ITO CORPORATE WARD 2 , COIMBATORE V. SHRI. T S R KHANNAIYAN, COIMBATORE

ITA 812/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1063 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment; Capital asset; Charitable institution; Question of law; Procedural lapse; Block assessment; Tax effect; Benefit of exemption
• Section: 143(3); 2(14); 148; 63; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.256 & 257/CHNY/2018 ' (' / ASSESSMENT YEARS : 2007-08 & 2009-10 SHRI T.S.R. KHANNAIYANN, 67, AVARAMPALAYAM ROAD, K.R. PURAM, COIMBATORE 641 006. PAN : AFZPK 7832 C V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE -2, THE JOINT COMMISSIONER OF INCOME TAX, RANGE-II, COIMBATORE. (*+/ APPELLANT) (,-*+/ RESPONDENTS) ./ ITA NO.812/CHNY/2018 ' (' / ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, CORPORATE WARD 2, 63-A, RACE COURSE ROAD, COIMBATORE. V. SHRI T.S.R. KHANNAIYANN, 67, AVARAMPALAYAM ROAD, K.R. PURAM, COIMBATORE 641 006. (*+/ APPELLANT) (,-*+/ RESPONDENT) './ 0 1 /ASSESSEE BY : SH. T. BANUSEKAR, CA 2 0 1 /REVENUE BY : SHRI SAILENDRA MAMIDI, PCIT SHRI AR.V. SREENIVASAN, JCIT 3 0 /$ / DATE OF HEARING : 05.07.2018 4!( 0 /$ / DATE OF PRONOUNCEMENT : 12.09.2018 2 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE APPEALS FILED BY THE ASSESSEE AND REVENUE AR E DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE. WHEN THE ASSES SEE HAS FILED APPEALS FOR ASSESSMENT YEARS 2007-08 AND 2009-10, T HE REVENUE HAS FILED APPEAL FOR ASSESSMENT YEAR 2007-08. THER EFORE, WE HEARD ALL THESE APPEALS TOGETHER AND DISPOSING THE SAME B Y THIS COMMON ORDER. 2. LETS FIRST TAKE REVENUES APPEAL IN I.T.A. NO.8 12/CHNY/2018 FOR ASSESSMENT YEAR 2007-08. 3. SHRI SAILENDRA MAMIDI, THE LD. DEPARTMENTAL REPR ESENTATIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD TO DISALLOWANCE CLAIMED BY THE ASSESSEE UNDER SECTI ON 10(38) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACC ORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE ASSESSEE DISCLOSED 4,63,21,320/- AS LONG TERM CAPITAL GAIN, HOWEVER, T HE SAME IS SHORT TERM CAPITAL GAIN. ACCORDING TO THE LD. D.R., THE CIT(APPEALS) BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN T HE CASE OF THE 3 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 ASSESSEES WIFE AND HIS DAUGHTER, FOUND THAT THE GA IN IS A LONG TERM CAPITAL GAIN. ACCORDING TO THE LD. D.R., NO APPEAL WAS FILED AGAINST THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE ASSES SEES WIFE AND HIS DAUGHTER SINCE THE TAX EFFECT WAS VERY LESS. THERE FORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT JUSTIFIED IN PLACING RELIANCE ON THE ORDERS OF THIS TRIBUNAL IN THE CASE OF ASSESSEE S WIFE AND HIS DAUGHTER. 4. ON THE CONTRARY, SH. T. BANUSEKAR, THE LD. REPRE SENTATIVE FOR THE ASSESSEE, SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD 750 SHARES OF M/S GANESAR GINNING MILLS LTD. AND OFFERED 4,51,43,911/- AS LONG TERM CAPITAL GAIN. IN FACT, THE SHARES WERE SOLD TO M/S DLF RETAILS. ACCORDING TO THE LD. REPRESENTATIVE, THE SHARES OF M/S GANESAR GINNING M ILLS LTD. WERE PURCHASED BY THE ASSESSEE ON 23.09.2005 AND THE SAM E WERE SOLD BY THE ASSESSEE ON 29.11.2006. THE HOLDING PERIOD OF SHARES WAS 432 DAYS, I.E. MORE THAN 12 MONTHS. REFERRING TO S ECTION 2(29A) OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT IN T HE CASE OF SHARES, IF THE ASSESSEE HOLDS THE SHARES FOR MORE THAN 12 M ONTHS, THEN IT HAS TO BE TREATED AS LONG TERM CAPITAL GAIN. THE L D. REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGMENT OF KARNATAKA HI GH COURT IN 4 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 BHORUKA ENGINEERING INDUSTRIES LTD. V. DCIT (2013) 36 TAXMANN.COM 82 AND ALSO ON THE JUDGMENT OF APEX COU RT IN ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION V. ITO (19 64) 52 ITR 524. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RE LIANCE ON THE JUDGMENT OF APEX COURT IN MRS. BACHA F. GUZDAR V. C IT [1955 SCR(1) 876]. SINCE THE SHARES WERE HELD BY THE ASS ESSEE FOR MORE THAN 12 MONTHS, ACCORDING TO THE LD. REPRESENTATIVE , THE CIT(APPEALS) HAS RIGHTLY FOUND THAT IT IS ONLY A LO NG TERM CAPITAL GAIN. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE DATES OF PURCHASE AND SALE OF SHARES ARE NOT IN DISPUTE. IN FACT, THE ASSESSEE PURCHASED 750 SHARES OF M/S GANESAR GINNIN G MILLS LTD. ON 23.09.2005 WHICH FALLS IN THE FINANCIAL YEAR 200 5-06 AND THE SAME WERE SOLD BY THE ASSESSEE ON 29.11.2006 WHICH FALLS IN FINANCIAL YEAR 2006-07. THEREFORE, IT IS CLEAR THA T THE ASSESSEE WAS HOLDING THE SHARES FOR MORE THAN 12 MONTHS. HENCE, IT HAS TO BE TREATED ONLY AS LONG TERM CAPITAL GAINS. A SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASSESSEES WIFE SMT. T.R.K. SARASWATHY AND HIS DAUGHTER SMT. K. PRI YA IN I.T.A. 5 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 NOS.1600/MDS/2015 AND 1601/MDS/2015 RESPECTIVELY. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 6. NOW COMING TO THE ASSESSEES APPEAL IN I.T.A. NO.256/CHNY/2018 FOR THE ASSESSMENT YEAR 2007-08. 7. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS NON-SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT. THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS RAISED THIS ISSUE B EFORE THE ASSESSING OFFICER SPECIFICALLY BY A LETTER DATED 16 .12.2014. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE R ECEIVED THE NOTICE ONLY ON 25.03.2015, WHICH WAS BEYOND THE PER IOD OF SIX MONTHS. THE ASSESSING OFFICER OUGHT TO HAVE SERVED THE NOTICE ON OR BEFORE 30.09.2014. REFERRING TO SECTION 143(2) OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFF ICER WAS EXPECTED TO SERVE THE NOTICE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF FINANCIAL YEAR IN WHICH THE RETURN WAS FILED . ADMITTEDLY, ACCORDING TO THE LD. REPRESENTATIVE, THE NOTICE WAS NOT SERVED ON THE ASSESSEE, THEREFORE, IT HAS TO BE PRESUMED THAT THE ASSESSING 6 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 OFFICER HAS ACCEPTED THE RETURN FILED BY THE ASSESS EE. HENCE, THE CONSEQUENTIAL ASSESSMENT CANNOT STAND IN THE EYE OF LAW. THE LD. REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGMENT OF APEX COURT IN ACIT V. HOTEL BLUE MOON (2010) 321 ITR 362 AND SUBM ITTED THAT OMISSION ON THE PART OF THE ASSESSING OFFICER TO IS SUE NOTICE UNDER SECTION 143(2) OF THE ACT CANNOT BE A PROCEDURAL IR REGULARITY AND IT IS NOT CURABLE, THEREFORE, REQUIREMENT OF NOTICE UNDER SECTION 143(2) OF THE ACT CANNOT BE DISPENSED WITH. IN VIEW OF THE J UDGMENT OF APEX COURT IN HOTEL BLUE MOON (SUPRA), ACCORDING TO THE LD. REPRESENTATIVE, THE CONSEQUENTIAL ASSESSMENT ORDER CANNOT STAND IN THE EYE OF LAW. 8. ON THE CONTRARY, SHRI SAILENDRA MAMIDI, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE BY A LETTER DATED 05.03.2014 REQUESTED THE ASSESSING OFF ICER TO TREAT THE RETURN ALREADY FILED AS THE RETURN FILED IN RESPONS E TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT. ACCORDING TO THE LD. D.R., THE REASON FOR REOPENING OF ASSESSMENT WAS ALSO FURNISHED TO T HE ASSESSEE ON 01.07.2014. IN THE CASE BEFORE THE APEX COURT IN H OTEL BLUE MOON (SUPRA), IT WAS A SEARCH CASE. THEREFORE, ACCORDIN G TO THE LD. D.R., THE ASSESSEE MAY NOT KNOW WHAT ARE THE MATERIAL FOU ND DURING THE 7 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 COURSE OF SEARCH OPERATION. IN THE CASE BEFORE US, THE ASSESSING OFFICER INFORMED THE ASSESSEE ABOUT THE REASON FOR REOPENING, THEREFORE, THE ASSESSEE KNOWS WILL THAT WHY THE CAS E WAS TAKEN UP FOR SCRUTINY EVEN THOUGH THE NOTICE WAS NOT ISSUED WITHIN A PERIOD OF SIX MONTHS. SINCE THE ASSESSEE KNOWS FULLY WELL TH AT THE INCOME HAS ESCAPED FROM ASSESSMENT AND THE CASE WAS REOPEN ED ONLY TO ASSESS THE ESCAPED INCOME, ACCORDING TO THE LD. D.R ., THE ASSESSING OFFICER HAS RIGHTLY REOPENED THE ASSESSME NT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE REQUESTED THE ASSESSING OFFICER TO TREAT T HE RETURN FILED ALREADY AS ONE FILED IN RESPONSE TO THE NOTICE ISSU ED UNDER SECTION 148 OF THE ACT FOR REOPENING. ONCE THE RETURN WAS TREATED AS ONE FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SECTIO N 148 OF THE ACT, THE OTHER FORMALITIES CONTEMPLATED UNDER SECTION 14 3 OF THE ACT HAVE TO BE FOLLOWED. THEREFORE, THE CIT(APPEALS) M AY NOT BE CORRECT IN DISTINGUISHING THE FACTS BEFORE THE SUPR EME COURT THAT IT WAS A SEARCH CASE. WHETHER IT WAS A SEARCH CASE OR OTHERWISE, THE PROCEDURE CONTEMPLATED UNDER SECTION 143(2) OF THE ACT CANNOT BE 8 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 OVERLOOKED. IN FACT, THE APEX COURT OBSERVED AT PA GES 369 AND 370 AS FOLLOWS:- THIS SECTION DOES NOT PROVIDE FOR ACCEPTING TH E RETURN AS PROVIDED UNDER SECTION 143(1)(A). THE ASSESSING OFFICER HAS TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) ONLY. IN CASE OF DEFAU LT IN NOT FILING THE RETURN OR NOT COMPLYING WITH THE NOTICE UNDER SECTI ON 143(2)/142, THE ASSESSING OFFICER IS AUTHORIZED TO COMPLETE THE ASS ESSMENT EX PARTE UNDER SECTION 144. CLAUSE (B) OF SECTION 158BC BY REFERR ING TO SECTION 143(2) AND (3) WOULD APPEAR TO IMPLY THAT THE PROVISION S OF SECTION 143(1) ARE EXCLUDED. BUT SECTION 143(2) ITSELF BECOMES NECESSAR Y ONLY WHERE IT BECOMES NECESSARY TO CHECK THE RETURN, SO THAT WHER E BLOCK RETURN CONFORMS TO THE UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES, THERE IS NO REASON, WHY THE AUTHORITIES SHOULD ISSUE NOTICE UNDER SECTION 143(2). HOWEVER, IF AN ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 158BC, NOTICE UNDER SECTION 143(2) SHOULD B E ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF BLOCK RETURN. OMISS ION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 1 43(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE D ISPENSED WITH. THE OTHER IMPORTANT FEATURE THAT REQUIRES TO BE NOTICED IS THAT SECTION 158BC(B) SPECIFICALLY REFERS TO SOME OF THE PROVISIONS OF THE ACT WHICH REQUIRE TO BE FOLLOWED BY THE ASSESSING OFFICER WHI LE COMPLETING THE BLOCK ASSESSMENTS UNDER CHAPTER XIV-B OF THE ACT. THIS LEG ISLATION IS BY INCORPORATION. THIS SECTION EVEN SPEAKS OF SUB-SECT IONS WHICH ARE TO BE FOLLOWED BY THE ASSESSING OFFICER. HAD THE INTENTIO N OF THE LEGISLATURE BEEN TO EXCLUDE THE PROVISIONS OF CHAPTER XIV OF THE ACT, THE LEGISLATURE WOULD HAVE OR COULD HAVE INDICATED THAT ALSO. A REA DING OF THE PROVISION WOULD CLEARLY INDICATE, IN OUR OPINION, IF THE ASSE SSING OFFICER, IF FOR ANY REASON, REPUDIATES THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 158BC(A), THE ASSESSING OFFICER MUST NEC ESSARILY ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE TIME PRESCRIBED IN THE PROVISO TO SECTION 143(2) OF THE ACT. WHERE THE LEGIS LATURE INTENDED TO EXCLUDE CERTAIN PROVISIONS FROM THE AMBIT OF SECTION 158BC(B) IT HAS DONE SO SPECIFICALLY. THUS, WHEN SECTION 158BC(B) SPECIFICA LLY REFERS TO APPLICABILITY OF THE PROVISO THERETO IT CANNOT BE E XCLUDED. WE MAY ALSO NOTICE HERE ITSELF THAT THE CLARIFICATION GIVEN BY THE CENTRAL BOARD OF 9 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 DIRECT TAXES IN ITS CIRCULAR NO. 717 DATED AUGUST 14, 1 995, HAS A BINDING EFFECT ON THE DEPARTMENT, BUT NOT ON THE COURT. THI S CIRCULAR CLARIFIES THE REQUIREMENT OF LAW IN RESPECT OF SERVICE OF NOTICE UNDER SUB- SECTION (2) OF SECTION 143 OF THE ACT. ACCORDINGLY, WE CONCLUDE THAT EVEN FOR THE PURPOSE OF CHAPTER XIV-B OF THE ACT, FOR THE DETERMINATION O F UNDISCLOSED INCOME FOR A BLOCK PERIOD UNDER THE PROVISIONS OF SECTION 158BC, THE PROVISIONS OF SECTION 142 AND SUB-SECTIONS (2) AND (3) OF SECTION 143 A RE APPLICABLE AND NO ASSESSMENT COULD BE MADE WITHOUT ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT. HOWEVER, IT IS CONTENDED BY SRI SHEKHAR, L EARNED COUNSEL FOR THE DEPARTMENT THAT IN VIEW OF THE EXPRESSION ' SO FAR A S MAY BE' IN SECTION 153BC(B), THE ISSUE OF NOTICE IS NOT MANDATORY BUT OPT IONAL AND ARE TO BE APPLIED TO THE EXTENT PRACTICABLE. IN SUPPORT OF THA T CONTENTION, THE LEARNED COUNSEL HAS RELIED ON THE OBSERVATION MADE BY THIS COURT IN DR. PARTAP SINGH' S CASE [1985] 155 ITR 166 . IN THIS CASE, THE COURT HAS OBSERVED THAT SECTION 37(2) PROVIDES THAT ' THE PROVIS IONS OF THE CODE RELATING TO SEARCHES, SHALL SO FAR AS MAY BE, APPLY TO SEARCHES DIRECTED UNDER SECTION 37(2). READING THE TWO SECTIONS TOGETHER IT MERELY MEANS THAT THE METHODOLOGY PRESCRIBED FOR CARRYING OUT TH E SEARCH PROVIDED IN SECTION 165 HAS TO BE GENERALLY FOLLOWED. THE EXPRESSI ON ' SO FAR AS MAY BE' HAS ALWAYS BEEN CONSTRUED TO MEAN THAT THOSE PR OVISIONS MAY BE GENERALLY FOLLOWED TO THE EXTENT POSSIBLE' . THE LEA RNED COUNSEL FOR THE RESPONDENT HAS BROUGHT TO OUR NOTICE THE OBSERVATIO NS MADE BY THIS COURT IN THE CASE OF MAGANLAL V. JAISWAL INDUSTRIES, NEEM ACH, [1989] 4 SCC 344 WHEREIN THIS COURT WHILE DEALING WITH THE SCOPE AND IMPORT OF THE EXPRESSION ' AS FAR AS PRACTICABLE' HAS STATED ' WIT HOUT ANYTHING MORE THE EXPRESSION ' AS FAR AS POSSIBLE' WILL MEAN THAT THE MANNER PROVIDED IN THE CODE FOR ATTACHMENT OR SALE OF PROPERTY IN EXECUTION OF A DECREE SHALL BE APPLICABLE IN ITS ENTIRETY EXCEPT SUCH PROVISION THE REIN WHICH MAY NOT BE PRACTICABLE TO BE APPLIED.' 16. THE CASE OF THE REVENUE IS THAT THE EXPRESSION ' SO FAR AS MAY BE APPLY' INDICATES THAT IT IS NOT EXPECTED TO FOLLOW T HE PROVISIONS OF SECTION 142, SUBSECTIONS (2) AND (3) OF SECTION 143 STRICTLY FOR THE PURPOSE OF BLOCK ASSESSMENTS. WE DO NOT AGREE WITH THE SUBMISS IONS OF THE LEARNED COUNSEL FOR THE REVENUE, SINCE WE DO NOT SEE ANY RE ASON TO RESTRICT THE SCOPE AND MEANING OF THE EXPRESSION ' SO FAR AS MAY BE APPLY' . IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE R ETURN FILED UNDER SECTION 158BC(A) PROCEEDS TO MAKE AN ENQUIRY, HE HAS N ECESSARILY TO FOLLOW THE PROVISIONS OF SECTION 142, SUB-SECTIONS (2) AND (3) OF SECTION 143. 10 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 10. IN VIEW OF THE ABOVE JUDGMENT OF APEX COURT, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT EVEN THOUGH THE CASE WAS REOPENED AND REASON FOR REOPENING WAS SUPPLIED, THE ASSESSIN G OFFICER WAS EXPECTED TO SERVE THE NOTICE UNDER SECTION 143(2) O F THE ACT WITHIN A PERIOD OF SIX MONTHS. AS HELD BY THE APEX COURT, IF THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT ISSUED WITH IN THE PRESCRIBED TIME, THEN THERE WILL BE PRESUMPTION THAT THE ASSES SING OFFICER ACCEPTED THE RETURN FILED BY THE ASSESSEE. IN THIS CASE, THE ASSESSEE REQUESTED THE ASSESSING OFFICER TO TREAT T HE RETURN ALREADY FILED AS ONE FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. THEREFORE, THERE IS A PRESUMPTION THAT THE AS SESSING OFFICER ACCEPTED THE RETURN ALREADY FILED SINCE THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT SERVED WITHIN A PERIOD OF SIX MONTHS. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE OR DERS OF THE LOWER AUTHORITIES. ACCORDINGLY, ORDERS OF BOTH THE AUTHO RITIES BELOW ARE SET ASIDE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 12. NOW COMING TO THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2009-10 IN I.T.A. NO.257/CHNY/2018. 11 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 13. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS EXEMPTION CLAIMED BY THE ASSESSEE IN RESPECT OF SALE OF AGRIC ULTURAL LAND. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSES SEE PURCHASED 16 ACRES OF AGRICULTURAL LAND ON 27.11.2003. THE A SSESSEE WAS CULTIVATING THE SAME FROM THE DATE OF PURCHASE. AC CORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS ALSO DISCLOSED AGRICULTURAL INCOME IN THE RETURN. ADMITTEDLY, THE SAME WAS SIT UATED BEYOND 8 KMS RADIUS OF MUNICIPALITY. ACCORDING TO THE LD. R EPRESENTATIVE, IT IS AN AGRICULTURAL LAND WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE AGRICULTURAL LAND I N QUESTION WAS SURROUNDED BY FACTORIES AND INDUSTRIES. THE PRICE OFFERED BY THE ASSESSEE WOULD NOT HAVE BEEN OFFERED BY AN AGRICULT URIST AND THE ASSESSING OFFICER FOUND THAT THE LAND IN QUESTION W AS CLASSIFIED AS INDUSTRIAL LAND. THE ASSESSING OFFICER FURTHER FOU ND THAT THE ASSESSEE WAS IN THE HABIT OF PURCHASING AND SELLING OF LANDS ON CONTINUOUS BASIS, THEREFORE, IT IS AN ADVENTURE IN THE NATURE OF TRADE. HENCE, IT HAS TO BE ASSESSED AS BUSINESS PROFIT. 12 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 14. REFERRING TO COPY OF PATTA, WHICH IS OTHERWISE KNOWN AS VILLAGE ACCOUNT NO.10(1), THE LD. REPRESENTATIVE SU BMITTED THAT THE LAND WAS NOT CLASSIFIED AS INDUSTRIAL LAND. IT WAS A PUNJA LAND. MERELY BECAUSE THE PURCHASE OF LAND WAS FOR INDUSTR IAL PURPOSE OR OTHER THAN AGRICULTURAL PURPOSE, ACCORDING TO THE L D. REPRESENTATIVE, THE SALE OF LAND WILL NOT LOSE ITS CHARACTER AS SAL E OF AGRICULTURAL LAND. PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN T HE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2011-12 IN I.T.A. NO.804/M DS/2016 DATED 28.10.2016, THE LD. REPRESENTATIVE SUBMITTED THAT T HIS TRIBUNAL FOUND THE ASSESSEE IS NOT IN THE BUSINESS OF REAL E STATE. BY PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN MR S. SAKUNTHALA VEDACHALAM V. MRS. VANITHA MANICKAVASAGAM (2014) 36 9 ITR 558, THE LD. REPRESENTATIVE SUBMITTED THAT THE HIGH COUR T FOUND IN SIMILAR CIRCUMSTANCES THAT THE LAND IS AGRICULTURAL LAND. SINCE THE ASSESSEE CULTIVATED THE LAND AND MERELY BECAUSE THE LAND WAS SOLD TO A NON- AGRICULTURIST, ACCORDING TO THE LD. REPRESENTATIVE, IT CANNOT BE CONSTRUED AS NON-AGRICULTURAL LAND. MOREOVER, THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR TO ASSESSMENT YEAR 2011-12 FOUND THAT THE ASSESSEE IS NOT IN THE BUSINESS OF PURCHASE AND SAL E OF LAND. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING 13 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 OFFICER IS NOT JUSTIFIED IN TREATING THE PROFIT ON SALE OF LAND AS BUSINESS PROFIT AND THE CIT(APPEALS) IS ALSO NOT JU STIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 15. ON THE CONTRARY, SHRI SAILENDRA MAMIDI, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE LAND IN QUESTION IS SITUATED IN AN AREA WHICH IS SURROUNDED BY FACTORIES AND INDUSTRIE S. ACCORDING TO THE LD. D.R., THE PRICE OFFERED BY THE BUYER WOULD NOT HAVE BEEN OFFERED BY AN AGRICULTURIST. SINCE THE CIT(APPEALS ) FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LAND, ACCORDING TO THE LD. D.R., HE HAS NOT FOUND THAT TH E LAND IN QUESTION IS AN AGRICULTURAL LAND. ACCORDING TO THE LD. D.R. , THE CIT(APPEALS) FOUND THAT THE TRANSACTION OF PURCHASE AND SALE OF LAND IS ADVENTURE IN THE NATURE OF TRADE AND THE INVESTMENT MADE BY T HE ASSESSEE IS A STOCK-IN-TRADE, THEREFORE, THE PROFIT ON SALE OF SU CH LAND HAS TO BE ASSESSED AS BUSINESS PROFIT. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE STATE REVENUE DEPARTMENT ADMITTEDLY CLASSIFIED THE LAND A S PUNJA LAND. PUNJA LAND CAN BE USED FOR CULTIVATION. IN THIS CA SE, THE ASSESSEE 14 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 CONTENDS THAT THE LAND IN QUESTION WAS CULTIVATED A ND AGRICULTURAL INCOME WAS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME REGULARLY. THIS FACT WAS NOT DENIED BY THE REVENUE . THE ONLY OBJECTION OF THE LD. D.R. IS THAT THE LAND IN QUEST ION IS SURROUNDED BY INDUSTRIES AND FACTORIES. THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT MERELY BECAUSE THE ADJOINING LAND WAS CONVERTED INTO INDUSTRIAL AND FACTORY LAND, THE AGRICULTURAL LAND OF THE ASSESSEE WOULD NOT LOSE ITS CHARACTER AS AGRICULTURAL LAND. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEES LAND WAS USED FOR I NDUSTRY OR FACTORY. THE ASSESSEES LAND CONTINUES TO BE AN AG RICULTURAL LAND. THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESS MENT YEAR 2011-12 IN I.T.A. NO.804/MDS/2016 BY AN ORDER DATED 28.10.2016, EXAMINED THIS ISSUE ELABORATELY AND OBSERVED AS FOL LOWS:- 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. THE FIRST ISSUE THAT IS TO DECIDED IS WHETHER THE SALE OF LAND DONE BY THE ASSESSEE DURING THE RELEVA NT PREVIOUS YEAR IS TO BE CONSIDERED AS PART OF A BUSINESS ACTIVITY OR NOT. ASSESSEE HAD SOLD TWO PIECES OF LAND DURING THE RELEVANT PREVIOUS YEAR. F IRST PIECE OF LAND AT SOWRIPALAYAM ON WHICH ASSESSEE RETURNED LONG TERM C APITAL GAINS 33,52,365/-. OBVIOUSLY, THE LAND WAS MORE THAN THREE YEAR S OLD SINCE ITS PURCHASE. SECOND PIECE OF LAND SOLD BY ASSESSEE AT OTHAKALMANDAPAM, CLAIMED BY THE ASSESSEE AS AGRICULTURAL IN NATURE, MEASURED 4.34 ACRES. ITS LOCATION WAS BEYOND FOURTEEN KILOMETERS FROM COIMBATORE CORPORATION LIMITS. THE SAID LAND WAS SOLD BY THE ASSESSEE TO A CHARITABLE TRUST OF WHICH ASSESSEE WAS THE MANAGING TRUSTEE, FOR A PRIC E OF 5,26,80,000/-. APART FROM THESE TWO TRANSACTIONS, THERE WERE CERTA IN OTHER LAND 15 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 TRANSACTIONS ENTERED BY THE ASSESSEE IN PREVIOUS YE ARS RELEVANT TO ASSESSMENT YEARS 2006-2007, 2007-08 AND 2009-10. IN THE PREVIOUS Y EAR RELEVANT TO ASSESSMENT YEAR 2006-2007, THERE WAS PURCHASE OF AGRICULTURAL LAND FOR 3,67,00,000/-. THOUGH DURING THAT YEAR ASSESSEE HAD ATTEMPTED TO MAKE INVESTMENTS IN LAND OF M/S. STAN DARD MOTORS LTD IT HAD NOT FRUCTIFIED. THIS POSITION HAS NOT BEEN DIS PUTED BY THE REVENUE. DURING THE VERY SAME YEAR ASSESSEE HAS SOLD LAND FO R 74,00,000/-. THE NEXT TRANSACTION WAS DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. ASSESSEE HAD SOLD LAND FOR 48.81 LAKHS AND ALSO GIVEN AN ADVANCE OF 241.11 LAKHS FOR PURCHASING ANOTHER LAND. THE ASSESSEE ALSO APPEAR TO HAVE SOLD SHARES OF M/S. GANESHA GINNING CO. LTD TO M/S. DLF RETAILS DURING THE SAID YEAR. HOWEVER, THIS IN OUR OPINION CANNOT BE EQUATED TO A LAND SALE. DURING THE PREVI OUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-2010 ASSESSEE HAD SOLD A PIECE OF LAND FOR 10.67 CRORES. THERE OBVIOUSLY WAS NO PURCHASE OR SALE DU RING THE RELEVANT PREVIOUS YEAR 2008-2009. IN OUR OPINION, ABOVE TRANSACT IONS WHICH HAPPENED OVER A NUMBER OF YEARS WERE SO SPORADIC TH AT IT COULD NOT BE CONSIDERED AS ONE CREATING A SERIES WHICH COULD S HOW AN INTENTION TO TRADE IN LAND. NONE OF THE LAND SOLD BY THE ASSESSEE OV ER THE PERIOD OF FIVE YEARS WAS DEVELOPED BY THE ASSESSEE OR PLOTTED BY T HE ASSESSEE. ASSESSEE HAD SHOWN THE LAND ALWAYS AS INVESTMENTS IN ITS BA LANCE SHEET. NO DOUBT IT WAS HELD THAT BOMBAY HIGH COURT IN THE CASE OF GOPAL RAMNARAYAN KASAT(SUPRA ) THAT EVEN AN ISOLATED TRANSACTION COULD QUALIFY A S AN ADVENTURE IN THE NATURE OF TRADE. BUT THEIR LORDSH IP ALSO HELD THAT A CONTINUITY WAS NECESSARY FOR REACHING A CONCLUSION THAT ASSESSEE WAS INDULGING IN A TRADE OR BUSINESS. IN OUR OPINION, P URCHASE AND SALE DONE BY THE ASSESSEE OVER A PERIOD OF FIVE YEARS WAS NOT OF SUCH FREQUENCY THAT COULD CREATE A CHAIN OR CONTINUITY, WHICH CAN PER SUADE US TO BELIEVE THAT ASSESSEE HAD AN INTENTION TO DO A BUSINESS OR TRAD E OF PURCHASE AND SELLING A LAND. JUST LIKE ANY OTHER INVESTOR, ASSESSEE INV ESTED IN LAND OVER A LONG PERIOD OF TIME AT DISPARATE PLACES. IT EFFECTED S ALE OF LAND WHENEVER AN OPPORTUNITY AROSE. IN SOME YEARS, THERE WERE MORE T HAN ONE NUMBER OF SUCH TRANSACTIONS. IN CERTAIN OTHER YEARS, THERE WE RE NO TRANSACTION OF PURCHASE OR SALE OF LAND. IN OUR OPINION, THE CONCL USION OF THE LOWER AUTHORITIES THAT THERE EXISTED A SERIES OF TRANSACTI ONS AND ASSESSEE HAD AN INTENTION TO TRADE IN LAND OR DO REAL ESTATE BUSINE SS WAS INCORRECT. ESPECIALLY SO, SINCE ASSESSEE WAS IN THE BUSINESS O F MANUFACTURING TRANSFORMERS. THUS, ACCORDING TO US, SURPLUS ARISIN G OUT OF SALE OF LAND 16 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 DURING THE RELEVANT PREVIOUS YEAR COULD NOT HAVE BE EN CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS BUT ONLY UNDER THE HEAD CAPITAL GAINS. 13. THIS TAKES US TO SECOND ISSUE AS TO WHETHER 4.34 A CRES LAND SOLD BY THE ASSESSEE AT OTHAKALMANDAPAM TO M/S. HINDUSTAN E DUCATIONAL AND CHARITABLE TRUST, WAS AGRICULTURAL OR NOT. IF IT WAS AGRICULTURAL LAND ASSESSEE WOULD NOT BE EXIGIBLE TO CAPITAL GAINS TAX, SINCE SECTION2(14)(III) OF THE ACT EXCLUDED AGRICULTURAL LAND FROM THE DEFI NITION OF CAPITAL ASSETS. CLAIM OF THE ASSESSEE WAS THAT THE SAID LA ND WAS CLASSIFIED BY REVENUE DEPARTMENT AS AGRICULTURAL IN REVENUE RECOR DS. LD. ASSESSING OFFICER HIMSELF HAS STATED THAT IN THE ASSESSMENT O RDER THAT THE LAND SOLD WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTUR AL AND IT WAS SUBJECT TO PAYMENT OF LAND REVENUE. HOWEVER, AS PER ASSESSING OFFICER, THE LAND WAS NOT ACTUALLY USED FOR AGRICULTURAL PURPOSE. IN OUR OPINION THIS CONCLUSION WAS REACHED BY THE ASSESSING OFFICER WITHOUT ANY MA TERIAL EVIDENCE. THE LAND WAS OWNED BY ASSESSEE SINCE 1995 AND WAS PURCHASE D AT A COST OF 89,915/- THEREFORE CONCLUSION OF THE ASSESSING OFFICER THAT INCOME DERIVED FROM AGRICULTURAL OPERATION DID NOT BEAR A RATIONAL PROPORTION TO THE COST IS ITSELF INCORRECT. ASSESSEE HAD DECLARE D AGRICULTURAL INCOME OF 18,10,750/- DURING THE RELEVANT PREVIOUS YEAR. ASSESSIN G OFFICER HAD ALSO COME TO A CONCLUSION THAT THE LAND WAS SITUATED IN A DEVELOPED AREA, WHEN IN REALITY THE LAND WAS SITUATED 14 KM FROM THE COIM BATORE CORPORATION LIMIT. THERE WAS NO PLOTTING OF LAND DONE BY THE A SSESSEE. CERTIFICATE FROM THE REGISTRATION DEPARTMENT PLACED AT PAGE 101 OF PAPER BOOK DOES NOT CLASSIFY THE LAND AS INDUSTRIAL LAND. IT SIMP LY MENTIONED THE LAND FELL UNDER A CATEGORY CALLED DRY SPECIAL TYPE OF LAND CL ASS II. IT MIGHT BE TRUE THAT PURCHASER OF LAND HAD NO INTENTION TO CARRY ON ANY AGRICULTURAL ACTIVITY IN THE SAID LAND. NO DOUBT HONBLE APEX COURT IN TH E CASE OF SMT. SARIFABIBI MOHAMMED IBRAHIM (SUPRA ) HAS LAID DOWN THIRTEEN TESTS FOR DECLARING WHETHER A PIECE OF LAND IS AGRICULTURAL OR NOT. HOWEVER IT DOES NOT REQUIRE A CUMULATIVE SATISFACTION OF ALL THE T HIRTEEN INDICATORS. THE QUESTION HAS TO BE ANSWERED, CONSIDERING THE ANSWE RS TO ALL THE THIRTEEN INDICATORS. IN THE CASE BEFORE US, IT IS AN ADMITT ED POSITION THAT THE REVENUE RECORDS CLASSIFIED THE LAND AS AGRICULTURA L IN NATURE. ASSESSEE HAD HELD THE LAND FOR MORE THAN FIFTEEN YEARS BEFOR E HE SOLD IT AND HAD ALSO SHOWN AGRICULTURAL INCOME IN HIS RETURNS. THE RE IS NOTHING ON RECORD TO SHOW THAT ADJOINING AREAS WERE USED FOR NON AGRICUL TURAL ONLY. THERE IS NOTHING ON RECORD TO SHOW THAT LAND WAS SOLD ON SQ UARE FOOT BASIS. ON THE OTHER HAND, COPY OF SALE DEED PLACED AT PAGE NO.65 TO 76 SHOW THAT LAND 17 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 WAS SOLD ON ACREAGE BASIS. IN THE CASE OF SAKUNTHALA VEDACHALAM VS. VANITHA MANICKA VASAGAM (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT HAD AFTER CONSIDERING THE JUDGMENT OF GUJARAT HIGH COUR T IN THE CASE SIDDARTHA DESAI (SUPRA) HELD AS UNDER:- 9. THE ISSUE INVOLVED IN THE ABOVE TAX CASE (APPE ALS) LIES ON THE NARROW COMPASS, VIZ., WHETHER THE LANDS SOLD BY THE ASSESSEES ARE A GRICULTURAL LANDS AND WHETHER THEY ARE ENTITLED TO THE BENEFIT OF EXEMPTION FROM CAPITAL GAINS TAX. 10. IT IS ON RECORD THAT IN A REPORT HAS BEEN SUBMI TTED BY THE REVENUE AUTHORITIES, IT IS ADMITTED THAT THE LANDS ARE CLASSIFIED AS AGR ICULTURAL LANDS IN THE REVENUE RECORDS AND THEY ARE DRY LANDS. THE REMAND REPORT O F THE ASSESSING OFFICER IN THIS REGARD READS AS FOLLOWS : 'DURING THE TIME OF ASSESSMENT PROCEEDINGS ITSELF, A CONFIRMATION WAS OBTAINED FROM THE HEADQUARTERS DEPUTY TAHSILDAR, THIRUKA ZHU KUNDRAM, WHO HAS CERTIFIED IN HIS LETTER DATED DECEMBER 23, 2010, REFERRED TO AT 2 ABOVE, THAT IN THE LANDS IN QUESTION CASUARINAS ARE GROWN FOR THE PAST ONE AND A HALF YEAR AND HENCE THE SAME ARE AGRI CULTURAL LANDS. HE HAS ALSO CONFIRMED IN T HE SAID LETTER THAT THE LANDS ARE SITUATED AT ONE KILOMETRE DISTANCE FROM THE TOWN PA NCHAYAT OF MAMALLAPURAM (I.E., WITHIN THE SPECIFIED DISTANCE FROM THE OUTER LIMITS OF THE NEAREST MUNICIPALITY/TOWN PANCHAYAT) AND THE POPULA TION OF THE MAMALLAPURAM TOWN PANCHAYAT AS PER THE 2001 CENSUS WAS 12,345.' 11. THE ASSESSEE HAS ALSO PRODUCED A COPY OF THE AD ANGAL AND THE LETTER FROM THE TAHSILDAR, WHICH SHOWED THAT THE LANDS WERE AGRICUL TURAL IN NATURE AND THE REVENUE HAS ALSO ACCEPTED THAT THE LANDS ARE FALLING WITHIN THE RESTRICTED ZONE IN TERMS OF SECTION 2(14) OF THE INCOME-TAX ACT. 12. HENCE, THE ONLY POINT THAT HAS TO BE CONSIDERED IS THAT WHETHER THE TEST AS LAID DOWN IN THE DECISION REPORTED IN CIT V. SIDDHARTH J . DESAI [1983] 139 ITR 628 (GUJ) HAS BEEN SATISFIED BY THE ASSESSEES. IN THE S AID DECISION, IN PARAGRAPH 11, IT IS HELD AS FOLLOWS (PAGE 638) : 'ON A CONSPECTUS OF THESE CASES, SEVERAL FACTORS AR E DISCERNIBLE WHICH WERE CONSIDERED AS RELEVANT AND WHICH WERE WEIGHED AGAIN ST EACH OTHER WHILE DETERMINING THE TRUE NATURE AND CHARACTER OF THE LA ND. IT MAY BE USEFUL TO EXTRACT FROM THOSE DECISIONS SOME OF THE MAJOR FACTORS WHIC H WERE CONSIDERED AS HAVING A BEARING ON THE DETERMINATION OF THE QUESTION. THOSE FACTORS ARE : (1) WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRI CULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND REVEN UE ? (2) WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USE D FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME ? (3) WHETHER SUCH USER OF THE LAND WAS FOR A LONG PE RIOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY WAY OF A STOP-GAP ARRANGE MENT ? (4) WHETHER THE INCOME DERIVED FROM THE AGRICULTURA L OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVESTMENT MADE IN PURCHASING THE LAND ? 18 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 (5) WHETHER, THE PERMISSION UNDER SECTION 65 OF THE BOMBAY LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF THE LA ND ? IF SO, WHEN AND, BY WHOM (THE VENDOR OR THE VENDEE) ? WHETHER SUCH PERMISSIO N WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND ? IF THE PERMISSION WAS IN RESPECT OF A PORTION OF THE LAND AND IF IT WAS OBTAINED IN THE PAST, WHAT WAS THE NA TURE OF THE USER OF THE SAID PORTION OF THE LAND ON THE MATERIAL DATE ? (6) WHETHER THE LAND, ON THE RELEVANT DATE, HAD CEA SED TO BE PUT TO AGRICULTURAL USE ? IF SO, WHETHER IT WAS PUT TO AN ALTERNATIVE U SE ? WHETHER SUCH CESSER AND/OR ALTERNATIVE USER WAS OF A PERMANENT, OR TEMPORARY N ATURE ? (7) WHETHER THE LAND, THOUGH ENTERED IN REVENUE REC ORDS, HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVER BEEN PL OUGHED OR TILLED ? WHETHER THE OWNER MEANT OR INTENDED TO USE IT FOR AGRICULTURAL PURPOSES ? (8) WHETHER THE LAND WAS SITUATE IN A DEVELOPED ARE A ? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF T HE LANDS IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRI CULTURAL ? (9) WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOTTI NG AND PROVID ING ROADS AND OTHER FACILITIES ? (10) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTI ONS OF THE LAND FOR NON- AGRICULTURAL USE ? (11) WHETHER PERMISSION UNDER SECTION 63 OF THE BOM BAY TENANCY AND AGRICULTURAL LANDS ACT, 1948, WAS OBTAINED BECAUSE THE SALE OR I NTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST ? IF SO, WHETHER THE SALE OR INTE NDED SALE TO SUCH NON-AGRICULTURIST WAS FOR NON-AGRICULTURAL OR AGRICULTURAL USER ? (12) WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACR EAGE BASIS ? (13) WHETHER AN AGRICULTURIST WOULD PURCHASE THE LA ND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AND WHETHER THE OW NER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPERTY YIELDING AGRICULTURAL PROD UCE ON THE BASIS OF ITS YIELD ? AT THE RISK OF REPETITION, WE MAY MENTION THAT NOT ALL OF THESE FACTORS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THOSE FACTORS MAY MAKE APPEARANCE AND THAT THE ULTIMATE DECISION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF CIRCUMSTANCES.' 13. ACCORDING TO THE TRIBUNAL, THAT IF THE ABOVE TE STS ARE APPLIED, THE ASSESSEES COULD NOT SATISFY ANY OF THE CONDITIONS EXCEPT CONDITIONS NOS. 1, 5, 11 AND 12. THE TRIBUNAL HELD THAT THE ASSESSEES COULD NOT PROVE THAT THE LA NDS WAS ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES. THIS REASONING DOES NOT APPEAR TO BE CORRECT IN VIEW OF THE ABOVESAID DECISION OF THE GUJARAT HIGH COURT, WHERE IN IT WAS CLEARLY HELD IN CLAUSE (1) IN PARAGRAPH 11 THAT WHETHER THE LAND WAS CLASSIFIE D IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYM ENT OF LAND REVENUE HAS TO BE CONSIDERED FOR GRANT OF EXEMPTION. 14. THUS, IT IS EVIDENT FROM THE ABOVE, WHICH CLEAR LY STATES THAT ANY ONE OF THE ABOVE FACTORS CAN BE PRESENT IN A CASE TO QUALIFY FOR THE BENEFIT OF CLASSIFICATION AS AGRICULTURAL LANDS. IN THIS CASE, THE ASSESSEES HAV E QUALIFIED UNDER CLAUSE 11(1) SINCE 19 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 AS PER THE ADANGAL RECORDS, THESE LANDS WERE CLASSI FIED AS AGRICULTURAL LANDS AND THE ASSESSEES HAVE ALSO PAID REVENUE KIST, NAMELY, REVE NUE PAYMENT. THEREFORE, THE TRIBUNAL HAS MISCONSTRUED THE JUDGMENT OF THE GUJAR AT HIGH COURT (SUPRA) THAT ALL CONDITIONS LAID DOWN IN PARAGRAPH 11 SHOULD BE SATI SFIED, WHICH IS NOT A CORRECT INTERPRETATION. 15. TO GET EXEMPTION, THE ASSESSEE HAS TO SATISFY T HE CONDITIONS LAID DOWN IN SECTION 2(14) OF THE INCOME-TAX ACT, WHICH READS AS FOLLOWS : '2. (14) 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HELD BY AN ASSES SEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE (I) ANY STOCK-IN-TRADE, CONSUMABLE STORES OR RAW MATERIALS HELD FOR THE PUR POSES OF HIS BUSI NESS OR PROFESSION ; (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PROP ERTY (INCLUDING WEARING APPAREL AND FURNITURE, BUT EXCLUDING JEWELLERY) HELD FOR PER SO NAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM : EXPLANATION.-FOR THE PURPOSES OF THIS SUB-CLAUSE, ' JEWELLERY' INCLUDES- (A) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTHER PRE CIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH PRECIOUS MET A LS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONE, AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL ; (B) PRECIOUS OR SEMI-PRECIOUS STONES, WHETHER OR NO T SET IN ANY FURNITURE, UTENSIL OR OTHER ARTICLE OR WORKED OR SEWN INTO ANY WEARING AP PAREL ; (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SI TUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORA TION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPU LATION 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 MOR E THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTON MENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD T O THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT C ONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE ; 20 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 (IV) 6 PER CENT. GOLD BONDS, 1977, OR 7 PER CENT. GOLD BONDS, 1980, OR NATIONAL DEFENCE GOLD BONDS, 1980, ISSUED BY THE CENTRAL GOV ERNMENT ; (V) SPECIAL BEARER BONDS, 1991, ISSUED BY THE CENTR AL GOVERNMENT ; (VI) GOLD DEPOSIT BONDS ISSUED UNDER THE GOLD DEPOS IT SCHEME, 1999, NOTIFIED BY THE CENTRAL GOVERNMENT.' 16. ONCE THE TRIBUNAL HAS ACCEPTED THAT THE CLASSIF ICATION OF LANDS AS PER THE REVENUE RECORDS ARE AGRICULTURAL LANDS, WHICH ARE E VIDENCED BY THE ADANGAL AND THE LETTER OF THE TAHSILDAR AND SATISFIES OTHER CON DITIONS OF SECTION 2(14) OF THE INCOME-TAX ACT, WE ARE OF THE VIEW THAT THE TRIBUNA L HAS MISDIRECTED ITSELF AS STATED ABOVE. 17. YET OTHER REASON GIVEN BY THE TRIBUNAL IS THAT THE ADJACENT LANDS ARE PUT TO COMMERCIAL USE BY WAY OF PLOTS AND, THEREFORE, THE VERY CHARACTER OF THE LANDS OF THE ASSESSEES IS DOUBTED AS AGRICULTURAL IN NATURE. THE MANNER IN WHICH THE ADJACENT LANDS ARE USED BY THE OWNER THEREIN IS NOT A GROUND FOR THE TRIBUNAL TO COME TO A CONCLUSION THAT THE ASSESSEES' LANDS ARE NOT AGRICULTURAL IN NATURE. THE REASON GIVEN BY THE TRIBUNAL THAT THE ADJACENT LAND S HAVE BEEN DIVIDED INTO PLOTS FOR SALE WOULD NOT MEAN THAT THE LANDS SOLD BY THE ASSESSEES WERE FOR THE PURPOSE OF DEVELOPMENT OF PLOTS. ALSO THE REASONING GIVEN B Y THE TRIBUNAL 'NO AGRICULTURISTS WOULD HAVE PURCHASED THE LAND SOLD B Y THE ASSESSEE FOR PURSUING ANY AGRICULTURAL ACTIVITY' IS BASED ON MERE CONJECT URES AND SURMISES. 18. THE PLEA OF THE LEARNED STANDING COUNSEL APPEAR ING FOR THE REVENUE THAT THERE WAS NO AGRICULTURAL OPERATIONS PRIOR TO THE DATE OF SALE IS OF NO AVAIL AS THE DEFINITION UNDER SECTION 2(14) OF THE INCOME-TAX AC T HAS THE ANSWER TO SUCH A PLEA RAISED. FURTHERMORE, IT IS ALSO ON RECORD THAT THE LANDS ARE AGRICULTURAL LANDS CLASSIFIED AS DRY LANDS, FOR WHICH KIST HAS BEEN PA ID. 19. THE VIEW OF THE ASSESSEE IS FORTIFIED BY THE DE CISION REPORTED IN CIT V. RAJA BENOY KUMAR SAHAS ROY [1937] 32 ITR 466 (SC) WHEREIN, IT IS HELD AS FOLLOWS (PAGE 476) : 'THERE WAS AUTHORITY FOR THE PROPOSITION THAT THE E XPRESSION 'AGRI CULTURAL LAND' MENTIONED IN ENTRY 21 OF LIST II OF THE SEVENTH SCH EDULE TO THE GOVERNMENT OF INDIA ACT, 1935, SHOULD BE INTERPRETED IN ITS WIDER SIGNIFICANCE AS INCLUDING LANDS WHICH ARE USED OR ARE CAPABLE OF BEING USED FOR RAI SING ANY VALUABLE PLANTS OR TREES OR FOR ANY OTHER PURPOSE OF HUSBANDRY (SEE SA ROJINIDEVI V. SHRI KRISHNA ANJANNEYA SUBRAHMANYAM ILR [1945] MAD 61 AND MEGH R AJ V. ALLAH RAKHIA [1942] FCR 53).' 20. FOR THE FOREGOING REASONS, WE PASS THE FOLLOWIN G ORDER : (I) ON THE QUESTION OF LAW RAISED, WE ARE OF THE VI EW THAT THE TRIBUNAL WAS NOT JUSTIFIED IN REJECTING THE EXEMPTION. ACCORDINGLY, THE QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEES ; (II) CONSEQUENTLY, THE ORDER OF THE TRIBUNAL DATED APRIL 11, 2013, IS SET ASIDE. 21 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 IN THE RESULT, BOTH THE ABOVE TAX CASE (APPEALS) AR E ALLOWED. NO COSTS. CONSEQUENTLY, CONNECTED MISCELLANEOUS PETITIONS ARE CLOSED. THEIR LORDSHIP HAD CLEARLY HELD THAT NATURE OF USE OF ADJACENT LAND WAS NOT RELEVANT IN DECIDING THE NATURE OF LAND SOLD BY AN ASSESSEE. THEIR LORDSHIP HAD ALSO HELD THAT A PRESUMPTION COULD NEVER BE TAK EN REGARDING THE PURPOSE FOR WHICH THE BUYER PURCHASED THE LAND. LOR DSHIP ALSO OBSERVED THAT NATURE OF CLASSIFICATION OF LAND BY THE REVENU E AUTHORITIES IN THE REVENUE RECORD WAS OF PRIME IMPORTANCE IN DETERMINI NG THE NATURE OF LAND SOLD BY THE ASSESSEE. CONSIDERING THE FACTS AND CI RCUMSTANCES OF THE CASE AND ALSO APPLYING THE LAW LAID DOWN BY HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF SAKUNTHALA VEDACHALAM VS. VANITHA MANICKAVASAGAM (SUPRA), WE ARE OF THE OPINION THAT LOWER AUTHORITIES FELL I N ERROR IN CONSIDERING THE LAND MEASURING 4.34 ACRES AT OTHAKALMANDAPAM SOLD BY THE ASSESSEE TO M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST AS NON AGRICULTURAL IN NATURE AND EXIGIBLE TO CAPITAL GAINS. THE SAID LAN D COULD NOT BE CONSIDERED AS CAPITAL ASSET BY VIRTUE OF SEC. 2(14)(III) OF THE ACT. ASSESSEE WAS JUSTIFIED IN CLAIMING THAT SURPLUS ARISING OUT OF S ALE OF LAND AS NOT EXIGIBLE TO CAPITAL GAINS TAX. 16. IN VIEW OF THE ABOVE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2011-12, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. MOREOV ER, THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2011-12 IN I.T.A. NO.802/MDS/2016 DATED 28.10.2016 FOUND THAT THE ASSESSEE IS NOT IN THE BUSINESS OF REAL ESTATE. ACCORDINGLY , ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE BY HOLDING THAT THE LAND IN QUESTION IS AGRICULTURAL LAND AND THE PROFIT ON SUCH SALE OF LAND IS NOT LIABLE FOR TAXATION BY VIRTUE OF SECTION 2(14)(III) OF THE ACT . THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 22 I.T.A. NOS.256 & 257/CHNY/18 I.T.A. NO.812/CHNY/18 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 18. TO SUM UP, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 12 TH SEPTEMBER, 2018 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 12 TH SEPTEMBER, 2018. KRI. 0 ,/78 98(/ /COPY TO: 1. './ /ASSESSEE 2. ASSESSING OFFICERS 3. 3 :/ () /CIT(A)-1, COIMBATORE 4. PRINCIPAL CIT-1, COIMBATORE 5. 8; ,/ /DR 6. <' = /GF.