1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA , JUDICIAL MEMBER ITA NO.1350/CHD/2010 ASSESSMENT YEAR: 2006-07 THE DCIT, VS. . SHRI HARJIT SINGH SANGHA, CIRCLE 4(1), CHANDIGARH CHANDIGARH PAN NO. BEGPS3665L & C.O. NO. 4/CHD/2011 (IN ITA NO.1350/CHD/2010) ASSESSMENT YEAR: 2006-07 SHRI HARJIT SINGH SANGHA, VS. THE DCIT, CIRCLE 4(1 ), CHANDIGARH CHANDIGARH PAN NO. BEGPS3665L ITA NO.1351/CHD/2010 ASSESSMENT YEAR: 2006-07 THE DCIT, VS. . SHRI SUKHWANT SINGH, CIRCLE 4(1), CHANDIGARH CHANDIGARH PAN NO. BEGPS9365R & C.O. NO. 5/CHD/2011 (IN ITA NO.1351/CHD/2010) ASSESSMENT YEAR: 2006-07 SHRI SUKHWANT SINGH, VS. THE DCIT, CIRCLE 4(1), CHANDIGARH CHANDIGARH PAN NO. BEGPS9365R ITA NO.68/CHD/2011 ASSESSMENT YEAR: 2006-07 THE DCIT, VS. . SHRI KARANBIR SINGH, CIRCLE 4(1), CHANDIGARH CHANDIGARH PAN NO. ADYPS3456K 2 & C.O. NO. 21/CHD/2011 (IN ITA NO.68/CHD/2011) ASSESSMENT YEAR: 2006-07 SHRI KARANBIR SINGH, VS. THE DCIT, CIRCLE 4(1), CHANDIGARH CHANDIGARH PAN NO. BEGPS9365R ITA NO. 1175/CHD/2009 ASSESSMENT YEAR: 2006-07 SHRI KARNAIL SINGH, VS. THE ACIT, CIRCLE 4(1), CHANDIGARH CHANDIGARH PAN NO. BEHPS6941E ITA NO. 1176/CHD/2009 ASSESSMENT YEAR: 2006-07 SMT. SEEMA DHALIWAL, VS. THE ADDL CIT, RANGE (IV) , CHANDIGARH CHANDIGARH PAN NO. ABBPD2272P (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SARITA KUMARI / SHRI N.K.SAINI RESPONDENT BY: SHRI VINEET KRISHAN ORDER PER SUSHMA CHOWLA, JM THE THREE APPEALS BY THE REVENUE ARE AGAINST TH E SEPARATE ORDERS OF CIT(A), CHANDIGARH DATED 5.8.2010 / 17.8.2010 A LL RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED U /S 143(3) OF THE I.T. ACT, 1961. THE ASSESSEES BELONGING TO SAME FAMILY (REALTIVES) HAVE FILED CROSS OBJECTIONS AGAINST EACH APPEAL FILED BY THE R EVENUE. THE RELATED ASSESSEES HAVE ALSO FILED TWO APPEALS BY WAY OF ITA NOS. 1175 & 3 1175/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07 A GAINST THE ORDER OF CIT(A), CHANDIGARH DATED 14.10.2009 AND 25.9.2009 AGAINST THE ORDER PASSED U/S 143(3) OF THE ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROU NDS OF APPEAL IN ALL THE APPEALS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-II LD. HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN TREATING THE SALE OF LA ND MEASURING 64 KANAL 15 MARLA / 9 KANALS SITUATED IN VILLAGE KARORAN AS AGRICULTURAL LAND. 3. THE ASSESSEE IN ITS CROSS OBJECTIONS HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE ORDER PASSED BY LD. CIT(A) CHANDIGARH DATE D 5.8.2010/ 17.8.2010 ARE CONTRARY TO LAW AND FACTS O F THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) CHANDIGARH EVEN AFTER ACCEPTING THE FACT THA T THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND REJECTED THE CLAIM OF THE ASSESSEE THAT THE SALE OF AGRICULTURAL LAND BY THE ASSESSEE IS NOT LIABLE TO EVEN CAPITAL GAIN TAX. 4. FURTHER, THE ASSESSEE HAS RAISED THE FOLLOWING C OMMON GROUNDS IN I.T.A.NOS.1175 & 1176/CHD/2009 :- 1. THAT THE ORDER PASSED U/S 250(6) BY THE LD. CIT(A) CHANDIGARH DATED 14.10.2009 IS BAD IN LAW AND FACTS OF THE CASE. 4 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) CHANDIGARH GRAVELY ERRED IN UPHOLDING THE ORDER OF LD. ASSESSING OFFICER WHO HAD TREATED THE SALE OF AGRICULTURAL LAND MEASURING 19 KANAL 14 MARLS AMOUNTING TO RS. 48,45,000/- SITUATED IN VILLAGE KARARON AS INCOME FROM THE PROFITS AND GAINS OF BUSINESS. THE AGRICULTURAL LAND SOLD BY THE APPELL ANT IS NOT EVEN AN ASSET AND CONSEQUENTLY NOT LIABLE TO INCOME TAXES / CAPITAL GAINS. 3. THAT THE CIT(A), CHANDIGARH GRAVELY ERRED IN UPHOLDING THE ORDER OF LD. ASSESSING OFFICER IN WHI CH HE HAD WRONGLY TAKEN THE SALE AMOUNT OF THE LAND AT RS. 48,45,000/- AS AGAINST THE ACTUAL SALE OF RS. 39,42,000/-. 4. THAT WITHOUT PREJUDICE TO ABOVE, AT THE BEST THE CA PITAL GAIN COULD BE LEVIED. 5. THAT THE LD. CIT(A) GRAVELY ERRED IN UPHOLDING THE CHARGING OF INTEREST U/S 234B AND 234C OF THE INCOM E TAX ACT. 5. ALL THE APPEALS OF THE REVENUE, CROSS OBJECTIONS RAISED BY THE ASSESSEES AS WELL AS THE APPEALS RELATING TO DIFFER ENT ASSESSEES ON IDENTICAL ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED O F BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IN THE IMPUGNED APPEALS PREFERRED BY THE REVENUE AND THE CROSS OBJECTIONS RAISED BY THE ASSESSEE AND ALSO THE APPEAL FILED BY DIFFERENT ASSESSEE, THE ISSUE RAISE D RELATES TO THE COMPUTATION OF INCOME ON SALE OF LAND IN VILLAGE KA RORAN, DISTT. MOHALI. 5 6. THE FACTS IN THE IMPUGNED APPEALS BEFORE US ARE IDENTICAL. HOWEVER, REFERENCE IS MADE TO THE FACTS IN I.T.A.NO . 1350/CHD/2010 TO ADDRESS THE ISSUE RAISED BEFORE US. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE ES IN THE IMPUGNED APPEALS BEFORE US WERE CO-OWNERS OF THE AGRICULTURA L LAND IN VILLAGE VILLAGE KARORAN, DISTT. MOHALI. IN THE RETURN OF I NCOME FILED FOR THE YEAR UNDER CONSIDERATION EACH OF THE CO-OWNERS HAD DECLA RED INCOME FROM LONG TERM CAPITAL GAINS ON SALE OF THEIR RESPECTIVE SHAR ES IN THE SAID PROPERTY IN VILLAGE KARORAN, DISTT. MOHALI. THE SAID PIECE OF LAND WAS TRANSFERRED BY THE CO-OWNERS VIDE 14 SALE DEEDS EXECUTED IN THE NA ME OF BASICALLY 2-3 PERSONS. THE ASSESSING OFFICER DURING THE COURSE O F ASSESSMENT PROCEEDINGS REQUISITIONED THE ASSESSEE TO FURNISH T HE DETAILS IN RESPECT OF THE LAND SOLD AND THE SALE CONSIDERATION RECEIPTS. THE DETAILS OF LAND SOLD AS FURNISHED BY THE ASSESSEE ARE TABULATED UNDER TA BLE-1 AND THE ASSESSING OFFICER ON PERUSAL OF THE SALE DEEDS HAS TABULATED THE DETAILS OF PURCHASER AND SIZE OF THE LAND SOLD BY THE ASSESSEE UNDER TAB LE-2 WHICH ARE REPRODUCED AT PAGES 3 TO 6 OF THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE TOOK A FRESH ST AND VIDE LETTER DATED 8.5.2008 THAT THE LAND SOLD WAS AGRICULTURAL IN NAT URE AND HENCE NOT LIABLE TO TAX ON ITS SALE. THE ASSESSEE FURNISHED THE CO PIES OF THE PURCHASE DEEDS OF THE LAND POINTING OUT THAT THE SAID AGRICU LTURAL LAND WAS SITUATED AT DISTANCE OF MORE THAN 12 KM FROM MOHALI AND THER E WAS NO OTHER MUNICIPAL COMMITTEE NEARBY. THE ASSESSEE ALSO PLAC ED RELIANCE ON THE NOTIFICATION NO.SOI0(E) DATED 6.1.1999 AS AMENDED B Y NOTIFICATION NO.SOI302 DATED 28.12.1999 ISSUED BY THE CENTRAL BO ARD OF DIRECT TAXES AND SUBMITTED THAT THE LAND IN QUESTION WAS BEYOND THE LIMIT LAID DOWN FOR URBANIZATION AND THE SAID GAIN ARISING ON ITS SALE WAS NOT LIABLE TO CAPITAL 6 GAINS. THE ASSESSEE FURTHER CONTENDED THAT IN THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2006-07 THERE WERE RUMOURS THAT THE RE WAS GOING TO BE MUNICIPAL COMMITTEE IN NAYAGAON AND AS THE LAND OF THE ASSESSEE WAS VERY CLOSE TO IT, THE CAPITAL GAIN WAS DECLARED BY THE ASSESSEE AS LIABLE TO TAX IN THE RETURN OF INCOME FILED. 8. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING THE LONG TERM CAPITAL GA INS ON SALE OF LAND AND THE CLAIM THAT ON THE SALE OF THE SAID LAND NO CAPI TAL GAIN LIABILITY AROSE, WAS MADE BY THE ASSESSEE VIDE ITS LETTERS DATED 8.5 .2008 AND 13.10.2008, IS NOT MAINTAINABLE BECAUSE OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN GOETZE INDIA LTD. VS. CIT, 284 ITR 323 (SC ). 9. COMING TO THE MERITS OF THE CLAIM OF THE ASSESSE E, THE ASSESSING OFFICER IN ORDER TO VERIFY THE NATURE OF THE LAND S OLD BY THE ASSESSEE I.E. KHASRA NO.232/1/2 IN VILLAGE KARORAN IS AGRICULTURA L LAND, INFORMATION WAS CALLED FROM PUNJAB ESTATE OFFICE. A COPY OF NOTIFI CATION OF PRINCIPAL SECRETARY TO GOVT. OF PUNJAB, DEPTT. OF LOCAL GOVT. , DATED 18.10.2006 WAS OBTAINED BY THE ASSESSING OFFICER. AS PER THE SAID NOTIFICATION KARORAN VILLAGE WAS NOTIFIED AS LAND FOR URBAN USAGE/NON-AG RICULTURAL ACTIVITIES. THE SAID NOTIFICATION WAS ISSUED CONSEQUENT UPON LE TTER NO.F/NO A- 19/2006-FC DATED 14.9.2006 BY THE MINISTRY OF ENVIR ONMENT & FOREST REITERATING THE FINAL APPROVAL FOR DELISTING 707.70 HECTARE OF CULTIVATED AND HABITATION AREA IN NADA AND KARORAN VILLAGE FROM TH E LIST OF FOREST LANDS. ACCORDINGLY, UNDER SECTION 4 AND 5 OF THE PUNJAB MU NICIPAL ACT, THE GOVT. OF PUNJAB DECLARED THE LOCAL AREA MENTIONED IN THE SCHEDULE OF BOUNDARY COMPRISING OF VILLAGES KARORAN, NADA AND KANSAL TO BE A TRANSITIONAL AREA FOR THE PURPOSE OF CONSTITUTING THE NAGAR PANCHAYAT . THE AREA OWNED BY 7 THE ASSESSEE I.E. KHASRA NO.232/1/2 WAS SPECIFICALL Y LISTED AS FALLING WITHIN THE JURISDICTION OF THE NOTIFIED AREA COMMITTEE. T HE CLAIM OF THE ASSESSEE THAT SUCH NOTIFICATION CAME INTO EFFECT AFTER THE T RANSACTION I.E. SALE OF LAND SPANNING BETWEEN THE PERIOD 20.9.2005 TO 8.3.2006 W AS REJECTED BY THE ASSESSING OFFICER AS THE INTENTION TO CONSTITUTE NA GAR PANCHAYAT, NAYAGAON WAS DECLARED VIDE NOTIFICATION NO.10/16/20 01-2LG(3)/14863 DATED 12.9.2005. ACCORDINGLY, THE ASSESSING OFFICE R OBSERVED THAT THE SAID NOTIFICATION WAS ANNOUNCED ON 12.9.2005 I.E. B EFORE THE SALE OF LAND BY THE ASSESSEE, WHICH WAS FINALLY APPROVED VIDE NO TIFICATION DATED 14.9.2006, AFTER DELISTING THE FOREST LAND VIDE LET TERS DATED 10.8.2006 AND 14.9.2006. THE COPY OF THE NOTIFICATION DATED 18. 10.2006 WAS APPENDED AS ANNEXRURE-A TO THE ASSESSMENT ORDER. FURTHER EN QUIRIES WERE MADE FROM PATWARI , THE REVENUE RECORD HOLDER, ABOUT THE USAGE AND NATURE OF LAND WHICH ARE INCORPORATED UNDER PARA 4.2 OF THE A SSESSMENT ORDER. THE STATEMENT OF THE PATWARI WAS RECORDED UNDER SECTION 131 OF THE INCOME TAX ACT AND THE COPY OF THE STATEMENT IS ANNEXED AS ANNEXURE-B TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER ALSO SOUGH T INFORMATION FROM THE PURCHASERS OF LAND UNDER SECTION 133(6) OF THE INC OME TAX ACT IN WHICH THEY CONFIRMED THAT THEY HAD PURCHASED THE SAID PLO TS OF LAND FOR RESIDENTIAL PURPOSES AND IT WAS ADMITTED THAT NO PL OT NO./S WAS MARKED. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN WHY THE TRA NSACTION SHOULD NOT BE TREATED AS ADVENTURE IN THE NATURE OF TRADE AND THE ENTIRE PROFITS BE ASSESSED AS INCOME FROM UNEXPLAINED SOURCES. THE R EPLY OF THE ASSESSEE DATED 12.12.2008 BEFORE THE ASSESSING OFFICER IS IN CORPORATED UNDER PARA- 7 AT PAGES 22 TO 25 OF THE ASSESSMENT ORDER, IN WHI CH IT WAS REITERATED THAT THE ASSESSEE HAD PURCHASED 795 KANALS OF LAND JOINT LY IN THE YEAR 1995-96 ALONGWITH OTHER CO-OWNERS AND THEREAFTER AGRICULTUR AL OPERATIONS WERE CARRIED OUT ON PART OF THE LAND AND ORCHARD OF GUAV A WAS RAISED ON SOME 8 LAND BESIDES THE CONVENTIONAL PRODUCE. THE ASSESSE E CLAIMED TO HAVE SOLD UNDIVIDED SHARE IN THE AGRICULTURAL LAND AND NO PLO TS WERE STATED TO BE CARVED OUT BY THE ASSESSEE. IT WAS ALSO EXPLAINED THAT FOR CARVING OUT THE PLOTS IN THE AREA, AND FOR DEVELOPING AND MAKING RO ADS ETC. PERMISSION WAS REQUIRED FROM PUDA, WHICH THE ASSESSEE NEVER SOUGHT . NO APPLICATION WAS MADE FOR CHANGE IN LAND USE. THE ASSESSEE FURT HER CONTENDED THAT THE CONSTRUCTION OF HOUSES BY THE PURCHASERS AT A LATER STAGE CANNOT CONVERT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE AS ADVENTURE IN THE NATURE OF TRADE. THE ASSESSEE CLAIMED THAT THERE WAS NO MUNICIPAL CO MMITTEE IN CHANDIGARH WHEN THE LAND WAS PURCHASED IN 1995 AND THE AREA CAME IN THE LIMITS OF MUNICIPAL COMMITTEE MUCH AFTER THE SALE. THE NATURE OF THE LAND BEING SHAMLAT AND ITS PARTITION BETWEEN VILLAGERS A ND THE ACQUISITION BY THE ASSESSEE CO-OWNERS IN THE UNDIVIDED LAND WAS AL SO REFERRED TO BY THE ASSESSEE. THE ASSESSING OFFICER REJECTING THE CLAI M OF THE ASSESSEE IN VIEW OF NON AGRICULTURAL ACTIVITIES BEING CARRIED O UT ON MAJOR PORTION OF THE LAND AND 120 KANAL OF THE LAND BEING VACANT, TH E STATEMENT OF THE PATWARI AND THE PURCHASERS AND ALSO THE SIZE OF LAN D PURCHASED BY THE SELLERS BEING SMALL AND FOR RESIDENTIAL PURPOSES, H ELD THAT THE LAND SOLD BY THE ASSESSEE FALLS WITHIN THE AMBIT OF NOTIFIED ARE A COMMITTEE AND INTENTION FOR URBAN USAGE BEING ANNOUNCED BY THE G OVT. ON 12.9.2005 I.E. BEFORE SALE OF LAND BY THE ASSESSEE, AND THE LAND B EING I KM. RADIUS OF PGIMER, SECTOR 12, CHANDIGARH AS TESTIFIED BY THE P ATWARI IN HIS STATEMENT RECORDED ON 19.11.2008 AND THE SUBSEQUENT PARTITION OF LAND INTO SMALL PLOTS AND DEVELOPMENT OF COLONIES, ESTABLISHE D THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS OF SALE AND PURCHASE OF LA ND AND THE PROFITS ARISING FROM THE AFORESAID SALES WERE DIRECTED TO B E ASSESSED AS BUSINESS PROFITS WITHIN THE AMBIT OF SECTION 28(1) OF THE AC T. 9 10. ALL THE CO-OWNERS FILED APPEALS BEFORE THE CIT( A). THE CIT(A), CHANDIGARH VIDE SEPARATE ORDERS DATED 14.10.2009 IN THE CASE OF SMT.SEEMA DHALIWAL AND SHRI KARNAIL SINGH UPHELD TH E ORDER OF THE ASSESSING OFFICER IN ASSESSING THE INCOME AS BUSINE SS PROFITS IN THE CASE OF THE ASSESSEE CO-OWNERS. BOTH THE CO-OWNERS ARE IN APPEAL AGAINST THE SAID ORDERS OF THE CIT(A). 11. FURTHER THE CIT(A), CHANDIGARH VIDE DIFFERENT O RDERS DATED 5.8.2010 IN THE CASE OF S/SHRI HARJEET SINGH, SUKHWANT SINGH AND KARANBIR SINGH OBSERVED HAT THE CLAIM OF THE ASSESSEE WAS THAT THE PURCHASE OF LAND WAS MADE FOR AGRICULTURE AND PART OF IT WAS BEING USED AS SUCH. FURTHER, THE LAND WAS PART OF FOREST LAND AND ONLY AGRICULTURAL ACTIVITIES WERE PERMISSIBLE EVEN AFTER DEFORESTATION. THE CIT(A) F URTHER HELD THAT THERE WAS NO EVIDENCE OF PREPARATION OF SITE PLAN AND SAL E OF PLOTS FOR DEVELOPING COLONY. IN THE CASE OF ONE OF THE CO-O WNERS, SMT.LEENA SANDHU THE ASSESSING OFFICER, WARD-4(3) VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT TREATED THE LAND AS LIABLE TO CAP ITAL GAINS. THE CIT(A) THUS CONCLUDED THAT THE ASSESSING OFFICERS DECISIO N TO ASSESS THE RETURNED INCOME AS BUSINESS INCOME WAS NOT ACCEPTABLE AND AT THE SAME TIME THE CONTENTION OF THE ASSESSEE THAT THE LAND BEING AGRI CULTURAL IS NOT LIABLE TO CAPITAL GAINS, IS ALSO NOT ACCEPTABLE. 12. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF C IT(A) INHOLDING THE SALE OF SAID LAND AS AGRICULTURAL LAND. THE ASSESS EE HAS FILED CROSS OBJECTION RAISING THE ISSUE THAT AFTER ACCEPTING TH E CLAIM OF THE LAND BEING AGRICULTURAL LAND, THE CIT(A) HAS ERRED IN HOLDING THAT THE SAME IS LIABLE TO CAPITAL GAINS. 10 13. SHRI VINEET KRISHAN APPEARED ON BEHALF OF THE ASSESSEE AND SMT. SARITA KUMARI & SHRI N.K.SAINI APPEARED FOR THE REV ENUE AND PUT-FORTH THEIR CONTENTIONS. 14. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIAN CE ON THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN DCI T VS. M/S A.P.PAPER MILLS LTD. (I.T.A.NO. 161/CHANDI/2006 & I .T.A.NO. 736/CHANDI/2007) RELATING TO ASSESSMENT YEARS 2001- 02 & 2002-03 DATED 22.7.2009. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEES IN THE CAPTIONED APPEALS BEFORE US ARE CO -OWNERS OF PIECE OF LAND IN VILLAGE KARORAN, DISTT. MOHALI, WHO HAD PUR CHASED THE ABOVE-SAID LAND JOINTLY IN 1996. THE SAID LAND WAS ORIGINALLY CLAIMED TO BE SHAMLAT LAND AND THEREAFTER IT WAS PARTITIONED BETWEEN THE VILLAGERS WHO OWNED AGRICULTURAL LAND IN THE VILLAGE IN THE RATIO OF TH EIR LAND HOLDING AND WERE MADE CO-OWNERS IN THE UNDIVIDED LAND IN MUSHTARKA K HATA. THE ASSESSEE CLAIMED TO HAVE PURCHASED A SHARE IN THE ABOVE-SAID UNDIVIDED LANDHOLDINGS AND AFTER ITS PURCHASE CLAIMED TO BE C ARRYING OUT AGRICULTURAL ACTIVITIES ON PORTION OF THE LAND AND HAD CONSTRUCT ED CERTAIN STRUCTURES ON CERTAIN PORTION OF THE LAND. 16. DURING THE YEAR UNDER CONSIDERATION THE CO-OWNE RS OF THE LAND I.E. THE ASSESSEES BEFORE US HAD SOLD PART OF THEIR LAND HOLDINGS BY EXECUTING 14 SALE DEEDS. THE DETAILS OF AGRICULTURAL LAND IN VILLAGE KARORAN, DISTT. MOHALI, PART HOLDINGS SOLD BY THE ASSESSEE BEFORE U S WERE AS UNDER : 11 KHASRA NO. AREA OF LAND SALE PRICE LTC G SOLD (RS.) DECLARED(RS.) SEEMA DHALIWAL 232/1/2 37 K 10M 75,00,000/- 60,24,203/- KARNAIL SINGH 232/1/2 19 K 14M 39,42,000/- 28,41,498/- SUKHWANT SINGH 232/1/2 21 K 14.5M 48,45,000/- 38,78,999/- HARJIT SINGH 232/1/2 64 K 15M 129,42,000/- 114,46,382/- KARANBIR SINGH 232/1/2 9 K 6.5M 18,65,000/- 14,94,801/- 17. THE DETAILS OF SALE OF LAND IN KHASRA 232/1/2 I N VILLAGE KARORAN, DISTT. MOHALI, PURCHASER-WISE AND SIZE-WISE OF LAND SOLD IS DETAILED IN TABLE-2 AT PAGES 4 TO 6 OF THE ASSESSMENT ORDER. I N THE RETURN OF INCOME FILED BY THE CAPTIONED ASSESSEES FOR THE YEAR UNDER CONSIDERATION, THE GAINS ARISING ON SALE OF LAND WAS DECLARED AS INCOM E FROM LONG TERM CAPITAL GAINS IN THE RESPECTIVE HANDS OF THE CO-OWN ERS. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DATED 8.5.2008 CLAIMED THAT THE SALE OF AGRICULTURAL LAND IS NON-TAXABLE AND HENCE, NO TAX WAS PAYABLE BY THE ASSESSEE. THE ABO VE-SAID CLAIM OF THE ASSESSEE FORWARDED VIDE LETTER DATED 8.5.2006 WAS R EJECTED BY THE AUTHORITIES BELOW IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN GOETZE INDIA LTD. VS. CIT (SUPRA). THE AS SESSING OFFICER HAD ASSESSED THE SAID GAIN ON SALE OF LAND AS INCOME FR OM BUSINESS BEING ADVENTURE IN THE NATURE OF TRADE. HOWEVER, THE CIT (A) IN THE CASE OF THE ASSESSEES-CO-OWNERS HAD HELD THAT THE LAND SOLD BY THE ASSESSEE WAS AGRICULTURAL LAND AND THE GAIN ARISING ON ITS TRANS FER WAS ASSESSABLE AS INCOME FROM LONG TERM CAPITAL GAINS. HOWEVER, IN T HE CASE OF SMT. SEEMA DHALIWAL AND SHRI KARNAIL SINGH, THE ORDER OF THE A SSESSING OFFICER WAS UPHELD BY THE CIT(A). 12 18. THE FIRST ISSUE RAISED IN THE PRESENT APPEALS I S THE NATURE OF LANDHOLDINGS OF THE ASSESSEE. THE SECOND ISSUE WHI CH ARISES FOR ADJUDICATION IS WHETHER THE GAIN ARISING ON THE SAL E OF THE SAID LAND IS TO BE ASSESSED AS TAXABLE OR NON-TAXABLE IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD MADE ENQUIRIES REGARDING THE USAGE OF THE LAND AND ITS C ONVERSION INTO URBAN LAND. THE ASSESSING OFFICER HAD SOUGHT THE NOTIFIC ATION FROM THE PRINCIPAL SECRETARY TO GOVT. OF PUNJAB, LOCAL GOVT. DATED 18.10.2006, AS PER WHICH KARORAN VILLAGE WAS NOTIFIED AS LAND FOR URBAN USAGE/NON- AGRICULTURAL ACTIVITIES. THE COPY OF THE SAID NOTI FICATION IS ANNEXED AS ANNEXURE-A TO THE ASSESSMENT ORDER. THE NOTIFICATI ON WAS ISSUED CONSEQUENT UPON LETTER NO.F/NO A-19/2006-FC DATED 1 4.9.2006 BY THE MINISTRY OF ENVIRONMENT & FOREST REITERATING THE FI NAL APPROVAL FOR DELISTING 707.70 HECTARE OF CULTIVATED AND HABITATI ON AREA IN NADA AND KARORAN VILLAGE FROM THE LIST OF FOREST LANDS. CON SEQUENTLY IN EXERCISE OF POWERS CONFERRED UNDER SECTION 4 AND 5 OF THE PUNJA B MUNICIPAL ACT, THE GOVT. OF PUNJAB DECLARED THE LOCAL AREA MENTIONED I N THE SCHEDULE OF BOUNDARY COMPRISING OF VILLAGES KARORAN, NADA AND K ANSAL TO BE A TRANSITIONAL AREA FOR THE PURPOSE OF CONSTITUTING T HE NAGAR PANCHAYAT. THE INTENTION WAS DECLARED TO CONSTITUTE NAGAR PANC HAYAT, NAYAGAON VIDE NOTIFICATION NO.10/16/2001-2LG(3)/14863 DATED 12.9. 2005. ALSO MINISTRY OF ENVIRONMENT & FOREST, GOVT. OF INDIA VIDE ISSUAN CE OF LETTER NO.F/8- 19/2006-FC DATED 14.9.2006 APPROVED THE DELISTING O F 707.70 HECTARE OF AREA IN NADA AND KARORAN VILLAGE. THE ASSESSING O FFICER FURTHER NOTED THAT THE ASSESSEES SHARE OF LAND I.E. KHASRA NO.23 2/1/2 IS SPECIFICALLY LISTED AS FALLING WITHIN THE JURISDICTION OF THE NO TIFIED AREA COMMITTEE. THE ABOVESAID CHRONOLOGY OF EVENTS ENUMERATED ABOVE IS DETAILED IN THE NOTIFICATION DATED 18.10.2006 ITSELF. 13 19. THE ASSESSING OFFICER DURING THE COURSE OF ASS ESSMENT PROCEEDINGS ALSO MADE ENQUIRIES FROM THE PATWARI ABOUT THE USAG E AND NATURE OF LAND. THE STATEMENT OF THE PATWARI WAS RECORDED ON 19.11. 2008, COPY OF WHICH IS ANNEXED AS ANNEXURE-B OF THE ASSESSMENT ORDER. THE PATWARI PRODUCED THE MAP/LATHA OF VILLAGE KARORAN WHEREIN HE POINTED OUT THE EXACT LOCATION OF THE VILLAGE STATING THAT THIS VILLAGE WAS ADJACE NT TO POST GRADUAATE INSTITUTE OF MEDICAL EDUCATION AND RESEARCH (PGIMER ), SECTOR 12, CHANDIGARH I.E. LAND BEING AT 1 K.M. RADIUS. THE PATWARI ALSO INFORMED THAT KARORAN VILLAGE FALLS WITHIN THE MUNICIPAL LIM IT/NOTIFIED AREA COMMITTEE. IN RESPECT OF THE LANDHOLDINGS SOLD B Y THE CO-OWNERS IN THE CAPTIONED APPEALS BEFORE US, THE PATWARI AFFIRMED T HAT THE SAID LAND DID INDEED FALL WITHIN THE SPECIFIED AREA AS PER NOTIFI CATION NO.10/16/2001- 2LG3/4976-77 DATED 18.10.2006 AND FURTHER CONFIRMED THAT THIS LAND FALLS ADJOINING TO VILLAGE KHUDA LAHORA, KHUDA JASSA OF U .T. VILLAGE NADA OF PUNJAB. THIS LAND ALSO FALLS WITHIN 1 KM. OF RADIU S OF PGI, SECTOR 12, CHANDIGARH. THIS LAND IS SPECIFICALLY REFERRED TO AS KHASRA NO.232/1/2 AND FALLS WITHIN THE NOTIFIED AREA COMMITTEE (OF NA YAGAON). THE PATWARI FURTHER WAS ASKED TO GIVE DETAILS OF NATURE OF ACTIVITIES CONDUCTED ON THIS LAND BEFORE AND AFTER SALE. IN THIS REGARD THE STATEMENT OF PATWARI WAS AS UNDER : WITH SPECIFIC REFERENCE TO THE AREA REFERRED TO AS KHASRA NO.232/1/2 IT IS SUBMITTED THAT VACANT LAND IS 120 KANALS. IN THE REST OF THE AREA LAND IS USED FOR RESIDENTIAL B UILDING. ABOUT 2 ACRES OF LAND IS COVERED WITH CHARA/CHARI F OR ANIMALS. THE SUBMISSION IS GIVEN AFTER REFERENCE T O REGISTER KHASRA GIRDHAWARI FOR THE CURRENT PERIOD. 14 20. DURING THE COURSE OF THE ASSESSMENT, THE COPIE S OF GIRDHAWARI FOR THE PERIOD 2005-06 WAS ALSO OBTAINED, WHICH REFLECT ED THAT THERE WAS NO CULTIVATION OF CROPS IN THE LAND SPECIFIED AS KHASR A NO.232/1/2. THE COPY OF THE GIRDHAWARI IS ANNEXED AS ANNEXURE-C OF THE A SSESSMENT ORDER. THE GIRDHAWARI LISTS THE NATURE OF LAND/ASSETS/ACTIVITI ES FOR THE PERIOD 2005-06 AS UNDER : SAUNI OR KHARIF (13.10.05 TO 02.03.06) (I) 72 KANAL WITH TUBEWELL AND HOUSE (II) 44 KANAL BAAGH (III) 120 KANAL KHALI OR VACANT LAND (IV) 235.11 KANAL NADI DA RASTA(GAIRMUMKIN OR UN CLASSIFIED) 21. IN THE TOTALITY OF THE ABOVE-SAID FACTS AND CIR CUMSTANCES AND THE EVIDENCE PERUSED BY US, THE NATURE OF LAND BEING AG RICULTURAL LAND STANDS ESTABLISHED; A) AS THE SAID LAND WAS PART OF NOTIFI ED FOREST AREA WHERE ADMITTEDLY NO OTHER ACTIVITIES EXCEPT AGRICULTURAL, IF ALLOWED, COULD BE CARRIED OUT; B) GIRDHAWARI OF THE LANDHOLDINGS OF T HE ASSESSEE PROVES THE STAND OF THE ASSESSEE THAT IT WAS AGRICULTURAL LAND AND ALSO THE NOTIFICATION ISSUED FOR THE URBAN USAGE/NON-AGRICULTURAL ACTIVI TIES CERTIFIES THAT PRIOR TO ITS NOTIFICATION THE SAID LAND WAS USED FOR AGRI CULTURAL PURPOSES. THE LAND BEING REGISTERED IN LAND REVENUE RECORDS AS AG RICULTURAL LAND, THEN THERE IS NO BASIS FOR HOLDING THE SAID LAND AS NOT AGRICULTURAL LAND. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDI GARH BENCH OF THE TRIBUNAL IN DCIT VS. A.P.PAPER MILLS LTD. (SUPRA). ACCORDINGLY, WE HOLD THAT THE NATURE OF THE LAND SOLD BY THE ASSESS EE AS ON THE DATE OF ITS ALE WAS AGRICULTURAL LAND, WHICH WAS ACQUIRED BY TH E ASSESSEE IN THE YEAR 1995 AND WAS SOLD DURING THE YEAR UNDER CONSIDERATI ON. 15 22. THE SAID ASSET BEING HELD BY THE ASSESSEE CANNO T BE SAID TO BE A BUSINESS ASSET AND ITS SALE IN SMALL PLOTS OF LAND TO DIFFERENT PURCHASERS IS NOT ADVENTURE IN THE NATURE OF TRADE, IN THE ABSENC E OF THE ASSESSEE HAVING FLOATED THE SAME OR HAVING DEVELOPED ITS LAND FOR T HE PURPOSES OTHER THAN AGRICULTURAL LAND. FURTHER FOR CONVERTING THE USA GE, PRIOR PERMISSION IS REQUIRED FROM THE AUTHORITIES AND IN THE ABSENCE OF ANY PERMISSION BEING OBTAINED BY THE ASSESSEE FROM PUDA AUTHORITIES IN R ESPECT OF THE SAID LAND SOLD, MERELY BECAUSE THE LAND IS SOLD IN SMALL PLOTS TO PERSONS WHO INTENDED ITS RESIDENTIAL USE, DOES NOT CHANGE THE N ATURE OF LAND SOLD IN THE HANDS OF THE ASSESSEE AND ITS TAXABILITY. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BLE PATNA HIGH COURT IN THE CA SE OF ADDL.CIT VS. TARACHAND JAIN, 123 ITR 567 (PAT), WHICH HAS BEEN R EFERRED TO BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN DCIT VS. M/S A. P.PAPER MILLS LTD. (SUPRA). THE RELEVANT EXTRACT OF THE SAID JUDGMENT IS AS UNDER : .. THE LAND MAY LIE NEAR AN URBAN AREA AND THE LAND MAY HAVE FETCHED A GOOD PRICE, MAY HOLD GOOD I N CASES OF AGRICULTURAL LAND ALSO. SINCE THE LAND HAS BEEN REC ORDED IN THE OFFICIAL RECORDS AS AGRICULTURAL LAND, IF THE DEPAR TMENT WANTED TO SHOW THAT THE ENTRY WAS WRONG. IT SHOULD HAVE GI VEN CONCRETE FACTS IN THAT DIRECTION. FOR EXAMPLE, IT C OULD HAVE SHOWN THAT THE LAND LAY WITHIN THE MUNICIPAL LIMITS OF THE TOWN OF RANCHI OR THAT THE ASSESSEE HAD MADE HIS ENTIRE PLOT OF LAND INTO PARCELS AND WAS SELLING EACH ONE OF THEM FOR T HE PURPOSE OF CONSTRUCTING A HOUSE THEREOF. THE FACT THAT THE PURCHASER HAS PURCHASED IT FOR THE PURPOSE OF CONSTRUCTING HI S HOUSE HAS NO RELEVANT, BECAUSE SO FAR AS THE SELLER IS CONCER NED, HE WILL BE DEEMED TO HAVE PARTED WITH THE AGRICULTURAL LAND IN THE FORM OF AGRICULTURAL LAND, UNLESS IT IS PROVED OTHE RWISE. THE DEPARTMENT HAS NOT BROUGHT UP ANY SUCH MATERIAL ON THE RECORD BY WHICH IT COULD BE SAID THAT THE CRITERIA ADOPTED BY THE TRIBUNAL FOR DETERMINING THE CHARACTER OF THE A GRICULTURAL LAND WAS WRONG. [EMPHASIS SUPPLIED] 16 23. IN VIEW THEREOF WE HOLD THAT THE GAIN ARISING O N THE SALE OF THE AFORESAID AGRICULTURAL LAND CANNOT BE TAXED AS INCO ME FROM BUSINESS. 24. THE NEXT CONTROVERSY WHICH ARISES IN THE PRESEN T APPEAL IS THE TREATMENT OF THE GAIN ARISING ON TRANSFER OF THE SA ID AGRICULTURAL LAND. THE PLEA OF THE ASSESSEE IS THAT ONCE IT HAS BEEN E STABLISHED THAT THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND, THE SAME IS NOT TO BE ASSESSED AS INCOME FROM CAPITAL GAIN BUT IS EXEMPT FROM TAX. W E FIND NO MERIT IN THE SAID STAND OF THE ASSESSEE. UNDER THE PROVISIONS O F SECTION 45 OF THE INCOME TAX ACT ANY PROFIT OR GAIN ARISING FROM THE TRANSFER OF CAPITAL ASSET IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS IN THE YEAR OF ITS TRANSFER. THE DEFINITION OF CAPITAL ASSET AS PER S ECTION 2(14) OF THE ACT IS THE PROPERTY OF ANY KIND HELD BY THE ASSESSEE, SU BJECT TO THE EXEMPTIONS PROVIDED IN CLAUSES (I) AND (VI) TO SECTION 2(14) O F THE ACT. ONE SUCH CLAUSE IS IN RESPECT OF THE AGRICULTURAL LAND HELD BY THE ASSESSEE NOT BEING SITUATED IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF MUNICIPALITY/CANTONMENT BOARD OR WHICH POPULATION O F NOT LESS THAN TEN THOUSAND OR; ANY AREA WITHIN EIGHT KILOMETERS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD AS REFERRED TO IN ITEM NO.(A) ABOVE. THUS MEANING THEREOF THAT EACH AND EVERY PIECE OF A GRICULTURAL LAND IN INDIA DOES NOT FALL OUTSIDE THE DEFINITION OF CAPIT AL ASSET BUT IS LIMITED TO THE EXCEPTION PROVIDED UNDER CLAUSE (III) TO SECTIO N 2(14) OF THE ACT. IN THE FACTS OF THE PRESENT CASE BEFORE US THE PATWARI HAS TESTIFIED IN HIS STATEMENT RECORDED ON 19.11.2008 THAT SUCH LAND WAS WITHIN ONE KILOMETER RADIUS OF PGIMER, SECTOR 12, CHANDIGARH AND FURTHER THE NOTIFICATION FOR THE URBAN USAGE WAS ANNOUNCED BY THE GOVERNOR ON 12 .9.2005 I.E. BEFORE THE SALE OF LAND BY THE ASSESSEE STARTING FROM 20.9 .2005. 17 25. THE LEARNED A.R. FOR THE ASSESSEE HAS FAILED TO CONTROVERT THE ABOVE-SAID FINDINGS OF THE ASSESSING OFFICER AND IN THE ABSENCE OF THE SAME THE SAID LAND SOLD BY THE ASSESSEE FALLS WITHI N THE DEFINITION OF CAPITAL ASSET AND THE GAIN ARISING ON ITS TRANSFER IS TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAINS, WHICH IS EXIGI BLE TO CAPITAL GAIN TAX. FURTHER IN THE CASE OF ONE OF THE CO-OWNERS, MS.LEE NA SANDHU, THE SAID GAIN WAS RETURNED UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAINS AS IS EVIDENT FROM THE COPY OF COMPUTATION OF INCOM E FILED AT PAGES 73 AND 74 OF THE PAPER BOOK. THE RETURNED INCOME WAS ACCEPTED BY THE ASSESSING OFFICER INCHARGE OF MS.LEENA SANDHU VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT RELATING TO ASSESSMENT YE AR 2006-07 DATED 5..9.2008. THE COPY OF THE SAID ORDER IS PLACED AT PAGE 72 OF THE PAPER BOOK. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICE R TO ASSESS THE GAIN ARISING ON TRANSFER OF SAID AGRICULTURAL LAND AS IN COME FROM LONG TERM CAPITAL GAINS. 26. AS NOTED ABOVE, THE FACTS IN THE CASE OF S/SHRI SUKHWANT SINGH, KARANBIR SINGH, KARNAIL SINGH AND SMT.SEEMA DHALIWA L ARE IDENTICAL TO THE FACTS IN THE CASE OF SHRI HARJIT SINGH AND HENC E OUR DECISION IN THE ABOVE-SAID CASE WOULD APPLY MUTATIS MUTANDIS TO THE SE CASES ALSO. 27. THE APPEALS FILED BY THE REVENUE IN I.T.A.NO. 1 350/CHD/2010, I.T.A.NO. 1351/CHD/2010 & I.T.A.NO. 68/CHD/2011 ARE DISMISSED. 28. SIMILARLY, CROSS OBJECTIONS FILED BY THE ASSESS EE IN C.O.NO.4/CHD/2011, C.O.NO.5/CHD/2011 & C.O.NO.21/CH D/2011 ARE ALSO DISMISSED. 18 29. THE APPEALS FILED BY THE ASSESSEE IN I.T.A.NO.1 175/CHD/2009 & I.T.A.NO.1176/CHD/2009 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JUNE, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST JUNE, 2011 RKK/RATI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH