Shri Rupesh Bholidas Patel, Kalol V. The Dy. Commissioner of Income Tax, Central Circle-1(2), Ahmedabad

ITSSA 193/AHD/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3821 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA M AGARWAL; SAURABH SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Business income
• Section: 143(3); 153A

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER . / I.T(SS).A. NOS. 193 TO 196/AHD/2016 ( ASSESSMENT YEARS : 2007-08, 2009-10, 2010-11 & 2011 -12) SHRI RUPESH BHOLIDAS PATEL B-26, ISHWARKRUPA SOCIETY, PANCHVATI AREA, HIGHWAY, KALOL / VS. DCIT, CENTRAL CIRCLE 1(2), AHMEDABAD ./ ./ PAN/GIR NO. : ABIPP7984R ( APPELLANT ) .. ( / RESPONDENT ) . / I.T(SS).A. NOS. 197 TO 199/AHD/2016 ( ASSESSMENT YEARS : 2008-09, 2009-10 & 2012-13) SHRI RUPESH BHOLIDAS PATEL HUF B-26, ISHWARKRUPA SOCIETY, PANCHVATI AREA, HIGHWAY, KALOL / VS. DCIT, CENTRAL CIRCLE 1(2), AHMEDABAD ./ ./ PAN/GIR NO. : AAEHP0316 ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. SOPARKAR & SMT. URVASHI SHODHAN, A.R. / RESPONDENT BY : SMT. APARNA M. AGARWAL, CIT. D.R. & SHRI SAURABH SINGH, SR. D.R. DATE OF HEARING 20/06/2018 !'# / DATE OF PRONOUNCEMENT 04/07/2018 / O R D E R IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE RE SPECTIVE ASSESSEES NAMED ABOVE FOR DIFFERENT ASSESSMENT YEAR S TABULATED HEREIN: SL. NO. IT(SS)A NO. NAME OF ASSESSEE AY CIT(A) ORDER DATED ASSESSMENT ORDER PASSED UNDER S.143 (3) R.W.S. 153A (1)(B) OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 1 193/AHD/2016 SHRI RUPESH B. PATEL 2007-08 17.03.2016 18.03.2015) 2 194/AHD/2016 SHRI RUPESH B. PATEL 2009-10 16.03.2016 18.03.2015 3 195/AHD/2016 SHRI RUPESH B. PATEL 2010-11 16.03.2016 17.03.2015 4 196/AHD/2016 SHRI RUPESH B. PATEL 2011-12 16.03.2016 17.03.2015 5 197/AHD/2016 SHRI RUPESH B. PATEL HUF 2008-09 16.03.2016 11.03.2015 6 198/AHD/2016 SHRI RUPESH B. PATEL HUF 2009-10 16.03.2016 11.03.2015 7 199/AHD/2016 SHRI RUPESH B. PATEL HUF 2012-13 16.03.2016 11.03.2015 2. AT THE TIME OF HEARING, IT WAS SUBMITTED ON BEHA LF OF THE ASSESSEE THAT ALL THE CASES ARE INTER-CONNECTED AND GIVE RISE THE SIMILAR GRIEVANCE PERMEATING OVER DIFFERENT ASSESSMENT YEAR S AND THEREFORE, IT WILL BE CONVENIENT TO HEAR ALL THE APPEALS TOGETHER . WE ACCORDINGLY HAVE HEARD ALL THE APPEALS TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 3. WE SHALL FIRST TAKE APPEAL IN IT(SS)A NO. 193/AH D/2016 FOR ADJUDICATION PURPOSES. IT(SS)A NO. 193/AHD/2016 4. AS PER THE GROUNDS OF APPEAL, THE ASSESSEE HAS S OUGHT TO CHALLENGE THE ACTION OF CIT(A) IN CONFIRMING THE AS SESSMENT FRAMED UNDER S.153A OF THE ACT WHEREBY THE HEAD OF INCOME FOR THE PURPOSES IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 3 - OF ASSESSMENT OF GAIN ARISING ON SALE OF PLOT OF LA NDS HAS BEEN CHANGED FROM CAPITAL GAINS/ INCOME FROM OTHER SOURCES O FFERED BY THE ASSESSEE TO BUSINESS INCOME ASSESSED BY THE AO. 5. APART FROM THE CHALLENGE TO THE ACTION OF THE RE VENUE AUTHORITIES ON MERITS, THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS OF APPEAL IN TERMS OF THE RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 WHICH READS AS UNDER: 1. BOTH THE LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN FRAMING ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A IGNORING FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING COURSE OF SEARCH AND TIME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT HAD ALSO EXPIRED BEFOR E THE DATE OF SEARCH. HENCE ASSESSMENT FRAMED U/S 153A IS REQUIRED TO QUA SHED CONSIDERING SAME AS CONCLUDED ASSESSMENT MODIFIED AS PER ORIGINAL RE TURN OF INCOME. IT BE SO HELD NOW. 6. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUND ESSEN TIALLY IS LEGAL IN NATURE AND CONCERNS JURISDICTIONAL ASPECT OF THE SE ARCH ASSESSMENT AND THUS GOES TO THE ROOT OF THE MATTER. HE SIMULTANEOU SLY SUBMITTED THAT THE JURISDICTIONAL DEFECT PROPOSED TO BE URGED BY W AY OF ADDITIONAL GROUND CAN BE DECIDED ON THE BASIS OF FACTS OF MATE RIAL ALREADY AVAILABLE ON RECORD AND DOES NOT REQUIRE EXAMINATIO N OF ANY FRESH FACTS. WE FIND MERIT IN THE PLEA RAISED ON BEHALF OF THE ASSESSEE FOR ADMISSION OF ADDITIONAL GROUND CONCERNING JURISDICT IONAL ISSUE AS IT STRIKES TO THE ROOT OF THE CONTROVERSY IN HAND. WE THEREFORE CONSIDER IT EXPEDIENT TO ADMIT THE ADDITIONAL GROUND RAISED AS NOTED ABOVE. 7. ADDRESSING THE LEGAL ISSUE RAISED BY WAY OF ADDI TIONAL GROUND, LEARNED AR POINTED OUT THAT A SEARCH ACTION UNDER S .132 OF THE INCOME TAX ACT, 1961 (THE ACT) WAS CONDUCTED IN THE CASE O F KALOL-PRAJAPATI GROUP ON 06.11.2012. CONSEQUENT UPON THE SEARCH, P ROCEEDINGS UNDER S. 153A WERE INITIATED IN THE CASE OF GROUP ASSESSE ES INCLUDING THE ASSESSEE HEREIN. IN RESPONSE THEREOF, THE ASSESSEE FILED RETURN OF IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 4 - INCOME UNDER S.153A OF THE ACT. THE AFORESAID RETU RN WAS SUBJECTED TO SCRUTINY ASSESSMENT. THE LEARNED AR THEREAFTER REFERRED TO THE ASSESSMENT ORDER PASSED UNDER S. 153A OF THE ACT AN D SUBMITTED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER S.153 A, THE AO OBSERVED THAT CERTAIN INCOME AMOUNTING TO RS.5,72,8 87/- ARISING ON SALE OF PLOTTED LAND AT SANAVAD HAS BEEN SHOWN UNDE R THE HEAD INCOME FROM OTHER SOURCES. LIKEWISE, GAIN ON SALE OF LAN D IN THE SUBSEQUENT ASSESSMENT YEARS 2009-10, 2010-11 AND 2011-12 HAS B EEN SHOWN UNDER THE HEAD CAPITAL GAINS. THIS ACTION OF ALTERATIO N OF CHANGE OF HEAD OF INCOME IN SEARCH ASSESSMENT IS IN CONTROVERSY. THE LEARNED AR THEREAFTER REFERRED TO THE SHOW CAUSE NOTICE DATED 13.02.2015 (PAGE NO.5 OF THE PAPER BOOK) ISSUED BY THE AO IN THIS RE GARD. AS PER THE AFORESAID SHOW CAUSE NOTICE, THE AO OBSERVED THAT T HE ASSESSEE PURCHASED AGRICULTURAL LAND AND CONVERTED THE SAME INTO NON- AGRICULTURAL LAND, DONE PLOTTING AND SOLD THE SAME TO VARIOUS CUSTOMERS. THE AO SHOW CAUSED THE ASSESSEE TO TREA T THE AFORESAID ACTIVITY TO BE A BUSINESS ACTIVITY FOR VARIOUS AS SESSMENT YEARS SPANNING OVER VARIOUS ASSESSMENT YEARS IN APPEAL. AFTER CONSIDERING THE DETAILED REPLY OF THE ASSESSEE TO COUNTER THE S HOW CAUSE NOTICE, THE AO CONTINUED TO BELIEVE THAT THE ACTIVITY OF THE AS SESSEE OF DIVIDING AND SUB-DIVIDING THE LAND AFTER CONVERSION INTO NON -AGRICULTURAL LAND AND SALE THEREOF TO VARIOUS CUSTOMERS IS AKIN TO BU SINESS ACTIVITY. THE AO ACCORDINGLY HELD THAT THE INCOME ARISING ON SALE OF PLOTTED LAND IS REQUIRED TO BE ASSESSED UNDER THE HEAD BUSINESS IN COME INSTEAD OF INCOME FROM OTHER SOURCES (AY 2007-08)/ CAPITAL GAINS (AYS 2009- 10, 2010-11 & 2011-12). IN THIS BACKDROP, THE LEAR NED AR SUBMITTED THAT BY VIRTUE OF THE AFORESAID ACTION, THE AO HAS CHANGED THE TAXABLE HEAD OF INCOME IN THE COURSE OF SEARCH ASSESSMENT. THE LEARNED AR, AT THIS JUNCTURE, VOCIFEROUSLY SUBMITTED THAT WHILE DOING SO AND WHILE ASSESSING THE INCOME ALREADY OFFERED UNDER THE DIFF ERENT HEAD OF INCOME, THE AO HAS NOT MADE ANY REFERENCE TO ANY IN CRIMINATING IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 5 - MATERIAL AS EVIDENT FROM THE SHOW CAUSE NOTICE AS W ELL AS THE ASSESSMENT ORDER. THE LEARNED AR THUS SUBMITTED TH AT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND IN THE COURSE O F SEARCH, THE ACTION OF THE AO TO MERELY CHANGE AND ALTER THE HEAD OF AS SESSAIBILITY OF INCOME IS A COMPLETE NON-STARTER. THE LEARNED AR S UBMITTED THAT THERE ARE LONG LINE OF JUDICIAL PRECEDENTS WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT WHERE NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND ASSESSMENT FOR RELEVANT ASSESSMENT YE AR IS ALREADY STOOD COMPLETED ON THE DATE OF SEARCH (AND IT DID NOT ABA TE IN TERMS OF 2 ND PROVISO TO S.153A), NO ADDITIONS CAN BE MADE ON THE BASIS OF RE- APPRECIATION OF REGULAR ACCOUNT OF THE ASSESSEE. T HE LEARNED AR CONTENDED THAT A RETURN WAS FILED EARLIER PRIOR TO SEARCH AND THE ASSESSMENT PROCEEDINGS IN PURSUANCE THERETO IS DEEM ED TO HAVE BEEN CONCLUDED ON EXPIRY OF THE TIME LIMIT PROVIDED FOR INITIATION OF ASSESSMENT PROCEEDINGS. THE TIME LIMIT FOR ISSUANC E OF NOTICE UNDER S.143(2) STOOD EXPIRED AT THE TIME OF SEARCH AND IN THE ABSENCE OF ANY PENDING ASSESSMENT, THE ASSESSMENT FOR AY 2007-08 P URSUANT TO THE ORIGINAL RETURN ACHIEVED FINALITY. THE LEARNED AR ACCORDINGLY SUBMITTED THAT THE ASSESSMENT OF INCOME UNDER S. 14 3(3) R.W.S. 153A MUST HAVE NEXUS TO THE INCRIMINATING MATERIAL, IF A NY, FOUND IN THE COURSE OF SEARCH IN VIEW OF SEVERAL DECISIONS ON TH IS SCORE. THE LEARNED AR SUBMITTED THAT IN THE ABSENCE OF ANY INC RIMINATING MATERIAL REFERRED TO IN THE ASSESSMENT ORDER, THE ACTION OF THE AO/CIT(A) IN MAKING ADJUSTMENTS IN THE RETURN OF INCOME IN THE C OURSE OF SEARCH ASSESSMENT UNDER S.153A IS WITHOUT SANCTION OF LAW IN VIEW OF SEVERAL DECISIONS OF THE HONBLE GUJARAT HIGH COURT INCLUDI NG THE CASE OF PR.CIT VS. SAUMYA CONSTRUCTION (P.) LTD. 387 ITR 52 9 (GUJ). THE LEARNED AR CONTENDED THAT THE ACTION OF THE REVENUE IN ALTERING THE HEAD OF ASSESSMENT IN THE INSTANT CASE IS A MATTER OF REGULAR ASSESSMENT. SUCH ACTION IN THE COURSE OF SEARCH AS SESSMENT IS BAD IN LAW AND THUS REQUIRES TO BE SET ASIDE. IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 6 - 8. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AO AND CIT(A) AND SUBMITTED IN FURTHERANCE THAT THE AO HAS CLEARLY DEMONSTRATED ON FACTS THAT ACTIVITY OF THE ASSESSEE TOWARDS SALE OF PLOTTED LAND TO NUMEROUS CUSTOMERS IS A BUSINESS AC TIVITY INDEED. THE LEARNED DR ACCORDINGLY SUBMITTED THAT NO INTERFEREN CE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 9. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL AVAILABLE ON RECORD AND CASE LAW CITED. T HE SCOPE OF APPLICABILITY OF SECTION 153A CONCERNING SEARCH ASS ESSMENT IS IN QUESTION. IT IS THE CASE ON BEHALF OF THE ASSESSEE THAT RE-ALIGNMENT OF TAXABILITY OF INCOME OFFERED FROM ONE HEAD TO ANOTH ER ARE SUBJECT MATTER OF REGULAR ASSESSMENT AND DO NOT RESONATE WI TH THE SCHEME OF SEARCH ASSESSMENT UNDER S. 153A OF THE ACT DE HORS REFERENCE TO ANY INCRIMINATING MATERIAL IN THIS REGARD. FURTHER EMP HASIS IS LEAD ON BEHALF OF THE ASSESSEE THAT IN THE ABSENCE OF ANY I NCRIMINATING MATERIAL, NO ADJUSTMENT OF REGULAR INCOME OFFERED I N THE RETURNED INCOME IS PERMISSIBLE UNDER S.153A OF THE ACT. AS NOTED ABOVE, IT IS POINTED OUT ON BEHALF OF THE ASSESSEE THAT IMPUGNED RETURN FOR AY 2007-08 OF THE ASSESSEE-RUPESH B. PATEL WERE NOT PE NDING FOR ASSESSMENT AT THE TIME OF SEARCH AND CONSEQUENTLY, THE REGULAR ASSESSMENT/DEEMED ASSESSMENT STAND CONCLUDED AT THE TIME OF SEARCH RELATING TO THE ASSESSMENT YEAR IN QUESTION AND THU S SURVIVES AND DID NOT GET ABATED. IT IS THUS THE CASE ON BEHALF OF T HE ASSESSEE THAT IN THESE FACTS, IT IS NOT PERMISSIBLE FOR THE AO TO IN VOKE AUTHORITY VESTED UNDER S.153A OF THE ACT TO INDULGE IN MAKING ROUTIN E EXAMINATION OF VARIOUS ITEMS OF INCOME AND EXPENDITURE FILED AND D ECLARED IN THE RETURN WHICH HAS NO NEXUS TO THE INCRIMINATING MATE RIAL FOUND IN THE COURSE OF SEARCH, IF ANY. IN ESSENCE, IT IS THE CA SE OF THE ASSESSEE THAT ADDITIONS/DISALLOWANCES COULD NOT BE MADE IN THE AS SESSMENT FRAMED UNDER S.153A OF THE ACT DE HORS REFERENCE TO ANY INCRIMINATING IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 7 - MATERIAL FOUND IN THE COURSE OF SEARCH WHERE THE RE TURN FILED PRIOR TO SEARCH SURVIVES AND DO NOT GET ABATED BY OPERATION OF LAW. 10. THE APPEAL OF THE ASSESSEE THUS HINGES AROUND O NE PERTINENT LEGAL POINT AS TO WHETHER THE REVENUE IS ENTITLED T O INTERFERE WITH THE ASSESSMENT CONCLUDED EITHER UNDER S. 143(1) OR UNDE R S. 143(3) OF THE ACT AND NOT PENDING AT THE TIME OF SEARCH IN THE AB SENCE OF ANY INCRIMINATING MATERIAL UNEARTHED AS A RESULT OF SEA RCH. 11. ON A BARE PERUSAL OF THE ASSESSMENT ORDER PASSE D UNDER S. 153A, WE FIND A TOTAL ABSENCE OF REFERENCE TO ANY INCRIMI NATING MATERIAL WHICH MAY HAVE ANY BEARING TO THE RE-ALIGNMENT OF H EAD OF INCOME TOWARDS GAIN ARISING ON SALE OF PLOTTED LAND. THE RETURN FOR THE ASSESSMENT YEAR IN QUESTION SO FILED WAS ACCEPTED U NDER S.143(1) OF THE ACT AND / OR ASSESSED UNDER S.143(3) OF THE ACT PRIOR TO SEARCH AND, AS SUCH, NO ASSESSMENT WAS EVENTUALLY PENDING ON TH E DATE OF INITIATION OF SEARCH WHICH MAY GET ABATED IN CONSEQ UENCE OF SEARCH. IN THESE FACTS, THE POSITION OF LAW HAS BEEN EVOLVE D OVER TIME BY JUDICIAL PRECEDENTS. IN THE LIGHT OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF SAUMYA CONSTRUCTION (P.) LTD. (SUPRA) AND THE DECISION OF THE HONBLE DELHI HIGH COURT RENDERED I N THE CASE OF KABUL CHAWLA 380 ITR 572 (DELHI), WE ARE OF THE VIE W THAT VARIOUS ADDITIONS/DISALLOWANCES MADE BY THE AO ARE CLEARLY BEYOND THE SCOPE OF THE AUTHORITY VESTED UNDER S. 153A OF THE ACT OW ING TO ABSENCE OF ANY INCRIMINATING MATERIAL OR EVIDENCE DEDUCED AS A RESULT OF SEARCH. NO REFERENCE OF SUCH INCRIMINATING MATERIAL, IF ANY , IS FOUND IN THE ASSESSMENT YEAR. 12. IN VIEW OF THE LONG LINE OF JUDICIAL PRECEDENTS GOVERNING THE FIELD, WE HOLD THAT ROUTINE ADJUSTMENTS IN THE NATU RE OF CHANGE OF HEAD OF INCOME OF REPORTED INCOME WITHOUT ANY NEXUS TO I NCRIMINATING IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 8 - MATERIAL FOUND, IF ANY, AS A RESULT OF SEARCH OPERA TIONS ARE NOT SUSTAINABLE IN THE EYES OF LAW IN SECTION 153A PROC EEDINGS. HENCE, THE RE-ALIGNMENT OF HEAD OF INCOME TOWARDS GAIN ON SALE OF LAND FOR THE PURPOSES OF TAXABILITY REQUIRES TO BE QUASHED. THUS, WE FIND MERIT IN THE LEGAL GROUND RAISED BY THE ASSESSEE. IN THI S VIEW OF THE MATTER, WE DO NOT INTEND TO ADJUDICATE THE MERITS OF THE AD JUSTMENTS / RE- ALIGNMENT. 13. IN THE RESULT, THE CAPTIONED APPEAL OF THE ASSE SSEE IN IT(SS)A NO.193/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PA TEL] FOR AY 2007-08 IS ALLOWED. 14. IN IT(SS)A NOS. 194 & 195/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PATEL] FOR AYS 2009-10 & 2010-11 AND IT(SS )A NOS.197 & 198/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PATEL HUF] FOR AYS 2008-09 & 2009-10 ALSO, THE RESPECTIVE ASSESSEES HA VE FILED ADDITIONAL GROUND CHALLENGING THE JURISDICTION OF THE AO TO AL TER THE HEAD OF INCOME IN RESPECT OF ALREADY INCLUDED IN THE REGULA R RETURN AND IN THE ABSENT OF ANY REFERENCE TO ANY INCRIMINATING MATERI AL. WE FIND THAT THE FACTS AND ISSUES INVOLVED IN THESE APPEALS ARE IDENTICAL IN MATERIAL RESPECT TO APPEAL IN IT(SS)A NO.193/AHD/2016 (SUPRA ). ACCORDINGLY, IN PARITY, THE CAPTIONED APPEALS ARE ALSO REQUIRED TO BE ALLOWED IN FAVOUR OF THE ASSESSEE FOR SIMILAR REASONINGS. 15. IN THE RESULT, IT(SS)A NOS. 194 & 195/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PATEL] FOR AYS 2009-10 & 2010-11 AN D IT(SS)A NOS.197 & 198/AHD/2016 [IN CASE OF SHRI RUPESH BHOL IDAS PATEL HUF] FOR AYS 2008-09 & 2009-10 ARE ALLOWED. 16. WE SHALL NOW ADVERT TO IT(SS)A NO. 196/AHD/2016 IN RESPECT OF SHRI RUEPSH BHOLIDAS PATEL FOR AY 2011-12. IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 9 - 16.1 THE ASSESSEE IN THE INSTANT CASE HAS CHALLENGE D THE ACTION OF THE AO ON MERITS IN ASSESSING CAPITAL GAINS ARISING FRO M THE SALE OF SANAVAD LAND UNDER THE HEAD OF BUSINESS INCOME. 16.2. BRIEFLY STATED, IN THE COURSE OF ASSESSMENT P ROCEEDINGS UNDER S.153A R.W.S. 143(3), THE AO FOUND THAT ASSESSEE HA S DISCLOSED A SUM OF RS.27,35,119/- ON SALE OF PLOT OF SANAVAD LAND U NDER THE HEAD SHORT TERM CAPITAL GAIN. SIMILARLY, ANOTHER SUM OF RS.10,84,063/- WAS DISCLOSED UNDER THE HEAD LONG TERM CAPITAL GAI N. THE AO OBSERVED THAT THE ASSESSEE HOLDING THE AGRICULTURAL LAND CONVERTED THE SAME INTO NON-AGRICULTURAL LAND AND DIVIDED AND SUB -DIVIDED THE LAND BY PLOTTING THEREOF. THE DIVIDED LAND (PLOT) WAS SO LD TO VARIOUS CUSTOMERS. THE AO HELD THE SAME TO BE A BUSINESS A CTIVITY AS AGAINST ACCRETION TO THE CAPITAL ASSET AT THE TIME OF SALE. THEREFORE, THE AO HELD THAT THE INCOME ARISING ON SALE OF PLOTS IS RE QUIRED TO BE ASSESSED AT A HIGHER RATE OF TAXATION UNDER THE HEAD BUSINE SS INCOME AND THUS, DENIED THE CONCESSIONAL TREATMENT CLAIMED BY THE AS SESSEE UNDER THE HEAD CAPITAL GAINS. 16.3 THE CIT(A) CONFIRMED THE AFORESAID ACTION OF T HE AO IN FIRST APPEAL. 16.4 AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL B EFORE THE TRIBUNAL. 16.5 LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A FARMER AND HIS ANCESTRALS WERE ALSO DOING FARMING A CTIVITY. THE ASSESSEE HEREIN PURCHASED LAND AT VILLAGE SANAVAD A LONGWITH FAMILY MEMBERS AND RELATIVES WHO ARE FARMERS WITH AN INTEN TION TO USE IT FOR AGRICULTURAL PURPOSE. HOWEVER, DUE TO NEW ZONING, ALL SURVEY NUMBERS OF VILLAGE SANAVAD FELL UNDER RESIDENTIAL ZONE DESP ITE BEING AGRICULTURAL LAND. THE AGRICULTURAL ACTIVITY WAS T HUS SEVERALLY EFFECTED IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 10 - DUE TO SPURT IN DEVELOPMENT ACTIVITY IN THE AREA. THE LAND ADMEASURING 71661 SQ.MTRS. BEING HUGE AREA COULD NO T BE SOLD AS A WHOLE. THEREFORE, THE LAND WAS DIVIDED INTO PIECES IN SMALL PLOT FOR WHICH THE APPROVAL FROM AUDA WAS TAKEN ON 09.09.200 8 FOR WHICH NA CHARGES ETC. WERE PAID TO DDO. THE LAND WAS THU S SUB-DIVIDED INTO 120 PLOTS WHILE NO DEVELOPMENT ACTIVITY WAS CA RRIED OUT BY THE LAND OWNERS. IT WAS FURTHER SUBMITTED THAT MANY PL OTS WERE SOLD TO NEARBY FARMERS AND VILLAGERS IN THE YEAR 2008-09 (2 3 PLOTS), 2009-10 (40 PLOTS) AND IN THE YEAR 2010-11 (57 PLOTS). THE LEARNED AR ACCORDINGLY SUBMITTED THAT WHERE NO DEVELOPMENT ACT IVITY WAS CARRIED OUT BY THE LAND OWNERS ACCEPT PAYING REQUIRED CHARG ES TO THE GOVERNMENT AGENCIES FOR APPROVAL. THE SELLING OF L AND BY SUB- DIVIDING IN PLOTS DOES NOT CONSTITUTE BUSINESS ACTI VITY. THE LEARNED AR FURTHER SUBMITTED THAT SUBSTANTIAL GAIN ON SALE OF SUCH PLOTS HAS BEEN OFFERED AS SHORT TERM CAPITAL GAINS IN THE INC OME TAX RETURN FILED FOR PRECEDING AY 2010-11 WHERE THE TAX RATE IS NO D IFFERENT. THE LEARNED AR ACCORDINGLY SUBMITTED THAT INCOME OFFERE D UNDER THE HEAD CAPITAL GAINS HAS A RATIONAL BASIS AND THE ACTION OF AO IS DEVOID OF ANY SATISFACTION TO ASSESS IT UNDER HEAD BUSINESS INCOME. 16.6 THE LEARNED AR THEREAFTER RELIED UPON THE DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. P REMJI GOPALBHAI 113 ITR 785 (GUJ) AND OF THE CO-ORDINATE BENCH IN H ITESHKUMAR ASHOKKUMAR VASWANI VS. JT.CIT (2017) 165 ITD 505 (A HMEDABAD) TO SUPPORT ITS THE CLAIM OF TAXABILITY OF GAINS UNDER THE HEAD CAPITAL GAINS. 16.7 THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO AND CIT(A). IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 11 - 17. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE CASE LAW CITED. THE SUBSTANTIVE ISSUE IN THE PRESE NT APPEAL IS WHETHER GAINS ARISING ON SALE OF PLOTS BY THE ASSESSEE IN T HE RELEVANT ASSESSMENT YEAR IN QUESTION IS REQUIRED TO BE TAXED UNDER THE HEAD CAPITAL GAINS AS OFFERED BY THE ASSESSEE OR IS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. THE QUESTION IS ESSENTIALLY FACTUAL IN NATURE AND DEPENDS ON THE FACTS PREVALENT IN A G IVEN CASE. THE ASSESSEE HAS ADVANCED JUSTIFICATION FOR TAXABILITY UNDER THE HEAD CAPITAL GAINS ON THE GROUND THAT THE ASSESSEE BEI NG A FARMER HAS ACQUIRED AGRICULTURAL LAND. HOWEVER, DUE TO CHANGE IN THE GOVERNMENT POLICY, THE LAND FELL INTO RESIDENTIAL ZONE WHERE T HE ASSESSEE FOUND IT DIFFICULT TO CARRY ON AGRICULTURAL ACTIVITY DUE TO ON-GOING CONSTRUCTION AND DEVELOPMENT. DUE TO THE LARGE SIZE OF THE LAND , IT WAS DIVIDED AND SUB-DIVIDED AND SOLD TO THE INTERESTED CUSTOMERS. THESE FACTS DO NOT EXCLUSIVELY SUGGEST THAT THE ENTIRE EXERCISE WAS TO EXPLOIT THE LAND COMMERCIALLY IN THE NATURE OF ADVENTURE WHICH IS AK IN TO THE BUSINESS. IN THE LIGHT OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PREMJI GOPALBHAI (SUPRA) AND THE DECISION O F AHMEDABAD TRIBUNAL IN THE CASE OF HITESHKUMAR ASHOKKUMAR VASW ANI (SUPRA), WE FIND MERIT IN THE PLEA OF THE ASSESSEE FOR TREATING THE SAME TO BE GAIN ARISING FOR CAPITAL NATURE AND THUS, ASSESSABLE UND ER THE HEAD OF CAPITAL GAINS. WE THEREFORE CANCEL AND SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARD AND RESTORE THE TREATMENT GIV EN BY THE ASSESSEE IN ITS RETURN OF INCOME ON THIS ACCOUNT. 18. IN THE RESULT, THE CAPTIONED APPEAL OF THE ASSE SSEE IN IT(SS)A NO.196/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PA TEL] FOR AY 2011-12 IS ALLOWED. 19. THE REMAINING IT(SS)A NO.199/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PATEL HUF] FOR AY 2012-13 INVOLVES QUESTION SIMILAR IT(SS)A NOS. 193 TO 199/AHD/16 [SHRI RUPESH BHOLIDA S PATEL & HUF VS. DCIT) - 12 - TO IT(SS)A NO.196/AHD/2016. THE FACTS AND ISSUE BE ING IDENTICAL, IN PARITY, WE HOLD THAT ACTION OF THE AO IN TREATING T HE GAINS ARISING ON SALE OF PLOTS AT VILLAGE SAIJ TO BE A BUSINESS INC OME IS NOT SUPPORTED ON FACTS. THUS, THE ORDER OF THE CIT(A) APPEALED A GAINST, IS SET ASIDE AND CANCELLED AND THE AO IS DIRECTED TO RESTORE THE TREATMENT GIVEN BY THE ASSESSEE IN THE RETURN OF INCOME TOWARDS CAPITA L GAINS ARISING ON SALE OF PLOTS. 20. IN THE RESULT, IT(SS)A NO.199/AHD/2016 [IN CASE OF SHRI RUPESH BHOLIDAS PATEL HUF] FOR AY 2012-13 IS ALLOWED. 21. IN THE COMBINED RESULT, ALL THE CAPTIONED APPEA LS ARE ALLOWED. SD/- SD/- (MADHUMITA ROY) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/07/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/07/20 18