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TMI Blog2016 (10) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... consistently declared year-after-year on agricultural land so held before its sale. The non-agricultural land so held were shown as investment and subjected to wealth tax being capital asset. On perusal of the written submissions as reproduced by the CIT(A) we note that the land/properties were purchased and held for several years in many cases before its sale. Coupled with this, we also take note of the fact that assessee has large capital of its own at its disposal which is far in excess of the corresponding investments made in land/properties over years. On cumulative reading of these glaring facts, we fail to comprehend the action of the Revenue in holding capital gains earned on sale as declared to be a business venture. It is manifest that the AO as well as CIT(A) misdirected themselves in law and on facts in holding the land/properties to be in the nature of trading asset merely on the ground that some of the agricultural land were converted into non- Agricultural land and some agreements were entered for the development of the land in the year under appeal acquired and held for decades in many cases. We find considerable weight in the plea of the assessee that intention at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that five appeals pertaining to the Assessment Years (AYs) 2007-08, 2009-10, 2010-11, 2011-2 & 2012-13 emanates from the common order of the Commissioner of Income Tax (Appeals) [CIT(A) in short) and appeal pertaining to AY 2008-09 arises from separate order of the CIT(A). We were also informed in the course of hearing that the facts in all these assessment years under appeals are similar and therefore AY 2012-13 may be taken as a lead year for the purpose of adjudication of common issue in all these appeals. We have proceeded accordingly as per suggestions made. 2. Thus, we shall take up the appeal in ITA No.371/Ahd/2016 for Asst.Year 2012-13 first. The grounds of appeal raised by the assessee read as under:- 3. The assessee in the course of hearing has not pressed ground No.3 of the appeal challenging disallowance of expenditure u/s.14A of the Act. Accordingly, ground No.3 of the assessee's appeal is dismissed as not pressed. This leaves us with ground Nos.1 & 2, whereby the assessee has assailed the action of the AO in treating the capital gains arising on sale of property as "business income". 4. Facts in brief as emanating from the records are that a search action u/s.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opers are confirming party. (E)The number of properties sold by the assessee for the year under consideration was fifteen. II. Events as narrated in the preceding paras vividly brings out the facts that the owners of the land have dealt with the land in same way as a dealer in it would ordinarily do like purchasing the land, converting it into nonagricultural, developing it and then selling it in small pieces. It is worthwhile to mention here that Shri Anil Bholabhai R Patel is a well known builder and is also a partner in M/s. Sai Developers and M/s. Siddharth Developers and other related Developers with whom the development agreement was entered into. In the light of above fact the purpose of transaction of purchase and sale is clearly discernible. III. Here it is more than apparent that the operations involved in the transaction are of the same kind and carried on in the same way as those which are characteristic of ordinary trading in the line of business in which the transaction was made. IV. Here the agricultural land is in the close vicinity of city and was purchased solely with the intention to resell at the profit and purchaser had no intention to use it for agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has placed reliance on the decision of the Bombay High Court in the case of Commissioner of Income-Tax Vs Dhable, Bobde Parose, Kale, Lute and Choudhari (202 ITR 98). Here the facts of the case with that of case cited by the assessee are easily distinguishable. In the case cited Supra, the transaction was an isolated transaction of purchase and sale of agricultural land by the assessee. While, here, the assessee is actively engaged in the purchase of land and this is not an isolated instant. Moreover, assessee in its balance sheet has shown "Advances received against land". This shows the magnitude of the trading in land. It is well settled law that if the commodity purchased is generally the subject Inaner of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment of personal use, possession or enjoyment. IX. Assessee's other contention that he is not holding land as stock-in-trade and has shown the same as fixed assets does not have any force. The consistent methods followed by the assessee have nothing to do with the chargeability of the correct income. Moreover, Income-tax Authorities are not required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant after considering the earlier decision of ITAT for A.Y.2004-05 wherein the issue was decided in favour of the appellant and after distinguishing the same. The relevant portion of the order of the ITAT is reproduced as under: "6. We have heard the rival contentions and perused the material on record. The past history of the case shows, that the appellant in every year is disclosing the capital gain on sale of the land, however, family members as well as HUF also claiming capital gain on sale of land. But, the intention of the assessee to earn profit by making investment in land repeatedly by purchasing the land. At the outscript of the Municipal area, any of the land may be agriculture to earn the profit. These lands were not purchased for the purposes of investment. The agricultural use as claimed by the assessee was made up to 2003 whereas plot of land;, were sold in A, Y. 2006-07. Therefore, the intention of the assessee was to earn much profit in the trading of the land. In past, the Co-ordinate 'C' Bench had decided this issue in favour of the assessee in A.Y.04-05, which was decided on the basis of Shri Bholabhai R. Patel HUF for A. Y.01 -02 for A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order being relied upon by me. In view of the duty and need to follow later ITAT decision, discussion on the rival contentions available before me is both academic and meaningless. Moreover, I find 'that the number of transactions of dealing in land/immovable properties have been generally increasing from year to year. Accordingly, respectfully following the ITAT decision as above, it is held that there is no infirmity in the Id. AO's conclusion with regard to the nature of the transactions and the head under which the income needs to be brought to tax. Thus, it is held that the AO has rightly brought the respective amounts to tax under the head 'business' as against the head of 'capital gains' as disclosed by the appellant, and, that no interference in AO's decision is called for. 10. In view of the above, the related grounds raised by the appellant for all the five years under reference are dismissed. 11. With respect to the second issue on disallowance u/s 14A, the appellant, through the Id. AR's communication dated 5/10/2015 has withdrawn the related ground. Such withdrawal being allowed, the ground stands dismissed for all the five years under r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as wealth tax statute is concerned. Thirdly, the Ld.AR pointed out with reference to the written submissions placed before the AO as well as before the CIT(A) that the assessee was a co-owner in most of these land and properties giving rise to the impugned gains. He pointed out that similar gains have also accrued in the hands of other co-owners which were offered by the co-owners as capital gains and duly accepted by the Revenue in their assessment framed u/s.143(3) of the Act. To lend support to such contention, the Ld.AR referred to paper-book No.2, wherein the assessment orders of co-owners were placed on records. He thus contended that there is no justifiable reason to take a different stand in the case of the assessee herein in departure with the stand of the other co-owners duly accepted by the Revenue. Fourthly, the Ld.AR adverted our attention to page Nos.12 to 26 of the paper-book No.I, wherein the balance-sheet, capital account, details of fixed assets including land and properties are available. The Ld.AR pointed out with reference to the fixed assets Schedule at page No.18 of the paper-book and submitted that the immovable properties other than land under sale were put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity as a reason to deny the benefit of chargeability under the head "capital gain" is also a damp squib. The Ld.AR contended that, as pointed out earlier, the land were ordinarily held for number of years prior to its sale. The intention at the time of acquisition or purchase is a relevant criteria for determination of taxability under the head "capital gain" or otherwise. He submitted that merely because some development has been entered into after passage of several years and conversation of agricultural land into non-agricultural land after a gap of several years will not change the colour of the capital asset to a trading asset in retrospect. He thereafter contended that having regard to net worth of the assessee, the number of transaction of sale cannot be termed as high to enable the AO to draw adverse inference against the assessee. Also, the assessee continues to hold many other parcel of land apart from the land which have been sold. He accordingly contended that there is no warrant for the Revenue to treat the "capital gains" offered of these facts as "business income". The Ld.AR further adverted our attention to the decision of the Coordinate Bench of this Tribunal (ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2006-07. The Ld.AR further observed that the status of the land has to be seen with reference to the date of purchase and not when it was converted into NonAgricultural land or when it purportedly became stock-in-trade at a later point of time. He submitted that it is an admitted fact on record that the land purchase were held as investment since inception and consequently capital gain on sale of investment i.e. capital asset can be taxed only under the head "capital gains". He further pointed out that the Tribunal in subsequent decision in AY 2006-07 failed to take note of the crucial fact that the assessee was holding the land for long period ranging between six to thirteen years before its sale and therefore the intention of the assessee to hold the land/properties as capital asset is manifest. He therefore submitted that the decision rendered by the Tribunal in AY 2006-07 cannot be applied in view of the clear facts in favour of the assessee. 8. The Ld.AR thereafter submitted that apart from the distinguishable features between facts pertaining to AYs 2004-05 qua 2006-07 as pointed out above, the Tribunal ought not to have taken a contrary stand in the subsequent year in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT reported in (2015) 169 TTJ (Raipur) (UO), copy of which has been placed in file. The Ld.AR pointed out that the aforesaid legal ground was raised before the CIT(A) which remained to be disposed of. The Ld.AR finally submitted that the action of the assessee in treating the gain in arising on sale of land and other properties under the head "capital gains" cannot be faulted in the circumstances narrated above. 9. The Ld.AR thereafter submitted that the relief claimed u/s.54B of the Act also requires to be granted as claimed under the return of income in accordance with law. Similarly, the assessment made holding the capital gains as business income by the AO in AY 2007-08 is not sustainable in law and, therefore, the order of the AO is required to be set aside and suitable relief be granted to the assessee as per the grounds of appeal. 10. The Ld.DR, on the other hand, heavily relied upon the order of the authorities below and also the order of the Co-ordinate Bench of the Tribunal in assessee's own case relevant to Asstt.Year 2006-07. The Ld.DR for the Revenue submitted that the action of the Revenue is in tune with the impugned order of the ITAT relevant to Asstt.Year 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies over years. On cumulative reading of these glaring facts, we fail to comprehend the action of the Revenue in holding capital gains earned on sale as declared to be a business venture. It is manifest that the AO as well as CIT(A) misdirected themselves in law and on facts in holding the land/properties to be in the nature of trading asset merely on the ground that some of the agricultural land were converted into nonagricultural land and some agreements were entered for the development of the land in the year under appeal acquired and held for decades in many cases. We find considerable weight in the plea of the assessee that intention at the time of purchase to hold impugned land/properties as a capital asset is manifest on records. The balance-sheet filed by the assessee over years, wealth-tax returns filed by the assessee, adequacy of its own capital clearly underscore the intention of the assessee to hold land/properties as capital asset as claimed. Inextricably, we also take note of the plea of the assessee that he is a co-owner of impugned land/properties holding certain percentage of ownership-rights therein and the claim of the land/properties as capital asset has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 is partly allowed in terms of directions noted above. 13. For parity of reasoning, our decision as noted above relevant to AY 2012-13 in ITA No.371/Ahd/2016 shall apply mutatis mutantis to all the remaining appeals captioned above. 14. Now we shall address ourselves to the legal issue raised relevant to AY 2007-08 in IT(ss)A No.70/Ahd/2016, wherein the assessee has questioned the action of the Revenue in holding the "capital gains" declared on sale of land/properties as "business income" in proceedings u/s.153A of the Act withour reference to any incriminating material. 14.1. Relevant legal ground raised by the assessee in this regard reads as under:- 1. The Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad has erred in law and on facts of the case in not considering Ground No.1 raised before the Assessing Officer regarding non abatement of original assessment. 2. Without prejudice to the above, the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad has erred in confirming the action of the Assessing Officer in treating the amount of sale of agricultural land as income from business and thereby making addition of ₹ 12,01,695/- to the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nating in the present case that in the absence of incriminating document/material, no addition can be sustained u/s.153A of the Act is no longer res integra in view of the decision of the Hon'ble Allahabad High Court in the case of CIT vs. Rajkumar Arora(supra) and also the Coordinate Bench of Raipur in the case of Rawal Das Jaswani vs. ACIT(supra). It will be appropriate to mention that the aforesaid view is also supported by the decision of Hon'ble Delhi High Court in the case of Kabul Chawla reported in (2015) 61 taxmann.com 412(Delhi) also relied upon by the Assessee. The relevant findings of the Hon'ble Delhi High Court are reproduced hereunder:- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:- i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income already assessed. 39. The question framed by the Court is answered in favour of the Assessee and against the Revenue. 40. The appeals are accordingly dismissed but in the circumstances no orders as to costs." 14.3. The judicial precedence noted above has underscored need for Revenue to unearth the material as a result of search to justify the assessment sought to be made. Respectfully following the judicial precedence touching the controversy, the legal issue stands adjudicated in favor of the assessee. Thus, in our considered view, the realignment of income from one head of income to another without reference to any incriminating material is not sustainable in law in the facts of the present case. 14.4. Accordingly, we allow the aforesaid legal ground raised by the assessee relevant to AY 2007-08. 15. In the combined result, appeal of the Assessee in IT(ss)A No.70/Ad/206 for AY 2007-08 is allowed, remaining appeals of the assessee, i.e. IT(ss)A No.71/Ahd/2016 to 73/Ahd/2016 for AYs 2009-10 to 2011-12, ITA Nos.29/Ahd/12 and 371/Ahd/2016 for AYs 2008-09 & 2012-13 respectively are partly allowed. Consequently, Stay Petitions filed by the Assessee for pending disposal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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