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TMI Blog2014 (7) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... n is still agricultural land - physical verification of the land will clinch the issue without any doubt, so that not only on legal principles but also factually also assessee’s contentions can be proved or disproved – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. - ITA. No. 204/Hyd/2014, ITA. No. 205/Hyd/2014 - - - Dated:- 13-6-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Mr. K. C. Devdas For the Respondent : Mr. B. Yadagiri ORDER Per B. Ramakotaiah, A. M. These two appeals are by assessee against the common Order of the CIT(A)-I, Hyderabad dated 27.01.2014 for the A.Y. 2006-07 and 2008-09. Assessee is aggrieved on the levy of capital gains on sale of land stated to be agricultural land by him but treated as non-agricultural land by Revenue. 2. Briefly stated, assessee is the owner of ac.3.27 gts situated at survey No.262 and 263 as well as ac.11.34 gts situated at survey No.163, 164 of Vattinagulapalli village, Rajendranagar Mandal, Rangareddy Dist. While settling his lands to his family members situated at survey No.163, 164 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yderabad for an amount of ₹ 37,69,600/- which were received by the assessee on 16.11.2007 and 03.11.2008, to substantiate that the compensation was received for agricultural land and also for horticultural crops, pump shed etc., It was the contention that the said lands were agricultural lands. In addition, it was also contended that assessee even though entered into an agreement of sale, the land was not given possession to the said buyer as the land was covered by G.O.Ms.No.111 of Government of Andhra Pradesh, where development of commercial nature was not permitted. Further, notification for acquiring the land for the ORR project was already issued covering part of the survey land. It was the contention that since the sale agreement without possession of the land cannot be considered as transfer , capital gains is not exigible. Assessee relied on various case law in support of his contentions that capital gains cannot be levied. 4. The A.O. however, did not agree with the said contentions. He seems to have obtained separate pahani patrikas from the MRO and also seems to have inspected the land. His findings on both the contentions of the assessee are as under : 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate, irrigation requirement, fertilizers, pesticides and fungicides. 7. The Assessing Officer made enquiries from the MRO office and verified the Pahanis and found that the land was classified as vacant land (padava in Telugu) and no crops were cultivated on the piece of land situated in Survey No.262 263 from the FY 2000-01 to 2007-08. The said information was put to the assessee and the assessee in reply has filed a valuation report of Horticulture Officer who has stated to have valued certain tree crops situated at survey no.262 of the assessee where the valuation was done for the purpose of land acquisition. The Horticulture Officer was summoned u/s.131 of I.T. Act and his sworn statement was recorded on 25-11-2009 in which he stated that he furnished the valuation report by identifying certain tree crops on survey no. 262 and it was also mentioned in that report they were all 3-4 years old. The Assessing Officer averred that if this contention is correct then there could have been mention of these crops in the revenue records for the FYs 2000-01 to 2007-08. The Assessing Officer noted that the revenue records maintained with Mandal Revenue Officer is the basic document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORR, he has to compensate similar land in survey No.163 and 164 and therefore, A.O. was of the opinion that assessee has extinguished his rights as per section 2(47)(ii) of the Act, notwithstanding registration of the deed. Accordingly, he brought sale consideration for computation of capital gains. Thereafter, taking cue from the other family member s returns, A.O. also determined the cost of acquisition at a very small amount thereby, determining the capital gain on sale of the land in A.Y. 2006-07 at ₹ 2,64,42,407/-. In the process, he brought the entire ac.3.27 gts to tax. The matter did not rest there. As the assessee has received compensation from the Government for acquiring land in survey No. 262 and 263 to an extent of ac.1.36 gts (out of the same deemed to have sold in A.Y. 2006-07) an amount of ₹ 21,91,471/- was also brought to tax as income from other sources and accordingly, assessment for A.Y. 2008-09 was completed by the A.O. 6. Before the Ld. CIT(A), assessee contested each of the issues raised by the A.O. and relied on various revenue receipts, electricity bills, pahani patrikas and also orders of the authorities acquiring land to submit that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case are identical to the case cited above and Even the purchaser is also the same party i.e., SAPPL and as per the agreement of sale dt. 27-1-2006, it is clearly mentioned that the vendor has offered to sell the land admeasuring Ac.3-27 guntas in survey no. 262 and 263 of Vattinagulapally village, Rajendra Nagar Mandal, Ranga Reddy District, and as per clause-3, the vendor i.e., the assessee has agreed to give equivalent lands in survey no.163 and 164 on the same terms and conditions of the agreement if he fails to get de-notification of the land falling in the property under consideration from the proposed ORR and finally as per c1ause-12 in the event if the vendor fails to execute the sale deed, the purchaser will be entitled to seek specific performance of agreement. All these shows that the conditions laid down in section 2(47)(v) have been satisfied and the Assessing Officer is justified in treating the transaction as liable for capital gains in the year of the agreement. 08.0. The appellant's argument that the electricity charges were paid by him is also considered (and the evidence filed by the appellant shows that the bill was dated 121988 and it is not understoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of Outer Ring Road as income from other sources and brought to tax the amount received during the year as such to tax. Ld. CIT(A), however, while confirming the capital gains in A.Y. 2006-07 directed the A.O. to tax the amounts in A.Ys. 2008-09 and 2009-10 as per the receipt, even though A.O. has already taxed the amount in A.Y. 2008-09 on receipt basis. Therefore, in a way, Ld. CIT(A) confirmed the order of the A.O. It is the assessee s contention that this land acquired by the State Government was agricultural land and relied on the orders of the authorities to contend that the land in question was agricultural land. The Grounds in A.Y. 2008-09 are accordingly raised. 9. Ld. Counsel after explaining the facts and referring to the paper book placed on record containing pages 1 to 296 and also supplementary paper book containing the data sheets and judgments containing page nos.1 to 39, submitted that the findings of the A.O. and consequential finding by the Ld. CIT(A) are not only factually wrong but also judicially not sustainable. To start with, it was submitted that A.O. made a mistake in observing that agreement of sale does not mention that the land was agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot understandable, when even A.O. himself claims to be a Doctorate in Horticulture. 9.3. It is also submitted that in the next part in page 7 itself, A.O. doubts the very existence of the plants/trees while saying that the plants can be 5 years old. It was submitted that assessee is not claiming that trees are fruit bearing but the contention is that the land is agricultural land. Instead of answering this question, A.O. with lot of prejudice to the assessee, stated that those trees would not have been harvested so as to state that the agricultural operations are not carried out. Even with reference to the contention that assessee was claiming to have cultivated paddy, jowar, corn, vegetables, flowers and fruits, it was submitted that assessee was having not only this ac.3.27 gts in survey Nos.262 and 263 but also ac.11.34 gts in survey Nos. 163 and 164 and in that entire land of ac.15.00 or so assessee was cultivating various crops. Therefore, A.O s contentions are not correct. It was further submitted that A.O. seems to have inspected the land without taking the assessee or any other person to assist where the lands are exactly situated. It was submitted that without giving op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 180 Taxman 114 (Del.) x) Lavleen Singhal vs. DCIT (2007) 111 TTJ (Del.) 326 xi) ITO vs. Amrutilal B. Shah (2013) 22 ITR (Tribu.) 668 (Mum.) xii) Sarifabibi Mohd. Ibrahim vs. CIT (1993) 204 ITR 631 (SC) 10. Learned D.R. however, relied on the various findings of the A.O. and Ld. CIT(A) and supported the orders in his detailed submissions on the issue. It was also his contention that the fact that compensation was paid to assessee can not be taken as evidence as that amount would be paid to owner only pending registration. Issue is whether assessee gave possession as defined under Transfer of Property Act. 11. We have considered the rival submissions and examined the documents on record along with the orders of the authorities. First of all, we have to admit that the order of the A.O. seems to be based on some wrong presumptions and bias against the assessee for whatever may be the reason. This opinion was formed on noticing various observations of the A.O. stated to be findings for rejecting assessee s contentions. To start with, A.O. mentions the following as a finding of fact in para -1. 1. The plain reading of the said agreement of sale that was found and seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous crops can also be rejected as they are without any basis. Just because assessee has mentioned that he has cultivated different types of crops, the argument cannot be rejected without any evidence to the contrary. No where it was mentioned that he has cultivated only on the piece of ac.3.27 gts that assessee is cultivating the land by growing various crops. He has more land as stated earlier to an extent of 15 acres. Be that as it may, assessee relied on some pahani patrikas obtained at a later point of time which indicate that the land is still agricultural land. Whereas, the A.O. seems to have obtained some pahanis from Mandal Revenue Officer, Rajendranagar Mandal copies of which are not placed on record. Assessee says that these were never put to the assessee except mentioning in the show cause notice as A.O s observations. This aspect was also verified by us in the course of hearing and nothing was brought on record about the socalled pahanies obtained from MRO, Rajendranagar Mandal. Assessee in fact asked for cross-examination of the said documents through the MRO which was denied stating that the authority is a Government authority and assessee need not cross-examine, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise at all. Issue of giving possession becomes academic in nature. Therefore, assessee s grounds are accordingly allowed for statistical purposes. 12. There are contentions about the cost of land. In case A.O s findings are that the land is/was not used for agricultural operations or are not capable for agricultural operations at any point of time, then while computing capital gains, A.O. should consider determining the cost of acquisition by giving due opportunity to the assessee. Therefore, this issue on which assessee has raised grounds 18 and 19 are also set aside to the file of A.O. to consider, if required. 13. As far as this issue in A.Y. 2008-09 is concerned, the State Government has acquired the land as agricultural land and compensation was also paid as agricultural land. Details of compensation received are as under: Particulars Amount in Rs. Compensation of Agricultural lands 37,69,600 Compensation for fruit bearing trees (Pages 48 52 of P.B.II) 27,343 Storage House (Pages 38 to 52 of P.B.II) 1,74,402 ..... 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