2013 (5) TMI 75 - AT - Income Tax

Sale of lands - Business income or capital gains - adventure in the nature of trade - Held that - It is a fact that sale proceeds of plots of land situated in Municipal Area have been taxed under the head Short Term capital gains by the AO. If the said transaction was not assessed as an adventure in nature of business how the sale of agriculture land can be assessed as business income. It is also a fact that income from the plots in question has been assessed as agricultural income by the AO for the AY under consideration. Similarly, the factum that pieces of land were shown as agricultural land in Revenue records even after the sale has not been challenged by the AO. Condonation of delay - held that - AO has not filed any affidavit along with the condonation-application, though the note sheet talks of filing of an affidavit if necessary, as stated at paragraph No.5 of our order - In our opinion sufficiency/reasonableness of cause is totally missing in the case under consideration - Decided against the revenue.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Treatment of income from the sale of agricultural land as an adventure in the nature of trade.
3. Consideration of the intention of the assessee, period of holding, and development potential in surrounding areas.
4. Applicability of the decisions of the Hon'ble Supreme Court and High Court in similar cases.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Assessing Officer (AO) filed an application to condone a delay of 620 days in filing the appeal before the Tribunal. The AO cited the decisions of the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Ors and CIT v. Sothia Mining & Mfg. Corpn. Ltd. to support the condonation request. The Tribunal noted that the delay must be explained reasonably and sufficiently. The AO failed to provide a satisfactory explanation for the entire period of the delay. The Tribunal emphasized that the CIT initially decided not to file an appeal after considering the facts and evidence. The subsequent decision to file an appeal, influenced by a confidential letter from the CCIT, lacked a reasonable cause. The Tribunal rejected the condonation application, stating that the sufficiency and reasonableness of the cause were missing.

2. Treatment of Income from Sale of Agricultural Land as an Adventure in the Nature of Trade:
The AO treated the sale of agricultural land as an adventure in the nature of trade, adding Rs. 1.08 Crores to the total income of the assessee. The assessee contended that the land was agricultural, and the sale proceeds should be treated as capital gains. The First Appellate Authority (FAA) found that the land was used for agricultural purposes before and after the sale, and the agricultural income was declared and accepted by the AO. The FAA held that the AO's observation of regular trading in land was not supported by evidence. The Tribunal upheld the FAA's decision, stating that the sale of agricultural land could not be treated as business income without concrete evidence of trading intention.

3. Consideration of Intention of the Assessee, Period of Holding, and Development Potential:
The AO argued that the intention of the assessee, the period of holding, and the development potential in surrounding areas indicated an adventure in the nature of trade. The FAA found that the assessee's intention was to hold the land for agricultural purposes, and the land was not converted to non-agricultural use. The Tribunal agreed with the FAA, noting that the assessee's past record did not suggest regular trading in land. The Tribunal emphasized that the burden was on the Revenue to prove the trading intention, which was not established in this case.

4. Applicability of Decisions of the Hon'ble Supreme Court and High Court:
The AO relied on the decisions of the Hon'ble Supreme Court in G. Venkatswamy Naidu & Co. v. CIT and the Hon'ble Bombay High Court in DCIT v. Gopal Ramnarayan Kasat. The FAA distinguished these cases, stating that the facts were not comparable. The Tribunal concurred, noting that the land in question was agricultural and used as such before and after the sale. The Tribunal held that the cited cases were not applicable to the present case, as the facts differed significantly.

Conclusion:
The Tribunal dismissed the appeal filed by the AO, upholding the FAA's order. The delay in filing the appeal was not condoned due to the lack of a reasonable cause. The sale of agricultural land was not treated as an adventure in the nature of trade, and the income was rightly assessed under the head 'Capital Gains'. The Tribunal emphasized the importance of concrete evidence and the burden of proof on the Revenue to establish the trading intention.

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