TaxTMI 
TaxTMI 
2014 (10) TMI 291
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....agricultural lands and accordingly, the exemption claimed under capital gains was negatived and the amount of profit was brought to tax as business income. This order of Assessing Officer was ultimately upheld by the ITAT vide order dated 31.08.2012 in ITA.No.287/Hyd/2011 in assessee's own case. Consequent to that, A.O. levied penalty at Rs. 23,22,615 for furnishing inaccurate particulars of income vide order dated 27.03.2012. 3. Before the Ld. CIT(A) assessee inter alia contended that assessee was under bona-fide impression that the income earned is agricultural income. It further supported that all the relevant facts and details have been placed on record and nothing has been discovered by the A.O. from any outside source. It was also further stated that assessee has purchased agricultural lands long back, shown them as assets and by sale of agricultural lands capital gains is exempt under provisions of section 2(14). It was further submitted that A.O. have accepted the lease income of agricultural lands and further no wealth tax was levied in earlier years accepting assessee's agricultural holdings as such. Assessee also furnished a certificate from Tahsildar, Shameerpet Mand....
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....es and giving of loans and advances to give effect and implement the said objects." 5.4 It is very clear from above that the appellant company was formed with the sole purpose of conducting business in real estate. It is also worth noting that the appellant company was never an agriculturist. In other words, this company had neither any knowledge nor had ever conducted any agricultural operations. After formation of the company, the appellant started to purchase land, primarily agricultural land. The honourable ITAT clearly held that the agricultural land so purchased was never subjected to any form of cultivation by the appellant. There was also no evidence to the argument of the appellant that the agricultural lands had been given on lease to agriculturists. Such an argument was found to be false by the honourable ITAT. Huge lands falling in three different survey numbers were sold at Turakpally and Kompally, the latter having been purchased only one year earlier. Even during earlier years the appellant had been continuously purchasing lands at different regions and also selling them. The appellant neither possessed the expertise nor the wherewithal to conduct any agricultural....
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....mpany with the main object to deal with in real estate. The land purchased by the assessee in the present case is subject matter of trade and it has purchased at regular intervals and it cannot be considered as investment activity of the assessee. Even after purchasing the agricultural land, the assessee cannot be said to be carrying on any agricultural operation. There were no activities connected with the land. Though the' assessee taken a plea that the land was leased for agricultural operations, the evidence brought on record does not suggest that the agricultural operation was actually carried on the said land. Though the assessee shown the land as an investment in the Balance Sheet it cannot 'change the 'character of land as stock-in-trade. The entry in the books of account is not conclusive to hold that the assessee has not dealt with in land. In our opinion, the land dealt by the assessee is a stock-in-trade. It is carrying. on business and making profit by buying and selling the land. The facts of case suggest that the assessee with a sole motive of dealing in land acquired the land and sold the same which can be nothing but adventure in the nature of trade. Fu....
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....edings. The- issues in the present year may be the same as they may have been in the earlier but still it is expected of the Assessing Officer to verify the facts on those issues and then he may follow his order in the earlier years. That too he is not bound to follow if a mistake has been committed persistently over the past number of years as was held by the Supreme Court in the case of CIT v. British Paints India Ltd. (1991) 188 ITR 44. Therefore, we are not agreeing with the contention of the assessee's counsel. 27. In the result, assessee's appeal is dismissed". 5.5. From the above discussion, it is clear that the appellant company was formed with the intention of conducting the business of real estate. It is only with this purpose that the appellant had been purchasing agricultural lands at cheaper prices and had been consistently selling these lands to make a profit. No agricultural operations of any kind were carried out on these lands and there was also no lease of these lands to anyone. In other words as discussed in the evidence above, from the very beginning the intent of the appellant was to conduct the business of real estate and that is precisely what i....
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.... Tulla Virender vs. ACIT 36 Taxmann.com 545 to submit that ITAT on similar facts in another case held that where the intention of assessee from inception was to carry on agricultural operations on land in question, gain from its sale could not be taxed as profit arising from adventure in nature of trade. Ld. Counsel also relied on the decision of Coordinate Bench in the case of Gowtham Constructions Co., vs. ITO, Ward 4(2) (2013) 39 Taxman.com 181 to submit that where assessee doing business of purchase and sale of lands/developing real estate by purchasing agricultural land and reflect the same in the balance sheet as fixed asset and later on sold the said land in profit, merely because land was sold on profit it could not be said that income arising from sale of land was taxable nor profit arising from adventure in nature of trade. Relying on the above decisions it was the contention that the Tribunal has differed from the existing case law on the similar facts to hold that assessee has indulged in adventure in nature of trade and thereby, it is only change of opinion but not furnishing of 'in accurate particulars'. Ld. Counsel relied on the decision of Hon'ble Punjab & Haryana H....
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...., payment of land revenue and leasing of the land for agricultural purposes are in favour of the assessee. However, the assessee is a private limited company having the main object of dealing in real estate has not actually carried on the agricultural operations in the said land and even if it is accepted that the land was leased for agricultural purposes, it is only a stop gap arrangement and the evidence brought on record is not enough to show there was actual agricultural operation. The land was sold for nonagricultural purposes at heavy price. The intention of the assessee was to deal in the land and earn profit. Being so, in our opinion, the facts and circumstances brought on record clearly demonstrate that the assessee is a dealer in real estate and carried on the business of buying and selling of land and income arising out of this activity is nothing but business income and it has to be taxed accordingly. 26. The learned AR made one more argument that in earlier year the Assessing Officer accepted the income arising out of sale of such land as income from agriculture and consistency is to be followed for this assessment year also. More so, in the Wealth-tax returns for A....
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.... authorities, there was no evidence brought on record to show that the certificates produced by assessee were bogus. Admittedly, certificate produced by the assessee is from Govt. Agency, who has also given a certificate that he is a competent authority to issue certificate. This being the position, the department has not brought on record anything to show that the authority who has given a certificate is not competent to issue the certificate. The A.O. procured certificates from different authorities and he has never questioned the authority who has issued a certificate with SDE, Maintenance, Sub Division, PWD (B&R), Sonepat, where he stated that the distance of the property from the municipal limit is beyond 8 kms. was not examined. The AO never questioned the authority who has given the certificate. It was held in the case of CIT v. Khoday Easwarsa and Sons 83 ITR 369 (SC) that penalty proceedings being penal in character, the Revenue itself has to establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the department must have before it before levying penalty cogent material or evid....
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....ties are expected to consider the fresh material at the time of penalty proceedings. The AO cannot proceed penalty proceedings merely on the basis of findings given in the assessment proceedings. The assessee's inability to explain the discrepancies cannot be the reason for levy of penalty. The material already gathered or inference already drawn by the AO did not find any further support from further enquiries in the penalty proceedings. On the other hand, the assessee was able to produce certificate from the authority who has issued a certificate that the distance of the impugned property is more than 8 KM from the municipal limit of Sonepat and the District Town Planner is a competent authority to issue a certificate. The AO has never alleged in the assessment order of penalty order that the Govt. authority who has issued a certificate to the assessee is not a competent authority to issue the certificate or the certificate is bogus or it was obtained through unfair means. Being so, in our opinion, penalty cannot be levied. The AO treated the penalty proceedings as mere continuance of the assessment proceedings and did not bother to make its penalty proceedings as self contai....
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....s. 7.3. Hon'ble Apex Court in the case of CIT vs. Reliance Petro Products (2010) 322 ITR 158 has held as under : "We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars". 7.4. Hon'ble Punjab & Haryana High Court in the case of Sidhartha Enterprises 322 ITR 82 has held as under : "The judgment of the Supreme Court in Union of India vs. Dharamendra Textile Processors & Ors. (2008) 219 CTR (SC) 617 : (2008) 306 ITR 277 (SC) cannot be read as laying down that in....