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TMI Blog2020 (2) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... fully knowing that if he will rely upon those proceedings, he will have to meet and discard the reply and explanations of the assessee and also the reports, if any, given by his predecessor and by the concerned investigation authorities and under the circumstances his action of reopening might not pass the test of reasons to believe , hence, he skipped the entire episode of earlier proceedings, based his reasons for reopening of the assessment on the alleged information received from DCIT, central circle, Panaji, which even does not support the reasoning given by the AO. When the very reasons on the basis of which the reopening, allegedly could not form the basis of forming the belief by the AO that the income of the assessee had escaped assessment, the consequential reassessment order formed by the AO u/s 147 of the Act is illegal and the same is accordingly quashed. Nature of land sold - The assessee furnished the evidence before the lower authorities that it had employed two employees and further developed the orchard by putting efforts i.e. by weeding undesired growth of wild plants, by clearing bushes grown between the food bearing trees, pruning the food bearing tree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade. Further, even though the said company did not continue to maintain and develop the land as orchard for the purpose of earning agricultural income, yet, the fact on the file is that it even did not alter its character. If the previous owner did not carry out agricultural activity on an agricultural land, however did not alter or change its nature and character, but the subsequent owner of land starts the agricultural activity on the said land, under the circumstances, it can be safely held that the land remains the agricultural land and has not lost its original characteristic. In view of the above discussion of the matter, the issue on factual matrix is also decided in favour of the assessee. - ITA No. 652/CHD/2017 (Assessment Year : 2008-09) - - - Dated:- 11-12-2019 - SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER Assessee by : Shri Sudhir Sehgal, Advocate Revenue by : Shri Chandrajit Singh, CIT-DR ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 13.02.2017 of the Commissioner of Income Tax (Appeals), Shimla, H. P. [hereinafter referred to as CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in the business of real estate and the land was purchased by the assessee company for development of hotel project / housing project. The A.O. in this respect relied upon the clauses of agreement to sale. The AO further observed that even the assessee company could not prove with convincing evidence that agricultural operations were carried out on the said land. The AO further observed that even the said land was within 8 K.M. of the Municipal limits of Panaji and that the population of Panaji was more than ten thousand persons as per census of 2001. He, therefore, observed that the land in question was not exempt from taxation as per the provisions of section 2(14) of the Income Tax Act. He further observed that though the population of village Reis Magos was less than ten thousands but since the land fell within 8 K.M. of Municipal limits of Panaji , hence, the contention of the assessee that the land did not fall within the definition of the capital asset as per section 2(14)(iii) of the Act was not factually correct. He further observed that the contention of the assessee company that the distance was to be measured by road was erroneous. He held that the distance can be mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered Land Valuer and numerous other evidences had been furnished, which confirms that the land in question was more than 10 Kilometers away from the limits of the 'Panaji' and, as such, the CIT (A) having considered and examined all such documentary evidence should have given categorical finding that the land in question was more than 10 Kilometers away from Municipal Committee, rather than holding that the issue is only an academic as nothing adverse has been pointed out by the CIT(A) against such documentary evidences. 6. That all such evidences confirm that the land in question was agricultural land and is more than 10 Kilometers away from Municipal Committee and, as such, the CIT (A) has erred in holding that the land was capital asset, which is against the facts and circumstances of the case. 7. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 6. We have heard the rival contention and have also gone through the record. Our finding in respect of the issues raised in this appeal is as under. Firstly, we take up the legal issue raised vide Grounds No. 1 2. Ground no. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fully and truly all material facts necessary for assessment of its total income for the A.Y. 2008-09, income to the extent of ₹ 60 crores has escaped assessment for which proceedings u/s 147 are being initiated. Issue notice u/s 148 for the A.Y. 2008-09. Sd/- (Anshuman Sharma) Dy. Commissioner of Income Tax Circle, Parwanoo 8. A perusal of the above reasons recorded by the Assessing Officer for reopening of the assessment reveals that the Assessing Officer had received information from the Dy. C.I.T., Central Circle, Panaji that during the search action carried out at his residence of Sh. Suresh V. Parulekar, a copy of sale deed of land between M/s Delanco Home Resorts Pvt. Ltd. and the assessee was found. In his statement Sh. Parulekar stated that his company M/s Reis Magos Estate Pvt. Ltd. had sold the aforesaid land to the assessee company for ₹ 9,76,0,000/- which was subsequently sold to M/s Delanco Home Resorts Pvt. Ltd. on 09.04.2007 for a consideration of ₹ 60 crores. The Assessing Officer, however, has reproduced the relevant part of the statement of Sh. S. V. Parulekar in the assessment order which is further repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment has mentioned that during the search action executed between assessee and M/s Delanco Home and Resorts private limited was found. This fact mentioned by the assessing officer is contrary to the effect coming out of the statement of Mr. Perulekar. In his reply to question No. 7, Mr. Perulekar has stated that he has heard that the land has been subsequently sold by the assessee to M/s. DLF group. Mr.Perulekar did not show any direct or specific knowledge about the fact the sale of land or as to the terms of the sale deed of sale consideration settled. From the above facts, it is apparent that the assessing officer has wrongly mentioned that during research action a copy of the sale deed between the assessee and M/s. Delanco Home and Resorts Private limited was found or that Mr. Perulekar in his statement had stated that the assessee had sold the land at a sale consideration of ₹ 60 crores to M/s. Delanco Home and resorts Pvt. Ltd. Hence, the very basis of information leading the assessing officer to form belief that the income of the assessee had escaped assessment is wrongly and falsely mentioned by the assessing officer. Now the question that arises as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby, the assessee has been asked to attend to the proceedings before him and produce the necessary documents and details as asked for. A copy of letter dated 03/09/2010 has been placed on the file whereby Deputy Director of Income Tax (Inv.), H.P., Shimla, has asked the assessee to furnish the required details relating to the purchase and sale of land in question. The assessee has also been asked to explain as to why not any capital gains tax has been paid on the sale of the land in question. The perusal of the above aforesaid letter dated 30/09/2010 reveals that the Ld. Deputy Director of Income tax (Inv.), H.P., Shimla, has raised all the queries and doubts that have been mentioned by the Assessing officer in the reasons recorded for reopening of the assessment and has asked the assessee to give his explanation about the same . The contents of the letter dated 03/09/2010 of the Deputy Director of income tax ( Inv.), H.P., Shimla, for the sake of ready reference, are reproduced as under:- Sub:- Enquiry Proceedings - regarding Please refer to your letter dated June 15, 2010. In your above letter it was mentioned that a Survey u/s 133A of the Act was conducted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.... The following points are also brought into your kind notice: - a) The land of 1,31,425 sq. mtrs in survey no 87/ 1-A at Verem Reis Magos is classified as residential land by the district revenue administration in 1994. b) The village panchayat Reis Magos issued permission for constructing residential complexes on the above land in 1995-96 and renewed the same from time to time unto the year 2009. c) The earlier owner of the above land M/s Reis Magos estates Pvt. Ltd (which held the land for 7 Years) has claimed that the land is non-agricultural and has not claimed and exemption on the profit on sale of the above land. d) You have not actually carried out agricultural operations on the above land and there is no documentary evidence to prove that actual agricultural operations were carried out. e) You have not declared any agricultural income in your returns of income filed before the department for any assessment year. Even the consideration received and profit on sale of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, further referred the matter to the assessing officer of the assessee, it is not clear as to what prevented the assessing officer for not mentioning about the report or reference received by him in this respect from the office of Deputy Director of Income Tax ( Inv.), H.P., Shimla. Though, the assessing officer in the reasons recorded has mentioned all the facts, circumstances, reasons and doubts as have been raised by Deputy Director of Income Tax ( Inv.), H.P., Shimla, however, the assessing officer has mentioned the basis of information as information received from the DCIT, Central Circle, Panaji, without any reference to the survey action carried out at the premises of the assessee and further correspondence made by his predecessor about the sale deed in question vide his letter dated 4.3.2010 (supra) and the reply of the assessee there to vide letter dated 4.4.2010. The facts on the file reveal that after the receipt of information from DCIT, Panaji, a survey action was carried out at the premises of the assessee from where the sale deed in question was found. Thereafter, not only the assessing officer, as discussed above, but also the Deputy Director of Income tax (Inv.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense. Furthermore, the reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are reason to believe and not reason to suspect . There can be no manner of doubt that the words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Incometax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect, though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. The entire law as to what would constitute reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the master plan and has been approved for residential purposes by way of grant change of land User Certificate (CLU). ii) The assessee company had purchased the land not with the intention to carry out agricultural activities, rather, for construction purposes. That even the purchase and sale consideration was very excessive as compared to the price value of the agricultural land. iii) The earlier owner has not claimed the said land as agricultural, rather, has returned the income from the sale of land as its business income. That even the subsequent purchaser has also not purchased the land for agriculture purposes, but for residential project. Neither the assessee nor the buyer is agriculturist. iv) Assessee had not carried out any agricultural activities on the land and that the natural growth on land does not tantamount to agriculture operations. Assessee had failed to establish that any agricultural operations were carried out by the assessee. Even the assessee has not shown any agricultural income in the return of income. v) The land is situated with in 8 Kms (about 4 kms) from the Panjim Municipal Committee. 12. The Ld. CIT(A) has also relied upon the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee proves that the user or to say the nature of the land was not changed and that is why the renewal of the permission was sought from time to time. Had the nature of the land ever changed to residential by any of the occupier of the land, there was no question of seeking and granting of renewal of the permission for change of land user. Even the fact that the land is an orchard has not been denied or refuted by the revenue authorities. The assessee had also given the explanation that since the land is situated within 200 meters of river Mandova, with in which no construction could be carried out and due to the said reason neither the previous owner could carry out construction nor the assessee was able to do so. The previous owner that is M/s Reis Magos Pvt. Ltd. had retained the portion of the land which was 200 metres away from river Mandova. Though, initially the intention of the assessee might have been to develop some construction project, however due to the practical problems in implementing the same, the assessee decided not to change the user of the land and, therefore, continued to maintain it in its original and actual form, that is, as an orchard. The assessee furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee did not rather to say could not proceed with its such intentions, rather, maintained and developed the original form of the land i.e. of an orchard. The assessee continued with the horticulture activity which is a branch of the agriculture, hence, it cannot be said that the land was not an agricultural land at the time of its sale by the assessee. Even the assessee has further claimed that the nature of the land even has not been changed till date. The assessee in this respect has relied upon the report of Sh. Vineet Raut Desai, Engineer cum Land Valuer, who along with Sh. VK Jain, Sh. Rajeev Jain and Sh. Gaurav Jain (counsels for the assessee) who visited the land in question, measured the distance from the outer skirts of the Municipal limits and also noted and photographed the actual vegetation on the land. Some of the photographs have been placed on the file to show that the land on the date of visit on 10/07/2016 was a neglected orchard. He has further deposed in his affidavit that the distance from the municipal limits to the land in question by shortest route was 10 km, whereas, via most common and convenient road it was 19 km. He also obtained a certificate fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2015 passed in ITA No. 151 of 2013 in the case of Smt. Maltibai R Kadu. Prior to the said amendment of 2014, the law was settled through various case laws that the distance between the municipal limits and assessed property is to be measured as per approach road/motorable road. The Ld. AR in this respect has relied upon the decision of the Chennai Bench of the Tribunal in ITO Vs. Shri Chagan Lal Lalji Aswin order dated 18.10.2011 in ITA No. 857/Mds/2011 and ITAT, Amritsar Bench in the case of ITO Vs. M/s Ranjit Rattan Mehra (HUF) order dated 18.7.2012 in ITA No. 442(Asr.)/2011 and ITAT Mumbai Bench in the case of ACIT vs Sh. Sunil G. Mathreja order dated 7.3.2014 in ITA No. 6562/Mumbai/2011 another and of the Hon ble Punjab Haryana High Court in the case of in the case of CIT v Satinder Pal Singh 188 Taxman 54 (P H)(2010). The assessee in this case has placed certificates from Gram Panchayat and Land Revenue officials, apart from the report and affidavit of Regd. Land Valuer cum Engineer to the effect that the land in question is situated at a distance of about 10.5 Km from the Panaji Municipal limits, whereas, the Department has relied upon the vague and uncertain st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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