASON TO SUSPECT'. THERE CAN BE NO MANNER OF DOUB T THAT THE WORDS 'REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST B E THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THAT THE INCOME- TAX OFFICER MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVI DENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE INCOME TAX OFFICER WOULD BE ACTING WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF T HAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELE VANT TO THE BELIEF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMI NE THIS ASPECT, ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 18 THOUGH THE DECLARATION OR SUFFICIENCY OF THE REASON S FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. THE ENTIRE LAW AS TO WHAT WOULD CONSTITUTE 'REASON TO BELIEVE' HAD SUMMED UP BY SUPREME COURT IN INCOME TAX OFFICER V LAKHMANI MEWALDAS (1976) 103 ITR 437. IN THE CASE IN HAND, ALTHOUGH, THE ASSESSING OFFICE R HAD INFORMATION COMING INTO HIS POSSESSION THAT THE ASS ESSEE HAD SOLD THE PROPERTY IN QUESTION BUT HAD NOT RETURNED / PAID TH E CAPITAL GAINS TAX, HOWEVER, HE WAS ALSO AWARE THAT THE NECESSARY ENQU IRIES WERE MADE IN THIS RESPECT NOT ONLY BY HIS OFFICE BUT ALSO BY THE INVESTIGATION WING THAT TOO NOT ONLY DURING THE SURVEY ACTION AT THE P REMISES OF THE ASSESSEE CARRIED OUT U/S 133A OF THE ACT BUT ALSO THEREAFTER . THE ASSESSEE DULY EXPLAINED ABOUT THE TRANSACTION AND EXPLAINED THAT THE LAND BEING AGRICULTURAL AND NOT FALLING WITHIN THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14) OF THE ACT, HENCE, WAS NOT EXIGIBLE TO CAPITAL GAINS TAX. THE ASSESSING OFFICER, WITHOUT HAVING MET WITH THE REPLY AND EXPLANATIONS GIVEN BY THE ASSESSEE AND EVEN NOT MEN TIONING A WORD ABOUT REPORTS THEREOF OF THE CONCERNED OFFICERS, PR OCEEDED TO REOPEN THE ASSESSMENT ON THE SAME PREMISE. THE ASSESSING OFFI CER, FULLY KNOWING THAT IF HE WILL RELY UPON THOSE PROCEEDINGS, HE WIL L HAVE TO MEET AND DISCARD THE REPLY AND EXPLANATIONS OF THE ASSESSEE AND ALSO THE REPORTS, IF ANY, GIVEN BY HIS PREDECESSOR AND BY THE CONCER NED INVESTIGATION AUTHORITIES AND UNDER THE CIRCUMSTANCES HIS ACTION OF REOPENING MIGHT NOT PASS THE TEST OF REASONS TO BELIEVE, HENCE, HE SKIPPED THE ENTIRE ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 19 EPISODE OF EARLIER PROCEEDINGS, BASED HIS REASONS F OR REOPENING OF THE ASSESSMENT ON THE ALLEGED INFORMATION RECEIVED FROM DCIT, CENTRAL CIRCLE, PANAJI, WHICH EVEN , AS DISCUSSED ABOVE, DO ES NOT SUPPORT THE REASONING GIVEN BY THE AO. WHEN THE VERY REASONS O N THE BASIS OF WHICH THE REOPENING, ALLEGEDLY , COULD NOT FORM THE BASIS OF FORMING THE BELIEF BY THE AO THAT THE INCOME OF THE ASSESSEE HA D ESCAPED ASSESSMENT, THE CONSEQUENTIAL REASSESSMENT ORDER FO RMED BY THE AO U/S 147 OF THE ACT IS ILLEGAL AND THE SAME IS ACCORDING LY QUASHED. GROUNDS NO.3 TO 7:- 11. THOUGH, WE HAVE QUASHED THE REASSESSMENT ORDER AS PER OUR ADJUDICATION ON THE ISSUE OF VALIDITY OF REOPENING OF THE ASSESSMENT, HOWEVER, AS BOTH THE PARTIES HAVE ARGUED THE CASE O N FACTS ALSO, HENCE, WE DEEM IT APPROPRIATE TO ADJUDICATE THE MATTER ON FACTUAL MATRIX OF THE CASE ALSO. THE ASSESSING OFFICER HAS BASED HIS FINDINGS ON TH E FOLLOWING POINTS:- I) THE LAND FALLS UNDER DEVELOPMENT ZONE AS PER THE MASTER PLAN AND HAS BEEN APPROVED FOR RESIDENTIAL PURPOSES BY WAY OF GRANT CHANGE OF LAND USER CERTIFICATE (CLU). II) THE ASSESSEE COMPANY HAD PURCHASED THE LAND N OT WITH THE INTENTION TO CARRY OUT AGRICULTURAL ACTIVITIES, RAT HER, FOR CONSTRUCTION PURPOSES. THAT EVEN THE PURCHASE AND S ALE CONSIDERATION WAS VERY EXCESSIVE AS COMPARED TO THE PRICE VALUE OF THE AGRICULTURAL LAND. ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 20 III) THE EARLIER OWNER HAS NOT CLAIMED THE SAID L AND AS AGRICULTURAL, RATHER, HAS RETURNED THE INCOME FROM THE SALE OF LAND AS ITS BUSINESS INCOME. THAT EVEN THE SUBSEQUE NT PURCHASER HAS ALSO NOT PURCHASED THE LAND FOR AGRIC ULTURE PURPOSES, BUT FOR RESIDENTIAL PROJECT. NEITHER THE ASSESSEE NOR THE BUYER IS AGRICULTURIST. IV) ASSESSEE HAD NOT CARRIED OUT ANY AGRICULTURAL ACTIVITIES ON THE LAND AND THAT THE NATURAL GROWTH ON LAND DOES N OT TANTAMOUNT TO AGRICULTURE OPERATIONS. ASSESSEE HAD FAILED TO ESTABLISH THAT ANY AGRICULTURAL OPERATIONS WERE CAR RIED OUT BY THE ASSESSEE. EVEN THE ASSESSEE HAS NOT SHOWN ANY A GRICULTURAL INCOME IN THE RETURN OF INCOME. V) THE LAND IS SITUATED WITH IN 8 KMS (ABOUT 4 KMS) FROM THE PANJIM MUNICIPAL COMMITTEE. 12. THE LD. CIT(A) HAS ALSO RELIED UPON THE ABOVE P OINTS WHILE CONFIRMING THE ORDER OF THE AO. APART FROM THAT, TH E LD. CIT(A) HAS ALSO OBSERVED THAT THE EVIDENCES FURNISHED BY THE A SSESSEE OF THE SALE OF FRUIT/AGRICULTURAL CROP DO NOT INSPIRE CONFIDENCE A S THE PAYMENTS AND RECEIPTS HAVE BEEN SHOWN IN CASH AND THE VOUCHERS A RE SELF-MADE VOUCHERS. NEITHER THE RECEIPTS NOR THE PAYMENTS WE RE THROUGH CHEQUE. THAT THE ASSESSEE NEITHER PURCHASED THE LAND WITH A NY INTENTION TO CARRY OUT ANY AGRICULTURAL ACTIVITY ON THE SAID LAND NOR EVER CARRIED OUT THE SAME. THERE HAS TO BE A SERIES OF OPERATIONS LIKE T ILLING OF LAND, IRRIGATION, MANAGEMENT ETC. WHICH ALL TOGETHER CONS TITUTE AGRICULTURE ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 21 ACTIVITY, BUT THE ASSESSEE HAS FAILED TO PROVE THE CARRYING OF SUCH ACTIVITY. 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PAR TIES IN RESPECT OF EACH OF THE POINT AND HAVE ALSO MINUTELY GONE THROU GH THE RECORD. THOUGH THE CONTENTION OF THE REVENUE THAT THE ASSES SEE COMPANY IS A CONSTRUCTION /DEVELOPMENT COMPANY AND THAT THE LAND IN QUESTION WAS NOT PURCHASED WITH AN INTENTION TO CARRY OUT AGRICU LTURAL ACTIVITIES SEEMS TO BE TRUE, HOWEVER, THIS FACT IN ITSELF, IN OUR VI EW, IS NOT SUFFICIENT TO HOLD THAT THE LAND WAS NOT AN AGRICULTURAL LAND. TH E ASSESSEE HAS PROVED ON THE FILE WITH SUFFICIENT DOCUMENTS IN THE SHAPE OF REVENUE RECORDS THAT THE LAND TILL DATE HAS BEEN CLASSIFIED AS ORCH ARD ZONE. EVEN WHEN THE EARLIER OWNER IN THE YEAR 1994 HAD APPLIED FOR CHANGE OF USER OF LAND FROM AGRICULTURE TO RESIDENTIAL, AN ACTUAL SURVEY A T SITE WAS CARRIED OUT BY THE LAND REVENUE AUTHORITIES WHO REPORTED THAT THE LAND IN QUESTION WAS A MIXED GARDEN. NOT AN IOTA OF EVIDENC E HAS BEEN POINTED OUT TO SHOW THAT THE NATURE OF LAND IN QUESTION HAS EVER BEEN CHANGED EITHER BY THE EARLIER PURCHASER OR BY THE ASSESSEE. MERELY BECAUSE PERMISSION FOR CHANGE OF USER WAS GRANTED BY THE VI LLAGE PANCHAYAT OR THE LAND REVENUE AUTHORITIES, THAT ITSELF IS NOT SU FFICIENT TO CLASSIFY THE LAND AS RESIDENTIAL LAND UNTIL AND UNLESS THE NATUR E AND USER OF THE LAND IS ACTUALLY CHANGED BY AN OVERT ACTIVITY. THOUGH TH E PERMISSION FOR CHANGE OF USER WAS GRANTED AND RENEWED FROM TIME TO TIME BUT THE NATURE OF THE LAND WAS NEVER CHANGED. THE ASSESSING OFFICE R HAS MENTIONED THAT ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 22 PERMISSION FOR CONSTRUCTING THE LAND WERE RENEWED F ROM TIME TO TIME UP TO YEAR 2009 AND THEREAFTER ALSO. THE FACT THAT THE CLU WAS APPLIED AND RENEWED TILL THE SALE OF THE LAND BY THE ASSESSEE P ROVES THAT THE USER OR TO SAY THE NATURE OF THE LAND WAS NOT CHANGED AND T HAT IS WHY THE RENEWAL OF THE PERMISSION WAS SOUGHT FROM TIME TO T IME. HAD THE NATURE OF THE LAND EVER CHANGED TO RESIDENTIAL BY ANY OF T HE OCCUPIER OF THE LAND, THERE WAS NO QUESTION OF SEEKING AND GRANTING OF RENEWAL OF THE PERMISSION FOR CHANGE OF LAND USER. EVEN THE FACT T HAT THE LAND IS AN ORCHARD HAS NOT BEEN DENIED OR REFUTED BY THE REVEN UE AUTHORITIES. THE ASSESSEE HAD ALSO GIVEN THE EXPLANATION THAT SINCE THE LAND IS SITUATED WITHIN 200 METERS OF RIVER MANDOVA, WITH IN WHICH N O CONSTRUCTION COULD BE CARRIED OUT AND DUE TO THE SAID REASON NEI THER THE PREVIOUS OWNER COULD CARRY OUT CONSTRUCTION NOR THE ASSESSEE WAS ABLE TO DO SO. THE PREVIOUS OWNER THAT IS M/S REIS MAGOS PVT. LTD. HAD RETAINED THE PORTION OF THE LAND WHICH WAS 200 METRES AWAY FROM RIVER MANDOVA. THOUGH, INITIALLY THE INTENTION OF THE ASSESSEE MIG HT HAVE BEEN TO DEVELOP SOME CONSTRUCTION PROJECT, HOWEVER DUE TO T HE PRACTICAL PROBLEMS IN IMPLEMENTING THE SAME, THE ASSESSEE DEC IDED NOT TO CHANGE THE USER OF THE LAND AND, THEREFORE, CONTINUED TO M AINTAIN IT IN ITS ORIGINAL AND ACTUAL FORM, THAT IS, AS AN ORCHARD. T HE ASSESSEE FURNISHED THE EVIDENCE BEFORE THE LOWER AUTHORITIES THAT IT HAD EMPLOYED TWO EMPLOYEES AND FURTHER DEVELOPED THE ORCHARD BY PUTT ING EFFORTS I.E. BY WEEDING UNDESIRED GROWTH OF WILD PLANTS, BY CLEARIN G BUSHES GROWN BETWEEN THE FOOD BEARING TREES, PRUNING THE FOOD BE ARING TREES AND TO ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 23 FURTHER DEVELOP AND ENHANCE THE YIELD OF FRUIT CROP S SUCH AS CASHEW, MANGOES, JACKFRUIT AND COCONUT. THE ASSESSING OFFIC ER HAS DENIED RELIEF ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE T HE EVIDENCE OF TILLING AND PLOUGHING OF THE FIELDS AND HARVESTING OF CROP ETC. THE ASSESSING OFFICER, IN OUR VIEW, COULD NOT DIFFERENTIATE BETWE EN TRADITIONAL AGRICULTURE AND HORTICULTURE. THE CASE OF THE ASSES SEE SPECIFICALLY IS THAT IT HAS BEEN DEVELOPING AND MAINTAINING AN ORCHARD. 14. THE NEXT ISSUE RAISED BY THE LOWER AUTHORITIES IS THAT THE ASSESSEE HAD NOT SHOWN ANY POSITIVE INCOME FROM THE OF AFORE SAID AGRICULTURAL / HORTICULTURE ACTIVITY. THE ASSESSEE DULY EXPLAINED TO THE LOWER AUTHORITIES THAT THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE ON THE AFORESAID ACTIVITY WAS ALMOST EQUAL TO THE INCOME E ARNED FROM THE AGRICULTURAL ACTIVITY. THE ASSESSEE ALSO PRODUCED T HE RELEVANT BILLS AND VOUCHERS TO SHOW THAT IT HAD SOLD THE FRUIT CROPS I N THE LOCAL MARKET. IN OUR VIEW, MERELY BECAUSE THE ASSESSEE DID NOT SHOW POSITIVE INCOME FROM THE AGRICULTURAL ACTIVITY THAT ITSELF IS NOT E NOUGH TO HOLD THAT THE ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL ACTIVIT Y. THE ASSESSEE HAS PRODUCED EVIDENCE ON THE FILE THAT IT DID NOT CHANG E THE NATURE OF THE LAND, CONTINUED AND DEVELOPED THE ORCHARD, EMPLOYED TWO EMPLOYEES FOR THE DEVELOPMENT AND MAINTENANCE OF THE ORCHARD AND ALSO PRODUCED THE EVIDENCE OF EXPENDITURE AND INCOME ON THE SAID ACTI VITY. MERELY BECAUSE THE PAYMENTS RECEIVED WERE IN CASH, THAT ITSELF, IN OUR VIEW, CAN NOT BE A REASON TO DISCARD THAT EVIDENCE. AS IT IS GENERALL Y KNOWN THAT IN ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 24 HORTICULTURE SECTOR WHERE THE CROPS ARE GENERALLY S OLD TO PRIVATE PARTIES IN THE MARKET, THE PAYMENTS AND RECEIPTS ON THE SAL E OF CROPS BY THE FARMERS IS NORMALLY DONE IN CASH. THE FACT THAT AGR ICULTURAL OPERATION DID NOT RESULT IN SURPLUS AND NO AGRICULTURAL INCOM E WAS DECLARED IN THE RETURN, CANNOT BE A GROUND TO TREAT THE LAND AS NON -AGRICULTURAL LAND. THE FACT ON THE FILE IS THAT THOUGH THE ASSESSEE H AD PURCHASED THE PROPERTY IN QUESTION WITH AN INTENTION TO DEVELOP A RESIDENTIAL OR HOTEL PROJECT, HOWEVER, THE ASSESSEE DID NOT RATHER TO SA Y COULD NOT PROCEED WITH ITS SUCH INTENTIONS, RATHER, MAINTAINED AND D EVELOPED THE ORIGINAL FORM OF THE LAND I.E. OF AN ORCHARD. THE ASSESSEE CONTINUED WITH THE HORTICULTURE ACTIVITY WHICH IS A BRANCH OF THE AGRI CULTURE, HENCE, IT CANNOT BE SAID THAT THE LAND WAS NOT AN AGRICULTURA L LAND AT THE TIME OF ITS SALE BY THE ASSESSEE. EVEN THE ASSESSEE HAS FUR THER CLAIMED THAT THE NATURE OF THE LAND EVEN HAS NOT BEEN CHANGED TILL D ATE. THE ASSESSEE IN THIS RESPECT HAS RELIED UPON THE REPORT OF SH. VINE ET RAUT DESAI, ENGINEER CUM LAND VALUER, WHO ALONG WITH SH. VK JAI N, SH. RAJEEV JAIN AND SH. GAURAV JAIN (COUNSELS FOR THE ASSESSEE) WHO VISITED THE LAND IN QUESTION, MEASURED THE DISTANCE FROM THE OUTER SKIR TS OF THE MUNICIPAL LIMITS AND ALSO NOTED AND PHOTOGRAPHED THE ACTUAL V EGETATION ON THE LAND. SOME OF THE PHOTOGRAPHS HAVE BEEN PLACED ON T HE FILE TO SHOW THAT THE LAND ON THE DATE OF VISIT ON 10/07/2016 WAS A N EGLECTED ORCHARD. HE HAS FURTHER DEPOSED IN HIS AFFIDAVIT THAT THE DISTA NCE FROM THE MUNICIPAL LIMITS TO THE LAND IN QUESTION BY SHORTEST ROUTE WA S 10 KM, WHEREAS, VIA MOST COMMON AND CONVENIENT ROAD IT WAS 19 KM. HE AL SO OBTAINED A ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 25 CERTIFICATE FROM THE OFFICE OF MAMLATDAR ( THE A UTHORIZED OFFICER TO COLLECT LAND REVENUE IN RESPECT OF AGRICULTURAL LAN D) WHO CERTIFIED THAT THE LAND IN QUESTION UNDER THE SURVEY NO.87/1-A SIT UATED AT REIS MAGOS VILLAGE WAS AT A DISTANCE OF 10.5 KM FROM OUTER PAN AJI MUNICIPAL LIMITS. APART FROM THAT, THE ASSESSEE HAS ALSO FURNISHED TH E CERTIFICATE FROM VILLAGE PANCHAYAT THAT THE LAND IN QUESTION HAS BEE N SITUATED AT A DISTANCE OF MORE THAN 10 KM FROM PANAJI MUNICIPAL C OUNCIL. A CERTIFICATE FROM DIRECTORATE OF CENSUS OPERATIONS, GOA HAS BEEN FURNISHED TO THE EFFECT THAT THE POPULATION OF THE VILLAGE REIS MAGOS IS LESS THAN 10,000. IT IS PERTINENT TO MENTION HERE T HAT DURING THE APPELLATE PROCEEDINGS, THE ASSESSING OFFICER CLAIMED THAT HE HIMSELF HAD VISITED THE SPOT. HOWEVER, IT HAS NOT BEEN MENTIONED THAT W HAT ROUTE WAS FOLLOWED BY HIM?; WHETHER THE ROAD WAS A MOTORABLE ROAD?; WHETHER ANY NOTICE WAS ISSUED TO THE ASSESSEE?; WHETHER HE HAS TAKEN ALONG ANY OFFICIAL OF THE INCOME TAX DEPARTMENT AT GOA?; WHET HER HE HAD MET ANY GOVERNMENT OFFICIAL OR OTHER RESPECTABLE PERSON TO PROVE THE VERACITY AND TRUTHFULNESS OF HIS CLAIM? EVEN THE ASSESSING O FFICER HAS NOT DENIED THE CLAIM OF THE ASSESSEE THAT THE LAND IN QUESTION TILL DATE WAS AN ORCHARD AND ITS NATURE HAS NOT BEEN CHANGED. THE AS SESSEE HAS PROVED BEYOND DOUBT NOT ONLY THE NATURE AND CLASSIFICATION OF THE LAND BEING AN ORCHARD AND FILING WITHIN THE DEFINITION AND SCOPE OF AN AGRICULTURAL LAND AND FURTHER THAT IT HAS BEEN SITUATED AT A DISTANCE OF MORE THAN 10 KM FROM THE MUNICIPAL LIMITS OF PANAJI. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS HIMSELF MENTIONED THAT HE HAS NOT TAKEN INTO ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 26 CONSIDERATION THE MOTORABLE OR PUCCA ROAD TO MEASUR E THE DISTANCE OF THE LAND IN QUESTION FROM MUNICIPAL LIMITS OF PANAJI. H E HAS MENTIONED THAT THE APPROACH BY ROAD WOULD BE AN ERRONEOUS WAY TO C OMPUTE SUCH DISTANCE. HOWEVER, THE LAW HAS BEEN SETTLED IN THIS RESPECT. ALTHOUGH, AN AMENDMENT HAS BEEN BROUGHT TO THE RELEVANT PROVISI ONS OF SECTION 2(14) OF THE INCOME TAX ACT WITH EFFECT FROM 01/04/2014, WHEREBY, IT HAS BEEN PROVIDED THAT THE AERIAL DISTANCE FROM THE MUN ICIPAL LIMITS TO THE PROPERTY HAS TO BE TAKEN INTO CONSIDERATION, HOWEVE R, THE SAID AMENDMENT HAS BEEN MADE WITH PROSPECTIVE EFFECT AS CLARIFIED VIDE CBDT CIRCULAR NO.17/2015 DATED 6.10.2015, PURSUANT THE ORDER OF THE HONBLE BOMBAY HIGH COURT (NAGPUR BENCH) DATED 30.0 3.2015 PASSED IN ITA NO. 151 OF 2013 IN THE CASE OF SMT. MALTIBAI R KADU. PRIOR TO THE SAID AMENDMENT OF 2014, THE LAW WAS SETTLED THROUGH VARIOUS CASE LAWS THAT THE DISTANCE BETWEEN THE MUNICIPAL LIMITS AND ASSESSED PROPERTY IS TO BE MEASURED AS PER APPROACH ROAD/MOTORABLE ROAD. THE LD. AR IN THIS RESPECT HAS RELIED UPON THE DECISION OF THE CHENNA I BENCH OF THE TRIBUNAL IN ITO VS. SHRI CHAGAN LAL LALJI ASWIN O RDER DATED 18.10.2011 IN ITA NO. 857/MDS/2011 AND ITAT, AMRITS AR BENCH IN THE CASE OF ITO VS. M/S RANJIT RATTAN MEHRA (HUF) OR DER DATED 18.7.2012 IN ITA NO. 442(ASR.)/2011 AND ITAT MUMBAI BENCH IN THE CASE OF ACIT VS SH. SUNIL G. MATHREJA ORDER DATED 7.3.2014 IN ITA NO. 6562/MUMBAI/2011 & ANOTHER AND OF THE HONBLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF IN THE CASE OF CIT V SAT INDER PAL SINGH 188 TAXMAN 54 (P&H)(2010). THE ASSESSEE IN THIS CASE HA S PLACED ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 27 CERTIFICATES FROM GRAM PANCHAYAT AND LAND REVENUE OFFICIALS, APART FROM THE REPORT AND AFFIDAVIT OF REGD. LAND VALUER CUM ENGINEER TO THE EFFECT THAT THE LAND IN QUESTION IS SITUATED AT A D ISTANCE OF ABOUT 10.5 KM FROM THE PANAJI MUNICIPAL LIMITS, WHEREAS, THE DEPA RTMENT HAS RELIED UPON THE VAGUE AND UNCERTAIN STATEMENTS OF INCOME T AX INSPECTOR AND THAT OF ASSESSING OFFICER, WHICH AS DISCUSSED ABOVE CAN NOT BE RELIED UPON. MOREOVER, THE CERTIFICATE PROCURED BY THE ASS ESSING OFFICER DURING APPELLATE PROCEEDINGS FROM THE OFFICE OF MUNICIPAL COUNCIL, MAPUSA GOA STATES THE DISTANCE OF VILLAGE REIS MAGOS FROM MUNICIPAL CORPORATION GOA AND NOT OF THE LAND OF THE ASSESSEE . EVEN THE LD. CIT(A) HAS ALSO NOT GIVEN ANY FINDING THAT THE EVID ENCE FURNISHED OR RELIED UPON BY THE AO INSPIRES ANY CONFIDENCE. RATH ER, HE HAS OPINED FROM THE APPRAISAL OF THE EVIDENCE ON THE FILE THAT IT IS A DISPUTED ISSUE AND HAS CHOSEN TO BASE HIS FINDINGS ON THE FIRST IS SUE HOLDING THAT THE LAND IN QUESTION IS NOT AN AGRICULTURAL LAND. HOWEV ER, IN THE LIGHT OF RELIABLE EVIDENCES FURNISHED BY THE ASSESSEE, IT CA N BE SAFELY CONCLUDED THAT THE LAND IS SITUATED BEYOND 8 KMS FROM THE MUN ICIPAL LIMITS OF PANAJI. 15. SO FAR AS THE OBSERVATION OF THE LOWER AUTHORIT IES THAT THE EARLIER PURCHASER HAS NOT CLAIMED THE SAID LAND AS AGRICULT URAL LAND NOT FALLING IN THE DEFINITION OF CAPITAL ASSET IS CONCERNED, I T IS TO BE NOTED THAT REIS MAGOS ESTATE PVT. LTD. HAS NOT PAID ANY CAPITAL GAI NS TAX ON THE SALE OF THE SAID LAND TO THE ASSESSEE. THE SAID SELLER HAS RETURNED THE INCOME ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 28 FROM THE ABOVE SALE OF LAND AS BUSINESS INCOME, WHI CH MEANS THAT THE SAID COMPANY HAS TREATED THE LAND AS STOCK IN TRADE AND NOT AS AN INVESTMENT OR A CAPITAL ASSET. THE QUESTION OF EXEM PTION FROM CAPITAL GAINS TAX WOULD HAVE ARISEN, IF THE PREVIOUS OWNER WOULD HAVE TREATED THE SAID LAND AS AN INVESTMENT ASSET AND NOT AS STO CK IN TRADE. FURTHER, EVEN THOUGH THE SAID COMPANY DID NOT CONTINUE TO MA INTAIN AND DEVELOP THE LAND AS ORCHARD FOR THE PURPOSE OF EARNING AGRI CULTURAL INCOME, YET, THE FACT ON THE FILE IS THAT IT EVEN DID NOT ALTER ITS CHARACTER. IF THE PREVIOUS OWNER DID NOT CARRY OUT AGRICULTURAL ACTI VITY ON AN AGRICULTURAL LAND, HOWEVER DID NOT ALTER OR CHANGE ITS NATURE AN D CHARACTER, BUT THE SUBSEQUENT OWNER OF LAND STARTS THE AGRICULTURAL AC TIVITY ON THE SAID LAND, UNDER THE CIRCUMSTANCES, IT CAN BE SAFELY HEL D THAT THE LAND REMAINS THE AGRICULTURAL LAND AND HAS NOT LOST ITS ORIGINAL CHARACTERISTIC. IN VIEW OF THE ABOVE DISCUSSION OF THE MATTER, THE ISSUE ON FACTUAL MATRIX IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. IN THE RESULT THE APPEAL OF THE ASSESSEE IS, HEREBY ALLOWED AND CONSEQUENTLY THE ADDITIONS MADE / CONFIRMED BY THE LOWER AUTHORITIES STAND DELETED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.201 9. SD/- SD/- ( . . / N.K. SAINI) ( ! / SANJAY GARG) '#$ / VICE PRESIDENT %& / JUDICIAL MEMBER DATED : 11 .12.2019 G.P./RKK/SR. PS ITA NO. 652-CHD-2017 M/S BLUE COAST INFRASTRUCTURE DEVELOPMENT P. LTD., 7, DISTT. SOLAN, H.P. 29 3,(+45 65!+ / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. ()$& / THE RESPONDENT 3. . 7+ / CIT 4. . 7+ ( )/ THE CIT(A) 5. 58(+9 , 09 , :;<= / DR, ITAT, CHANDIGARH 6. <>/ / GUARD FILE 3 . / BY ORDER, ? / ASSISTANT REGISTRAR