Shri Ashok S Gupta, Pune V. Asst. CIT, Circle 9, Pune

ITA 670/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80061 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C SARANGI
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Competent authority
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.670/PN/2013 (A.Y: 2008-09) SHRI ASHOK S GUPTA M/S. MZSK & ASSOCIATES CHARTERED ACCOUNTANTS LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411001 PAN: AAXPG9805C APPELLANT VS. ACIT, CIRCLE-9, PUNE RESPONDENT APPELLANT BY : SHRI NILESH KHANDELWAL RESPONDENT BY : SHRI S.C. SARANGI DATE OF HEARING: 08.07.2014 DATE OF ORDER : 31.07.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-V, [IN SHORT CIT(A)] PUNE, DATED 20.03.2012 FOR A.Y. 2008-09 ON THE FOLLOWING GROUNDS. 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE A ND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, THE ADDITION OF RS.1,22,71,081/- MADE BY THE AO AND CONFIRMED BY THE 1 ST APPELLATE AUTHORITY TREATING THE PROFIT ON SALE OF AGRICULTURAL LAND IS ASSESSABLE IN THE H ANDS OF THE APPELLANT IS UNWARRANTED, UNJUSTIFIED, & CONTRA RY TO THE SCHEME AND PROVISIONS OF THE ACT AND FACTS PREV AILING IN THE CASE. IT FURTHER BE HELD THAT THE PROFIT ON SALE OF AGRICULTURAL LAND IS NOT TAXABLE IN THE HANDS OF TH E APPELLANT. THE ADDITION MADE BY THE AO AND CONFIRME D BY THE 1 ST APPELLATE AUTHORITY IN THIS RESPECT BE DELETED. TH E APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 2 ITA NO.670 OF 13 SHRI ASHOK S GUPTA 2. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE A ND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, THE ADDITION OF RS.16,07,926/- MADE BY THE AO BY DISALLOWING CLAIM IN TERMS OF PROVISIONS OF SEC.40A (IA) OF THE ACT IS UNJUSTIFIED UNWARRANTED AND CONTRARY TO THE SCHEME AND PROVISIONS OF THE ACT. IT FURTHER BE HEL D THAT NO DISALLOWANCE IN TERMS OF PROVISIONS OF SEC.40A(I A) IS WARRANTED AS PER PROVISIONS OF THE ACT AND FACTS PREVAILING IN THE CASE. THE ADDITION MADE BY THE AO AND CONFIRMED BY THE 1 ST APPELLATE AUTHORITY BE DELETED. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 3. THE APPELLANT PRAYS TO BE ALLOWED TO ADD, AMEND, MO DIFY, RECTIFY, DELETE, RAISE ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE HAS NOT PRESSED GROUND NO.2, SO THE SAME IS DISMISSED AS NOT PRESSED. THE ONLY ISSUE FOR ADJUD ICATION REMAINS WITH REGARD TO THE ADDITION OF 1,22,71,081/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY FIRST APPELL ATE AUTHORITY TREATING THE PROFIT ON SALE OF AGRICULTURAL LAND AS ASSESSABLE IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN PROFIT ON SALE OF AGRICULTURAL LAND IN EARLIER TWO YEARS, THE DETAILS OF WHICH ARE AS UNDER. A.Y. PROFIT SHOWN OUT OF SALE OF AGRICULTURAL LAND (AMT. IN RS.) 2007 - 08 3,95,267/ - 2008 - 09 1,22,71,081/ - 2009 - 10 9,08,790/ - HE NOTICED THAT IN A.Y. 2007-08, THE ADDITION OF 3,95,267/- WAS MADE BY THE ASSESSING OFFICER ON SIM ILAR POINT, BUT THE ASSESSEE DID NOT FILE APPEAL BEFORE CIT(A) AND THEREFORE, THE DECISION WAS ACCEPTED BY THE ASSESSEE. THE ASS ESSING OFFICER MADE NECESSARY ENQUIRIES AND CAME TO THE CONCLUSION THAT NO AGRICULTURAL ACTIVITY WAS CARRIED OUT IN RESPECT OF THE SAID LANDS AS WELL AS THE FACT THAT LAND SITUATED AT KHANDSHI- NESAVE IN TALUKA MAVAL WAS PURCHASED ALONG WITH THREE OTHER P ARTNERS AND 3 ITA NO.670 OF 13 SHRI ASHOK S GUPTA WAS SOLD IN LESS THAN THREE YEARS AFTER CONSOLIDATI NG THE 6 PLOTS PROVED BEYOND DOUBT THAT THE DOMINANT MOTIVE WAS NO T AGRICULTURE BUT TO EARN PROFIT ON ACCOUNT OF SALE O F THE PLOTS ITSELF. ACCORDINGLY, THE ASSESSING OFFICER MADE ADDITION OF 1,22,71,081/- ON ACCOUNT OF PROFIT ON SALE OF LAND. 3. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAD UPHE LD THE ORDER OF ASSESSING OFFICER BY OBSERVING AS UNDER: 9. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AS WELL AS REPLY OF THE APPELLANT. IT IS SEEN THAT THE APP ELLANT HAS SOLD TWO PLOTS OF LAND AT JAMBHOOLGAON AND 6 PLOTS OF LAND AT KHANDSHI-NESAVE AS FURNISHED IN THE FOLLOWING CH ART: SR. NO NAME OF PLACE GAT NO PURCHASE DATE COST OF PURCHASE SALES DATE REMARKS 1 JAMBOOLGAON 506,505,59 29/04/2002 08/01/2008 NURSERY 2 KAMSHETKHADKALE 78 11/01/2008 1,31,00,000 HOLDING 3 NESAVE 162 21/06/2006 24/12/2007 4 KHANDSHI 56 01/10/2006 24/12/2007 5 KHANDSHI 57 06/10/2006 24/12/2007 6 KHANDSHI 110 18/05/2006 24/12/2007 7 KHANDSHIL 106 21/06/2006 24/12/2007 8 KHANDSHI 109 06/10/2006 24/12/2007 9 KARTATAKVEKURDE 88 15/10/2007 1,00,00,000 HOLDING NURSERY 10 ROHA 143,159 17/05/2007 18,40,000 HOLDING NURSERY 10. THE DETAILS REGARDING SALE OF LAND AT JAMBHOOLG AON AS WELL AS KHANDSHI-NESAVE ARE DISCUSSED AND ANALYSED AS UNDER: I) LAND AT LAMBHOOLQAON: THE LAND AT JAMBHOOLGAON WAS PURCHASED ON 29/04/200 2 AND SOLD ON 08/01/2008. THE APPELLANT CLAIMED THAT HE WAS CARRYING ON THE BUSINESS OF NURSERY FROM THIS L AND BUT NO DETAILS COULD BE FILED BEFORE THE ASSESSING OFFI CER. THE APPELLANT HAS FILED CERTAIN PHOTOGRAPHS CLAIMING TO BE TAKEN AT JAMBHOOLGAON LAND EVIDENCING ACTIVITY OF NURSERY BEING CARRIED OUT THERE. BUT FROM THE PHOTOGRAPHS, NOT CL EARLY 4 ITA NO.670 OF 13 SHRI ASHOK S GUPTA PROVED THAT THE SAME PERTAINS TO JAMBHOOLGAON OR SOMEWHERE ELSE. IT IS IMPORTANT TO NOTE THAT THE AP PELLANT WAS HAVING THE NURSERY AT OTHER PLACES TOO. THEREFO RE, THE PHOTOGRAPHS FILED DURING THE COURSE OF APPELLATE PR OCEEDINGS DO NO PROVE WITH CERTAINTY THAT NURSERY ACTIVITY WA S CARRIED OUT AT JAMBHOOLGAON LAND. SECONDLY, THE CLAIM OF TH E APPELLANT THAT NURSERY ACTIVITY WAS CARRIED OUT AT JAMBHOOLGAON IS CONTRADICTED BY THE SUBMISSIONS FIL ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. THE APPELLANT HAS STATED THAT TH E LANDS AT JAMBHOOLGAON AS WELL AS KHANDSHI-NESAVE WERE SOLD BECAUSE OF ROAD ACCESS PROBLEM, TERRAIN ISSUE, NON- AVAILABILITY OF WATER AS WELL AS THE FACT THAT IT W AS SITUATED IN THE INTERIORS AND WAS FAR FROM SALES AND DISPLAY OFFICE LOCATED AT WADGAON. THESE FACTS HAVE BEEN DISCUSSED IN DETAIL ON PAGE NOS. 5 & 6 OF THE ASSESSMENT ORDER. IN THE REPLY, THE APPELLANT HAS ALSO STATED THAT DESPITE S ERIOUS EFFORTS TO BRING THE SLOPES OF LAND UNDER CULTIVATI ON, MOST PART OF THE LAND REMAINED VACANT. THUS, IT CAN BE S EEN FROM THE REPLY ITSELF THAT MOST PART OF THE LAND REMAINE D BARREN DUE TO NON-AVAILABILITY OF WATER AND SLOPE PROBLEM. THIS BEING SO, THE LAND AT JAMBHOOLGAON CANNOT BE TREATE D AS AGRICULTURAL LAND. SINCE THE APPELLANT WAS ENGAGED IN THE BUSINESS PURCHASE AND SALE OF LAND, THE TRANSACTION S IN RESPECT OF JAMBHOOLGAON LAND HAS TO BE TREATED AS B USINESS ACTIVITY AND ACCORDINGLY, PROFIT ON THE SALE OF SAI D LAND HAS BEEN RIGHTLY TREATED AS BUSINESS INCOME BY THE ASSE SSING OFFICER. II) LAND AT KHANDSHI-NESAVE: THIS LAND WAS PURCHASED BY THE APPELLANT ALONGWITH 3 OTHER PARTNERS IN 2006 ON VARIOUS DATES. AFTER CONSOLIDAT ION, THE LAND WAS SOLD ON 24/12/2007 BY THE APPELLANT ALONGW ITH 3 OTHER PERSONS. THE APPELLANT COULD NOT SUBMIT ANY P ROOF THAT THE LAND WAS PURCHASED WITH DOMINANT INTENTION OF CARRYING OUT AGRICULTURAL ACTIVITY. IN FACT, THE RE PLY OF THE APPELLANT AS DISCUSSED IN PARAS 5 & 6 OF THE ASSESS MENT ORDER, IT CAN BE CLEARLY SEEN THAT NO ACTIVITY WAS CARRIED OUT IN THE SAID LAND. THE LAND WAS NOT HAVING SUFFICIEN T WATER, IT HAD BAD TERRAIN AND MOST PART OF THE LAND REMAINED VACANT. A LAND WHICH IS ACCEPTED BY THE APPELLANT HIMSELF T O BE BY AND LARGE NOT CAPABLE OF CULTIVATION AND ALSO BECAU SE OF THE FACT THAT NO AGRICULTURAL ACTIVITY WAS CARRIED OUT IN THE SIX PLOTS OF LAND CONSOLIDATED AND SOLD BY THE APPELLAN T PROVED BEYOND DOUBT THAT THE LAND WAS BY AND LARGE BARREN AND BARREN LAND CANNOT BE TREATED AS AGRICULTURAL LAND. FOR THIS PROPOSITION, RELIANCE IS ALSO PLACED ON HON'BLE HYD ERABAD TRIBUNAL'S DECISION IN THE CASE OF SURESH KUMAR D S HAH VS. 5 ITA NO.670 OF 13 SHRI ASHOK S GUPTA DY.CIT. REPORTED IN (2012) 49 SOT 341 (HYD.) TRIBUN AL. SECONDLY, THE INTENTION TO PURCHASE AND SELL THESE LANDS FOR PROFIT MOTIVE IS ALSO CLEAR FROM THE FACT THAT THE LAND WAS PURCHASED BY THE APPELLANT ALONGWITH 3 OTHER PERSON S. IT IS NOT CLEAR AS TO HOW AGRICULTURAL OPERATIONS COULD H AVE BEEN CARRIED OUT ON A LAND WITH 3 OTHER PERSONS WITHOUT ANY FORMAL AGREEMENT OR PARTNERSHIP DEED. SINCE THERE W AS NO SUCH AGREEMENT OR PARTNERSHIP DEED ETC. IN THIS CAS E, IT CANNOT BE SAID THAT THE LAND WAS PURCHASED FOR THE PURPOSE OF CULTIVATION ALONGWITH THREE PERSONS AS NO MECHAN ISM FOR THE SAME HAS BEEN PUT FORWARD BY THE APPELLANT TO SUBSTANTIATE THE CLAIM. SINCE THESE LANDS WERE PURC HASED AT ADJACENT LOCATIONS AND WERE CONSOLIDATED AND SUBSEQ UENTLY SOLD AT HIGHER PRICE TO EARN HIGHER PROFIT, IT CANN OT BE SAID THAT THERE WAS NO INTENTION TO MAKE PROFIT. IN FACT , THE DOMINANT INTENTION TO EARN PROFIT IS CLEARLY ESTABL ISHED WITH A SEQUENCE OF EVENTS IN RESPECT LAND TRANSACTIONS P ERTAINING TO KHANDSHI-NESAVE VILLAGE. THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE APPELLANT AND THE GROUND IS DISM ISSED. 11. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SEEN THAT THE LOCATION OF KHANDSHI VILLAGE IS 10 KMS FROM LONAVAL A AS DOWNLOADED FROM GOOGLE WEBSITE MARKED AS ANNEXURE-L . IF THE LOCATION OF THIS LAND IS 10 KMS FROM LONAVALA R AILWAY STATION, THEN IT HAS TO BE LESS THAN 8 KMS FROM THE OUTER PERIPHERIES OF LONAVALA MUNICIPAL COUNCIL AND THER EFORE, THIS LAND WILL BE SUBJECT TO CAPITAL GAINS TAX ON A CCOUNT OF ITS PROXIMITY TO LONAVALA MUNICIPAL COUNCIL. WHEN CONFRONTED ON THIS ISSUE, IT WAS SUBMITTED THAT HE HAS FILED CERTIFICATE FROM GRAM PANCHAYAT THAT THE LAND IS BEYOND 8 KMS AND THIS BEING AUTHENTIC CERTIFICATE, THE SAME SHOULD BE ACCEPTED. THE LEARNED COUNSEL OF THE APPELLANT ALSO SUBMITTED THAT AS PER GOOGLE, DISTANCE BETWEEN LONAVALA AND KHANDSHI IS ABOUT 30 KMS. 12. AFTER CAREFULLY CONSIDERING THE REPLY OF THE AP PELLANT, IT IS SEEN THAT THE CERTIFICATE ISSUED BY THE GRAM PAN CHAYAT IS QUITE VAGUE. IT SIMPLY SAYS THAT DISTANCE BETWEEN L ONAVALA AND NESAVE IS 23 KMS AND DISTANCE BETWEEN LONAVALA AND KHANDSHI IS 25 KMS. HOWEVER, IT DOES NOT MENTION A S TO WHETHER THE DISTANCE IS FROM '0' MILE OF LONAVALA OR OUTER PERIPHERIES. FOR THE PURPOSE OF SECTION 2(14) OF THE IT. ACT, THE CALCULATION SHOULD BE FROM OUTER LIMIT OF LONAV ALA MUNICIPAL COUNCIL THEREFORE, THE CERTIFICATES FRO M VILLAGE PANCHAYAT CANNOT BE RELIED UPON AS THESE ARE QUITE VAGUE AND ISSUED IN A ROUTINE MANNER. THE DISTANCE CHART PREPARED BY THE APPELLANT IS ALSO NOT RELIABLE AS I T HAS TAKEN CIRCUITOUS ROUTE. THE DISTANCE CHART MENTIONED IN 6 ITA NO.670 OF 13 SHRI ASHOK S GUPTA ANNEXURE-1 APPEARS TO BE LOGICAL IN THE SENSE THAT IT MENTIONS STRAIGHT LINE DISTANCE. THEREFORE, ALTERN ATIVELY, CAPITAL GAINS IS CHARGEABLE ON THE SALE OF THESE LA NDS. 4. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE ASSESSEE. THE STAND OF THE ASSESSEE HAS BEEN THAT THE ADDITION OF RS.1,22,71,081/- MADE BY THE ASSESSING OFFICER TREA TING THE PROFIT ON SALE OF AGRICULTURAL LAND AS BUSINESS INC OME WAS NOT JUSTIFIED AND CONTRARY TO THE SCHEME AND PROVISIONS OF THE ACT AND FACTS PREVAILING IN THE CASE. THE PROFIT ON SA LE OF AGRICULTURAL LAND IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS PLACED DETAILS WITH REGARD TO THE AGRICULTURAL ACTIVITY ON LAND IN QUESTION AND WITH REGARD TO THE DISTANCE FROM MU NICIPAL LIMITS WHICH WAS MAIN BASIS FOR THE DECISION OF ASSESSING OFFICER AND CONFIRMATION OF THE SAME BY CIT(A). THE LEARNED AU THORIZED REPRESENTATIVE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REQUESTED TO SET ASIDE THE OR DER OF AUTHORITIES BELOW AND ALLOW THE CLAIM OF THE ASSESS EE. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY AGRICULTURAL ACTIVITY ON THE LAND IN QUESTION AND HE HAS ACCEPTE D IN A.Y. 2007-08 THAT THE ASSESSING OFFICER HAS MADE SIMILAR ADDITION WHICH WAS NOT APPEALED BY THE ASSESSEE. MOREOVER, THE DISTANCE FROM THE RELEVANT MUNICIPAL CORPORATION IS LESS THA N THE PRESCRIBED LIMIT I.E. 8 KMS., SO THE ORDER OF AUTHO RITIES BELOW SHOULD BE UPHELD. 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF NURSERY RUNNING UNDER THE NAME AND STYLE OF M/S. OM FARMS AND NURSERY NEAR WADGAON. HE ACQUIRED DIFFERENT AG RICULTURAL LANDS AT NEARBY AREA CLAIMED FOR MULTIPLICATION OF NURSERY PLANTS. THE ASSESSEE HAS CLAIMED THAT HE HAS BEEN CARRYING OUT SIMILAR AGRICULTURAL ACTIVITIES AS A FARMER. HIS AGRICULTU RAL INCOME HAS 7 ITA NO.670 OF 13 SHRI ASHOK S GUPTA NOT BEEN DISPUTED. ONE OF SUCH AGRICULTURAL LAND I S HELD AT KHANDSHI-NESAVE WHICH HE HAS PURCHASED IN 2006. TH IS LAND WAS CONSOLIDATED ALONG WITH ADJOINING PLOT OWNERS A ND LATER SOLD IN F.Y. 2007-08 RELEVANT TO A.Y. 2008-09. IN THE C ASE OF LAND AT JHAMBOOLGAON, THE ASSESSEE HAS BEEN HOLDING THIS PI ECE OF LAND FOR MORE THAN 5 YEARS. THE LANDS IN QUESTION SITUA TED AT JAMBHOOLGAON & KHANDSHI-NESAVE ARE AGRICULTURAL LAN DS AND THE SAME WERE OUTSIDE MUNICIPAL LIMITS. THE POPULATION OF THE VILLAGE AS PER CERTIFICATE ISSUED BY THE GRAM PANCHAYAT WAS MUCH BELOW 10,000 PERSONS. THE CERTIFICATE TO THAT EFFECT ISS UED BY THE CONCERNED GRAM PANCHAYAT WAS FILED BEFORE AUTHORITI ES BELOW AND THE SAME IS PLACED AT PAGE 7 OF THE PAPER BOOK FILED BY THE ASSESSEE. REGARDING THE DISTANCE, CERTIFICATE FROM THE CONCERNED GRAM PANCHAYAT HAS BEEN PLACED AT PAGE 6 OF THE PAP ER BOOK. ACCORDING TO WHICH, IT IS BEYOND 10 KMS. OF NEAREST MUNICIPAL LIMITS. THIS EVIDENCE PUT FORWARD ON BEHALF OF ASS ESSEE COULD ONLY BE REJECTED BY CONFRONTING THE CONTENTS TO ISS UING AUTHORITIES OF SAME I.E. CONCERNED GRAM PANCHAYAT OFFICER / ELE CTED MEMBERS. REJECTING CONTENTS OF SAID CERTIFICATE IS SUED BY THE CONCERNED GRAM PANCHAYAT WITHOUT CONFRONTING CONTEN TS OF SAME TO THE CONCERNED PERSON IS NOT JUSTIFIED. IT LACS DUE OPPORTUNITY OF BEING HEARD WHICH IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 5.1 THE ASSESSING OFFICER HAS ADDED 1,22,71,081/- TOWARDS PROFIT ON SALE OF AGRICULTURAL LAND ON THE GROUND T HAT THE ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL ACTIVITY. THE D OMINANT INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE W AS TRADE OF SAME AND THAT THE ASSESSEE HAS NOT CHALLENGED THE S IMILAR ADDITION MADE IN A.Y. 2007-08. IT IS SETTLED LEGAL POSITION THAT EACH YEAR IS DIFFERENT. DECISION IN A PARTICULAR Y EAR IS TAKEN IN ITS OWN FACTS AND CIRCUMSTANCES. 8 ITA NO.670 OF 13 SHRI ASHOK S GUPTA 5.2 COMING TO THE ISSUE WHETHER PARTICULAR LAND IS AGRICULTURAL ONE OR NOT, WE FIND THAT WHILE MAKING THE DISALLOWA NCE, THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT TH E LANDS UNDER CONSIDERATION ARE AGRICULTURAL LANDS AS PER RELEVAN T REVENUE RECORDS. THE REVENUE RECORDS AND AGRICULTURAL ACTI VITY THEREON IS EVIDENT FROM THE COPY OF 7/12 EXTRACTS OF LAND AT J AMBHOOLGAON AND KHANDSHI-NESAVE AS PLACED ON PAGE NOS.44 TO 62 OF THE PAPER BOOK, INTER ALIA, THE NATURE OF LAND IS OBVIO USLY AGRICULTURAL ONE WHICH IS EVIDENT FROM 7/12 EXTRACTS OF REVENUE RECORDS OF REVENUE ESTATE OF CONCERNED VILLAGE. THE LAND WHIC H IS PART OF REVENUE ESTATE OF A PARTICULAR VILLAGE IS AGRICULTU RAL ONE AND THE SAME IS REFLECTED IN 7/12 EXTRACTS. IT MAY NOT HAV E AGRICULTURAL ACTIVITY AT THE RELEVANT POINT OF TIME BUT IT DOES NOT MEAN THAT IT LOSES ITS AGRICULTURAL CHARACTER. THERE MAY BE VAR IOUS REASONS FOR NON-AGRICULTURAL ACTIVITY AT A PARTICULAR TIME FOR EXAMPLE LACK OF IRRIGATION SOURCE, NON-AVAILABILITY OF LABOUR, VARI OUS CLIMATIC CONDITIONS, FINANCIAL CONDITION OF THE CULTIVATOR, ETC. 5.3 THE AGRICULTURAL LAND MAY LOSE ITS AGRICULTURAL CHARACTER BROADLY IN FOLLOWING SITUATIONS. (I) FALLING IN PRESCRIBED LIMIT OF MUNICIPAL LIMITS BY RELEVANT NOTIFICATION BY THE CONCERNED COMPETENT AUTHORITY OF THE AREA; (II) BY ISSUE OF NON-AGRICULTURAL (NA) CERTIFICATE BY TH E CONCERNED COMPETENT AUTHORITY ON APPLICATION OF OWNER/CULTIVATOR OF CONCERNED LAND. IT IS ESSENTIA L AT THIS STAGE TO MAKE IT CLEAR THAT EVEN AFTER COMING IN MUNICIPAL LIMIT, THE OWNER MAY CARRY OUT AGRICULTUR AL ACTIVITY IN THE SAID LAND AND ITS AGRICULTURAL INCO ME WOULD BE EXEMPT AS PER RELEVANT PROVISIONS OF INCOM E TAX ACT. HOWEVER, VIRTUE OF COMING IN MUNICIPAL LI MIT AS STATED ABOVE, IT LOSES ITS ELIGIBILITY FOR EXEMP TION WHILE COMPUTING CAPITAL GAIN THEREON ON TRANSFER OF SAID ASSETS. AS DISCUSSED ABOVE, THE LAND IN QUEST ION IS BEYOND PRESCRIBED LIMIT OF THE CONCERNED MUNICIP AL LIMITS AS DISCUSSED ABOVE. SO, THIS DEFICIENCY IS NOT ATTACHED TO THE ASSESSEES LAND. 9 ITA NO.670 OF 13 SHRI ASHOK S GUPTA (III) OTHER SITUATION FOR CHANGE OF AGRICULTURAL CHARACTE R MAY BE IN CASE THE AGRICULTURAL LAND ACQUIRED BY CONCERNED AUTHORITIES AS PER RELEVANT PROVISIONS OF LAND ACQUISITION ACT FOR DEVELOPMENT ACTIVITY AS PE R MASTER PLAN APPLICABLE TO THE AREA. SAME IS DONE B Y NOTIFICATION AS PER RELEVANT PROVISION OF LAND ACQUISITION ACT AND AWARD TO THAT EFFECT IS PASSED AFTER HEARING OBJECTIONS OF LAND HOLDER. THE LAND VEST I N GOVERNMENT AFTER AWARD OF THE SAID LAND IS DECLARED AS PER RELEVANT PROVISIONS OF LAND ACQUISITION ACT AND THE SAME IS PLACED AT DISPOSAL OF LOCAL BODY AUTHORITIE S TO BE USED AS PER NOTIFICATION. AFTER THAT THE OWNERS WILL NOT HAVE RIGHT OVER SAID LAND. HE HAS RIGHT OF ENHANCEMENT OF COMPENSATION THEREON AGAIN AS PER PROVISIONS OF LAND ACQUISITION ACT. AS THE ASSESSEES LAND IN QUESTION DOES NOT FALL IN ANY OF ABOVE CATEGORIES, SO IT IS NOT PROPER ON THE PART O F THE REVENUE TO INFER THAT THE LAND IN QUESTION CEASE TO BE AGRICUL TURAL LAND. 5.4 REGARDING AGRICULTURAL ACTIVITY AND INCOME THER EFROM, WE FIND THAT THE ASSESSEE HAS SHOWN AGRICULTURAL INCOM E IN A.Y. 2007-08 AND THE SAME HAS BEEN ACCEPTED AS AGRICULTU RAL INCOME WHILE COMPLETING THE SCRUTINY ASSESSMENT IN A.Y. 20 07-08 & A.Y. 2008-09. MOREOVER, THE ASSESSEE HAS INCURRED EXPENS ES ON PURCHASE OF SOIL, PLASTIC BAGS TO CARRY OUT NURSERY ACTIVITIES. ALL THESE EXPENSES HAVE BEEN ALLOWED WHILE COMPLETING T HE ASSESSMENT. THE ASSESSEE HAS PRODUCED BOOKS OF ACC OUNTS DURING THE COURSE OF ASSESSMENT AND THE DOCUMENTS H AVE ALSO BEEN VERIFIED BY THE ASSESSING OFFICER ON TEST CHEC K BASIS BEFORE FINALIZING THE ASSESSMENT. HAVING DONE SO, THE ASS ESSING OFFICER HAS MADE DISALLOWANCE OF EXEMPTION WHILE CALCULATIN G CAPITAL GAIN ON LAND TRANSACTION ON THE GROUND THAT DOMINAN T INTENTION OF THE ASSESSEE WAS TO CARRY ON AN ADVENTURE IN THE NATURE OF BUSINESS. THE MERE FACT THAT THE ASSESSEE DID NOT C ARRY OUT AGRICULTURAL ACTIVITIES ON THE LAND DOES NOT ALTER THE NATURE OF THE LAND. AS DISCUSSED ABOVE, THE NATURE OF THE LAND D ETERMINED BY 10 ITA NO.670 OF 13 SHRI ASHOK S GUPTA THE REVENUE RECORDS I.E. 7/12 EXTRACTS WHICH IS MAI NTAINED FOR AGRICULTURAL LANDS OF THE REVENUE STATE OF A PARTIC ULAR VILLAGE. SO, AT THE TIME OF PURCHASE BY THE ASSESSEE, THE LAND W AS AN AGRICULTURAL LAND AND IT REMAINED SO, TILL THE TIME THE SAME WAS SOLD BY THE ASSESSEE. THERE IS NOTHING ON RECORD T O SUGGEST THAT THE ASSESSEE HAD APPLIED FOR ANY N.A. CERTIFICATE A T ANY POINT OF TIME WITH REGARD TO THE SAID. 5.5 THE LAND AT KHANSHI-NESAVE LAND WAS PURCHASED A LONG WITH THREE OTHER PERSONS. AFTER PURCHASE OF THE LAND IT WAS REALIZED BY THE LAND HOLDERS THAT THE DEVELOPMENT COST FOR DOIN G NURSERY ACTIVITY ON THE SAID AGRICULTURAL LAND WAS BEING CO STLY. THE ASSESSEE REALIZED THAT IT WOULD BE BETTER FOR HIM T O DISPOSE OFF THE LAND AND PURCHASE IT ELSEWHERE FOR NURSERY ACTIVITY . HE SUBSEQUENTLY DISPOSED OFF THE LAND AT JAMBOOLGAON A ND KHANSHI- NESAVE AND PURCHASED AGRICULTURAL LAND AT KAMSHET K HADKALE, KARLA TAKVE KURDE AND AT ROHA SO THAT HE COULD CARR Y OUT ITS NURSERY ACTIVITIES THEREON. ALL THESE PIECES OF LA ND HAVE BEEN PURCHASED BY THE ASSESSEE IN THE F.Y. 2007-08 ITSEL F AFTER DISPOSING OFF THE AFORESAID LANDS. THE ASSESSEE HA S FILED THE DETAILS OF CHART SHOWING THE PURCHASE OF AGRICULTUR AL LANDS AND DISPOSAL OF AGRICULTURAL LANDS DURING THE YEAR WHIC H IS AS UNDER: SR. NO NAME OF PLACE GAT NO PURCHASE DATE COST OF PURCHASE SALES DATE REMARKS 1 JAMBOOLGAON 506,505,59 29/04/2002 08/01/2008 NURSERY 2 KAMSHETKHADKALE 78 11/01/2008 1,31,00,000 HOLDING 3 NESAVE 162 21/06/2006 24/12/2007 4 KHANDSHI 56 01/10/2006 24/12/2007 5 KHANDSHI 57 06/10/2006 24/12/2007 6 KHANDSHI 110 18/05/2006 24/12/2007 7 KHANDSHIL 106 21/06/2006 24/12/2007 8 KHANDSHI 109 06/10/2006 24/12/2007 9 KARTATAKVEKURDE 88 15/10/2007 1,00,00,000 HOLDING NURSERY 10 ROHA 143,159 17/05/2007 18,40,000 HOLDING NURSERY 11 ITA NO.670 OF 13 SHRI ASHOK S GUPTA 5.6 THE INVESTMENT IN AGRICULTURAL LAND HAS BEEN DI SCLOSED IN THE FINAL ACCOUNTS FILED WITH THE ASSESSING OFFICER . THE ASSESSEE HAS ALSO STARTED HIS NURSERY ACTIVITIES ON 2 OF THE SE 3 LANDS AS SOON AS THEY WERE PURCHASED. AS DISCUSSED ABOVE, T HE INCOME FROM SUCH ACTIVITY HAS ALSO BEEN CONSIDERED AT THE TIME OF COMPLETING THE SCRUTINY ASSESSMENT. THIS FACT HAS NOT BEEN CONTROVERTED BY THE REVENUE AUTHORITIES. THE ASSES SEE CLAIMS TO HAVE BEEN CONTINUED AGRICULTURAL ACTIVITY ON THE SA ME AGRICULTURAL LANDS BY WAY OF NURSERY ACTIVITY. THE INTENTION OF THE ASSESSEE TO ACQUIRE LAND FOR PURPOSE OF NURSERY ACT IVITY IS OBVIOUS, FROM THE FACT THAT THE ASSESSING OFFICER H AS ACCEPTED AGRICULTURAL INCOME EARNED FORM THE VARIOUS LAND HO LDINGS OF THE ASSESSEE. HE HAS ALLOWED EXPENSES INCURRED FOR CAR RYING OUT THE ACTIVITY AND HAS ASSESSED THE SAME WHILE COMPLETING THE SCRUTINY ASSESSMENT. WE FIND THAT THE HONBLE DELHI HIGH CO URT IN THE CASE OF HINDUSTAN INDUSTRIAL RESOURCES LTD. VS. ASS ISTANT COMMISSIONER OF INCOME TAX (2011) 335 ITR 77 (DELHI ) HAS HELD AS UNDER: HAVING CONSIDERED THE ARGUMENTS ADVANCED BY THE CO UNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE ASSESS EE'S CONTENTIONS DESERVE TO BE UPHELD AND THE FINDINGS R ETURNED BY THE INCOME-TAX APPELLATE TRIBUNAL OUGHT TO BE RE VERSED. WE ARE CONSCIOUS THAT WE ARE NOT MERELY REVERSING A FINDING OF FACT, WHAT WE ARE INTENDING TO DO IS TO POINT OU T THAT THE TRIBUNAL'S FINDING OF FACT IS CONTRARY TO ITS OWN R ECORD AND, THEREFORE, IS IN THE REALM OF PERVERSITY. THIS IS SO BECAUSE THE TRIBUNAL CLEARLY HELD THAT AT THE POINT OF TIME WHEN THE ASSESSEE PURCHASED THE SAID LAND, IT WAS AGRICULTUR AL LAND. THERE IS NO DISPUTE WITH REGARD TO THIS. THE TRIBUN AL ALSO NOTED THAT THE AWARD PASSED ON APRIL 1, 1992 BY THE DISTRICT COLLECTOR (LAND ACQUISITION), GREATER NOIDA, BULAND SHAR, WAS A DOCUMENT WHICH ESTABLISHED BEYOND DOUBT THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND. THUS, ON TH E DATE OF PURCHASE, THE LAND IN QUESTION WAS AGRICULTURAL LAN D AND ON THE DATE OF ACQUISITION, THE CHARACTER OF THE LAND CONTINUED TO BE AGRICULTURAL. WHEN THESE TWO CLEAR FINDINGS H AVE BEEN RETURNED, IT IS APPARENT THAT IN THE TRANSITIONAL P ERIOD, THAT IS, BETWEEN PURCHASE AND ACQUISITION, THE NATURE AN D CHARACTER OF THE LAND DID NOT CHANGE. THE FACT THAT THE 12 ITA NO.670 OF 13 SHRI ASHOK S GUPTA APPELLANT/ASSESSEE INTENDED TO USE THE LAND FOR IND USTRIAL PURPOSES DID NOT IN ANY WAY ALTER THE NATURE AND CH ARACTER OF THE LAND. THE FURTHER FACT THAT THE APPELLANT/ A SSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATIONS DID N OT ALSO RESULT IN ANY CONVERSION OF THE AGRICULTURAL LAND I NTO AN INDUSTRIAL LAND. IT IS NOBODY'S CASE THAT THE APPEL LANT/ ASSESSEE CARRIED OUT ANY OPERATIONS FOR SETTING UP ANY PLANT OR MACHINERY OR OF THE LIKE NATURE SO AS TO LEAD TO AN INFERENCE THAT THE NATURE AND CHARACTER OF THE LAND HAD BEEN CHANGED FROM AGRICULTURAL TO INDUSTRIAL. THE M ERE FACT THAT THE APPELLANT/ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATION DID NOT ALTER THE NATURE AND CHARACTER OF THE LAND. IN ANY EVENT, THIS DISCUSSION IS NOT R ELEVANT IN THE BACKDROP OF THE CLEAR FINDING GIVEN BY THE TRIB UNAL THAT ON THE DATE OF THE PURCHASE AND AS ALSO ON THE DATE OF ACQUISITION, THE LAND IN QUESTION WAS AGRICULTURAL LAND. HAVING COME TO SUCH A CONCLUSION, THE TRIBUNAL OUGH T NOT TO HAVE GONE INTO THE QUESTION OF INTENTION OF THE APPELLANT/ASSESSEE AND DEFINITELY NOT INTO THE QUES TION OF INTENTION OF THE LAND ACQUIRING AUTHORITY, THE LATT ER BEING A WHOLLY IRRELEVANT CONSIDERATION. IN THESE CIRCUMSTANCES, WE DECIDE THE QUESTION IN F AVOUR OF THE APPELLANT/ASSESSEE AND AGAINST THE REVENUE. THE SAME VIEW HAS BEEN TAKEN IN THE CASE OF LEVLEEN SINGHAL V DY. CIT (2007) 111 TTJ (DEL) 326 AND OM P RAKASH V ITO (2008) 25 SOT 198 (DEL). IT HAS BEEN ESSENCE O F ALL THESE DECISIONS THAT IF THE NATURE OF THE LAND IS AGRICUL TURAL, THEN THE RECEIPT FROM SALE THEREOF IS CAPITAL IN NATURE AND HENCE EXEMPT FROM TAX. THERE IS NO MANDATE IN THE INCOME TAX PR OVISIONS THAT FOR OBTAINING EXEMPTION IT IS NOT NECESSARY TO CARR Y OUT THE AGRICULTURAL ACTIVITY IN LAND IN QUESTION. WITHOUT PREJUDICE TO IT, THE ASSESSEE HAS CARRIED OUT ACTIVITIES OF PLANTATI ON AND SEEDING AT THE LANDS IN QUESTION. THE ASSESSEE HAS ALSO TR IED TO CARRY OUT NURSERY ACTIVITY ON THE SAID LAND BUT THE SAME WAS NOT FOUND FEASIBLE BECAUSE OF VARIOUS REASONS I.E. POWER PROB LEM, WATER PROBLEM, HOSTILE ATTITUDE OF LOCAL PEOPLE, ETC. WI THOUT PREJUDICE TO THE ABOVE, WE FIND THAT ONE OF THE MAIN STAND OF THE AUTHORITIES BELOW TO DISALLOW THE EXEMPTION IS THAT ON THE SIMI LAR ISSUE, ADDITION OF 3,95,167/- WAS MADE BY THE ASSESSING OFFICER IN 13 ITA NO.670 OF 13 SHRI ASHOK S GUPTA A.Y. 2007-08 AND THE ASSESSEE DID NOT FILE APPEAL I N THE MATTER. AS DISCUSSED ABOVE, THE ASSESSEE HAS NOT PREFERRED APPEAL IN THE ABOVE SAID YEARS BECAUSE PECULIAR FACTS FOR EXAMPLE THE COST OF LITIGATION, ETC. MOREOVER, EACH YEAR IS A DIFFEREN T ASSESSMENT YEAR AS CONSISTENTLY HELD BY THE COURTS OVER THE YEARS T HAT THE PRINCIPLE OF RES JUDICATE DOES NOT APPLY TO TAX PRO CEEDINGS. 6. IN VIEW OF ABOVE, WE HOLD THAT IT IS NOT THE AGR ICULTURAL ACTIVITY ON THE AGRICULTURAL LAND IN QUESTION BUT T HE INTENTION OF THE ASSESSEE WHICH IS IMPORTANT. AS STATED ABOVE, THE ASSESSEE IS RUNNING THE NURSERY ON BIG SCALE AND HE NEEDS EXTRA PIECES OF LAND IN ADJOINING PLACE FOR INCREASING HIS NURSERY ACTIVITY. THE NURSERY ACTIVITY ON THE SAID LAND IS AGRICULTURAL A CTIVITY. HOWEVER, IT WAS NOT FOUND VIABLE FOR SO MANY REASON S AS DISCUSSED ABOVE. IT DOES NOT MEAN THAT UNSUCCESSFU L AGRICULTURAL ACTIVITY ON A PARTICULAR LAND MAKES TH E LAND NON- AGRICULTURAL ONE WHILE THE SAME IS SITUATED BEYOND THE PRESCRIBED LIMIT FROM THE CONCERNED MUNICIPAL LIMITS. PROFIT ON SALE OF THE SAME COULD NOT BE TREATED AS INCOME FROM ADVENTURE AS HELD BY THE REVENUE AUTHORITIES. IN VIEW OF ABOVE, THE REV ENUE AUTHORITIES WERE NOT JUSTIFIED IN MAKING ADDITION O F 1,22,71,081/- TREATING PROFIT ON SALE OF AGRICULTUR AL LAND AS ACTIVITY FROM AN ADVENTURE ACTIVITY. THE ASSESSING OFFICER IS DIRECTED TO ALLOW EXEMPTION AS CLAIMED BY THE ASSES SEE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 31 ST OF JULY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST JULY, 2014 GCVSR 14 ITA NO.670 OF 13 SHRI ASHOK S GUPTA COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-V, PUNE 4) THE CIT-V, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE