9911796707
TMI Blog2022 (4) TMI 1609X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153A of the Act. In such circumstances the plea of the assessee cannot be accepted. In our considered opinion, as per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be determined afterwards and not at the time of issue of notice u/s 153A. In this view of the matter, we find no merit in this technical objection raised by the assessee and the same is rejected. Accordingly, the action of the AO in issuing notice u/s. 153A is justified. This ground of the assessee is therefore dismissed. Nature of land sold - Addition in respect of transfer of land by Based on the documents found during the search in the Appellant s group cases - What is sold by Appellant is agricultural and hence gains are outside the purview of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale will not create any right, title or interest in favour of the agreement holder and the amount received is only an `advance' not liable for income tax. 7. The Hon'ble Commissioner of Income Tax(Appeals)-11 ought to have held that no part of Rs. 3,38,75,000/- can be brought to tax as business income during the subject assessment year. 8. Without prejudice, the Hon'ble Commissioner of Income Tax (Appeals)-11 ought to have held that there was no transfer of the capital asset by the appellant during the previous year attracting the provisions of short term capital gains. 9. The appellant craves for leave to add to, delete from or amend the grounds of appeal. 2.1 Similar are the grounds for A.Y. 2006-07. Only Change in figures. 3. The assessee has also raised the following common grounds in these appeals:- 1. The order of the Learned Assessing Office (`LA0') and Learned Commissioner of Income-tax (Appeals)(`Ld. CIT(A)') is bad in law and against the provisions of section 153A, since amongst others, the additions are not based on any incriminating material found during the course of search. 2. For the above and other grounds that may be urged at the time of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are bad in law. 9. In relation to the above, reliance is placed on the following rulings: a. CIT v. IBC Knowledge Park (69 taxmann.com 108)(Kar); b. Best Infrastructure (India) Pvt. Ltd. (397 ITR 82)(Kar); c. CIT v. Kabul Chawla (380 ITR 573)(Del). 10. The ld. DR supported the order of the lower authorities. 11. We have heard both the parties and perused the material on record. Similar issue was considered by the coordinate Bench in the case of Shri Jitendra Virwani in ITA No. ITA Nos.1211 to 1217/Bang/2019 dated 30.7.2021 wherein assessment u/s. 143(3) r.w.s. 153A was upheld by observing as follows:- 31. We have heard both the parties and perused the material on record. The issue before us is relating to the reassessment proceedings u/s 153A of the Act for the AY 2009-10 to AY 2012-13 as there was a ground on this issue in these Assessment Years only. However, the AR enlarged his arguments for AY 2013-14 and AY 2014-15 which we declined to entrain it as there is no ground of appeal or additional grounds of appeal raised by the assesse on this issue in these Assessment Years. Therefore, as far as the question of validity of initiation of reassessment proceedings u/ 153A is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Section 153A. With all the stops having been pulled out the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 34. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section I53A says that such proceedings shall abate . The reason is not far to seek. Under Section 153A there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is bound to issue notice u/s 153A to the assessee to furnish the return for each Assessment Years falling within six Assessment Years immediately preceding the Assessment Year relevant to the previous year in which search conducted or requisition was made. Consequently, the Assessing Officer is empowered to assess or reassess the total income of all these six Assessment Years. 36. Before us, now the contention of the assessee for assessment years 2009-10 to 2012-13 is with regard to initiation of proceedings u/s. 153A of the Act, though there was no incriminating material found during the course of search and seizure action conducted 7.1.2015. The AO has simply referred to the documents seized and inventorised as A/JV01 placed at Paper Book page No. 78. This is not a document seized as such, it is a printout taken from the computer. The panchanama which is placed at page 1 of the Paper Book states very clearly that no documents were seized. A perusal of the document marked A/JV01 would show that there is nothing incriminating therein, it does not show any undisclosed income of the appellant. It is an un-signed mere dumb document. Hence, this document cannot be considered as incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings u/s. 153A is valid, however, the AO cannot resort to roving and fishing enquiry to find out whether any income has escaped assessment during the reassessment proceedings when there is no incriminating material found or seized during the course of search action u/s. 132 of the Act. In other words, we are of the opinion that AO was correct in law to issue notices u/s 153A for the years under consideration, as he was bound to pass Assessment orders in respect of all these concerned Assessment Years. However, addition in these Reassessment Years u/s 132 of the Act. 40. The ld. DR strongly relied on the decision of the Hon ble Karnataka High Court in the case of Canara Housing Development Co. (supra) wherein it was held as follows:- At this point, it is appropriate to draw inference from the Hon ble Karnataka High Court judgment in the case of Canara Housing Development Co. (supra). In that case, the Assessee, which was carrying on real estate business filed its return for AY 2008-2009. His case was taken up under Section 143(3) of the Act and an order came to be passed on 31st December, 2010. Subsequently a search took place in the premises of the Assessee under Section 132 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the undisclosed income, if any, unearthed during the search. It was further observed that in the facts of that case if the CIT had come across any income that the AO had not taken note of while passing the earlier order, the said material can be furnished to the assessing authority who will take note of it while determining total income. 43. In CIT Vs. Kabul Chawala 380 ITR 573 (Delhi H.C) it was held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The relevant extract is reproduced below:- The legal position that emerges on a perusal of section 153A and section 132 of the Income-tax Act, 196 is as under : (i) Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of book profit, de-hors any material found during the course of search, in the order passed under Section 153A of the Act was without jurisdiction, being outside the scope of proceedings under that Section? The facts of the case were that there was incriminating material found during the course of search conducted in the premises of the Assessee on 18th January, 2006 and subsequent dates. This included a statement of the General Manager (Marketing). On the basis of the said material and statement additions were made to the disclosed income under Section 115 JB although no material was found specific to such addition. The Court held that under Section 153A the additions need not be restricted or limited to the incriminating material, which was found during the course of search. Consequently even if no incriminating material was found for the addition under Section 115JB of the Act, since there was some incriminating material found which would sustain additions made and since the 'total income' had to be computed, they were sustained by the High Court. 45. In Filatex India Ltd. the Court sought to explain the observations in CIT v. Chetan Das Lachman Das (supra) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. 48. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was not borne out from the scheme of the said provision which was in the context of search and/or requisition. The Court also explained the purport of the words assess and reassess , which have been found at more than one place in Section 153A of the Act as under:- 26. The plea raised on behalf of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results: (a) Insofar as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment have already been completed and the assessment orders determining the total income are subsisting at the time of search or requisition are made the scope of assessment u/s 153 A is limited to reassess the income of the assessee on the basis of incriminating material found as a result of search. However, it won t disentitle the AO in issuing the notice u/s. 153A of the Act consequent to search action u/s. 132 of the Act. 51. The sole reason for conducting search in the case of the assessee is information received from prior to search from The Foreign Tax Division, Ministry of Finance by making request as per the proforma of Request for Information Under The Provision Of Tax Treaties placed under at Page no 538 on PB. Therefore, we are of the considered view that the additions made by the AO is merely based on information received prior to search from The Foreign Tax Division, Ministry of Finance by making request as per the proforma of Request for Information Under The Provision Of Tax Treaties which is not found as a result of search or requisition and consequently the additions made by the AO in assessment order passed u/s 153A of the Act, consequent to search, in absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under section 143(1) or 143(3), the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of section 153A is there should be a search under section 132. Initiation of proceedings under section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under section 132, the said proceeding shall abate. If such proceedings are already concluded by the Assessing Officer by initiation of proceedings und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome, which is already subjected to assessment under section 143(3) or under section 148 of the Act completed prior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153A of the Act. In such circumstances the plea of the assessee cannot be accepted. 54. In our considered opinion, as per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be determined afterwards and not at the time of issue of notice u/s 153A. In this view of the matter, we find no merit in this technical objection raised by the assessee and the same is rejected. 55. Accordingly, the action of the AO in issuing notice u/s. 153A in these assessment years 2009-10 to 2012-13 is justified. This ground of the assessee is therefore dismissed. 12. In view of the above order of the Tribunal, since the facts are same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and not stock in trade c. The said addition is not based on any incriminating material found during the course of search. d. The converted lands were not put to use for the intended purpose within two years of conversion as per directions laid in the conversion order. e. On the expiry of said two years, the lands restored to their original character of agricultural land . f. Agricultural activities were carried on by the Appellant till the date of transfer; g. No real income arose to the Appellant since the entire arrangement with VBEHCS has been cancelled vide Arbitration order dated 25.04.2013. What is sold by Appellant is agricultural and hence gains are outside the purview of capital gains tax 17. Without prejudice to the above, the Appellant submits that the asset transferred is an agriculture land within the meaning of section 2(14)(iii) of the Act. The Appellant submits that although the lands were converted, agricultural activities were carried on by the Appellant till the date of transfer. The same can be evidenced from the RTC Copies provided by the competent authorities. 18. Without prejudice, for the agricultural land to fall out of the purview of capital asset unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii)(b). c. The land is actually classified as agricultural land as per Government revenue records and this land is subject to revenue land tax. d. The land was actually and ordinarily used for agricultural purpose, since it was purchased till the date of sale. e. Even today the land is classified under agricultural land as per revenue records. The land was never used for non-agricultural purpose till the date of sale and it was never ceased to put to agricultural purpose. f. Agricultural operations were carried out in the said land by the assessee on his own and agricultural income was admitted up to the impugned AY. g. The assessee never made any plot out of the impugned land and the land was sold in acres and guntas and not as square feet. h. The assessee has not made any roads or any facilities and it was undeveloped land fit to use for agricultural purpose at the time of sale. i. The entire land was sold as it was purchased. The assessee sold the land only because of favourable marketing conditions as the land fetched a higher price. j. Even temporary stoppage of the agricultural activities due to unfavourable conditions, the land cannot be treated as non-agricultural land. k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as complete. 27. Hence, for the above reasons, it was submitted that it would not be appropriate to consider that income has arisen to the Appellant on account of the transfer of lands. The following propositions are relevant here: a. No real income arises in the present facts on the assumption that there is transfer of a capital asset. b. Income from capital gain on a transaction which never materialized is, at best, a hypothetical income. c. Where for want of statutory permissions, the entire transaction of development of land falls through, there will be no profit or gain which arises from the transfer of a capital asset. d. The Appellant did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. e. This being the case, in the circumstances, there was no debt owed to the Appellant. Hence, the Appellant has not acquired any right to receive income under the MOU. As such, no profits or gains 'arose' from the transfer of a capital asset. 28. The ld. AR submitted that the above principles are squarely covered by the ruling of the SC in Balbir Singh Maini (398 ITR 531). The following rulings also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was subject of cultivation from AY 2006-07 to 2012-13. However, the AO disputed that the income disclosed by the assessee as agricultural income is derived from the land sold by the assessee situated at Manchanayakanahalli and on the other hand, the land sold by the assessee was situated at Devarakaggalahalli. No bills and vouchers for carrying out the agricultural activities. The land was sold to GSPL for the purpose of housing project. was urban land and on transfer liable for capital gains tax. The plea of the assessee that though the said land was converted into nonagricultural land, the cultivation of land continued till date and income disclosed from the said land was outrightly rejected by the AO on the ground that the income disclosed by the assessee was situated at Manchanayakanahalli whereas the land sold was situated at Devarakaggalahalli. In our opinion, the AO cannot reject the claim of assessee without due verification. The land was converted by the assessee to sell it to a corporate entity so as to get better price and conversion is only to facilitate the sale and gains arising from such sale could not have been liable for capital gain. 20. It is not in dispute that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nverted into non-agricultural land purpose, but cultivation of land continued till the date of sale. Thus, the land should have been treated as agricultural land and exempt from capital gains in view of section 2(14) of the Act. While holding so, the Tribunal has also observed that had the State Reforms Act permitted the assessee to sell its agricultural lands without conversion to a corporate as in the case of other States, the assessee would not then be required to get the land converted merely to facilitate its sale to a corporate and the gains arising from such sale could not have been exigible to capital gains tax which is the subject of a Central Act. The Tribunal has also observed in that case that, even after conversion the assessee was carrying on agricultural operation and conversion was done only to facilitate sale of subject property to a corporate entity/non-agriculturist. The relevant observations of the Tribunal rendered in that case are extracted hereunder for the sake of reference:- 7.2. We have carefully considered the rival submissions, perused the relevant materials on record and also the various judgments of judiciary on a similar issue relied on by either of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said lands, were continued unabatedly by the assessee and incomes admitted by it from such operations were accepted by the revenue from the AYs 2004-05 to 2009-10, the details of which are as under: Asst. year Agrl. Income [in Rs. ] 2004-05 22,00,000 2005-06 22,00,000 2006-07 16,50,000 2007-08 16,50,000 2008-09 16,50,000 2009-10 16,50,000 7.2.4. Though the said land was converted into non-agricultural purposes in the year 2004-05 and one of the mandatory conditions specified in the conversion order dated 19.7.2004 was that if the converted land was not used for the purpose for which it was converted within a period of two years from the date of conversion, the order of conversion stands cancelled. Apparently, the assessee had continued the agricultural operations in the converted lands also which is evident from the fact that incomes derived from such agricultural operations on the said lands declared by the assessee in its returns of Income were accepted by the revenue for the AYs 2004-05 to 2009-10 (supra). No evidence was brought on record by the Revenue to suggest that the subject lands were utilized for any other purposes other than that of cultivation after conversion. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n area committee, town committee will cease to be an agricultural land. Whether the subject land is agricultural or otherwise is essentially a question of fact. In coming to a definite conclusion, a number of tests will have to be undertaken as laid down by the Hon'ble Supreme Court in the case of Sarifabibi Mohamed Ibrahim v. CIT reported in 204 ITR 631 (SC). The tests prescribed by the Hon'ble Supreme Court as under: (i) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? (ii) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (iii) Whether such user of the land was for a long period or whether it was of a temporary character or by any stop gap arrangement? (iv) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? (v) Whether the permission under Land Revenue Code was obtained for the non-agricultural used of the land, if so, when and by whom [the vendor or the vendee]; whether such permission was in respect of the whole or a portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property under dispute. Though the present assessee became the legitimate owner of the subject property on inheritance/in a partition/family arrangement as the case may be, the nature of the land use had not, however, undergone any change. Whether the lands which were used as agricultural lands even after its conversion loose its character of agricultural lands? 7.3. The stand of the AO was that once the agricultural lands were converted into non-agricultural, even though agricultural activity continues, the lands cannot be considered as agricultural lands. Countering the AO's assertion, the learned AR had argued that as per the mandatory conditions mentioned in the Certificate of conversion, if the subject land was not put to non-agricultural use within a period of two years from the date of conversion order, the conversion itself will become null and void. In this connection, the learned AR had placed strong reliance on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT v. Smt. K.Leelavathy (supra). 7.3.1. It is a fact that the land which was hitherto agricultural land does not automatically become a capital asset upon a mere fact of its conversi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly levied agricultural land tax. No adverse inference can be drawn. The ld. Counsel for the assessed tried to demonstrate that as per the Karnataka Land Revenue Act, 1964, section 83(2) read with sec. 95(2) mandates that the land holder should continue to pay the land revenue even after conversion. We need not go into this aspect for the reason that the period is too short a period and it is not a case where the revenue authorities have refused to levy land revenue by showing the reason. of conversion or for the reason that the assessee has refused to pay such land revenue. The AO has recorded a finding that the land revenue records to show that ragi and horse gram were grown on the said land. The reasons recorded by the assessing officer as well as the CIT (A), to our mind, are not relevant for coming to the conclusion as to whether a particular asset is a capital asset within the meaning of sec. 2 (14) of the Income-tax Act. The issue whether a particular land is agricultural land or not has been the subject matter of dispute in many a cases. In each of the judgments broad outlines have been given and it is suffice to say that the unanimous view of all the Hon'ble Courts is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 of the Act? 7.3.5. After taking into account the submissions of the either of the party and also the perusal of the orders of the authorities below, the Hon'ble Court had held as under: 5. We find from the record that the Appellate Commissioner as well as the Tribunal followed an earlier ruling of the Tribunal rendered on December 30, 2009, in the case of T. Suresh Gowda [ITA No. 262/ Bang/ 2009] wherein it appears, the question was resolved by looking into the date of permission for conversion as the cut-off line to decide as to whether the land was an agricultural land or otherwise. 6. It appears, the Tribunal had opined that the land retained its agricultural character till the date of order permitting non- agricultural use and, thereafter, it is not an agricultural land and, therefore, can be treated as capital asset. 7. The Appellate Commissioner as well as the Tribunal has applied this norm and while they did hold that the sale transaction in respect of the following extent of land: In respect of the sale transaction dated June 2,2004, it was taken as a sale of capital asset as this sale was after the date of permission for non-agricultural use granted by the Asst. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land from agricultural to non- agricultural and certificate was issued to that effect. Even for the revenue, there is no case that the land has been used for the intended purpose. 38. In the decision of Gujarat High Court relied upon by the DR, in the case of Gordhanbhai Kahandas Dalwadi v. Commissioner of Income-tax (1981) )27 ITR 664, the Hon'ble High Court held that the potential non-agricultural use does not alter the character of the land. This was a case wherein the land was purchased in 1954 and, subsequently, sold in 1969. The entries in the revenue records showed that the land was agricultural continued to be so. The land revenue paid was for agricultural use, but permission for non- agricultural use was obtained but not before the date of the sale. In these circumstances, the Hon'ble High Court upheld the presumption that the land is agricultural. The Hon'ble High Court came to the above conclusion in spite of the fact that this land was situated in an industrially developed area where the potential use of the land as non-agricultural land was very high but the Hon'ble High Court held that the use of the land as nonagricultural is totally immateria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose and how the purchaser was going to use land. ............................................................................. ITA. 305/Bang/2009 - By the Revenue in the case of T. Suresh Gowda A Y 2005-06 53. The revenue had taken an additional ground that is with regard to taking fresh additional evidence filed by the assessee without giving opportunity to the assessing officer. In this case, the assessing officer noticed that the assessee had sold land measuring 40 acres and 20 guntas at Seshagirihalli for Rs. 4, 50, 00, 000/ - on 7.4.04 to Tibetan Childrens' village and claimed exemption from capital gains which worked out to Rs. 3,68,01,771/- on the ground that the land situated in a rural area i.e., 8 Kms away from the limits of Bangalore Mahanagara Palike and the land is located as notified u/ s 2 (14)(iii)(b) of the Act as the transaction relates to sale of agricultural land. The assessing officer observed that the land was converted for residential purpose before the sale and, therefore, it is immaterial whether the land was situated outside the city limits or beyond 8 KMs. He further held that the cultivation of land till disposal is also irrelevant. He further h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, non- agriculturists and industrial companies are prohibited from purchasing of lands which are classified as 'agricultural' in the revenue records. If an agriculturist intends to sell his agricultural lands to a company /non- agriculturist for the use of non-agricultural purposes, he must possess a conversion order obtained from the revenue authorities to utilise the subject land for non-agricultural purposes. However, the same law/rule is not prevalent in the neighbouring States of Tamil Nadu, Andhra Pradesh or in Maharashtra, Delhi etc. In other words, the agriculturists of the said States are free to sell their lands as shown in the revenue records to non-agriculturists /Corporates without obtaining a conversion order. 7.3.9. Thus, it is evident from the fact that the agriculturists in other States can sell their agricultural lands without getting the same converted whereas the agriculturists in Karnataka cannot do so due to the Land Reforms Act prevailing in the State. As such, an agriculturist in Karnataka is on a different footing from his counterparts in other States. If one were to conclude that since the present assessee had obtained a conversion order to enable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessees. In light of these facts, we are of the view that the CIT(Appeals) has properly adjudicated the issue and we do not find any mistake therein. We accordingly confirm the order of the CIT(Appeals). 22. Further, in assessee s own case, the issue came before this Tribunal in ITA No. 1464 1465/B/2008 262/B/2009 wherein vide order dated 30.12.2009 it was held as under:- 2. Brief facts of the case are as follows. There was a survey u/s.133A in the case of Shri. M. N. Manjunath, proprietor of P. M. Concrete Blocks at his business premises at No. 119, Sheshagirihalli, Bidadi Hobli, Ramanagaram Taluk on 25.1.2006. During the course of survey action, certain copies of sale deeds and sale agreements in respect of purchase and sale of property effected by the assessee during the assessment year under consideration was found and they were impounded. There was no regular return for the year under consideration on the date of survey. On the basis of the evidence found, notice u/s.142(1) was issued on 2.2.2006 calling the assessee to file the return on or before 15.2.2006. The assessee filed a belated return on 13.3.2006 declaring income of Rs. 7,67,570/-. There was no offer of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purpose are briefly set out by the Assessing Officer in his order at pages 5 to 7. In the GPA executed by Narasimhaiah and Chikkaputtaiah, they stated that they are the owners of the land admeasuring 3 acres each and further stated that they had applied for conversion of the land from agricultural to non-agricultural residential purpose and the Assistant Commissioner, Ramanagara Sub-division, vide his order dt.15.5.95 had granted their request and now the land had been converted to non-agricultural purpose and subsequent to the conversion, they stated they had formed residential layout obtaining from Manchanayakanahalli Grama Panchayat and since they were unable to manage the affairs in respect of the sale of the sites, they thought it fit, necessary and convenient to appoint the assessee as their GPA holder to sell their sites. They permitted the assessee to negotiate on terms for and enter upon and conclude any contract, agreement or sale in respect of the scheduled property either in full or in part to any purchaser or purchasers of his choice and gave the assessee an absolute discretion to cancel or repudiate the contracts etc., Further, they authorized the assessee to recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illage through their representative Mr. Tenzin Chodak Gyalpo. A statement u/s.131 was recorded from him. 5. It was always the case of the assessee that though the land was converted into non-agricultural purpose, the assessee was continuing the agricultural activities and there were standing crops on the land purchased by the Tibetan Childrens Village and, therefore, in the light of clause (10) of the conversion order, i.e., if the land is not used for the intended purpose within two years from the date of the order, it will be deemed to be restored to the original position, is an established fact. So as to verify the same, in the statement, Mr. Tenzin Chodak Gyalpo, was specifically asked whether at the time of purchase, any amount was paid towards the standing crops. The answer was, he did not remember the position, but he confirmed that Tibetan Childrens Village had not paid any amount towards the standing crops at the time of sale. Thus the Assessing Officer concluded that since the land was already converted and put to use for formation of layout by the original owners, way back in the financial year 1995-96 itself, the assessee s version that the land was being used for non-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Inspector ( ITI for short), the land under reference and also the adjacent lands were not put to use for agricultural purposes for quite a long time as formation of layouts were under progress. He held there is no strength in the assessee s argument that he had carried on agricultural activities till the date of the sale. 8. Coming to the next point how the lands were utilized subsequent to transfer, he noted that the purchaser Tibetan Childrens Village, bought the land only for the purpose of nonagricultural activities. The land was to be utilized for construction of schools for Tibetans. Tibetan Childrens Village had purchased about 160 acres of land located in Sheshagirihalli and Manchanayakanahalli, which includes the land admeasuring 13 acres and 9 guntas held in the name of the assessee, sold for Rs. 14 acres during the financial year 2004-05. He further noted the statement recorded from the buyer, Mr. Tenzin Chodak Gyalpo. In his statement, Mr. Tenzen stated that the intention was to construct building for education like nursing college, degree colleges etc., They were also taking steps to get recognition as a deemed university. The Assessing Officer found that the lands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(SC) On the basis of the above, the assessee was liable to pay capital gains tax. Aggrieved by the above assessee approached the first appellate authority. 10. The Commissioner of Income-tax (Appeals) vide page 3 of his order records the report of the Assessing Officer, dt.13.6.2008 which is as under : None of the above factual position as contented by the LAO is disputed. However, what is disputed is his conclusion to contend that there was no agricultural cultivation carried out by the appellant. Though the lands were converted for non-agricultural purposes, it was never put to use for such converted purposes. This is evident from the governmental records, in the form of RTC, which consistently showed that there was a cultivation of ragi . The Commissioner of Income-tax (Appeals) further held that the assessee was not disputing the above facts which was clear from the assessee s rejoinder dt.21.7.08, but only objection of the assessee was that though the assessee s land was converted for non-agricultural purpose, but it was never put to use for such converted purpose which was evident from the Government record in the form of RTC. 11. The assessee s contention was not accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Childrens Village. These lands were bought by the assessee in the year 1995. These lands converted to non-agricultural and residential purposes on 29.4.1999 except an area of 31 guntas which was converted on 10.5.2004. The assessee claimed that the lands were sold as agricultural lands and, therefore, the assessee was not exigible to tax within the definition of capital asset as given in section 2(14) of the IT Act. However, the Assessing Officer did not accept the same, for the reason that the lands were not agricultural lands since they were converted for non-agricultural and residential purpose. According to the assessee, Assessing Officer did not consider the following important factors. Though the conversions were done, it was mandatory that the purpose for which it was converted should be implemented within two years from the date of conversion order or else the conversion order becomes null and void. This fact is highlighted by the statement of the State Government Officer, Shri. Karigowda, Assistant Commissioner, Ramanagar Sub Division, who appeared on 5.12.2007 and stated that if the land is not used for the specific purpose within two years of conversion, the conversio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on be obtained before commencement of work and submitted such permission has never been sought and obtained before commencement of the work. He further brought our attention to clause (10) which reads as under : It may be construed that this converted land must be utilized for the purpose permission has been accorded within two years. It is an admitted position that no further action was taken by obtaining permission from the BMRDA or the assessee had complied with condition No. 10. No activity was undertaken within the two years. In other words the conversion has been now been deemed to have been cancelled. The assessee s representative further submitted the assessee never paid any amount as tax to the Grama Panchayat. The learned representative for the assessee brought our attention to paper book pages 10 to 13 i.e., RTC form No. 16 in which the land revenue authorities have mentioned that the assessee had carried on certain agricultural activities. We find at page 12 the land used was to the extent of 1.38 acres and the crop grown was Ragi. So also at page 14 it is mentioned that the extent of land utilized was two acres for growing Ragi. He reiterated the submission made before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's favour. The Hon'ble Supreme Court laid down the broad parameters as to what could be considered as agricultural land. He submitted originally the land was an agricultural land. The original owners made a request for conversion in order to fetch good price. But the converted land was never used for the intended purpose as per the conversion order which stipulates that if the land is not put to use for the intended purpose within two years from the date of conversion, then the land reverts to the original status, which was confirmed by the Assistant Commissioner, Ramanagara Sub Division in his sworn statement. In other words, the land on the date of sale was retaining the character of agricultural land. The finding of the Assessing Officer that the RTC entries are not relevant is an archaic finding. Inviting our attention to the written submission before the CIT(A), dt.20.10.08, the assessee s representative submitted since the land which was converted to non-agricultural purposes was not put to use for the converted purpose, it retains its original status which is also evident from the statement given by the Assistant Commissioner, Ramanagara Sub Division. The findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land revenue authorities as same. Further the Tibetan Childrens Village authorities informed that they are intending to carry out educational activity. Therefore, they requested for renewal of the conversion order, because there was no application for renewal from the assessee, after the lapse of two years and therefore, the Tibetan Childrens Village authorities intimated the concerned authorities that that they are willing to pay the requisite charges and conversion fees for renewal of the orders. Bringing our attention to the agreement for sale, the assessee s representative submitted the sale deed was dated 26.9.1995, therefore, he submitted that from the certificate issued by the competent authority on 22.6.2006, it is clear that the land remained as agricultural land and the conversion took place only after the sale took place. The assessee purchased the land from Smt. Narasamma by deed dt.26.9.95. It is almost similar in the case of other assessee where they have purchased the land from various persons. Though the land was purchased on the basis of the certificate issued by the Village Accountant of Ramanagara taluk dt.22.6.2006 mentioned above, the assessee s representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al land is not sufficient to hold that the nature of the agricultural land has been changed. In this case, assessee's representative submitted the assessee obtained permission from the land revenue authorities u/s.63 of the Bombay Tenancy and agricultural Lands Act for putting the land into non-agricultural activities. The land was situated near Amul dairy, Ganesh Dugghalaya and Charotar Tobacco Company. Charotar Iron Factory, Krishna Iron Factory and other industrial concerns were also in the vicinity of the land. In the Land Records, no entry of change i.e., from agricultural to nonagricultural was made and, therefore, looking to the claim of the assessee that assessee was doing agricultural activity though on a small scale, the Hon'ble High Court held that the nature of the land had not been changed. 22. The learned representative for the assessee submitted the decision relied by the revenue authorities in the case of Commissioner of Income-tax v. Gemini Pictures Circuit P. Ltd., (1996) 220 ITR 43 is distinguishable on facts as the Hon'ble Supreme Court had referred to Gordhanbhai Kahandas Dalwadi 127 ITR 664 (supra). In the instant case, non-agricultural taxes were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned DR submitted, is not in a position to prove that he has not carried out any agricultural activity, then it is a conclusive proof that the assessee had not carried out any agricultural activity till the date of transfer. Even after presuming but not admitting that the assessee had carried out agricultural activities, the land has to be treated as nonagricultural in character. 25. The assessee has not produced any evidence in support of the claim that he had carried out agricultural activity on the land under reference till the date of the transfer except furnishing of RTC obtained from village accountant. Though this is prima facie evidence of agricultural holdings in the name of the assessee, but this is not sufficient evidence to prove the case of the assessee that he carried out agricultural activities on the land. The assessee has not adduced any evidence in support of the claim of acticultural activities other than RTC. The assessee was questioned and requested to produce the details of the crops cultivated, yield per acre, expenses incurred towards agricultural operations and the gross amount of sale proceeds on account of the sale of agricultural produce. There wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 512(Bom); ii) Fazalbhoy Investment Co. P. Ltd., v. Commissioner of Income-tax - 176 ITR 523 (Bom); iii) Commissioner of Income-tax v. Shiv Chand Satnam Paul - 231 ITR 663 (P H) 26. Replying to the above, the learned DR submitted the assessee made an application to the land revenue authorities to get the records changed from agricultural to non-agricultural lands. Subsequently, the buyer, the Tibetan Children's Village, paid non-agricultural tax on the land and also the penalty to get the land converted from agricultural to non-agricultural. It shows that the intention of the assessee at the time of selling was that the land should be treated as non-agricultural land, and it is clear from the sale deed. The learned DR submitted the RTC certificate was not in existence and even if it existed, it is not the final word. He invited our attention to para 3.10 of the Commissioner of Income-tax(A)'s order in the case of Suresh Gowda dt.10.2.2009. The facts in para 3.10 narrated therein as under: 3.10 The Hon'ble ITAT, Bangalore in the case of Shri. M. V. Chandrashekar v. DCIT, Circle -2(1),Bangalore (ITA No. 663/Bang/2002 dt.6.12.2002), which was also affirmed by the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the long run to get recognition as a deemed university. 28. The learned DR further submitted in the case reported in Musthafa Ummer and Another v. Appropriate Authority and Others (2002) 254 ITR 135, the Hon'ble Kerala High Court held that the land ceases to be agricultural land when the assessee agrees to sell the same for use as house sites. The Hon'ble Supreme Court in the case of Sarifabibi Mohmed Ibrahim and Others v. Commissioner of Income-tax (1993) 204 ITR 631, held all these factors must be cumulatively considered. So also in the case of Gemini Pictures (supra). 29. The learned DR invited our attention to page 10 and 11 of the assessee's paper book dt.20.2.95 i.e., order of the Addl.Deputy Commissioner, Ramanagaram, particularly the conditions 8 and 9 which read as under : (8) It may be construed that this converted land must be utilized for the purpose permission has been accorded within two years. (9) This order is issued as per the written agreement of the individual dt.27.7.94 and the individual is covered by agreement terms. In the event if the individual violates the terms of agreement the government is at liberty to initiate action against such indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not changed at the time of sale of the land by assessee. This fact is evident from the fact that the land is mentioned by survey number and not the khata number, in the sale deed. The survey numbers is used for agricultural land and revenue khata number is used for nonagricultural land. On the sale date, lands are identified as 'survey numbers' and not 'khata numbers' which leads to an irresistible conclusion that in government records the land remained as agricultural land. The decision of the Supreme Court in the case of Officer-in-charge, Court of Wards (105 ITR 133) (supra) laid down parameters as to what is to be considered as agricultural land. The assessee does not fall into the broad parameters in view of the fact that though the land was converted in 1995, 1999 it was not put to use for the intended purpose within the specified period of two years from the date of conversion. Agricultural land regained the character of agricultural land in 1997, 2001 i.e., after two years. The taxes paid in respect of the land was levied as agricultural land and not as non-agricultural land. This is evidenced by phani extracts in respect of these lands which show that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in, or (b) no mortgage of any land or interest therein, in which the possession of the mortgaged property is delivered to the mortgagee, shall be lawful in favour of a person. (i) who is not an agriculturist, or; (ii) .. By virtue of amendment brought to the section w.e.f.25.11.1980 the word 'valid' was changed to 'lawful'. In other words, prior to the amendment, the transfer to non-agriculturist was not valid, whereas after the amendment, the transfer is valid, but sale is unlawful. The intended purpose of the above change is that the transfer is no longer invalid but the person who violates the sale has to face the consequence since it is unlawful. Again, coming to section 84, it deals with the provisions for cultivation of uncultivated lands, which reads as under : Section 84: Uncultivated land may be required to be cultivated.-- Where the Assistant Commissioner having jurisdiction over any area in which any land is situated is satisfied that any land within such area has remained uncultivated for a period of not less than two consecutive years without sufficient cause, he may be notice served upon the land owner and any other person entitled to be or in possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and not the Khata numbers. Another evidence produced by the assessee to show that the agricultural character of the land had not changed is the certificate issued by the village accountant in all the above assessees' case to the effect that crops were grown in the lands in question during the years under appeal. This will lead to no different conclusion either in assessee's favour or of revenue. This alone cannot lead to a conclusion in favour of neither of the parties. The next objection of the revenue is that the certificates issued by the village accountant were randomly issued without any physical verification by him. This general and evasive argument of the DR cannot be accepted, in the absence of any proof that the officer in-charge has not verified the area physically. The material available in the hands of the assessee is enough to show the nature of the land prima facie at the time of the sale and not the use by the subsequent purchaser. In the instant case, the above facts prima facie leads to the conclusion that the character of the agricultural land has not been lost. It is true the assessee had no case that the entire land was used for agricultural activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r growing paddy during the Assessment Year 1941-42 and 1942-43. The Tribunal held in the absence of any evidence to establish that the land was agricultural, the Hon'ble High Court held that this is a reasonable conclusion because paddy had been grown on the land said land in 1941-42 and 1942-43 and because it ignored the Tahsildar's certificate which indicated that the said land was agricultural land till the year 1966. Coming to the instant case, assessee's claim that the assessee was using the land for agricultural purposes is without any evidence as to how much the assessee earned from agricultural activity and related expenses. However, assessee has produced certificate from the competent authorities that during these years assessee had used the land for growing ragi. In the absence of contrary evidence, the evidence adduced by the assessee coupled with the Village Accountant's certificate, we have to come to a reasonable presumption that the assessee's assertion that the land was used for some kind of agricultural activity, is to be accepted. 36. Coming to the decision relied by the learned DR in the case of Commissioner of Income-tax v. Shiv Chand Satnam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser which has to be seen for purposes of exemption from Wealth-tax. If there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be agricultural land for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence, the Hon'ble Supreme Court held. Coming to the instant case of the assessee, it is not disputed that in the revenue records, the entry is not changed, it continues as agricultural land. According to the revenue, the intention and purpose of the sale is for the use of Tibetan Childrens' Village for the setting up of educational institutions and other related purposes. According to the assessee, the land in his hands had retained the agricultural character till the date of sale, for the reason that the assessee was doing agricultural activity. We have hereinabove in para 34 mentioned that the department had estimated the agricultural income at Rs. 53 lakhs for 2004-05 and estimated the agricultural income of the group at Rs. 56 lakhs. Therefore, it is difficult to come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original character of the land, i.e., agricultural nature, would be restored. Then the assessee or the subsequent purchased has to pay penalty and make a further application to obtain permission to revive the land for intended purpose. The assessee has not done this even according to the revenue. This was done by the subsequent purchaser i.e., Tibetan Childrens' Village, which compels to conclude that what the assessee held at the time of sale was agricultural land. It is true the facts is on border line, but the evidence produced before us in the form of RTC showing agricultural income etc., is in assessee's favour. Secondly, the Hon'ble Gujarat High Court considered the land revenue paid was for agricultural use of the land. In the instant case of the assessee also what was paid by the assessee was agricultural revenue. The non-agricultural revenue was paid by the subsequent purchaser after making an application for the second time to revive the nature of the land, which is evidenced by the letter dt.1.3.2005 which was written to the Secretary, Manchanayakanahally Gram Panchayat by the Tibetan Childrens' Village. In the case decided by the Hon'ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suffice to say that this finding of the Commissioner of Income-tax(A) has not been rebutted before us and no evidence has been produced before us to show that the finding of the Commissioner of Income-tax(A) is wrong. Appeal by the assessee on this ground fails and it is dismissed. 43. In the result, appeal by the assessee is allowed in part. ITA.1465/Bang/2008 - By the assessee, Shri. Dasappa - Assessment Year.2005-06 : 44. The first ground is general in nature and does not call for any specific dealing as such. 45. Coming to the second ground which is with regard to the sale of land, we have elaborately deliberated upon the issue and given our findings at paras 33 to 38 above wherein we have held that the revenue authorities were not justified in holding that the land sold by the assessee was not agricultural land and consequentially charging long-term capital gains on such sale. 46. Coming to the third ground which is against charging of interest u/s.234B, we hold that the Assessing Officer may give consequential relief after giving effect to our order. 47. In the result, appeal by the assessee is allowed. 23. In the present case, the main reason for treating the land as non-agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and also being specified as agricultural land in revenue records, transfers such agricultural land as it is, in such circumstances, such transfer cannot be considered as a transfer of capital asset or transaction relating to sale of land was not an adventure in nature of trade so as to tax income arising out of this transaction as business income. 27. In the present case, the land sold by the assessee was classified as agricultural land in the revenue records. The RTC filed by the assessee before us shows that the assessee raised crops of Ragi and Paddy in certain portion and other portion was temporarily kept idle on account of certain difficulties. Being so, the status of the land therefore remained as agricultural land since mandatory condition stipulated in the conversion order is not complied with and on this count, the CIT(Appeals) was not correct in holding that the land which is subject matter of sale is not agricultural land on the reason that the land was converted for non-agricultural purposes. In view of this, the sale of the impugned land is to be treated as exempt from capital gain in terms of section 2(14) r.w. sections 45 48 of the Act. Accordingly, this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
