TaxTMI 
TaxTMI 
2022 (4) TMI 1608
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....as the said order is passed without considering the material on record and the written submissions filed on 16.03.2018. 1,90,86,666/- 3. The Hon'ble Commissioner of Income Tax (Appeals)-11 ought to have held that the assumption of jurisdiction u/s 153C of the Income Tax Act was bad in law. 4. The Hon'ble Commissioner of Income Tax (Appeals)-11 ought to have held that there being no recording of satisfaction as contemplated u/s 153C of the Income Tax Act, the issue of Notice and the subsequent passing of the impugned assessment order are bad in law. 5. Without prejudice the Hon'ble Commissioner of Income Tax (Appeals)-11 ought to have appreciated that the appellant had sold agricultural lands, therefore, the provisions of capital gains tax are not attracted. 6. Alternatively and without prejudice the Hon'ble Commissioner of Income Tax (Appeals)-11 ought to have held that in the absence of registered deed of conveyance no right, title or interest in the immovable property can be transferred attracting the provisions of the Income Tax Act. 7. The Hon'ble Commissioner of Income Tax (Appeals)-11....
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....d as agricultural lands in the revenue records and no development activities were carried on either by the Appellant or its previous owners till the time of sale. In fact, no development activities are undertaken by the current owners i.e. SPRD till date. It was submitted that the additions made by the LAO are based on the note annexed to the return of income and do not emanate from the documents seized during search proceedings. The additions under section 153C are based on materials which do not have a bearing on the determination of the total income of the Appellant. As such, the proceedings under section 153C are bad in law. 7. It was further submitted that the additions are not arising out of any material seized during the search. An assessment can be made under section 153C of the Act only if there is a satisfaction that the books of account, documents or assets seized or requisitioned have a bearing on the determination of total income of the other person for 6 block assessment years. The additions in respect of the agricultural lands at Yerehalli, Kanchigaranahalli and Manchanayakanhalli do not emerge from the incriminating material seized during the course of search. Th....
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....otice u/s. 153C was issued to the assessee on 23.7.2013. Assessee filed return on 19.12.2013 declaring Rs. 100/- being income from other sources and agricultural income of Rs. 17,500/- on 19.12.2013 for AY 2008-09 and Rs. 201/- being income from other sources and agricultural income of Rs. 17,500/- for AY 2009-10. The assessee has not filed returns of income u/s. 139(1) for these two assessment years. Along with returns filed in response to notice u/s. 153C of the Act for these years, a statement of long term capital gain was filed as follows:- AY 2008-09 Particulars Sales Price/Year Indexed cost/year Transfer expenses Indexed cost of improve -ment Exempt Capital gain Sale of agricultural land 19500000 (1/2/2018) 571635 (6/8/1993) 0 261650 18666715 0 Total 19500000 571635 0 261650 18666715 0 Sale of Agricultural land - Cost : 253138*(551/244) = 5,71,635 Cost of improvement: 1,84,722*(551/389) = 2,61,650 Exempt income : 1,95,00,000 AY 2009-10 Particulars Sales Price/ Year Indexed cost/year Transfer expenses Indexed cost of improvement Exempt Capital gain ....
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.... of Devrakagganahalli village, Maralwadi Hobli,Kanakapura Taluk, converted from agricultural to Nonagricultural residential purpose vide Official Memorandum of Conversion bearing No. ALN(K)SR19/2005-06 dated 21/06/2005 and bounded on the : East by Survey Nos 69 and 71.; West by Survey No 206 and 207. ; North by Survey No 74. ; South by Survey No 206 and 207. ; Item No. 6 All the piece and parcel of converted land measuring 5 Acres 17 guntas in Sy. No. 71 of Devrakagganahalli village, Maralwadi Hobli, Kanakapura Taluk, converted from agricultural to Nonagricultural residential purpose vide Official Memorandum of Conversion bearing No. ALN(K)SR1912005-06 dated 21/06/2005 and bounded on the : East by Survey Nos 23.; West by Survey No 70. ; North by Survey No 69 and 72 ; South by Survey No 206 and 207. ; Item No. 7 All the piece and parcel of converted land measuring 2 Acres in Sy. No. 22 of Devrakagganahalli village, Maralwadi Hobli, Kanakapura Taluk, converted from agricultural to Nonagricultural residential purpose vide Official Memorandum of Conversion bearing No. ALN(K)SR19/2005-06 dated 21/06/2005....
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....2-2003 1 acre 9 guntas Manchanayakanahalli 10 2003-2004 1 acre 9 guntas Manchanayakanahalli 10 2004-2005 1 acre 9 guntas Manchanayakanahalli 58/3A 2000-2001 16 guntas Manchanayakanahalli 58/3A 2001-2002 16 guntas Manchanayakanahalli 58/3A 2002-2003 16 guntas Manchanayakanahalli 58/3A 2004-2005 16 guntas Manchanayakanahalli 31 2000-2001 4 acres 10 guntas Manchanayakanahalli 31 2001-2002 4 acres 10 guntas Manchanayakanahalli 31 2004-2005 4 acres 10 guntas Manchanayakanahalli 10.7 Thus, the assessee made a plea that the said land was subject of cultivation from AY 2006-07 to 2012-13. However, the AO disputed that the income disclosed by the assessee as agricultural income is derived from the land sold by the assessee. On the other hand, it is from the land situated at Manchanayakanahalli and the land sold by the assessee was situated at Devarakaggalahalli. Further the assessee has not produced any bills and vouchers for carrying out the agricultural activities. The land was sold to GSPL for the purpose of housing project. According to the AO, the land sold by the ....
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....isions of Section 153C are inapplicable; the assessment order itself cannot be interpreted as the required satisfaction to act u/s 153C. 4. The learned Commissioner was in error in holding that the satisfaction note had been reproduced in the assessment order which is not factually correct and also in concluding that with respect to the taxed amount, fresh arguments especially legal in character on the basis of the existing records cannot be raised before him without appreciating that the first appeal proceeding are a mere continuation of the assessment proceedings and the powers of the Commissioner of Income Tax (Appeals) are co-terminous with those of the Assessing Officer. 5. Without prejudice and in the alternative even assuming without admitting that the satisfaction envisaged in Section 153C was recorded by the Learned Assessing Officer, the Hon'ble Commissioner of Income Tax (Appeals) ought to have held that such satisfaction does not meet the requirements of Section 153C. 6. The Hon'ble Commissioner of Income Tax (Appeals) was in error in holding that if the seized material is incriminating in nature, it is a ground to sustain the order ev....
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....d senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy. 20. Insofar as the judgment of the Gujarat High Court relied upon by the learned Solicitor General is concerned, we find that the High Court in that case has categorically held that it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act. This proposition of law laid down by the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as....
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....earched person. The provisions have been referred to in details in dealing with a challenge to the legality and validity of the seizure and action founded thereon. We do not find anything in this judgment which would enable us to hold that the tribunal's understanding of the said legal provision suffers from any error apparent on the face of the record. The Delhi High Court judgment, therefore, will not carry the case of the revenue any further." We, thus, do not find any merit in these appeals. 22. We now advert to the implication of the fact which has been emphasised in para 15. As pointed out in the said para, the assessment order passed by the AO covers eight Assessment Years. Assessment done in six Assessment Years is under Section 153C of the Act. Assessment order is set aside only in respect of four such Assessment Years that too on the technical ground, noted above. This objection pertaining to the four Assessment Years in question does not relate to the other two Assessment Years, namely, 2004-05 and 2005-06. Likewise, this decision has no bearing in respect of assessment done qua Assessment Year 1999-2000 as well as Assessment Year 200607. The necess....
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....tioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in subsection (1) of section 153A :" The provisions of Sec.153C of the Act, shown in bold letter and underlined as given above were substituted by the Finance (No.2) Act, 2014 w.e.f 1.10.2014 for the following words "and that Assessing Officer shall proceed against each of such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A". 10.15 The Assessments in the present case relate to the period pr....
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....rson. This is clear from the amended provisions of the law which reads thus: "and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A :" 10.16 The Kolkatta Bench of the ITAT in the case of Trishul HiTech Industries (supra) dealt with the purpose behind the aforesaid amendment and as to why it should held to be retrospective. The condition precedent for assessing or reassessing income u/s.153C is that the AO has to be satisfied that the seized material in the course of search has a bearing on determination of the total income of the other person i.e., it should be incriminating in nature. 10.17 We....
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....14, can lead to only one conclusion that the said amendment is clarificatory and therefore should be held to be retrospective in operation. 10.18 A plain reading of the amended provisions of section 153C(1) of the Act, would show that the AO is required to arrive at a satisfaction that the seized assets, books of account or documents belongs to or relates to a person other than the person was subjected to search. For arriving at such a satisfaction, it is necessary for the AO to prima facie spell out the nature of seized documents and how it belongs to or relates to the assessee. Before the Hon'ble High Court of Karnataka in the case of IBC Knowledge Park, 385 ITR 346 [Kar] the issue for consideration and adjudication was whether the Tribunal was right in holding that it was not necessary to record a satisfaction to the effect that seized material shows undisclosed income. While deciding this issue, the High Court came to the conclusion at para 50 thereof, that "the detection of seized material leading to an inference of undisclosed income is a sine qua non for invocation of section 153C of the Act". The Hon'ble Court came to the above conclusion after considering the deci....
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....tion made by AO is not based on any incriminating material found during the course of search. The addition cannot stand since there is no seized material in support of the addition made by the AO. The assessee in the return of income disclosed certain transactions as discussed in the assessment order which is reproduced in earlier part of this order and that cannot be the basis to make addition while framing assessment u/s. 143(3) r.w.s. 153C of the Act. There is no seized material found in the course of search which forms the basis for assessing income in the hands of the assessee for these two AYs. The disclosure made by the assessee in the Note annexed to the return of income filed on 19.12.2013 cannot be considered as seized material so as to induce the AO to make such an addition as undisclosed income of the assessee. 10.21 As per the provisions of section 153C of the Act, incriminating material which was seized had to pertain to the assessment year under consideration. It is an undisputed fact that documents which are seized referred to in para 10 of this order do not establish any co-relation with the additions made in these assessment years. This requirement u/s. 1....
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....date of sale. e. Even today the land is classified under agricultural land as per revenue records. The land was never used for non-agricultural purpose till the date of sale and it was never ceased to put to agricultural purpose. f. Agricultural operations were carried out in the said land by the assessee on his own and agricultural income was admitted up to the impugned AY. g. The assessee never made any plot out of the impugned land and the land was sold in acres and guntas and not as square feet. h. The assessee has not made any roads or any facilities and it was undeveloped land fit to use for agricultural purpose at the time of sale. i. The entire land was sold as it was purchased. The assessee sold the land only because of favourable marketing conditions as the land fetched a higher price. j. Even temporary stoppage of the agricultural activities due to unfavourable conditions, the land cannot be treated as nonagricultural land. k. The assessee had shown the agricultural income, when the agricultural operations were carried on the said land. l. The purpose for which the purchaser used the land cannot be a....
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....ultural land to fall out of the purview of capital asset under section 2(14)(iii), the land should be situated beyond 8 kms from the local limits any municipality or cantonment board. This fact is acknowledged by the AO. The income-tax law does not mandate that agriculture activities should be carried out for the land to be construed as agricultural land. 16. Further, as per the conversion order, one of the conditions laid for the conversion to be valid is that the land should be used for the intended purpose i.e., residential use within 2 years from the date of conversion order. Failure to comply with the condition would render the land conversion to be invalid. In this backdrop, since the land had not been put to use for its intended purpose, the lands automatically restored to its original nature of agriculture land on the expiry of two years. 17. It is also submitted that the AO has erred in stating that the lands are non-agricultural land since the lands were transferred to a non-agriculturist. The LAO relies on section 80 of the Karnataka Land Reforms Act, 1964 to show that the Appellant could not have transferred agriculture lands to nonagriculturist since the transfer....
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....ed to be registered for section 53-A to apply. Hence, section 2(47)(v) of the Act would not apply to the UAFS. 20. It is also submitted that merely because the Appellant has reflected the above transaction in her income-tax return as being exempt, does not imply that the UAFS results in income under the Act. In this regard, reliance is placed on the well-settled principles that taxation cannot be based on estoppel and that it can be only under the provisions of the Act. 21. Without prejudice, it is submitted that the arrangements with VBEHCSL are presently terminated pursuant to an arbitration arrangement and hence the Appellant continues to be the owner of the lands. 22. Without prejudice, it is further submitted that no development has taken place on the proposed lands to be transferred due to dispute on titles to the land; the land that was to be converted has not been converted. Hence, the terms of the MOU have not been complied with for the transfer to be regarded as complete. 23. Hence, for the above reasons, it would not be appropriate to consider that income has arisen to the Appellant on account of the transfer of lands. It is submitted that the following propo....
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....om agricultural to non agricultural residential purpose. Therefore the nature of the lands is non agricultural when the transfer took place. Further, as per section 80 of the Karnataka Land Reforms Act, 1964, the agricultural land cannot be transferred to a non agriculturist. Hence, in view of the above status of law in Karnataka an agricultural land can be transferred only to an agriculturist. The above mentioned lands were transferred to GSPL It means that the lands were transferred to a person who is other than agriculturist also because of the fact that the lands transferred were converted from agricultural to non agricultural residential purpose. 18. According to the AO, the above land was duly converted as non-agricultural land and sale of above land constitutes capital asset in terms of section 2(14) of the Act. Further the assessee placed following evidence with regard to agricultural income earned from the above property and also produced details of RTC which have been reproduced in the earlier part of this order. 19. Thus, the assessee made a plea that the said land was subject of cultivation from AY 2006-07 to 2012-13. However, the AO disputed that the ....
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.... non-agricultural land liable for capital gains tax. In other words, the AO unilaterally decided that the land was not subject matter of agricultural operations without any basis. Had he brought any material to suggest that the said land was not subject to agricultural operations by brining on record evidence to suggest that land was not used for agricultural purposes, then our decision would have been different. In our opinion, similar issue came for consideration before this Tribunal in ITA No. 1169 to 1172/Bang/2015, order dated 27.5.2016 in the case of Shri M.R. Anandaram (HUF) & Ors. wherein it was held as under:- "9. But in the instant case, the issue in dispute is with regard to chargeability of the capital gain on the impugned transaction. Our attention was drawn to the order of the Tribunal in the connected cases i.e., Shri M.R. Seetharam v. ACIT in ITA No. 1654/Bang/2012 dated 13.6.2014, in which the Tribunal has held that the agricultural land was transferred to buyer and the issue was raised, whether capital gain has accrued on such transactions. The Tribunal has held that though the subject land was converted into non-agricultural land purpose, but cultivation....
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.... we shall now proceed to deal with the sequence of events which apparently took place, chronologically, as under: 7.2.3. The assessee had in its possession certain acres of agricultural lands, out of which, lands to the extent of 6 acres and 1 gunta situated at Akkalenally and Mallenahally converted as non- agricultural vide Conversion order No. ALN(D) SR 30/200405 dated 19.7.2004 [source: Page 88 to 92 of PB AR] were sold to M/ s. ETL Corporate Services Private Limited for a sum of Rs. 45.58 crores. The subject property was a part of around 600 acres of lands known as 'Gokula Farm' which was originally purchased by Late Sri M.S.Ramaiah, the father of Sri M.R. Seetharam - HUF - way back in 1951 [Source: Page 6 of Sale Deed dt.12.4.2007]. The same has been jointly cultivated by the family, comprising of 10 children of Late M.S.Ramaiah. These lands were, subsequently, partioned in 1970 and after the death of Sri M.S. Ramaiah, the lands were further portioned [Refer: Para 3.2. of the Asst. order]. Even though, the subject property, among others, was converted as non-agricultural lands way back in 2004, agricultural activities, deriving agricultural income from the sai....
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....alli - Mallenahalli Village, Kasaba Hobli, Devanahalli Taluk bearing Sy Nos. 29, 30/1, 30/2, 37/1p, 37/4p, 37/6p, 37/7p, 37/10p, 37/13p, 37/ 16p, fruit yielding mango, sapota, coconut, cashew, coco, jack-fruit, rose apple, guava trees aged 25 - 30 years." 7.2.6. Ostensibly, neither the AO nor the CIT (A) had disputed the fact in clear terms that even after the conversion of the land for non- agricultural purposes, the assessee has been carrying on agricultural operations and also admitting incomes from such lands in its returns of income. The AO's stand that once the agricultural lands were converted into non-agricultural, even though agricultural activities continued; the lands cannot be termed as agricultural land is, in our view, not the correct proposition of law. This is apparent from the fact that one of the mandatory conditions contained in the conversion order that "10. The land should be used for the said purpose within two years from the date of this order [Refer: Pages 88 to 92 (including English translation) of PB AR]". 7.2.6. As a matter of perception, s. 2(14) defines 'capital asset'. Capital asset does not include agricultural land. Howe....
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....or non-agricultural use? (xi) Whether permission under Tenancy and Agricultural Lands Act was obtained because the sale or intended sale was in favour of non-agriculturist, if so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user? (xii) Whether the land was sold on yardage or on acreage basis? & (xiii) 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?" 7.2.7. In view of the norms prescribed by the Hon'ble Supreme Court in its judgment (supra), we are of the view that the facts making in the present case, the issue requires to be decided as to whether the subject land was an agriculture land. The land in question was inherited by the assessee (HUF), among others, as the same having been purchased by his father as an investment. As could be seen from earlier documents of purchase which explicitly exhibit that the subject land had put to exclusive use for agricultural purposes only and in fact a....
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....al in the case of H.S. Vijaya Kumar v, ACIT, Hassan in ITA No. 108/Bang/05 dated 28.11.2006. After taking into account the rival submissions of an almost identical issue to that of the present issue under dispute, the Tribunal has held as under: "6.4. In this case also various conditions imposed by the Deputy Commissioner, Hassan were not fulfilled by the assessee prior to the sale of the said land. It is observed that permission has been accorded for residential purposes and whereas the sale has been made to Indian Oil Corporation for putting up a service station. This contradiction itself goes to show that the permission accorded does not militate against the land becoming non- agricultural land. The first appellate authority also went by the fact that the land was sold on yardage basis to Indian Oil Corporation. This single circumstance in our considered opinion does not change the character of the land for the reason that no layout plan was obtained, nor the land had been subject to any change in physical characteristics. A person can obtain higher amount by adopting a particular methodology of valuation and this by itself does not result in an asset becoming a capital....
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....nt notifies that a particular area would be used for non-agricultural purposes. It is thereafter only that the acquisition start and accordingly the land of farmers are acquired. It would be travesty of justice, if a view has to be taken that when once a Notification is given by the Government, the agricultural land becomes non- agricultural land i.e., even prior to the issue of acquisition notices. As long as there is no change in the physical characteristics of the land in question, we cannot be held that there is a conversion. " 7.3.4. The jurisdictional High Court in the case of CITG v. Smt K. Leelavathy reported in (2012) 21 taxmann.com 148 (Kar) dated 2.1.2012 had an occasion to analyse the provisions of s. 2 (14) read with sections 45 and 48 of the Act. Briefly, the substantial questions of law raised by the Revenue before the Hon'ble Court was that - "1. Whether the appellate authorities were correct in holding that the land which is the subject-matter of sale is agricultural land as on the date of sale without taking into consideration the conversion of land to non-agricultural purpose and consequently recorded a perverse finding? & 2. Whethe....
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....ether the land was agricultural land or otherwise in the case of T. Suresh (supra) apply to the present case to be obnoxious or violating any statutory provisions and, therefore, we do not find any illegality in the finding recorded by the Appellate Commissioner and the Tribunal." . 7.3.6. In the case of M. ThimmeGowda [(i) Sri M. ThimmeGowda, (ii) Sri M.N. Manjunath, (iii) Sri Dasappa, (iv) Sri T. Suresh Gowda, (v) Sri T. PrasannaGowda v. Department of Income-tax, the earlier Bench of this Tribunal, in its findings in ITA 1464, 1465/B/08; 177,178,262 & 305/B/09 dated 30.12.2009, had dealt with an identical issue to that of the present issue under consideration. The main issue before the earlier Bench was: Whether the land sold by the assessee was agricultural in nature or not? .After duly analysing the rival submissions and also various judgements of judiciary as mentioned in its findings and also deliberating upon the sections 80 and 84 of the Karnataka Land Reforms Act, 1961, the earlier Bench had recorded its findings as under: "37 ............................................................................................................. (On page 22) ...........
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....utted, there must be material on the record to rebut the presumption. The approach of the fact-finding authorities, namely, the income-tax authorities and the Tribunal, should to consider the question from the point of view of presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by other facts in the case. While coming to the above conclusion, the Hon'ble High Court considered the following facts. The presumption for non-agricultural used was obtained by the assessee before the sale of the land. Coming to the facts in the instant case, the previous owner made an application for conversion, obtained the permission, but with the condition that the land should be used for the intended purpose within two years, otherwise the original character of the land, i.e., agricultural nature, would be restored. Then the assessee or the subsequent purchased has to pay penalty and make a further application to obtain permission to revive the land for intended purpose. The assessee has not done this even according to the revenue. This was done by the subsequent purchaser i.e., Tibetan Childrens' Village, ....
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.................................................................................................... 54. On similar issues in the connected case, we had held that the evidence produced by the assessee before the assessing officer and Commissioner of Income-tax (A) to the effect that assessee was doing cultivation of ragi etc., was sufficient to treat the land as agricultural land in the hands of the assessee, particularly because in the document, the nature of the land has been recorded as non-agricultural under the Karnataka Land Reforms Rules, 1966. While coming to the above conclusion we also held that this is a document maintained by the Government officials and treating the same as not valid in the absence of strict evidence to the contrary cannot be upheld. 55. On similar set of facts in the connected other cases, we have held that the land sold by the assessee is to be treated as agricultural land and the reasons given is applicable in the instant case of the assessee as the facts are identical ............." 7.3.7. The fact that the assessee had continued the agricultural operations unabated in the subject property on the date of sale even though the ....
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.... become a Capital asset, though the subject land remains an agricultural land, the assessee then stands discriminated in the eyes of law vis-a-vis its counterparts in other States. Had the State Reforms Act permitted the assessee to sell its agricultural lands without conversion to a Corporate as in the case of other States (supra), the assessee would not then be required to get the land converted merely to facilitate its sale to a corporate and the gains arising from such sale would not have been exigible to Capital Gains tax which is the subject of a Central Act (Income-tax Act).In the instant case as mentioned earlier even after conversion, assessee was carrying on agricultural operation and conversion was done only to facilitate sale of subject property to a corporate entity/non agriculturist. In substance, the Income-tax Act - a Central Act - is to be administered in such a manner to ensure that an assessee IS not subjected to suffer due to different State laws. 7.3.10. Taking into account all the aspects as discussed in the fore- going paragraphs and also in conformity with the judicial pronouncements on the issue (supra), we are of the view that though the subject l....
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....rn the assessee appended a note to the effect that the assessee sold agricultural land at 77/74, Sheshagiri halli, Bidadi Hobli, Ramanagaram taluk, during April, 2004 for a total consideration of Rs. 90,00,000/-. However, it was stated that it does not result in any capital gain since the land sold was agricultural land situated beyond 8 kms from corporation limit of Bangalore city as defined in section 2(14)(iii)(a) of the Act. This land measuring 9 acres was converted for non-agricultural purpose. It was further stated that though the land was converted, agricultural activities were carried on up to the date of sale. Therefore, what was sold was agricultural land within the meaning of section 2(14) and there was no capital gains tax arising out of such sales within the meaning of the definition of the term "capital asset". Since the assessee did not offer any capital gain and claimed that it was agricultural land though it was converted into non-agricultural residential purpose, the case was selected for scrutiny and notice u/s.143(2) was issued on 26.6.2006. 2. The Assessing Officer formed the opinion that the land sold was non-agricultural as evidenced by document impo....
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....nt and then to sign and execute and deliver the conveyances in favour of the said purchaser/purchasers or their nominee or nominees or assignee or assignees. With respect to two other properties also similar GPA was executed by Shashidhar Reddy and Rachaiah in favour of the assessee almost on the same lines. 4. From the above the Assessing Officer came to the conclusion that the original owners already formed the layout subsequent to the conversion of the agricultural land for nonagricultural residential purpose and the GPA was only for specific and exclusive purpose of making arrangement to sell the sites as mentioned above. The Assessing Officer held that the character of the land has already been changed. He further noted as per the conversion orders issued by the Assistant Commissioner, Ramanagara Sub Division, the land so converted were required to be put to the use for the purpose intended (nonagricultural) within two years from the date of the conversion order, otherwise the order was to be treated as null and void automatically. Particularly clause (10) of the conversion order specified as under : "10. The conversion of land hitherto shall be utilized for ....
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....s not justified. The Assessing Officer summoned the Assistant Commissioner, Ramanagara Sub-Division, calling for the original filed in connection with the conversion of the land, for inspection. A sworn statement was recorded u/s.131 on 5.12.2007. The conversion of the land into non-agricultural purpose was confirmed again by the Assistant Commissioner. He was again asked about the specific guidelines given by the State Government while giving permission for use of agricultural land to non-agricultural use. Answering to this question, he stated that there are about 12 conditions stipulated in the conversion order issued to the assessee. He was again asked if the land is not used for the specific non-agricultural residential purposes, what would be the repercussion. Answering to this, he stated that if the land is not used for the specific purpose for which it has been converted within the stipulated period of two years from the order, conversion order is deemed to be cancelled. 6. In the instant case, Assessing Officer noticed from the case records produced by the Assistant Commissioner, the original owners submitted layout plan as approved by the local Grama Panchayat aut....
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.... lands were acquired for the purpose of running educational institutions such as nursing college, degree college and to get recognition as a deemed university which he held proves that the land was purely non-agricultural at the time of purchase by that party. Consequentially, the assessee after conversion sold it as a nonagricultural land. He further noted that the land purchased by the Tibetan Childrens' Village had constructed buildings for office premises and construction of hotel building was going on and one building for college building was also under progress. This was found out by the ITI and report by his report dt.28.12.2007 which also established the status of the land at the relevant point of time. 9. Coming to the land surrounded by or adjacent to the land in dispute whether it is urban or rural, the Assessing Officer made the following observations. He found that the land stood adjacent to well-known high traffic density state highway running between Bangalore and Mysore at about 18 kms away from the corporation limits of Bangalore and is also located in the thickly populated industrial belt. It was a fast growing industrial area and hence, the assessee coul....
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....ent from the Government record in the form of RTC. 11. The assessee's contention was not accepted by the Commissioner of Income-tax (Appeals). He held the criteria for determination whether the land is agricultural or non-agricultural has been amplified in the treatise of Sampath Iyengar which briefly he records vide page 4 and 5 of his order. Accordingly, two tests were adumbrated in different cases, viz., (i) whether the price of land is such that no bonafide agriculturist would purchase the same at such price for genuine agricultural operations, and (ii) whether the price is such at which no prudent owner would agree to sell it even if he worked out the price on the capitalization method, taking into account its optimum yield in most favourable circumstances. In short, the price which the land fetches is an important criteria. The other criteria, is whether the land has been assessed to land revenue or not; whether agricultural activities are carried on or not; whether the land is capable of agricultural operations or not; the intention of the owner for which he is retaining the land and such intention not being fluctuating or ambulatory; character of adjoining land; de....
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....who appeared on 5.12.2007 and stated that if the land is not used for the specific purpose within two years of conversion, the conversion shall be deemed to have been cancelled. It is further submitted the lands were not put to residential use. This is evidenced by the photographs taken by the ITI at the time of enquiry on 27.12.07 i.e., almost three years and eight months after the sale. The photographs are found at pages 67 to 69 of the department's paper book. There is no sign of residential sites having been formed. The schedule to the sale deed reproduced at pages 4 to 6 of the assessment i.e., pages 1 to 43 of the department's paper book shows that the lands are sold in the measuring form of acres and guntas and not as residential sites. The report of ITI indicates that there is no sign of layout or residential sites having been formed. These factors indicate the lands were not put to use for the purpose for which it was converted. Thus, the lands to the extent of 12 acres and 38 guntas had lost their non-agricultural status as on 28.4.01 i.e., on the completion of two years from the date of conversion order. 15. Coming to the objection of the Departmental authoritie....
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.... of 1.38 acres and the crop grown was Ragi. So also at page 14 it is mentioned that the extent of land utilized was two acres for growing Ragi. He reiterated the submission made before the Departmental authorities that RTC form is a record issued by the Government which consistently show that there were agricultural activities going on. 16. He further submitted inviting our attention to written submission made before the Commissioner of Income-tax(A) on 21.7.2008 particularly at page 4, briefly which is as under. It was submitted that the LAO has concluded that the sites were formed for formation of layout. This conclusion is wrong for the reason if the sites had been formed by the original owners as held by the LAO at page 4 of the assessment order, the RTC records proves it wrong. Secondly, it was further submitted a very strong denial is also in the form of photographs taken by the ITI wherein one could see the construction of buildings by the Tibetan childrens' Village, but there is no evidence of any sites having been formed in the area. The photographs were taken as late as December, 2007, i.e., almost 3 and half years after the sale of land, and thirdly if the s....
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....es was not put to use for the converted purpose, it retains its original status which is also evident from the statement given by the Assistant Commissioner, Ramanagara Sub Division. The finding of the Assessing Officer that the data was filled year after year without verification is incorrect. The reality is that RTCs are not entered mechanically. The Village Accountants are expected to do the entries by actually carrying out the inspection in the land coming within the jurisdiction during the year. The entries in the RTC are made thereafter. The Commissioner of Incometax(A) is wrong in confirming the finding of the Assessing Officer to the contrary. It is a government record and it cannot be simply brushed aside. It may be true in stating "...the entries in the RTC alone shall not be considered as conclusive evidence to prove the case of the assessee." In the instant case, the Assessing Officer has not rebutted that assessee carried out the cultivation activities. In the absence of any rebuttal, the recordings in the RTC and also the facts of cultivation, coupled with the lapse of two years brings back the character of agricultural land. He further objected to the Assessing Offic....
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....ed the land from various persons. Though the land was purchased on the basis of the certificate issued by the Village Accountant of Ramanagara taluk dt.22.6.2006 mentioned above, the assessee's representative submitted it is clear that the assessee was cultivating ragi, vegetables and horsegram on the land. Merely because the assessee did not disclose any income, it does not mean that the agricultural activities were not undertaken as claimed by the revenue authorities. 18. Inviting our attention to the report of the Income-tax Inspector, Ward-3, Mandya, dt.27.12.2007, the representative submitted it is clear that even after conversion of the agricultural land into non-agricultural, assessee has not made any tax payment to Tahsildar or to the Grama Panchayat which is also clear from the letter hereinabove mentioned dt.1.3.2005. 19. Inviting our attention to the written submission at page 44, the learned representative submitted the conclusion of the Assessing Officer that the assessee had not carried out any agricultural activity is wrong. While answering to question No. 8, the assessee stated that the assessee carried out agricultural activities. Since the assess....
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....ssioner of Income-tax v. Gemini Pictures Circuit P. Ltd., (1996) 220 ITR 43 is distinguishable on facts as the Hon'ble Supreme Court had referred to Gordhanbhai Kahandas Dalwadi 127 ITR 664 (supra). In the instant case, non-agricultural taxes were collected from the Tibetan Children's Village and it was not the assessee who had paid conversion charges and penalty for failure for using the land for certified purpose. He again invited our attention to the decision of the Supreme Court in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy (1957) 33 ITR 466. 23. He further submitted that in the case of Prasanna Gowda, one of the assessee's before us, the Commissioner of Incometax(A) has decided the issue in assessee's favour on facts and particularly assessee's representative relied on the decision at page 5 para 4 of his order. In this case, according to the Commissioner of Income-tax(A), the Assessing Officer considered the land as capital asset because of the orders of conversion of land for non-agricultural purpose. However, the Commissioner of Income-tax(A) took note of clause (10) of the conversion order which shows that if the land remains unut....
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....l activities other than RTC. The assessee was questioned and requested to produce the details of the crops cultivated, yield per acre, expenses incurred towards agricultural operations and the gross amount of sale proceeds on account of the sale of agricultural produce. There was no evidence forthcoming from the assessee. On the other hand, the department sufficiently established that no agricultural activities were carried out, as under : a) Conversion of land from agricultural purposes to nonagricultural purposes, i.e., development of residential layout had taken place in the Financial Year 1995-96, i.e., 10 years before the date of transfer of the land; b) The assessee has acquired the land in the Financial Year 1995-96 by way of execution of GPA by the original landlords in favour of the assessee for the purpose of sale of sites formed by the landlord. As such, the fact has been clearly highlighted in the registered GPA without any ambiguity; c) Subsequent to conversion of the land for non-agricultural purposes, the taxes were collected by the Grama Panchayat instead of Tahashildar, indicating that no agricultural activities were conducted subsequent ....
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....isted, it is not the final word. He invited our attention to para 3.10 of the Commissioner of Income-tax(A)'s order in the case of Suresh Gowda dt.10.2.2009. The facts in para 3.10 narrated therein as under: 3.10 The Hon'ble ITAT, Bangalore in the case of Shri. M. V. Chandrashekar v. DCIT, Circle -2(1),Bangalore (ITA No.663/Bang/2002 dt.6.12.2002), which was also affirmed by the Hon'ble High Court of Karnataka, decided a similar issue vide ITA No. 209/2003 dt.2.1.2008. The facts of the case are that the assessee is an agriculturist who purchased agricultural land of about 41 acres between 1977 and 1992 at Goolimangala village, Sarjapur Hobli, Anekal Taluk and the entire land purchased was agricultural land, which was not a converted land. The land so purchased is also in green belt area and even the assessee never applied for conversion of land use. During the previous year relevant to the Assessment Year 1998-99 the assessee sold about 35 acres of land and the remaining was still with the assessee. Some plantation was made and was converted into smaller size of plots and after incurring development expenses, sold the same to different parties. The Assessing Of....
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....agaram, particularly the conditions 8 and 9 which read as under : (8) It may be construed that this converted land must be utilized for the purpose permission has been accorded within two years. (9) This order is issued as per the written agreement of the individual dt.27.7.94 and the individual is covered by agreement terms. In the event if the individual violates the terms of agreement the government is at liberty to initiate action against such individual as per the provisions of the land revenue act clause 84 of 1996. 30. In reply to the above, assessee's representative briefly submitted as under. The assessee is an agriculturist. Inviting our attention to the decision of the Commissioner of Income-tax(A) in the case of Thimme Gowda (ITA.178/B/09), he submitted the undisputed facts are that the lands are situated beyond 8 kms from the corporation limits. The lands were converted to commercial/residential usage in 1999, but was never put to use for the converted purpose. The land was used for agricultural cultivation. He further submitted that for the land to be treated as agricultural land, carrying on of agricultural activities is of paramount im....
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....road parameters in view of the fact that though the land was converted in 1995, 1999 it was not put to use for the intended purpose within the specified period of two years from the date of conversion. Agricultural land regained the character of agricultural land in 1997, 2001 i.e., after two years. The taxes paid in respect of the land was levied as agricultural land and not as non-agricultural land. This is evidenced by phani extracts in respect of these lands which show that the taxes were levied as agricultural land and not as nonagricultural land. Evidence to this effect was also produced. 31. The learned representative for the assessee again brought our attention to the application made by the Tibetan Childrens' Village, dt.1.3.2005 in which it was stated that assessee had not made renewal application after the lapse of time and Tibetan Childrens' Village. It was they who not only paid the penalty but also got the land converted by making renewal application. If the land had been used for intended purpose, there was no need of renewal application and payment of penalty. 32. Inviting our attention to page 5 of the paper book dt.27.1.09, the assessee&#....
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....sale has to face the consequence since it is unlawful. Again, coming to section 84, it deals with the provisions for cultivation of uncultivated lands, which reads as under : Section 84: Uncultivated land may be required to be cultivated.-- Where the Assistant Commissioner having jurisdiction over any area in which any land is situated is satisfied that any land within such area has remained uncultivated for a period of not less than two consecutive years without sufficient cause, he may be notice served upon the land owner and any other person entitled to be or in possession of the land require such persons to cultivate the land within one year from the date of service of such notice. Reading of the section makes it clear that if the Assistant Commissioner having jurisdiction over the area is satisfied that the land within his jurisdictional domain remained uncultivated for a period of not less than two consecutive years without sufficient cause, he may issue a notice to the land owner or to any other person entitled to be in possession of the land requiring them to cultivate the land within one year from the date of service of the notice. The case of the Departm....
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.... issued without any physical verification by him. This general and evasive argument of the DR cannot be accepted, in the absence of any proof that the officer in-charge has not verified the area physically. The material available in the hands of the assessee is enough to show the nature of the land prima facie at the time of the sale and not the use by the subsequent purchaser. In the instant case, the above facts prima facie leads to the conclusion that the character of the agricultural land has not been lost. It is true the assessee had no case that the entire land was used for agricultural activities. But the RTC certificates produced by the assessee also indicates that the lands were used for agricultural activities. However, we find that there is a specific finding by the Commissioner of Income-tax(A) in the case of Prasanna Gowda in ITA No. 177/Bang/09 that 10 acres and 10 guntas of land sold on 2.6.06 converted on 2.4.06 was capital asset and he further directed to compute long -term capital gains on this sale. In the absence of any evidence to the contrary, we confirm the order of the Commissioner of Income-tax(A) in ITA.177/Bang/2009 to this extent on facts. ....
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....dence as to how much the assessee earned from agricultural activity and related expenses. However, assessee has produced certificate from the competent authorities that during these years assessee had used the land for growing ragi. In the absence of contrary evidence, the evidence adduced by the assessee coupled with the Village Accountant's certificate, we have to come to a reasonable presumption that the assessee's assertion that the land was used for some kind of agricultural activity, is to be accepted. 36. Coming to the decision relied by the learned DR in the case of Commissioner of Income-tax v. Shiv Chand Satnam Paul - 231 ITR 663 (P&H), this was a case wherein the Tribunal held that the land was located within the municipal limits and does not fall within the ambit of capital asset. The Hon'ble High Court held that the Tribunal become coming to such a conclusion should have satisfied itself regarding the remaining two ingredients mentioned in Section 2(14)(iii)(a) regarding population not less than 10,000 according to the last preceding census and the land was situated in any area within such distance, not being more than eight kilometres from the loc....
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.... the assessee, it is not disputed that in the revenue records, the entry is not changed, it continues as agricultural land. According to the revenue, the intention and purpose of the sale is for the use of Tibetan Childrens' Village for the setting up of educational institutions and other related purposes. According to the assessee, the land in his hands had retained the agricultural character till the date of sale, for the reason that the assessee was doing agricultural activity. We have hereinabove in para 34 mentioned that the department had estimated the agricultural income at Rs. 53 lakhs for 2004-05 and estimated the agricultural income of the group at Rs. 56 lakhs. Therefore, it is difficult to come to the conclusion that in the hands of the assessee, the character of the land had changed. Merely because the original owners had made application to change the character of the land from agricultural to non-agricultural and certificate was issued to that effect. Even for the revenue, there is no case that the land has been used for the intended purpose. 38. In the decision of Gujarat High Court relied upon by the DR, in the case of Gordhanbhai Kahandas Dalwadi v. C....
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....al land. It is true the facts is on border line, but the evidence produced before us in the form of RTC showing agricultural income etc., is in assessee's favour. Secondly, the Hon'ble Gujarat High Court considered the land revenue paid was for agricultural use of the land. In the instant case of the assessee also what was paid by the assessee was agricultural revenue. The non-agricultural revenue was paid by the subsequent purchaser after making an application for the second time to revive the nature of the land, which is evidenced by the letter dt.1.3.2005 which was written to the Secretary, Manchanayakanahally Gram Panchayat by the Tibetan Childrens' Village. In the case decided by the Hon'ble High Court, it was held that the correct test to be applied was whether on the date of sale of the land whether the land was agricultural or nonagricultural and not the intended purpose and how the purchaser was going to use the land. 39. Now, we proceed to deal with the various appeals separately, as under. ITA. 1464/Bang/2008 - By the assessee, Shri. M. N. Manjunath - Assessment Year.2005-06 : 40. In the first effective ground, the asse....
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....By the assessee, Shri. Dasappa - Assessment Year.2005-06 : 44. The first ground is general in nature and does not call for any specific dealing as such. 45. Coming to the second ground which is with regard to the sale of land, we have elaborately deliberated upon the issue and given our findings at paras 33 to 38 above wherein we have held that the revenue authorities were not justified in holding that the land sold by the assessee was not agricultural land and consequentially charging long-term capital gains on such sale. 46. Coming to the third ground which is against charging of interest u/s.234B, we hold that the Assessing Officer may give consequential relief after giving effect to our order. 47. In the result, appeal by the assessee is allowed." 23. In the present case, the main reason for treating the land as non-agricultural is that the land was converted for usage of nonagricultural purposes. However, the assessee filed revenue records wherein it is stated that the land still continued to be agricultural land wherein crops like Ragi & Paddy were cultivated by the assessee. Further, it was brought on record by the assessee that t....
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....x income arising out of this transaction as business income. 27. In the present case, the land sold by the assessee was classified as agricultural land in the revenue records. The RTC filed by the assessee before us shows that the assessee raised crops of Ragi and Paddy in certain portion and other portion was temporarily kept idle on account of certain difficulties. Being so, the status of the land therefore remained as agricultural land since mandatory condition stipulated in the conversion order is not complied with and on this count, the CIT(Appeals) was not correct in holding that the land which is subject matter of sale is not agricultural land on the reason that the land was converted for non-agricultural purposes. In view of this, the sale of the impugned land is to be treated as exempt from capital gain in terms of section 2(14) r.w. sections 45 & 48 of the Act. Accordingly, this ground of the assessee is allowed." 27. In the present case, the assessee filed RTC copies of the property sold by the assessee and a chart of agricultural land holdings of the assessee which is reproduced below:- CHART OF AGRICULTURAL LAND HOLDINGS OF LATE SMT. LEELAVATHY FOR TH....