The ITO, Ward-2(1), Guntur, Guntur V. Sri. Putchala Basaweswara Kumar, Guntur

ITA 83/VIZ/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2062 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M N MURTHY NAIKDR
• Keywords: Capital asset
• Section: 2(14)

Judgement Text

ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.82/VIZAG/2012 ( / ASSESSMENT YEAR: 2006-07) ITO WARD - 2(1) GUNTUR VS. SMT. PUTCHALA VENKATA RAMANAMMA KOTHAPET, GUNTUR [PAN: ADKPP 6554H ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.83/VIZAG/2012 ( / ASSESSMENT YEAR: 2006-07) ITO WARD - 2(1) GUNTUR VS. SRI PUTCHALA BASAWESWARA KUMAR KOTHAPET, GUNTUR [PAN: ADKPP6554H ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK,DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 23.2.2016 / DATE OF PRONOUNCEMENT : 02.03.2016 ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGA INST THE SEPARATE, BUT IDENTICAL ORDERS OF COMMISSIONER OF I NCOME TAX (APPEALS), GUNTUR DATED 22-11-2011 AND PERTAINS TO THE ASSESSM ENT YEAR 2006-07. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMO N, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. ITA.NO. 83/V/2012 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN TEXTILES AND REAL ESTATE FILED HIS RETURN OF INCOME FOR THE A.Y. 2006-07 DECLARING TOT AL INCOME OF RS. 3,46,600/- BESIDES AGRICULTURAL INCOME OF RS. 15,00 0/-. THE RETURN WAS PROCESSED UNDER SEC. 143(1) OF THE INCOME TAX ACT, 1961. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTI NY ASSESSMENT AND ACCORDINGLY, NOTICE UNDER SEC. 143(2) OF THE ACT WA S ISSUED. IN RESPONSE TO NOTICE, THE AUTHORISED REPRESENTATIVE OF THE ASS ESSEE APPEARED AND FILED INFORMATION CALLED FOR. DURING THE COURSE OF ASSESSMENT, THE A.O. NOTICED THAT, THE ASSESSEE HAS CREDITED AN AMOUNT O F RS. 1,59,39,117/- TO CAPITAL ACCOUNT TOWARDS PROFIT ON SALE OF AGRICU LTURAL LANDS. IT IS ALSO ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 3 NOTICED THAT THE ASSESSEE HAS COMPUTED SHORT TERM C APITAL GAIN AND CLAIMED EXEMPT FROM TAX. THEREFORE, THE A.O. ISSUED A DETAILED SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE PROFIT EA RNED FROM SALE OF LAND FOR RS. 1,59,39,117/- SHALL NOT BE BROUGHT TO TAX. 3. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE H AS FILED DETAILED WRITTEN SUBMISSION AND CONTENDED THAT SALE OF AGRIC ULTURAL LAND AND RESULTANT GAIN IS NOT LIABLE TO TAX AS THE AGRICULT URAL LANDS ARE NOT A CAPITAL ASSET AND HENCE, EXEMPTION CLAIMED IS CORRE CT AS PER THE PROVISIONS OF INCOME TAX ACT, 1961. THE ASSESSEE FU RTHER SUBMITTED THAT THE LANDS SOLD ARE AGRICULTURAL LANDS AND SITUATED IN A VILLAGE WHICH IS 13 KM AWAY FROM THE NEAREST MUNICIPAL LIMITS FOR WHICH CERTIFICATE FROM THE REVENUE AUTHORITIES IS OBTAINED. IT WAS FURTHER STA TED THAT HE HAD PURCHASED AGRICULTURAL LANDS TO DO AGRICULTURAL OPE RATIONS, BUT MEANWHILE HE GOT BETTER OFFER AND HENCE SOLD THE LA NDS. THEREFORE, IT IS NOT CORRECT TO SAY THAT HE IS INVOLVED IN THE BUSIN ESS OF REAL ESTATE OR THE ACTIVITY IS IN THE NATURE OF ANY ADVENTURE IN THE N ATURE OF TRADE. 4. THE A.O. AFTER CONSIDERING THE EXPLANATION OFFER ED BY THE ASSESSEE HELD THAT THE ASSESSEE IS INVOLVED IN THE BUSINESS OF REAL ESTATE AND IT IS NOT A MERE PURCHASE AND SALE OF AGRICULTURAL LANDS. THE A.O. FURTHER HELD THAT THE ASSESSEE BASICALLY A BUSINESSMAN INVOLVED IN THE BUSINESS OF ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 4 TRADING IN TEXTILES HAS STARTED NEW REAL ESTATE BUS INESS IN THE NAME OF M/S KUMAR ESTATES. DURING THE FINANCIAL YEAR 2004-0 5 AND 2005-06, THE ASSESSEE HAS PURCHASED THESE LANDS WITH A CLEAR INT ENTION TO DO REAL ESTATE BUSINESS AND NOT WITH A INTENTION TO DO AGRI CULTURAL OPERATIONS. THE ASSESSEE HAS ENTERED INTO A AGREEMENT WITH M/S R.K. TOWN SHIP CONSTRUCTIONS PRIVATE LIMITED ON 3-3-2005 AND AS PE R THE AGREEMENT THE ASSESSEE HAVE TO SELL 100 ACRES OF LAND TO THE COMP ANY FOR A CONSIDERATION OF RS. 5,25,000/- PER ACRE FOR WHICH THE COMPANY HAS TO PAY ADVANCE. THE A.O. FURTHER OBSERVED THAT ASSESSE E STARTS PURCHASING THE LANDS ONLY AFTER AGREEMENT WITH THE BUYER, WHIC H CLEARLY SHOWS HIS INTENTION OF PROCURING THE LANDS AND SELL IT TO THE BUYER FOR A BETTER PRICE. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS ENTERED INTO A GENERAL POWER OF ATTORNEY WITH VARIOUS PARTIES AND AS PER THE GPA, THE ASSESSEE HAD RIGHT TO SELL THE LAND TOTALLY, PARTLY OR IN PLOTS FOR ANY RATES AS PER THE WISH OF GPA HOLDER. THE GPA FURTHER STAT ES THAT THE ASSESSEE HAS THE RIGHT OF APPLYING FOR CONVERSION OF LAND FO R NON AGRICULTURAL PURPOSE BEFORE VUDA AND ALSO OBTAIN LOAN. FROM THIS , IT IS VERY CLEAR THAT THE ASSESSEE IS CARRYING OUT SYSTEMATIC BUSINE SS ACTIVITY OF BUYING AND SELLING LANDS. IT IS FURTHER OBSERVED FROM THE TAX AUDIT REPORT IN FORM NO. 3CB AND 3CD FILED ALONG WITH RETURN OF INC OME CLEARLY SHOWS ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 5 THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ES TATE AND ALSO MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR THE REAL ESTATE BUSINESS AND GOT HIS BOOKS AUDITED FROM THE AUDITOR UNDER SEC. 4 4AB OF THE ACT. THE A.O. FURTHER HELD THAT THERE IS NO EVIDENCE THAT TH ESE LANDS ARE CULTIVATED BY THE ASSESSEE AND CARRIED OUT ANY AGRI CULTURAL OPERATIONS FROM THE DATE OF PURCHASE. THERE IS NO EVIDENCE THA T THESE LANDS ARE CULTIVATED EVEN BEFORE PURCHASE BY THE ASSESSEE. ME RE PRODUCTION OF CERTIFICATE FROM VRO IS NOT SUFFICIENT TO PROVE THA T LANDS ARE USED FOR AGRICULTURAL PURPOSE. THEREFORE, FROM THE CONDUCT O F ASSESSEE IT IS CLEAR THAT HE HAD PURCHASED THESE LANDS WITH A INTENTION TO RESELL AT HIGHER RATES, WHICH IS NOTHING BUT A SYSTEMATIC ACTIVITY O F BUSINESS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE OR BUSINESS. HE NCE, THE ENTIRE PROFIT FROM SALE OF LAND WAS TREATED AS INCOME FROM BUSINE SS AND ADDED TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE RE ITERATED THE SUBMISSION MADE BEFORE THE A.O. THE ASSESSEE FURTHE R SUBMITTED THAT THESE LANDS ARE AGRICULTURAL LANDS AND USED FOR AGR ICULTURAL OPERATIONS BY MYSELF AND EVEN BY THE PREVIOUS OWNER. THE LANDS AR E SITUATED IN REVADI VILLAGE, PADMANABHAM MANDALAM, VISAKHAPATNAM DISTRI CT, WHICH IS 13 ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 6 KM AWAY FROM BHIMUNIPATNAM MUNICIPALITY. THE REVENU E AUTHORITIES CONFIRMED BY ISSUING A CERTIFICATE THAT THESE LANDS ARE AGRICULTURAL LANDS AND USED FOR AGRICULTURAL PURPOSE AND ALSO WHICH IS BEYOND 8 KM FROM THE LIMITS OF LOCAL MUNICIPALITY. THE ASSESSEE FURT HER SUBMITTED THAT HE HAD PURCHASED THESE LANDS FOR THE PURPOSE OF AGRICU LTURAL OPERATIONS. MERELY BECAUSE, THE LANDS ARE SOLD TO A REAL ESTATE FIRM AND WHICH WERE DEVELOPED BY THE BUYER AS RESIDENTIAL PLOTS AFTER 3 YEARS FROM THE DATE OF SALE, IT CANNOT BE HELD THAT THESE LANDS ARE PUR CHASED WITH A INTENTION TO DO REAL ESTATE BUSINESS. THE FACT THAT I AM IN T O REAL ESTATE BUSINESS CANNOT ALTER THE CHARACTERISTICS OF LAND. THOUGH, I AM IN TO THE BUSINESS OF REAL ESTATE, THESE LANDS NEVER PURCHASED FOR THE PURPOSE OF BUSINESS AND IN FACT PURCHASED WITH A INTENTION TO HOLD AND PUT TO USE FOR AGRICULTURAL PURPOSES. THEREFORE, THE A.O. WAS NOT CORRECT IN REJECTING THE EVIDENCES SUCH AS VRO CERTIFICATES AND SALE DEE DS OF LANDS, WHEREIN IT WAS CLEARLY MENTIONED THAT THESE LANDS ARE AGRIC ULTURAL LANDS, TO COMING TO THE CONCLUSION THAT THESE LANDS ARE INTEN DED FOR REAL ESTATE BUSINESS, CONSEQUENTLY THE PROFIT IS CHARGEABLE TO TAX AS INCOME FROM BUSINESS. THEREFORE, REQUESTED TO DELETE THE ADDITI ON MADE BY THE A.O. 6. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION. WHILE DELETING THE ADDITIONS, THE CIT(A) HELD THAT ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 7 THESE LANDS ARE AGRICULTURAL LANDS, WHICH ARE NOT A SSETS AS PER THE PROVISIONS OF SEC. 2(14) OF THE INCOME TAX ACT, 196 1 AND ACCORDINGLY OUTSIDE THE PURVIEW OF TAX. THE RELEVANT PORTION OF CIT(A) ORDER IS REPRODUCED HEREUNDER FOR READY REFERENCE. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELL ANT, GONE THROUGH THE ASSESSMENT ORDER, THE REMAND REPORT OF THE AO AND THE OBJECTIONS OF THE APPELLANT THEREON. ONE IMPORTANT THING HERE IS THAT THE AO HAS NOT DISPUTED THE PURCHASE AND SALE OF AGRICU LTURAL LANDS AND THE AMOUNTS INVOLVED. WHILE THE APPELLANT CONTENDED TH AT THE LANDS BEING AGRICULTURAL IN NATURE ARE NOT ASSETS IN TERMS OF S ECTION 2(14) OF THE IT ACT, 1961, AND THAT THE SHORT TERM CAPITAL GAINS AC CRUES TO HIM WAS EXEMPT, WHEREAS THE AO HAS TREATED THE ACTIVITIES O F THE APPELLANT AS ADVENTURE IN THE NATURE OF TRADE AND BROUGHT THE SU RPLUS TO TAX. BEFORE GOING FURTHER IN TO VARIOUS CONTENTIONS OF THE APPE LLANT AND THE AO, IN MY OPINION, IT IS IMPORTANT TO FIND OUT WHETHER THE LA NDS PURCHASED AND SOLD ARE AGRICULTURAL LANDS. IF IT IS SO, THEN THE INCOM E OUT OF SUCH DEALINGS IS AGRICULTURAL INCOME AND HENCE EXEMPT FROM TAX. IN T HIS CONTEXT THE COPIES OF THE DEEDS ON PURCHASE AND SALES HAVE BEEN PERUSED AS PRODUCED DURING THE COURSE OF THE APPELLATE PROCEED INGS, WHICH REVEALED THAT ALL THE LANDS ARE AGRICULTURAL LANDS AS THE WO RDS APPEARING IN SUCH DEEDS IN TELUGU IS, METTA BHUMULU MEANING IN ENGL ISH DRY AGRICULTURAL LANDS. IF, SUCH ARE THE FACTS OF THE CASE THEN IT R EQUIRES NO OTHER PROOF THAT THE SURPLUS GENERATED IN THE IMPUGNED TRANSACT IONS IS AGRICULTURAL INCOME. IT IS ALSO WORTHWHILE TO NOTE HERE THAT WHE THER IT IS THE CAPITAL GAINS OR INCOME OUT OF ADVENTURE IN THE NATURE OF T RADE OR SURPLUS OUT OF THE TRANSACTIONS MENTIONED HEREIN ABOVE, THE UNDISP UTED FACT IS THAT IT IS GENERATED OUT OF TRANSACTIONS OF AGRICULTURAL LANDS , WHICH ARE NOT ASSETS AS PER THE PROVISIONS OF SECTION 2(14) OF THE IT ACT, 1961 AND ACCORDINGLY OUT SIDE THE TAX PURVIEW. IN THE CIRCUMSTANCES, THE AO IS DIRECTED NOT TO SUBJECT THE SURPLUS OF THE ABOVE TRANSACTIONS TO TA X. THUS, THIS GROUND OF APPEAL IS ALLOWED. 7. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US AND RAISED FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT(A) ERRED BOTH ON FACTS AND IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LANDS SOLD ARE AGR ICULTURAL LANDS WITHOUT CONSIDERING THE FINDINGS SUBMITTED IN THE R EMAND ORDER AND IN ASSESSMENT ORDER. ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 8 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS NOT APPRECIATED THE FACT THAT THE LANDS IN QUESTION ARE NOT AGRICULTURAL LANDS SINCE THE DISTANCE FROM MUNI CIPAL LIMIT IS LESS THAN 8 KMS., AS EVIDENCED FROM THE CERTIFICATES ISS UED BY THE GOVT. AUTHORITIES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) SHOULD HAVE TAKEN INTO CONSIDERATION THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF SARIFABIBI MOH AMMED IBRAHIM VS. CIT REPORTED IN 204 ITR 0631(1993), FACT S OF WHICH ARE SQUARELY APPLICABLE TO THIS CASE. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 8. THE LD. D.R. SUBMITTED THAT CIT(A) WAS ERRED IN HOLDING THAT THE LANDS ARE AGRICULTURAL LANDS WITHOUT CONSIDERING TH E FINDINGS OF A.O. IN THE ASSESSMENT ORDER AND REMAND REPORT. THE D.R. FU RTHER SUBMITTED THAT THE A. O. HAS MADE THE ADDITION MAINLY ON THE GROUND THAT THESE LANDS ARE NOT USED FOR AGRICULTURAL PURPOSE AND ASS ESSEE IS INVOLVED IN THE BUSINESS OF REAL ESTATE. THE ASSESSEE BASICALLY A TRADER IN TEXTILES, COMMENCED REAL ESTATE BUSINESS IN THE NAME AND STYL E OF M/S KUMAR ESTATES AND VENTURED INTO AGREEMENT ON 3.3.2005 WIT H M/S R.K. TOWN SHIP CONSTRUCTIONS PRIVATE LIMITED. AS PER THE SAI D AGREEMENT, THE ASSESSEE HAVE TO SELL 100 ACRES OF LAND TO THE COMP ANY FOR A CONSIDERATION OF RS. 5,25,000/- PER ACRE, FOR WHICH THE ASSESSEE HAS RECEIVED PERIODICAL ADVANCE FOR PROCUREMENT OF LAND S. THE ASSESSEE ENTERED INTO SALE AGREEMENT WITH THE BUYER MUCH BEF ORE THE PURCHASE OF LANDS. FROM THIS CONDUCT OF ASSESSEE, IT IS VER Y CLEAR THAT THE ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 9 ASSESSEE IS CARRYING OUT SYSTEMATIC BUSINESS ACTIVI TY OF BUYING AND SELLING LANDS, WHICH IS NOTHING BUT ADVENTURE IN TH E NATURE OF TRADE OR COMMERCE AND THE RESULTANT PROFIT WAS RIGHTLY ASSES SED UNDER THE HEAD INCOME FROM BUSINESS. BUT, THE CIT(A), DIVERTED THE MAIN ISSUE AND DELETED THE ADDITION ON THE GROUND THAT THESE LANDS ARE AGRICULTURAL LANDS, WHICH ARE NOT ASSETS AS PER THE PROVISIONS O F SEC. 2(14) OF THE INCOME TAX ACT, 1961 AND NOT EXIGIBLE FOR TAX. IT W AS THE CASE OF A.O. THAT THE ASSESSEE ACTIVITY OF BUYING AND SELLING LA NDS IS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE OR COMMERCE, THERE FORE, THE PROFIT IS ASSESSABLE AS INCOME FROM BUSINESS. BUT, THE CIT(A) FAILED TO ADJUDICATE THE MAIN ISSUE RAISED BY THE A.O. AND WITHOUT DISCU SSING THE MAIN ISSUE DECIDED THE ISSUE ON THE BASIS OF WHETHER THE LANDS ARE AGRICULTURAL LANDS OR ASSTS AS PER THE PROVISIONS OF SEC. 2(14) OF THE ACT AND DELETED THE ADDITION WHICH IS NOT CORRECT. THEREFORE, REQUE STED TO SET ASIDE THE ORDER OF CIT(A). 9. THE LD. A.R. ON THE OTHER HAND, STRONGLY SUPPORT ED THE ORDER OF CIT(A). HOWEVER, FAIRLY ACCEPTED THAT THE CIT(A) HA S DECIDED THE ISSUE ON THE QUESTION OF WHETHER THE LANDS ARE AGRICULTUR AL LANDS OR CAPITAL ASSETS EXIGIBLE FOR TAX AS PER THE PROVISIONS OF SE C. 2(14) OF THE INCOME ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 10 TAX ACT, 1961, THEREFORE, REQUESTED TO SET ASIDE TH E ISSUE TO THE FILE OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE A.O. HAS TREATED PROFIT FR OM SALE OF AGRICULTURAL LANDS UNDER THE HEAD INCOME FROM BUSINESS. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE INVOLVED IN THE SYSTEMATI C ACTIVITY OF BUYING AND SELLING LANDS, WHICH IS IN THE NATURE OF ADVENT URE IN THE NATURE OF TRADE OR COMMERCE, THEREFORE THE PROFIT IS CHARGEAB LE TO TAX UNDER THE HEAD INCOME FROM BUSINESS. THE A.O. FURTHER WAS OF THE OPINION THAT THERE IS NO EVIDENCE THAT THESE LANDS ARE CULTIVATE D BY THE ASSESSEE AND CARRIED OUT ANY AGRICULTURAL OPERATIONS FROM THE DA TE OF PURCHASE. THERE IS NO EVIDENCE THAT THESE LANDS ARE CULTIVATED EVEN BEFORE PURCHASE BY THE ASSESSEE. MERE PRODUCTION OF CERTIFICATE FROM V RO IS NOT SUFFICIENT TO PROVE THAT LANDS ARE USED FOR AGRICULTURAL PURPOSE. THEREFORE, FROM THE CONDUCT OF ASSESSEE, IT WAS CLEAR THAT HE HAD PURCH ASED THESE LANDS WITH A INTENTION TO RESELL AT HIGHER RATES, WHICH IS NOT HING BUT A SYSTEMATIC ACTIVITY OF BUSINESS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE OR BUSINESS. IT WAS THE CONTENTION OF THE ASSESSEE THA T THESE LANDS ARE AGRICULTURAL LANDS AND USED FOR AGRICULTURAL OPERAT IONS. THE REVENUE RECORDS CLEARLY SHOW THAT THE LANDS ARE AGRICULTURA L LANDS AND USED FOR ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 11 AGRICULTURAL OPERATIONS. THE LANDS ARE SITUATED IN REVADI VILLAGE, PADMANABHAM MANDALAM, VISAKHAPATNAM DISTRICT, WHICH IS 13 KM AWAY FROM BHIMUNIPATNAM MUNICIPALITY. THE REVENUE AUTHOR ITIES CONFIRMED THAT THESE LANDS ARE AGRICULTURAL LANDS AND USED FO R AGRICULTURAL PURPOSE AND ALSO WHICH IS BEYOND 8 KM FROM THE LIMITS OF LO CAL MUNICIPALITY. THEREFORE, THE A.O. WAS NOT CORRECT IN REJECTING TH E EVIDENCES SUCH AS VRO CERTIFICATES AND SALE DEEDS OF LANDS TO COME TO THE CONCLUSION THAT THESE LANDS ARE INTENDED FOR REAL ESTATE BUSINESS, CONSEQUENTLY THE PROFIT IS CHARGEABLE TO TAX AS INCOME FROM BUSINESS . 11. THE SOLIDARITY ISSUE CAME UP FOR OUR CONSIDERAT ION IS WHETHER THE ACTIVITY OF BUYING AND SELLING LAND IS ADVENTURE IN THE NATURE OF TRADE OR COMMERCE AND THE RESULTANT PROFIT IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM BUSINESS. THERE IS NO DISPUTE WITH REGA RD TO NATURE OF LANDS AND DISTANCE OF LANDS SO AS TO COME TO THE CONCLUSI ON THAT THESE LANDS ARE AGRICULTURAL LANDS. THE ASSESSEE PRODUCED COPIE S OF SALE DEED AND CERTIFICATE FROM THE VRO, WHICH CLEARLY EXHIBITS TH AT THESE LANDS ARE AGRICULTURAL LANDS. THE ONLY DISPUTE IS WHETHER THE SE LANDS ARE AGRICULTURAL LANDS ACQUIRED FOR THE PURPOSE OF AGRI CULTURAL OPERATIONS OR PURCHASED FOR THE PURPOSE OF REAL ESTATE. ON PERUSA L OF THE RECORDS, WE FINDS THAT ASSESSEE IS BASICALLY A BUSINESSMAN INVO LVED IN THE BUSINESS OF ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 12 TRADING IN TEXTILES HAS STARTED NEW REAL ESTATE BUS INESS IN THE NAME OF M/S KUMAR ESTATES. THE ASSESSEE HAS ENTERED INTO A AGREEMENT WITH M/S R.K. TOWN SHIP CONSTRUCTIONS PRIVATE LIMITED ON 3-3-2005 AND AS PER THE AGREEMENT THE ASSESSEE HAVE TO SELL 100 ACR ES OF LAND TO THE COMPANY FOR A CONSIDERATION OF RS. 5,25,000/- PER A CRE, FOR WHICH HE HAD RECEIVED PERIODICAL ADVANCE. THE ASSESSEE PURCH ASED THE LANDS ONLY AFTER AGREEMENT WITH THE BUYER, WHICH CLEARLY SHOWS HIS INTENTION OF PROCURING THE LANDS AND SELL IT TO THE BUYER FOR A BETTER PRICE. THE ASSESSEE HAS ENTERED INTO A GENERAL POWER OF ATTORN EY WITH VARIOUS PARTIES AND AS PER THE GPA, THE ASSESSEE HAD RIGHT TO SELL THE LAND TOTALLY, PARTLY OR IN PLOTS FOR ANY RATES AS PER TH E WISH OF GPA HOLDER. THE GPA FURTHER STATES THAT THE ASSESSEE HAS THE RIGHT OF APPLYING FOR CONVERSION OF LAND FOR NON AGRICULTURAL PURPOSE BEF ORE VUDA AND ALSO OBTAIN LOAN. IT IS FURTHER OBSERVED FROM THE TAX AU DIT REPORT IN FORM NO. 3CB AND 3CD FILED ALONG WITH RETURN OF INCOME CLEAR LY SHOWS THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND ALSO MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR THE REAL ESTATE BUSI NESS AND GOT HIS BOOKS AUDITED FROM THE AUDITOR UNDER SEC. 44AB OF T HE ACT. ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 13 12. THE ABOVE FACTS ARE EMANATING FROM THE ASSESSME NT ORDER. THE A.O., AFTER CONSIDERING ALL THE FACTS, HAS COME TO THE CONCLUSION THAT ASSESSEE HAD PURCHASED THESE LANDS WITH A INTENTION TO RESELL AT HIGHER RATES, WHICH IS NOTHING BUT A SYSTEMATIC ACTIVITY O F REAL ESTATE BUSINESS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE O R COMMERCE AND PROFIT FROM SALE OF LAND IS CHARGEABLE TO TAX UNDER THE HE AD INCOME FROM BUSINESS. THE CIT(A), DELETED THE ADDITION BY OBSER VING THAT THESE LANDS ARE AGRICULTURAL LANDS, WHICH ARE NOT ASSETS AS PER THE PROVISIONS OF SEC. 2(14) OF THE INCOME TAX ACT, 1961 AND NOT EXIGIBLE FOR TAX. ON PERUSAL OF FACTS AND CIT(A) ORDER, WE FIND THAT THE ISSUE B EFORE THE CIT(A) AND FINDINGS OF THE CIT(A) ARE DIFFERENT. THE CIT(A) DI VERTED FROM THE MAIN ISSUE WHICH WAS THE REASON FOR ADDITION AND DELETED THE ADDITION WITH DIFFERENT FINDING WHICH WAS NOT AT ALL DISPUTED BY THE A.O. IT WAS THE CASE OF A.O. THAT THE ASSESSEE ACTIVITY OF BUYING A ND SELLING LANDS IS IN THE NATURE OF ADVENTURE IN THE NATURE OF TRADE OR C OMMERCE, THEREFORE, THE PROFIT IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. BUT, CIT(A) FAILED TO ADJUDICATE THE MAIN ISSUE RAISED B Y THE A.O. AND WITHOUT DISCUSSING THE MAIN ISSUE DECIDED THE ISSUE ON THE BASIS OF WHETHER THE LANDS ARE AGRICULTURAL LANDS OR ASSTS AS PER THE PR OVISIONS OF SEC. 2(14) OF THE ACT AND DELETED THE ADDITION WHICH IS NOT CORRE CT. CONSIDERING THE ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 14 FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT APP ROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF THE CIT(A), WITH A DIRECT ION TO PASS FRESH ORDER IN THE LIGHT OF THE ABOVE DISCUSSIONS. ACCORDINGLY, WE SET ASIDE THE CIT(A) ORDER AND DIRECT THE CIT(A) TO PASS FRESH OR DER AFTER REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA.NO. 83/V/2012 14. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL TO ITA.NO. 82/V/2012. THEREFORE, FOR THE REASONS RECORDED IN T HE PRECEDING PARAGRAPHS, WE SET ASIDE THE CIT(A) ORDER AND REMIT THE ISSUE BACK TO THE FILE OF CIT(A) TO PASS FRESH ORDER AFTER REASON ABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 15. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA.NO. 82/V/2012 AND 83/V/2012 ARE ALLOWED FOR STATISTICAL PURPOSE. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 2 ND MAR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 02.03.2016 VG/SPS ITA NO.82&83/VIZAG/ 2012 SMT. PUTCHALA VENKATA RAMANAMMA, & SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET 15 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO WARD-2(1), GUNTUR 2. / THE RESPONDENT SMT.PUTCHALA VENKATA RAMANAMMA, KOTHAPET,9-10-8, GUNTUR. 3. / THE RESPONDENT SRI PUTCHALA BASAWESWARA KUMAR, KOTHAPET, 9-10-8, GUNTUR. 4. + / THE CIT, GUNTUR 5. + ( ) / THE CIT (A), GUNTUR 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM