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TMI Blog2022 (4) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... municipal limits - only reason by AO to treating the income generated from sale of land is that the assessee has been continuously buying and selling the agricultural land and on this count, he treated the income generated on sale of these lands as business income of the assessee - HELD THAT:- There is no dispute that the assessees acquired agricultural land. There is also no dispute that there was agricultural operation in this land before sale of this land. AO was of the opinion that the amount received on sale of this agricultural property is nothing but on account of adventure in the nature of trade and the same was brought into income from business. In this case, the assessee held the land always as investment and not at all converted into stock- in-trade. The character of the land in the hands of the assessees has not changed. There is no material on record to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the assessee as adventure in the nature of trade. The land was sold by the assessees in acreage and not by making plots. Whether a land is agricultural la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. Accordingly, the ground of appeal raised by the assessee is allowed. - Shri Chandra Poojari, AM Smt. Beena Pillai, JM For the Appellant : Shri C.Ramesh, CA For the Respondent : Dr.Manjunath Karkaihalli, CIT-DR ORDER PER CHANDRA POOJARI, A.M: These five appeals by the assessee directed against the order of the CIT(A)-11, Bengaluru for the AYs.2010-11 to 2014-15. Since, certain issues in these appeals are common, these appeals are clubbed together and disposed-of, by way of this common o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income u/s.153A on 23-07-2016 for the AY.2014-15, declaring income of Rs. 2,66,010/-. Latter the AO issued notice u/s.143(2), dt.26-08-2016 independently and separately for each assessment year so as to frame assessment u/s.143(3) r.w.s.153A of the Act. 5. The AR submitted that the assessee could not find the notice issued u/s.153A dt 10.07.2015 while filing Appeal before Hon'ble ITAT. However later the Appellant has found the same. Hence, the assessee did not press this ground and accordingly, this ground is dismissed as not pressed. 6. Ground No.2:The proceedings u/s.153A are bad in law as there were no incriminating materials found during the course of search and the Assessment was completed purely on the basis of change of opinion and not on the search materials (AY.2011-12). The Appellant's case was subjected to an action u/s 153A of the Act in connection with search proceedings in the group case of Sri K Muniraju and others. Accordingly the search was conducted on Appellant u/s.132 on 09.10.2014. During the course of search proceeding. it has found some loose sheets, sale deeds, sale Agreements documents relating to land transaction and were seized from Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his there are no other tangible material found during the course of search. 6.3. Hence, the order passed u/s.153A rws 143(3) is bad in law and not as per provisions of section of the Act and prays before Hon'ble Tribunal squash the order of A.O. 6.4. In this regard the Ld.AR relied on the following decisions: 1. CIT Vs Kabul Chawla, [2016] 380 ITR 573 (Del) (Del - HC) where it is held that On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 2. Rajat Minerals Pvt. Ltd. Vs DCIT (ITAT Ranchi), 1.T(SS).A.Nos.41 to 47/Ran/2019 order dt 20/01/2020, where it is held that AO were clearly beyond the scope of authority vested under s.153A owing to absence of any incriminating material or evidence deduced as a result of search in so far as completed assessments were concerned and the same was not permissible in law. 3. ACIT Vs Moon Beverages Ltd. ITA Nos.115 to 118/Del/2018, AY 2009-10 to 2012-13 dt 27.11.2020 (Del -Trib) 4. CIT Vs M/s. SKS Ispat Power Limited (Bombay High Court) 5. Commissioner of Income Tax v. Gurinder Singh Bawa reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30/05/2012 by G.N. Venugopal to Rupen Patel 22 to 29 6 Deed for Declaration on 08/06/2011 by Munivenkatappa, Gowramma,Srinivas and others 30 to 36 7 Deed of Dissolution of Partnership on 31/01/2011 by Rajanna to G.N.Venugopal and B. Thimmegowda 37 to 39 Absolute Sale Deed on 20/09/2007 by Y.C.Sathish Kumar to Meenesh Hemalatha Dhamini 40 to 46 9 Partnership Deed on 25/09/2007 by Rajanna to G.N.Venugopal and B.Thimmegowda 47 to 51 10 Memorandum of,Understanding on 13/03/2007 by G.N.Venugopal to EXPAT Properties (I)Itd 52 to 56 Full and Final Settlement Agreement on 29/08/2008 by Rekha Venugopal to 11 Akkayamma, Manjula, Muniyappa, Lakshmmamma and others 57 to 76 12 Agreement of sale on 15/11/2010 by Ramakka, M. Prakash, Siddanna and others to G.N.Venugopal 77 to 86 13 PAYMENT RECEIPT CONFIRMATION DT 21/09/2011 by G.N.Venugopal to M.Siddanna FOR Rs.10 lakhs 87 to 89 14 Payment details 90 15 Payment details 91 16 Payment details 92 17 Y C Sathish Kumar - List of sites 93 18 Y C Sathish Kumar - List of sites 94 19 Y C Sathish Kumar - List of sites 95 20 Payment details 96 '1 Payment details 97 72 Payment details 98 23 Payment details 99 24 Deposit Slip on 31/07/2013, Favouring to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the landed property as follows: A.Y. Net sale consideration Rs. 2010-11 4,69,580 2011-12 27,33,930 2012-13 19,50,000 2013-14 2,42,88,040 2014-15 97,70,750 8.1. The AO in these assessment years, treated the income declared by the assessee as agricultural income on sale of landed property as business income of the assessee. 8.2. For the sake of brevity, we consider the facts in AY.2011-12 herein. 8.3. During the year, the Appellant has sold Agricultural lands situated at Bychapura Village and arrived and arrived net income from sale of Agricultural land is Rs. 27,33,930/-. This net income was shown under exempt income in the Return of Income filed u/s.139(4) and also Return filed u/s.153A. This Agricultural lands were purchased during 2006 and 2007 to do some Agricultural activities. These lands were very small and that it did not yield any income due to shortage of water. Hence the Appellant has decided to keep as investment and sell the same. Accordingly, the Appellant has identified the prospective buyer and sold the same during the year. Accordingly, the Appellant has arrived net gain of Rs. 27,33,930/- on sale of Agricultural land and the same is shown as exempt income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agricultural land and also not doubted about the nature of the lands sold. and he has not established that the said land is not a agricultural land and it is used for business purposes. 8.9. Further the A.O. has failed to appreciate the fact that during the assessment proceedings u/s.143(3) in the AYs 2011-12 and 2012-13, the A.O. has concluded and accepted the sale of Agricultural land and treated as exemption income declared by Assessee in the Return of Income filed. However there was no discussion in the said order through it the details of sale of Agricultural land was available with A.O. as it was shown in ITR 2 filed u/s.139(4). The very same department has accepted the financial statement and investment in lands as Fixed Assets. Now, the department has stated that the lands for the aforesaid years have to treated as stock in trade is totally arbitrary to the stand taken for subsequent years. 8.10. In view of the above, the Appellant was not doing any business activities and entire land held as investment and it is to be considered as Agricultural income on sale of Agricultural land, which is exempt from Tax. 8.11. In this regard, the assessee relies on the following decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of profit also cannot be a ground to treat the profit earned by the assessee on sale of agriculture land as business income. 8.12. Further the A.O. has failed to appreciate the fact that during the assessment proceedings u/s.143(3) in the AYs 2011-12 and 2012-13, the A.O. has concluded that the sale of Agricultural land was exempt income as declared by Assessee in the Return of Income filed. However, there was no discussion in the said order through it the details of sale of Agricultural land was available with A.O. as it was shown in ITR 2 filed u/s.139(4). 8.13. The Ld.DR submitted that there was no evidence to suggest that the impugned land was used for the purpose of agriculture in these assessment years. The land was kept idle and the assessee sold these lands at a very high and exorbitant price. The consideration received by the assessee itself show that land was not agricultural land. The assessee since in business of buying and selling of land in other words, assessee is in real estate business, the income generated from buying and selling of land to be treated as business income of the assessee. Accordingly, income generated from sale of land by continuously purchasin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case the treatment given by the assessee for this asset clearly indicate that the intention of the assessee is to hold the same as capital asset to have good returns from the same. (ii) The assessee held land for considerable time. The asset acquired was agriculture land as per the evidence brought on record. Thus, the assessee held the agriculture land for more than 3 years. During that period the assessee carried on regular agricultural operations in the land by leasing for agricultural purpose. In the light of favourable market conditions the assessee thought it good to sell the asset to realize a good amount. Realization of better price in a booming market cannot be considered as an adventure in trade. (iii)The expression adventure in the nature of trade occurs in the definition of business under section 2(13) but the expression adventure in the nature of trade has not been defined in the Act. It may be pertinent to mention here that a specific transaction partake the character of business or an adventure in the nature of trade or realization of capital asset or a mere conversion of asset has to be decided depending upon facts of each case. (iv) In deciding as to whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute that there was agricultural operation in this land before sale of this land. 9.4. The Assessing Officer was of the opinion that the amount received on sale of this agricultural property is nothing but on account of adventure in the nature of trade and the same was brought into income from business. In this case, the assessee held the land always as investment and not at all converted into stock- in-trade. The character of the land in the hands of the assessees has not changed. There is no material on record to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the assessee as adventure in the nature of trade. The land was sold by the assessees in acreage and not by making plots. 9.5. Now the question as to whether a land is agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. We have to answer the question on a consideration of all of them, a process of evaluation and the inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or intended to use it for agricultural purposes? 8. Whether the land was situated in a developed area? Whether its physical characteristics, surrounding situation and use of the land in the adjoining area were such as would indicate that the land was agricultural? 9. Whether the land itself was developed by plotting and providing roads and other facilities? 10. Whether there were any previous sales of portions of the land for non-agricultural use? 11. Whether permission under s. 63 of the Bombay Tenancy and Agricultural Land Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such nonagriculturists was for non-agricultural or agricultural user? 12. Whether the land was sold on yardage or on acreage basis? 13. Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? 9.8. A reference could be made to the case of CWT v. Officer- incharge (Court of wards) [1976] 105 ITR 133(SC) wherein the Constitution Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45 ITR 208/12 Taxman 201 held that the Supreme Court had pointed out that the entries raised only a rebuttable presumption and some evidence would, therefore, have to be led before taxing authorities on the question of intended user of the land under consideration before the presumption could be rebutted. The Court further held that the Supreme Court had clearly pointed out that the burden to rebut the presumption would be on the Revenue. The Bombay High Court held that the ratio of the decision of the Supreme Court was that what is to be determined is the character of the land according to the purpose for which it was meant or set apart and can be used. It is, therefore, obvious that the assessee had abundantly proved that the subject land sold by them was agricultural land not only as classified in the Revenue records, but also it was subjected to the payment of land revenue and that it was actually and ordinarily used for agricultural purpose at the relevant time. 9.11. We may also refer to the case of CIT v. Manilal Somnath [1977] 106 ITR 917(Guj.), wherein the Division Bench of the Gujarat High Court observed that the potential non- agricultural value of the land for which a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural purposes was based on cogent and relevant material. The Revenue record supported the claim. Even the records of the IT Department showed that the assessee had declared agricultural income from this land in her returns for the preceding two years. The land being located in commercial area or the land having been partially utilised for nonagricultural purposes or that the vendees had also purchased it for nonagricultural purposes, were totally irrelevant consideration for the purposes of application of s. 54B. 10. It is seen from the aforesaid decision that the agricultural land sold by the assessee with an intent to purchase another land within two years had also been permitted to claim exemption under s. 54B of the IT Act, 1961. In the instant case, even though there was no sale as such, the assessee owned agricultural land within the limits of Tirunelveli Corporation and he had not put up any construction thereon, the assessee is entitled to claim exemption from the WT Act for the assessment of wealth-tax. That the land in question is adjacent to the hospital is totally irrelevant. 9.14. Adverting to the facts of the present case, the land in question is classified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this very reason, we find the conclusion arrived at by the Tribunal is nevertheless the correct conclusion. 9.16. Further the word Capital Asset is defined in Section 2(14) to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include (iii) agricultural land in India, not being land situated (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 9.17. It is very clear from the above that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to the boom in real estate market came into picture at a later stage, the assessee has sold the land. Merely because of the fact that the land was sold for profit, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade. 9.19. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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