TaxTMI 
TaxTMI 
2014 (5) TMI 1191
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....ricultural receipts in the returns of income filed for previous three years thereby evidencing that the land in question is not agricultural land. 4. On the facts and circumstances, the ld.CIT(A) grossly erred in not considering the fact that assessee has sold the property to a non-agriculturist for non-agricultural purpose. 5. On the facts and circumstances, the ld.CIT(A) erred in deleting addition of 10,00,000/- by not appreciating that the source of CIB is authentic. The assessee was not able to disprove that he had not received the said amount. Hence the transaction reflected in CIB should be treated as genuine and to be taxed in the hands of the assessee. 6. For these and other grounds that may be adduced at the time of hearing the order of the learned CIT(A) may be set aside and order of Assessing Officer restored." 2. In this case issue nos.1,2,3 and 4 all are interconnected, therefore, disposed by the common order. 2.1. The short facts of the case are that the DDIT(Inv), Panaji was carried out certain investigation. As per the report assessee has sold certain landed property and claimed exemption u/s. 2(14) of the Income Tax Act which the as....
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.... disputed land in year 1988 but the assessee's name in Mutation Register only in 14.08.2008 and before 14.08.2008 some another person was the owner of the property. The Assessing officer was of the view that the property was transferred on 24.07.2008 as per the sale deed entered by the assessee with the purchaser for the consideration of Rs. 1,81,50,000/- therefore, date of acquisition of the property as on 21.06.2007, the period of holding of the said asset by the assessee in the previous year under consideration is only one year. Therefore, it is short term capital gain u/s. 2(42A) and it is liable to be short term capital gains u/s. 2(42B). The Assessing Officer has also verified that the assessee has not submitted any evidence that assessee has carried out any agricultural activities on it and assessee was not having any agricultural income for last years, therefore, the Assessing Officer was of the view that assessee never utilized the land for any cultivation. The assessee acquired land on 21.06.2007 and as it is transferred to M/s. Mahalakshmi Real Estate & Investment Pvt. Ltd., Margao, on 24.07.2008 without carrying out any agricultural operation for non-agricultural purpos....
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....ed by him in the year 1988 was sold by him after almost 20 years. I have also further observed that the appellant who is aged more than 60 years was not engaged in any business activity during the year under appeal as well as during the earlier years. Hence in my opinion the transaction of sale of land during the year cannot be considered as commercial transaction. Therefore the action of the ITO in considering the profits of Rs. 1,75,13,500/- computed by him and taxing it as Income from business is totally erroneous. (iv) Further according to me the gains made on the sale of the agricultural land sold during the year by the appellant cannot be also considered as long term/short term capital gains since the ITO failed to establish in the assessment order that the agricultural land sold by the appellant is not an agricultural land. However on the other side the appellant has brought on my record sufficient evidence to establish that the agricultural land sold by him does not come within the ambit of section 2(14) of the Income Tax Act so as to consider it as a capital asset, the sale of which is liable to capital gains tax. 6.5 At the time of hearing of appeal, the....
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....emao & Joaquim Alemao reported in 331 ITR 59 more particularly the following observations made by High Court while rendering the above judgment have become guiding factors for my deciding the case of the appellant Under Section 260A of the Income Tax Act, it is not open to the High Court to interfere in the finding of the fact. The finding of fact that could be interfered only if it was arrived at by application of wrong principles of law or was perverse i.e., to say that no prudent man versed in law would come to the said finding. In our view, the finding is neither perverse nor is it arrived at by wrong application of any principle of law and it is not open for us to interfere in the possible finding of fact in an appeal under Section 260A of the Income Tax Act. The Assessing Officer has noted that the said land was entered in the revenue record as an agricultural land i.e. garden or orchard. The ITAT also held that the land was recorded in the revenue records as an agricultural land. This is not disputed by the revenue. It is however contended that the land was not actually used for agricultural in as much as no agricultural income was derived from this land and was not....
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....ve decision the land sold by any assessee retains the agricultural character till the date of the order permitting non agricultural use and could be treated as capital asset only thereafter. According to the court there is no need to bring to tax the capital gains on sale of agricultural land which was not converted into non-agricultural land till the date of sale of said land. Considering the above factual and legal position I hold that the land sold during the year is an agricultural land and hence the said land cannot be considered as capital asset by applying provisions of section 2(14) of the Income Tax Act. Consequently the ITO was in error in taxing the gains made by the appellant on sale of said agricultural land. I therefore direct the ITO to delete the addition of Rs. 1,75,13,500/- made to the returned income of the appellant." 2.2. The learned DR submitted before us that the assessee has purchased an agricultural land on 13.12.1988 by agreement of sale but the sale deed was execute on 21.06.2007. The Assessing Officer has verified Form No. I & XIV obtained from the Mamlatdar of Ponda Taluka, and it was found that the land was categorised an agricultural land ....
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....not coming within 8 kms from any notified Municipality. ii. The form I & XIV brought on records of the ITO clearly showed that the land in question was agricultural land. iii. The agricultural operations were carried out in the property till the date it was sold. iv. The several fruit bearing trees existed in the said agricultural land for a number of years. The fruits grown in the land included cashews, mangoes, jack fruits and coconuts. v. The certificate issued by the Sarpanch of Usgao Village Panchayat which was brought on the records of the ITO clearly revealed that the land sold by the appellant was agricultural land and that several fruit bearing trees existed in the property. 3.3 The sole picture which emerges from the above clarifications/ information/details/documents available on the records of the ITO is that the land sold by the appellant was an agricultural land which cannot be treated as a capital asset liable to capital gains on its sale. In this backdrop it was requisite on the part of the ITO not to tax the gain made by the appellant by selling the above land. Instead he passed an assessment order treating the above lan....
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.... considered by him as a capital asset, the sale of which is liable to capital gains tax just because the said land has not been mentioned as agricultural land in the sale deed. 3.8 As regards the next statement made by the ITO in para 5.4 of his order in respect of not bringing of certain evidences on his record by the appellant, the appellant would like to emphasize that carrying on of agricultural operations is not synonymous with the carrying on of business activity. The ITO while requiring the receipts/bills in support of agricultural expenses should have kept in mind that he is not assessing the business income of the assessee. No agriculturist would be in a position to submit the details of above nature to the tax authorities as the Income Tax Act does not require him to keep records for the purpose of generating the said details. Further it would be next to impossible for any agriculturist to make available the said details after the expiry of almost three years from the date of sale of the land. Notwithstanding the above position, the ITO cannot treat the agricultural land as non agricultural land just because the details mentioned above have not been prod....
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....ill the date of sale. In view of this registration and carrying out of the agricultural operations, the court held that the purchaser will use the land for non-agricultural purposes is not material and the sale of land will not attract capital gains tax. 3.11 Further The ITO in his assessment order passed for the year has made remarks over the of sale deed dated 2 1/06/2007 executed by the appellant with the vendor of the land. In para 5.5 of his order the ITO has charged the appellant for fabricating the sale deed by mentioning therein that he purchased the property covered by the above sale deed in 1988. According to the ITO this has been done by the appellant to claim exemption and avoid tax on capital gains which may arise on sale of the property as there in no valid reason to substantiate the facts why the formal sale deed was executed only in the year 2007 and not in the year 1988. The ITO has further stated that there is no reason why the assessee was to pay money for the disputed property without any formal sale deed in the year 1988. 3.12 In above connection the appellant would like to point out that the ITO has made the above allegations without acquaint....
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....them. The Appellant has already produced the original agreement before the CIT(Appeals). 3.15 As regards another statement of the ITO in the above para in respect of the continuation of the name of the vendor till 14/08/2008 in the mutation register, the appellant would like to clarify that the changes in mutation records are carried out only after the execution of the sale deed. In this regard the appellant would like to further submit that the ownership right can be acquired by the purchaser of the property by executing agreement of sale and by taking over the possession of the property. The changes required to be made in mutation records is simple formality to be carried out at any time for safeguarding the interest of the purchaser against the wrongful acts of any outside third party claiming rights in the concerned property. 3.16 The appellant would also like to bring on record that while making the above statement regarding the acquisition of ownership rights by the appellant by executing the agreement, the ITO completely overlooked the provisions of section 2(47) of Income Tax Act which states that the transfer in relation to capital asset includes any tran....
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....s as profits from business the ITO has ignored not only all canons of justice but also the ratios laid down by the jurisdictional Bombay High Court in the case of CIT v. Smt Debbie Alemao & Joaquim Alemao reported in 331 ITR 59 cited by the appellant in the earlier para. The ITO has overlooked the fact that the appellant has never carried out in the past any business activity of buying and selling of land. Leave aside this activity of trading in lands the appellant did not carry out any other business activity during the year under consideration or in the past many years. It is therefore not correct on the part of the ITO to consider single transaction of sale of land that too agricultural land as adventure in the nature of trade with the object of earning profit. 3.21 The only reason given by the ITO to tax the gains as business profits is that the land was held by the appellant only for a year and the same has been sold to a company carrying on real estate business. The above land holding period of one year has been wrongly computed by him from the date of execution of sale deed in the year 2007 and not as per the agreement of sale executed in the year 1988. In this conn....
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.... reported in 331 ITR 59. 3.24 The references to the above judgments were very much crucial for the ITO since the Income Tax Department in Goa comes under the jurisdiction of Bombay High Court and any decision of this court has to be mandatorily followed by the Income tax authorities in Goa. Additionally the above two cases decided by the high court pertain to the sale of agricultural lands in Goa. In these judgments the court held that the lands sold by the concerned assessees were agricultural lands on account of their complying with the tests and factors laid down by the Supreme Court for considering any land as agricultural land. The Bombay High Court in the above matters also ruled that the sales of agricultural lands made by the concerned assessees were not liable for payment of capital gains tax. 3.25 Further the appellant would also like to stress that the ratios laid down by the Bombay High Court in the above two cases squarely apply to the present case of the appellant. Considering the applicability of these judgments of the Bombay High Court to the case of the appellant as also in view of the detailed explanations given in the matter by the appellant in ....
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....n the Court and after vacating stay order the sale deed was executed. We have also verified from the sale deed which is on page 45 to 71 in paper book wherein it has mentioned on page on page 56 of the paper book that Late Dr. Manuel Francisco Dias, and his wife Mrs. Elvira Dias has entered into an agreement with the purchaser therein to sell the said property described in the Scheduled No.1 for consideration of Rs. 6,36,500/- and he has already paid full amount in the year 1988 and possession was handed over to the assessee and now only a formal deed of sale was executed. The assessee also submitted that the property was purchased by agreement to sale in 1988 thereafter said property went under litigation. The matter was in court and after vacation of stay order was issued, sale deed was executed. The Assessing Officer was of the view that the agreement of sale was not executed by the assessee but it is a fake agreement to sale. We find from the above documentary evidence that assessee has first executed the agreement of sale and when assessee has made payment by demand draft and he has given the number of demand draft and it is mentioned in the sale deed also, therefore, we are o....
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....d it is liable to be exemption under section 2(14) of the Income tax Act on capital gain. We find that the assessee has sold agricultural land and this agricultural land is situated in village Panchayat and the same was not coming within 8 kms from notified Municipality. The form No. I & XIV shows that the land in question is agricultural land. The agricultural operation were carried in the property till the date it was sold and the several fruits bearing trees were existed in the said agricultural land for a number of years, thus, it is a garden land. Therefore, we are of the view that it is not liable to be a capital gain. We find that the CIT has relied upon the decision of Bombay High Court in the case of CIT vs. Debbie Alemao (2010) 331 ITR 59 wherein the Hon'ble Jurisdictional High Court has held that when land is shown by the Govt. as agricultural land and that land is never used as non agricultural land till it was sold. The assessee is not liable for capital gain. The Hon'ble High Court has further held that the land has to be treated as agricultural land even though no such agricultural income is shown by the assessee as the assessee stated that the agricultural income re....