TaxTMI 
TaxTMI 
2016 (8) TMI 81
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....assessment year 2010-11 on 30.12.2011 declaring total income of Rs..12,48,330/- including agricultural income of Rs..4,25,800/-. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 ["Act" in short] on 26.03.2013. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 18.09.2012. While finalizing the assessment proceedings, the Assessing Officer added to the income returned, an amount of Rs.. 3,04,01,161/- being profits earned/gained by the assessee on account of sale of three lands at Pudupakkam, with one of such land sold to M/s. Sai Care Pvt. Ltd. treating the same as profits arising from the purchase and sale of lands by the assessee. During the course of assessment proceedings the Assessing Officer analysed the profit and loss account, balance sheet and details of advances given by the assessee for purchase of lands and from this, the Assessing officer concluded that the assessee has been making huge investments in purchase of lands, developing them and has also been gaining huge income from sale of lands periodically which proves that the business of the assessee is purchase and sa....
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....s only based on the assumption. The ld. Counsel for the assessee has further argued that the assessee and his family have been engaged in agricultural activities for over generation and he is filing the return of income regularly and also has been returning agricultural income. She further submits that the land held by the assessee is an agricultural land and the same has been accepted by the Department in earlier assessment years. The holding of lands by the assessee and carrying on the activity of agriculture continuously on the lands without any conversion of such lands into further developments such as commercialisation do not amount to adventure in nature of trade. Merely sale of few pieces of land did not lose the basic character of agricultural lands and constitute business activity for the assessee and as such, the sale consideration of land though credited to profit and loss account do not amount to business income. Further, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A) on this issue. 5. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The question before us is whether th....
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.... be agricultural lands and therefore, the exemption claimed by the assessee under section 2(14) cannot be accepted. 6. On appeal, the ld. CIT(A) has observed that based on the facts of the case two issues have mainly arisen in this case. First issue is whether the lands under reference, which are claimed to be agricultural lands, located within the vicinity of city of Chennai constituted capital assets as defined in Sec. 2(14) of the I.T. Act or not. Second issue is whether the three instances of sale of lands by the assessee during the year constituted adventure in nature, to give rise to profits from business. The observations of the ld. CIT(A) are reproduced as under: "5.6.1 As could be made out from the facts, the appellant sold three pieces of lands totalling 2.09 acres located at Padupakkam Village, Chengalpattu Taluk of Kanchipuram District in Tamil Nadu, for a total consideration of Rs. .3,82,50,000/-, during the assessment year under reference. There were similar transactions in earlier years as well and for the A.Y. 2007-08 the issue under reference was well debated to arrive at the conclusion by the CIT(A) concerned, that the lands are agricultural. The basic conte....
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....be agricultural lands and agricultural incomes are offered from such lands, year after year, even as per the own admissions of the Assessing Officer. The disproportionate quantum of agricultural income compared to the value of the agricultural lands from which agricultural income was raised, is not an appropriate basis, to come to the conclusion that such lands are not nonagricultural lands, as made out by the AO. Further, on similar facts, the issue was decided by the CIT(A) for A.Y. 2007-08, holding that the lands held by the assessee, are agricultural lands. 5.6.3 On similar facts, where high valued lands located at Shamirpet, in the vicinity of Hyderabad, purchased on in year 1998 for Rs. 27.68 lakhs, were sold for a consideration of Rs. 135.00 lakhs in 2006, was in held to be agricultural land, by ITAT, 'A' Bench, Hyderabad in the case of Shri Tulsidas, L/R Late Smt. K. Renuka Devi of Secunderabad Vs ITO, (ITA No. 93/Hyd/08), where in the ITAT had referred to various decisions of High Courts and Supreme Court, including the case of Sarifabibi Mohd Ibrahim & Others (204 ITR 631), while arriving at such conclusions. The relevant portion of the decision runs as under: ....
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....rent from being within the prescribed limits, from the Municipality/Corporation. In this case it was not the case of the AO to prove that the said lands are within the limits prescribed from the Municipal Corporation of Chennai City. The AO has not brought any evidence on record to show that the land was developed for commercial exploitation, in spite of proximity to the high way and the metro city. Thus, based on the facts of the case, it is reasonable to hold that the lands under reference are continued/remained to be agricultural lands and do not fall under the purview of definition of capital asset as per the provisions of Sec. 2(14) of the I.T. Act, during the year under reference. Accordingly, the consideration mentioned on sale of such lands do not required to be treated as capital gains. 5.7 Regarding the issue of treating the three instances of sale of land as business or adventure in trade, it may be relevant to refer to the whole set of facts of the case, rather than referring to particular instance/instances. As held by pending-case law catena of judicial decisions, there is no standard procedure to describe an activity as an adventure of business/trade or otherwise.....