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TMI Blog2018 (10) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. In this view of the matter, we do not intend to adjudicate the merits of the adjustments / re-alignment. Capital gains arising from the sale of Sanavad land under the head of ‘business income’ - Held that:- 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 ent ire exercise was to exploit the land commercially in the nature of adventure which is akin to the business. In the light of the decision of the Hon’ble Gujarat High Court in the case of Premji Gopalbhai (1977 (8) TMI 43 - GUJARAT HIGH COURT) and the decision of Ahmedabad Tribunal in the case of Hiteshkumar Ashokkumar Vaswani (2017 (7) TMI 954 - ITAT AHMEDABAD), we find merit in the plea of the assessee for treating the same to be gain arising for capital nature and thus, assessable under the head of ‘capital gains’. - I.T(SS).A. Nos. 188 TO 190/Ahd/2016, I.T(SS).A. Nos. 191 And 192/Ahd/2016 - - - Dated:- 4-10-2018 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER For The Assessee : Smt. Urvashi Shodhan, A.R. For The Revenue : Shri Anshu Prakash, CIT., D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 submi tted that the addi tional ground essential ly is legal in nature and concerns jurisdictional aspect of the search assessment and thus goes to the root of the mat ter. She simultaneously submit ted that the jurisdictional defect proposed to be urged by way of addit ional ground can be decided on the basis of facts of material already available on record and does not require examination of any fresh facts. We find meri t in the plea raised on behalf of the assessee for admission of additional ground concerning jurisdictional issue as it strikes to the root of the controversy in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submit ted that in the absence of any incriminat ing material found in the course of search, the action of the AO to merely change and alter the head of assessaibi li ty of income is a complete non-starter. The learned AR submi t ted that there are long line of judicial precedents wherein it has been categorical ly 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 reappreciat ion of regular account of the assessee. The learned AR contended that a return was filed earlier prior to search and the assessment proceedings in pursuance thereto is deemed to have been concluded on expiry of the time limi t provided for init iation of assessment proceedings. The t ime limi t for issuance of notice under s.143(2) stood expired at the time of search and in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 examinat ion 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 addit ions/disal lowances could not be made in the assessment framed under s.153A of the Act de hors 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 is entit led to interfere wi th the assessment concluded either under s. 143(1) or under s. 143(3) of the Act and not pending at the t ime of search in the absence of any incriminating material unearthed as a resul t of search. 11. On a bare perusal of the assessment order passed under s. 153A, we find a total absence of reference to any incriminat ing mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the assessee for simi lar 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 al lowed. 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; respect ively. 16.1 The assessee in the instant case has challenged the action of the AO on merits in assessing capi tal 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 . Simi larly, another sum of ₹ 9,57,297/- was disclosed under the head long term capital gain for AY 2013-14. The AO observed that the assessee holding the agricultural land converted the same into nonagricultural land and divided and sub-divided the land by plotting thereof. The divided land (plot) was sold to various customers. The AO held the same to be a business act ivity as against accretion to the capi tal asset at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the AO and CIT(A). 17. We have careful ly considered rival submissions and perused the case law ci ted. 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 essent ially factual in nature and depends on the facts prevalent in a given case. The assessee has advanced justification for taxabil ity 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 fel l into residential zone where the assessee found it difficul t to carry on agricultural act ivi ty 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 ent ire exercise was to exploit the land commercial ly in the nature of adventure which is akin to the business. In the light of the decision of the Hon ble Gujarat High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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