TaxTMI 
TaxTMI 
2011 (10) TMI 469
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....AO to tax the same as short term capital gains. While doing so, the ld.CIT(A) has miserably failed to appreciate that the impugned land being agriculture land and being outside the scope and purview of sec.2(14) of the I.T. Act, 1961, the gains on transfer of the said land are exempt from income tax. It may please be held that gains earned by the appellant from the transfer of the said land are exempt from taxation. 3. During the proceedings before us, Ld AR for the assessee filed a request for admission of an additional ground and the same read as follows. Without prejudice to the grounds 1 and 2 and by way of an alternate claim the appellant assessee submits that the deduction u/s 54 B of the Act 1961 may please be granted to the appellant while calculating the capital gains on sale of agriculture land as the appellant has purchased another agriculture land within the prescribed statutory time limit and the necessary prescribed conditions are satisfied by the appellant and all the necessary details are already available on the records of the learned Assessing Officer. 4. From the above, there are three issues namely (i) validity of the reassessment proceedings u/s 147 of....
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.... noticed that nilgiri and moong were said to have been grown during the year 2003-04. For verifying the varacity of these details, AO summoned the purchaser of the land Shri Pravin Balakrishna Chaudhary u/s 131 of the Act and recorded a statement wherein, the purchaser stated that there was no evidence of any crop grown on the said land and the land was filled with only grass at time of sale. Other revelations from the said statement include that the said land was purchased applied and obtained certificate of non agricultural (N.A.) and plotted the land into housing plots and it was never meant for cultivation. It was also stated by him that the land was developed within two month from taking possession of the same. Other enquiry by the AO involves summoning of the Talati in order to verify the genuineness of the contents of the 7/12 extracts, the assessing officer summoned the Talathi of Kandari Shivar and examined him on oath u/s 131 of the Act and a statement was recorded. During the course of examination, the Talathi stated that the remarks about the crops grown in the 7/12 extracts are generally placed after visiting the land and as per the information provided by the owner of....
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....s held by the assessee. The assessing officer relied on the following decisions. Khan Bhadur Ahmed Alladin & Sons v. CIT (1968) 68 ITR 573 (SC); Janki Ram Bahadur Ram v. CIT (1965) 57 ITR 21 (SC); G.Venkataswami & Co. v. CIT 35 ITR 594 (SC) for strengthening his decision. In the process, the AO dismissed the assessee's submission entirely. 8. Aggrieved with the above decision of the assessing officer, the assessee filed an appeal before the CIT(A). During the proceedings, assessee filed written submissions which are described in paragraph 4.5 of the impugned order. On considering the above submissions, the CIT(A) dismissed the ground of invalid assessment raised by the assessee for the reasons described in paragraph 4.9 of the impugned order of the CIT(A). Further, the CIT(A) approved the finding of the assessing officer that there was no agricultural activity on the aid piece of land. Further, on the issue whether the sale of the said land is an adventure in the nature of a trade or not, the CIT(A) gave full discussion in paragraph 5 of the impugned order and finally approved the assessing officer's contention and held that the surplus on the sale transaction of the land has....
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.... other hand, she had continued her agricultural activity. It is pertinent to note that there is no prohibition under any law, to reinvest the sale proceeds of agriculture land in purchase of new agriculture land. There is no prohibition in any law, for time being in force, that one should not invest money received in agriculture land. Under the Indian Constitution, every citizen is having fundamental rights hold/sale any property at his/her wish. i) The assessee had never had any intention to make trading in lands, as alleged by the assessing officer without bringing any evidence on record. Assessing officer merely assume and presume, as per his sweet will, that assessee indulged in sale and purchase transactions of agri. lands. However, he has not brought any evidence in this regard on record and made out the case in his favour. j) There are no other investments made by the assessee except the purchase and sale of land cited supra. k) As explained above, the conclusion dawn by the assessing officer that the assessee has not cultivated the land is not at all correct. l) The assessee has cultivated the agriculture land and shown the net agricultural income. It is duly su....
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.... the various attendant circumstances, including the conduct of the assessee and the manner in which the dealing takes place. Considering the entire facts and the circumstances of the case in totality, it is ample clear that the assessee has made the investment in the said land and there is no intention at the time of purchase of the land except to cultivate the same, as it is evidenced by 7/12 extract of record of state land revenue. On the other hand, the entire action of the assessing officer is based on the surmises or conjectures and on basis of assumption and presumption and at his sweet will without bringing any evidence on record. q) In view of the above narrated facts and in the circumstances of the case the conclusion dawn by the assessing officer is not correct all correct and tenable on fact and in law too." 10. On the other hand, Ld DR for the revenue argued vehemently stating that the assessee purchased the impugned land on 12-10-2000 and sold the same on 21-3-2003 ie AY 2003-04. Ld DR not only objected to the admission of the additional ground relating to the claim u/s 54B of the Act but also made various propositions to demonstrate that the impugned land was....
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....ee is an individual and she purchased the said land on 12-10-2000 for a sum of Rs 1.43 lakhs and sold the same for Rs.11,11,000 on 21-3-2003 ie after the gap of 28 months. Assessee earned the profit of Rs 9,68,000/- and the same was not disclosed in the return on the ground that it is not a capital asset.. The fact of reinvestment of Rs 2 lakhs out of the said profits on the other land is now raised as an additional ground before the Tribunal. The said land was never used for agricultural purpose as the assessee is not a agriculturist. As per the revenue, the said land is located in the 'residential zone' marked by the local bodies and there is no way there is a conducting any agricultural activity in the said land, which is surrounded by the residential houses. As per the revenue, the 7/12 extracts of the assessee are not dependable and in any case, such documents are inconclusive as per the judgment of the Hon'ble Apex Court in the case of Smt.Saarifabibi Mohamed Ibrahim and Others (supra). Ld DR attempted the make out that the said judgment has set certain helpful guidelines to test if some land is to be held agricultural or otherwise. Therefore, the Ld DR is of the opinion that....
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.... 6 Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent or temporary nature? The land has not been put to agricultural use as made out in the assessment order and the statements of the talati and the purchaser. It can be seen that there was only a grass pad on the land at the time of the sale/purchase. The agricultural produce mentioned in the 7/12 extract was moong and nilgiri trees. It may be noted that the Nilgiri trees take atleast 6 years to grow. It is difficult to understand how the stumps of the Nilgiri trees were not present at site. 7 Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? Never used for agricultural purposes. Not tilled or ploughed. It was never meant for agricultural operations as it can be seen from the short time of ownership....... 8 Whether the land was situate in a developed area? Whether its physical characteristics, surroundi....
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....by the Hon'ble Apex Court would help to decide the present dispute. Therefore, we proceed to analyse the above table in the light of the facts available on record before us. 15. We find that the land transferred in question is borne in the records of the revenue as agricultural in nature. Regarding the use of the land for agricultural purpose, we find there is lot of dispute. In this regard, the assessee claims that he grew moong and Niligiri. Whereas the vendee of the land gives a statement that he purchased the free of any such crops or stumps of the crops/trees. Talati's statement does not help the assessee too. Further, assessee fails to meet the DR's argument that how the niligiri stumps are not seen by the Vendee, when he purchased the land. Assessee failed to provide any direct evidence say purchase/labour bills in support of the purchase of seed/seedlings, fertilizers, pesticides, labour bills etc on one side or sale bills in support of the earning of the net agricultural income of Rs 15,000/- on the other. It is a settled legal proposition that, when the claim of exemption/deduction is made, the onus is on the assessee to demonstrate the genuineness of such claim. Consi....
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....ng the contents in item 13 of the table relating to, - '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?".....,- we have our reservation on this issue and in our opinion, the said land cannot be purchased by an agriculturist and there it is against the assessee. The reason for this opinion include (i) the land is worth Rs 11.11 lakhs; (ii) the agricultural produce is worth few thousands ie 15,000/- as claimed in the return; (iii) the land is not fit for agriculture as view of the difficulties and unsuitability out lined by the assessee in his reply reproduced in paragraph 9(g) above. g). ...... The said land was sold not with intention to make profit but it had become inconvenient and difficult to carry out the agriculture activities in the said area due to uncongenial circumstances prevailing in that area. 16. The above statement of the assessee, although made in the context of informing the assessee's intention behind the sale of the impugned land, informs the prevailing ....
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....and the intention and conduct of the assessee to exploit such potential, were considered by the Apex court while designating the same as an non agricultural land and decided the case in favour of the revenue. On perusal of the said judgment, in our opinion, potential of the property ie location based or otherwise, intention and conduct of the land owner in dealing with such potential filled property, end use of the said property are vital facts to be considered for adjudicating the issue under consideration. The following extracts from the held portion of the said Judgment ie Smt.Saarifabibi Mohamed Ibrahim and Others (supra) are closely relevant and the same are extracted as under: "the land was situated within the municipal limits ...one km from the Surat Railway station; the land was not being cultivated (four years) until it was sold..; the appellant had entered into an agreement of sale with a housing cooperative society to sell the said land for an avowed non agricultural purpose;, namely, construction of house; they had applied... for March 1969 (sold in May 1969) for permission to sell the land for non agricultural purposes ...and obtained permission in April 69; land wa....
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....essee to prove with any other corroborative evidence about the genuineness of the contents of the 7/12 extracts. Generally the 7/12 extracts is an accepted evidence regarding the agricultural operations. But in the present case, the A.O. made enquiries and found that the entries were not based on actual circumstances. Therefore, the 7/12 extracts cannot be accepted as evidence in this particular case in the absence of any other evidence to prove the contention that there was actual cultivation. 4.10 Whether a particular piece of land is an agricultural land and cultivated or otherwise is a question of fact. No help of any judicial decision is required to prove this because each case is different with peculiar facts. Therefore, I am unable to take help of any decision relied on either by the assessee or by the A.O. The assessee also tried to argue that the land was classified as an agricultural land and the land revenue was paid by her. The question to be considered here is whether the agricultural operations were actually carried out on the said piece of land. The payment of land revenue cannot be taken to prove that there was an agricultural operation because the land revenue i....
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....t happened in this case and the assessee sold the land in view of the good price due to boom in the real estate sector. The proximity of the said piece of land to the municipal limits of Bhusawal can be one of the considerations by the assessee for making the said investment and such consideration cannot be equated with an intention o resale for profit. The assessee also held the said piece of land for a considerable period, i.e. 27 months and this is sufficient enough to hold as an investment. The conversion of the land for commercial purpose by the purchaser was not within the control of the assessee hence no adverse inference can be drawn. The assessee is not in the business of real estate and has not converted the land for commercial use. Thus, the factors considered by the A.O. for holding the said sale transaction as an adventure in the nature of trade are not justifiable. Considering the overall facts of the case, I am of the opinion that the assessee purchased the land as an investment and held it for a considerable period and then sold the same. Therefore, this transaction would result into capital gains. Therefore, the A.O s directed to consider the surplus on the sale tr....
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....e land purchased for Rs 1.43 lakhs was sold for Rs 11.11 lakhs in a span of 27 months. Normally, such phenomenal profits are possible with non agricultural land deals and it is one of the factors which goes against the assessee within the meaning of cited the Supreme Court's judgment. Further, Apex court has dismissed the assessee's arguments that the land records bear witness in her favour as other factors weigh more and in favour of the revenue. Therefore, the events that took place in and around the timing of the impugned sale transaction are relevant for deciding the issue under consideration. Intention of the assessee is decipherable from such events. Potential of the land for plotting for housing purpose and phenomenal price of Rs11.11 lakhs earned by the assessee also are the relevant indicators. In any case, the land is not congenial for agricultural use as admitted by the assessee. Thus, the ratio of the said apex court's judgment is applicable mutatis mutandis to the present dispute. 20. Unlike in the case of Smt Debbie Alemao supra, where there is standing coconut trees are undisputedly existing at the time of the sale, in the instant case, there are no such symptomat....
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....arious facts and the decisions were brought to our attention. In the process, he relied heavily on the decision of the Bombay High Court in the case of P.S.Joshi 189 Taxman Page 1, Supreme Court's decision in the case of Kelvinator of India 187 Taxman 312 (SC) apart from others. Further, he referred to the provisions of sec.157 of the Maharashtra land Revenue Code 1966 and sec.114 of the Indian Evidence act, 1872 to advance his case. 24. On the other hand, the learned departmental representative argued vehemently stating that the re-assessment proceedings are legally valid for many reasons. They are: (i) this is a case of processing the return u/s 143(1)(a) and there no occasion for formation of an opinion on any issue in general or on the issue which is subject matter of re-assessment. Therefore, it is not a case of change of opinion. He relied on the Supreme Court's judgment in the case of Rajesh Jhaveri Stock Brokers Pvt.Ltd. 291 ITR 500 (SC); (ii) Further, referring to the reasons recorded by the assessing officer, the learned departmental representative was of the opinion that at the relevant point of time, the assessing officer, who is in local know of the geography of the....
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....rrying on the business of purchase and sale of agricultural land and therefore the activity is an adventure in the nature of trade or business and income from the same is taxable as business income." In response to the above reasons of the AO for issue of notice u/s 148 of the Act, the assessee filed the following objection to the said issue of the notice. The points raised by the assessee are summarized as below. 1) the land bearing Survey No.145/3, Kandari was purchased in 2000-01 and is classified as agricultural land. She had been using the aid land for cultivation and the income derived there from ha been included in her return of income. The said land has been acquired and held as an investment and not as any stock in trade. 2) that she have never carried out any trade or adventure n the nature of trade in properties. 3) that the said agricultural land was sold as capital investment and not as a stock in trade. 4) that the sale of agricultural land in question was an isolated transaction of purchase and sale of property. 5) that the character of the land remained the same from the date of purchase to the date of sale. 6) that the land was sold not with th....
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....s case is different. She has purchased and sold a land and has again purchased another land on the very same day of sale of the earlier land held by her. The facts of the cases quoted by assessee area different from that of her case and therefore those decisions are not applicable in her case..................................................... In view of the above, the AO rejected the objections raised by the assessee against the assumption of jurisdiction. As per the AO, even an isolated transaction can be an adventure in the nature of trade and relied on the judgment of the Apex Court in the case of G.Venkataswami Naidu & Co. v. CIT 35 ITR 594 (SC). 26. To summarise, the case of the assessee is that the assessee is an agriculturist and the land in question is agricultural in nature and earned agricultural income of Rs 15,000/- and the sale transaction is not an adventure in the nature of trade as proposed by the AO. On the other hand, the case of the revenue is that the assessee is not an agriculturist and land in question was not used for agricultural purposes. Apex court's decision supports the views of AO. Therefore, the AO rightly assumed jurisdiction u/s 147 of Act. ....
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....Reason to believe" - A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise." In substance what it means is that a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference, but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. These two requirements i.e., "knowledge" and "reason to believe" have to be deduction from various circumstances in the case." 28. From the Supreme Court decision in the case of Joti Parshad (supra) that the "suspicion" or "doubt" or "mere seeing" cannot be equated to "believing". From the explanation given in sec. 26 of the IPC, "sufficient cause to believe" is an essential ingredient of "reason to believe". The circumstances also assume the importance in this matter of formation of reason to believe as per the above judgment of the Supreme Court of India. T....