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TMI Blog2018 (10) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... nating material found, if any, as a result of search operations are not sustainable in the eyes of law in Section 153A proceedings. 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 this view of the matter, we do not intend to adjudicate the merits of the adjustments / re-alignment . Assessing capital gains arising from the sale of Sanavad land under the head of ‘business income’- Held that:- The question is essentially factual in nature and depends on the facts prevalent in a given case. The assessee has advanced justification for taxability under the head ‘capital gains’ on the ground that the assessee being a farmer has acquired agricultural land. However, due to change in the Government policy, the land fell into residential zone where the assessee found it difficult to carry on agricultural activity due to ongoing 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment framed under s.153A of the Act whereby the head of income for the purposes of assessment of gain arising on sale of plot of lands has been changed from capital gains offered by the assessee to business income assessed by the AO. 5. Apart from the challenge to the act ion of the Revenue 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 the 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 before the date of search. Hence assessment framed u/s 153A is required to quashed considering the same as concluded assessment modified as per original return of income. It be so held now. 6. When the matter was called for hearing, the learned AR for the assessee submitted that the additional ground essentially is legal in nature and concerns jurisdictional aspect of the search assessment and thus goes to the root of the mat ter. She sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the income arising on sale of plotted land is required to be assessed under the head business income instead of capital gains . In this backdrop, the learned 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 different head of income, the AO has not made any reference to any incriminating material as evident from the show cause notice as well as the assessment order. The learned AR thus submitted that in the absence of any incriminating material found in the course of search, the action of the AO to merely change and alter the head of assessaibility of income is a complete non-starter. The learned AR submit ted 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 year is already stood completed on the date of search (and it did not abate in terms of 2nd proviso to s.153A), no additions can be made on the basis of rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the returned income is permissible under s.153A of the Act . As noted above, i t is pointed out on behalf of the assessee that impugned return for AY 2009-10 of the assessee-Dhiren B. Patel were not pending 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 thus survives and did not get abated. It is thus the case on behalf of the assessee that in these facts, it is not permissible for the AO to invoke authority vested under s.153A of the Act to indulge in making routine examination of various items of income and expenditure filed and declared in the return which has no nexus to the incriminating material found in the course of search, if any. In essence, it is the case of the assessee that additions/disallowances could not be made in the assessment framed under s.153A of the Act dehors reference to any incriminating material found in the course of search where the return fi led prior to search survives and do not get abated by operation of law. 10. The appeal of the assessee thus hinges around one pertinent legal point as to whether the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of already included in the regular return and in the absent of any reference to any incriminating material . We find that the facts and issues involved in these appeals are identical in material respect to appeal in IT(SS)A No.188/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. 191 192/Ahd/2016 [in case of Shri Kiri tkumar D. Patel] for AYs 2007-08 2008-09 are allowed. 16. We shall now advert to IT(SS)A Nos. 189 190/Ahd/2016 in respect of Shri Dhiren B. Patel for A.Ys. 2012-13 2013-14; respectively. 16.1 The assessee in the instant case has challenged the action of the AO on merits in assessing capital gains arising from the sale of Sanavad land under the head of business income . 16.2. Briefly stated, in the course of assessment proceedings under s.153A r.w.s. 143(3), the AO found that assessee has disclosed a sum of ₹ 1,45,157/- for AY 2012-13 on sale of plot of Sanavad land under the head short term capital gain . Similarly, another sum of ₹ 9,57,297/- was disclosed under the head long term capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at High Court in the case of CIT vs. Premji Gopalbhai 113 ITR 785 (Guj) and of the co-ordinate bench in Hiteshkumar Ashokkumar Vaswani vs. Jt.CIT (2017) 165 ITD 505 (Ahmedabad) to support it s 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). 17. We have carefully considered rival submissions and perused the case law cited. The substantive issue in the present appeal is whether gains arising on sale of plots by the assessee in the 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 given case. The assessee has advanced justification for taxability under the head capital gains on the ground that the assessee being a farmer has acquired agricultural land. However, due to change in the Government policy, the land fell into residential zone where the assessee found it difficult to carry on agricultural activity due to ongoing construction and development. Due to the large s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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