TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1608
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.... 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 erred in upholding the addition of Rs. 6,36,22,220/- made under the head `Business Income....
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.... 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. The Appellant had voluntarily disclosed the sale of these agricultural lands as exempt in the return of income....
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....013 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 Sale of agricultural land 5325000 (20/01/2009) 199695 (6/8/1993) 0 0 5125305 0 Total 5325000 199695 0 0 5125305 0 Sale of Agricultural land - Cost : 83721*(582/244) = 199695 Exempt U/S : 5325000 10.2 Later the AO issued a Questionnaire on 8.1.2014 seeking details o....
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.... 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 and bounded on the: East by Survey Nos. 206 and 207.; West by Survey No 66. ; North by Survey No 75 ; South by Kirengere Kere Lake Border; Item No. 8 All the piece and parcel of converted land measuring 1 Acres in Sy. No. 43 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 ....
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.... 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 ass was urban land and on transfer liable for capital gains tax. The plea of the assessee that though the said land was converted into nonagricultural land, the cultivation of land continued till date and income disclosed from the said land. The AO without physical verifying the claim of the assessee outrightly rejected the same holding that the income disclosed by the assessee was situated at Manchanayakanahalli whereas the land sold was situated at Devarakaggalahalli. In our opinion, the AO cannot reject the claim of assessee without due verification. The land was converted by the assessee to sell it to a corporate entity so as to get better price and conversion is only to facilitate the sale and gains arising from such sal....
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....isfaction 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 even when it is not in accordance with law." 10.11 The ld. AR submitted that the material on the basis of which notice u/s. 153C is issued does not belong to the assessee and on that basis, notice u/s. 153C cannot be issued to the assessee. According to him, in the present case, satisfaction recorded by the AO does not conform to the requirements of a valid satisfaction in invoking the provisions of section 153C of the Act. He drew our attention to the judgment of the Supreme Court in the case of CIT v. Singhad Technical Education Society, 397 ITR 344 (SC) wherein it was held as under:- "17. First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Sec....
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....ition 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 well. The judgment of the Gujarat High Court in the said case went in favour of the Revenue when it was found on facts that the documents seized, in fact, pertain to third party, i.e. the assessee, and, therefore, the said condition precedent for taking action under Section 153C of the Act had been satisfied. 21. Likewise, the Delhi High Court also decided the case on altogether different facts which will have no bearing once the matter is examined in the aforesaid hue on the facts of this case. The Bombay High Court has rightly distinguished the said judgment as not applicable giving the following reasons: "8. Reliance on the judgment of the Division Bench of the High Court of Delhi reported in case of SSP Aviation Ltd. v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 is misplaced. There, search was carried o....
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.... 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 necessary consequence would be that insofar as the conclusions of the AO in his assessment order regarding the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits of Sections 11 and 12 etc. are concerned, the same would not be affected by this judgment. It is, thus, clarified that this Court has not dealt with the matter on merits insofar as incriminating material found against the assessee or Mr. Navale is concerned. Pithily put, this Court has not given any clean chit to the assessee insofar as the finding of the AO to the effect that the assessee had been indulging in profiteering and collecting capitation fee is concerned. Whatever other repercussions are there, based on these findings, they can follow. This Court was not informed and, therefore, unaware of....
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....sessing 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 prior to the amendment referred to above. The aforesaid amendment has been held to be clarificatory in nature and therefore has to be held as applicable retrospectively from the inception of Sec.153C of the Act in the statue, by the ITAT Kolkata Bench in the case of Trishul Hi-Tech Industries Vs. DCIT IT(SS)A.Nos.84-86/Kol/2011 (AY 04-05, 05-06 & 06-07) order dated 24.9.2014. In the aforesaid decision the Hon'ble Kolkata Bench of ITAT, after considering the amended provisions of Sec.153C of the Act by the Finance Act, 2014, held that the provisions of Sec.153C of the Act as amended by Finance (No.2) Act, 2014 though is made applicable on and from 1.10.2014, is also relevant for earlier assessment years as it cures the infirmities of the previous legislation and also makes the provisions workable by avoiding absurd consequences. Accordingly, such provision is to be given retrospective operation and is also applicable to ....
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....sessing 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 are in respectful agreement with the view expressed by the ITAT Kolkata Bench in the case of Trishul Hi-Tech (supra). We may also add that it is settled rule of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. Ordinarily the Courts are required to gather the intention of the legislature from the overt language of the provision as to whether it has been made prospective or retrospective, and if retrospective, then from which date. What happens sometimes is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation, if subsequently some amendment is carried out to clarify the real intent, such amendment happens to be retrospective from the date the earlier provision was made effective. Such clarificatory or explanatory amendment is declaratory. As the later am....
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.... 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 decision of the Hon'ble Apex Court in the cases of Manish Maheshwari Vs. ACIT (289 ITR 341) and CIT Vs. Calcutta Knitwears (2014) 362 ITR 673 and other judgments of the Hon'ble Apex Court and other Hon'ble High Courts and CBDT, Circular No. 24/2015 dated 31.12.2015. The Hon'ble High Court also took the view that the AO is expected to spell out as to how the documents were incriminating in nature and prima facie represent undisclosed income. In this regard, we also find that in the order of assessment, the AO has not proceeded to make any assessment on the basis of material referred to in the satisfaction note. On the other hand, he has made additions which are not based on any seized material which pertains to assessee. Such a course is not permissible u/s. 153C of the Act as laid down by the Hon'ble High Court of Karnataka in the case of IBC Knowledge Park (supra). The decision of the Hon'ble Supreme Court in the case of Sinhgad Technical Education....
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....der 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. 153C of the Act was very essential for assessment u/s. provisions of section 153C which is a jurisdictional fact as held by the Supreme Court in Sinhgad Technical Edn. Society (supra). After taking note of the material as recorded in para 10 of this order, there was no seized incriminating seized material so as to frame assessment for these two assessment years u/s. 153C. Further, the ld. DR could not point out to the contrary. Being so, the judgment of the Supreme Court in the case Sinhgad Technical Edn. Society (supra) is squarely applicable to the facts of the present case. Since the assessment framed u/s. 153C of the Act to be based on material found during the course of search which relate to or belong to the assessee and since we have held that there is no seized material for addition made by the AO, we do not wish to address the arguments made by the ld. AR for the assessee that the condition precedent for initiating the proceedings u/s. 153C of the Act having....
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....hen the agricultural operations were carried on the said land. l. The purpose for which the purchaser used the land cannot be a reason to treat the agricultural land as non-agricultural land. m. The assessee has not taken any permission from the Government for making plots, as the assessee never had any intention to make the land into plots and carry on real estate business in respect of the land. The assessee has sold land in as it is condition. n. All of the above is also evidence by the agreements of sale. o. The assessee held the land always as investment and not at all converted into stock-in-trade. The character of the land in the hands of the assessee has not changed. p. There is no material on record in respect of this land to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the Assessing Officer in treating the activities of the assessee as adventure in the nature of trade. q. The assessee is not in the business of Real Estate as alleged by the lower authorities. r. The assessee had not applied for conversion of the land in question into non-agricultural purposes and no such permi....
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....ulturist since the transfer is prohibited. Here, it is submitted that pursuant to the amendment brought to section 80 w.e.f. 25.11.1980, the transfer of agriculture land to a non-agriculturist is valid, but the sale is invalid. Without prejudice, it is for the competent authority to determine whether the transfer is valid or invalid. It is not open for the AO to recharacterise the nature of an asset based on the prohibitions/ restrictions provided under the Karnataka Land Reforms Act, 1964. Reliance is placed on the ruling of the Bangalore ITAT in Appellant's own case for AY 2005-06 in ITA No. 1465/Bang/2008. 18. In respect of the AO's observation that the land revenues are collected by the Gramapanchayat after conversion leads to the conclusion that the lands are non-agricultural land is irrelevant. It is submitted that it is for the competent authorities to examine whether the applicable land revenues are paid by the Appellant or not. The mere fact that agricultural activities were carried on by the Appellant and the Appellant satisfies the conditions provided in section 2(14)(iii) is sufficient evidence to hold that the transferred lands are agricultural lands and income arisin....
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....s are relevant here:- a. No real income 'arises' in the present facts on the assumption that there is transfer of a capital asset. b. Income from capital gain on a transaction which never materialized is, at best, a hypothetical income. c. Where for want of statutory permissions, the entire transaction of development of land falls through, there will be no profit or gain which arises from the transfer of a capital asset. d. The Appellant did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. e. This being the case, in the circumstances, there was no debt owed to the Appellant. Hence, the Appellant has not acquired any right to receive income under the MOU. As such, no profits or gains 'arose' from the transfer of a capital asset. 24. The ld. AR submitted that the above principles are squarely covered by the ruling of the SC in Balbir Singh Maini (398 ITR 531). The following rulings also support this proposition:- a. CIT v. City Lubricants Ltd. (129 taxmann.com 267); Madras HC; b. Seshasayee Steels (P.) Ltd. v. CIT (421 ITR 46); SC; c. Pr. CIT v. Fardeen Khan (411 ITR 533); Bom....
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....ituated at Manchanayakanahalli and on the other hand, the land sold by the assessee was situated at Devarakaggalahalli. No bills and vouchers for carrying out the agricultural activities. The land was sold to GSPL for the purpose of housing project. was urban land and on transfer liable for capital gains tax. The plea of the assessee that though the said land was converted into nonagricultural land, the cultivation of land continued till date and income disclosed from the said land was outrightly rejected by the AO on the ground that the income disclosed by the assessee was situated at Manchanayakanahalli whereas the land sold was situated at Devarakaggalahalli. In our opinion, the AO cannot reject the claim of assessee without due verification. The land was converted by the assessee to sell it to a corporate entity so as to get better price and conversion is only to facilitate the sale and gains arising from such sale could not have been liable for capital gain. 20. It is not in dispute that the assessee has been owning the said land since long period and all the surrounding lands were also subject to agricultural activities and the said land was not put any non-agricultural pur....
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....al gains in view of section 2(14) of the Act. While holding so, the Tribunal has also observed that 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, 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 could not have been exigible to capital gains tax which is the subject of a Central Act. The Tribunal has also observed in that case that, even after conversion the assessee was carrying on agricultural operation and conversion was done only to facilitate sale of subject property to a corporate entity/non-agriculturist. The relevant observations of the Tribunal rendered in that case are extracted hereunder for the sake of reference:- 7.2. We have carefully considered the rival submissions, perused the relevant materials on record and also the various judgments of judiciary on a similar issue relied on by either of the party. The assessee-HUF had sold lands situated at Akklenahalli and Mallennahalli villages of Devanahalli Taluk to an extent of 6 acres and 1 gunta for a total consideration of R....
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....etails of which are as under: Asst. year Agrl. Income [in Rs. ] 2004-05 22,00,000 2005-06 22,00,000 2006-07 16,50,000 2007-08 16,50,000 2008-09 16,50,000 2009-10 16,50,000 7.2.4. Though the said land was converted into non-agricultural purposes in the year 2004-05 and one of the mandatory conditions specified in the conversion order dated 19.7.2004 was that if the converted land was not used for the purpose for which it was converted within a period of two years from the date of conversion, the order of conversion stands cancelled. Apparently, the assessee had continued the agricultural operations in the converted lands also which is evident from the fact that incomes derived from such agricultural operations on the said lands declared by the assessee in its returns of Income were accepted by the revenue for the AYs 2004-05 to 2009-10 (supra). No evidence was brought on record by the Revenue to suggest that the subject lands were utilized for any other purposes other than that of cultivation after conversion. This is evident from the fact that the incomes derived from such lands duly declared by the assessee which were accepted by the revenue. 7.2.5. Incidentally,....
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....uestion of fact. In coming to a definite conclusion, a number of tests will have to be undertaken as laid down by the Hon'ble Supreme Court in the case of Sarifabibi Mohamed Ibrahim v. CIT reported in 204 ITR 631 (SC). The tests prescribed by the Hon'ble Supreme Court as under: (i) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? (ii) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (iii) Whether such user of the land was for a long period or whether it was of a temporary character or by any stop gap arrangement? (iv) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? (v) Whether the permission under Land Revenue Code was obtained for the non-agricultural used of the land, if so, when and by whom [the vendor or the vendee]; whether such permission was in respect of the whole or a portion of the land; if the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the use....
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....heritance/in a partition/family arrangement as the case may be, the nature of the land use had not, however, undergone any change. Whether the lands which were used as agricultural lands even after its conversion loose its character of agricultural lands? 7.3. The stand of the AO was that once the agricultural lands were converted into non-agricultural, even though agricultural activity continues, the lands cannot be considered as agricultural lands. Countering the AO's assertion, the learned AR had argued that as per the mandatory conditions mentioned in the Certificate of conversion, if the subject land was not put to non-agricultural use within a period of two years from the date of conversion order, the conversion itself will become null and void. In this connection, the learned AR had placed strong reliance on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT v. Smt. K.Leelavathy (supra). 7.3.1. It is a fact that the land which was hitherto agricultural land does not automatically become a capital asset upon a mere fact of its conversion to non-agricultural purpose. The land even though converted for non-agricultural purpose, continues to b....
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....sed tried to demonstrate that as per the Karnataka Land Revenue Act, 1964, section 83(2) read with sec. 95(2) mandates that the land holder should continue to pay the land revenue even after conversion. We need not go into this aspect for the reason that the period is too short a period and it is not a case where the revenue authorities have refused to levy land revenue by showing the reason. of conversion or for the reason that the assessee has refused to pay such land revenue. The AO has recorded a finding that the land revenue records to show that ragi and horse gram were grown on the said land. The reasons recorded by the assessing officer as well as the CIT (A), to our mind, are not relevant for coming to the conclusion as to whether a particular asset is a capital asset within the meaning of sec. 2 (14) of the Income-tax Act. The issue whether a particular land is agricultural land or not has been the subject matter of dispute in many a cases. In each of the judgments broad outlines have been given and it is suffice to say that the unanimous view of all the Hon'ble Courts is that the issue should be decided on the facts and circumstances of the case. As we find that the f....
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....he party and also the perusal of the orders of the authorities below, the Hon'ble Court had held as under: "5. We find from the record that the Appellate Commissioner as well as the Tribunal followed an earlier ruling of the Tribunal rendered on December 30, 2009, in the case of T. Suresh Gowda [ITA No. 262/ Bang/ 2009] wherein it appears, the question was resolved by looking into the date of permission for conversion as the cut-off line to decide as to whether the land was an agricultural land or otherwise. 6. It appears, the Tribunal had opined that the land retained its agricultural character till the date of order permitting non- agricultural use and, thereafter, it is not an agricultural land and, therefore, can be treated as capital asset. 7. The Appellate Commissioner as well as the Tribunal has applied this norm and while they did hold that the sale transaction in respect of the following extent of land: Conversion Notification No. and Date Sy No. Extent of area Date of sale Sale consideration No.ALNSR/ 94/ 98-99 75 3A 38G 7.4.200 Rs. 50,00,000 DT.29.4.1999 77 3A 00G 4 No.ALNSR/ 8/ 2004-05 15.15 OA 10G Rs. 1,82,50,000 DT.10.5.200....
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....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 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. Commissioner of Income-tax (1981) )27 ITR 664, the Hon'ble High Court held that the potential non-agricultural use does not alter the character of the land. This was a case wherein the land was purchased in 1954 and, subsequently, sold in 1969. The entries in the revenue records showed that the land was agricultural continued to be so. The land revenue paid was for agricultural use, but permission for non- agricultural use was obtained but not before the date of t....
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....ion 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 non- agricultural and not the intended purpose and how the purchaser was going to use land. ............................................................................. ITA. 305/Bang/2009 - By the Revenue in the case of T. Suresh Gowda A Y 2005-06 53. The revenue had taken an additional ground that is with regard to taking fresh additional evidence filed by the assessee without giving opportunity to the assessing officer. In this case, the assessing officer noticed that the assessee had sold land measuring 40 acres and 20 guntas at Seshagirihalli for Rs. 4, 50, 00, 000/ - on 7.4.04 to Tibetan Childrens' village and claimed exemption from capital gains which worked out to Rs. 3,68,01,771/- on the ground that the land situated in a rural area i.e., 8 Kms away from the limits of Bangalore....
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....nversion order dated 19.7.2004 had lost its sanctity since the said property was not put use for non-agricultural purposes within two years for which conversion was granted. 7.3.8. Finally, the most important aspect which requires to be considered is that agriculture is a State subject and different States have different reforms (laws) as to who can purchase / own agricultural lands in the respective States. To illustrate further, in Karnataka, non- agriculturists and industrial companies are prohibited from purchasing of lands which are classified as 'agricultural' in the revenue records. If an agriculturist intends to sell his agricultural lands to a company /non- agriculturist for the use of non-agricultural purposes, he must possess a conversion order obtained from the revenue authorities to utilise the subject land for non-agricultural purposes. However, the same law/rule is not prevalent in the neighbouring States of Tamil Nadu, Andhra Pradesh or in Maharashtra, Delhi etc. In other words, the agriculturists of the said States are free to sell their lands as shown in the revenue records to non-agriculturists /Corporates without obtaining a conversion order. 7.3.9. ....
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....ion of land to the developer, but in fact possession was never handed over to the developer for further activities of development. Therefore, there was no transfer of asset in favour of the developer at any point of time. In the instant case, undisputedly agricultural activities are being undertaken on the disputed land till date. Therefore, from any angle, it cannot be said that there is any transfer of capital asset on which capital gain has accrued to the assessees. In light of these facts, we are of the view that the CIT(Appeals) has properly adjudicated the issue and we do not find any mistake therein. We accordingly confirm the order of the CIT(Appeals)." 22. Further, in assessee's own case, the issue came before this Tribunal in ITA No. 1464 & 1465/B/2008 & 262/B/2009 wherein vide order dated 30.12.2009 it was held as under:- "2. Brief facts of the case are as follows. There was a survey u/s.133A in the case of Shri. M. N. Manjunath, proprietor of P. M. Concrete Blocks at his business premises at No. 119, Sheshagirihalli, Bidadi Hobli, Ramanagaram Taluk on 25.1.2006. During the course of survey action, certain copies of sale deeds and sale agreements in respect of purcha....
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....gara Sub-division for conversion of the land and the same was approved by orders, dt.15.5.1995 in respect of two owners and order dt.20.12.1995 in respect of the one owner. Subsequent to the conversion of the land, the original owners had formed residential layouts with the approval of the Manchanayakanahalli Grama Panchayat. The relevant portion of the GPAs detailing the ownership of the property, conversion of the land from agricultural to nonagricultural residential purpose are briefly set out by the Assessing Officer in his order at pages 5 to 7. In the GPA executed by Narasimhaiah and Chikkaputtaiah, they stated that they are the owners of the land admeasuring 3 acres each and further stated that they had applied for conversion of the land from agricultural to non-agricultural residential purpose and the Assistant Commissioner, Ramanagara Sub-division, vide his order dt.15.5.95 had granted their request and now the land had been converted to non-agricultural purpose and subsequent to the conversion, they stated they had formed residential layout obtaining from Manchanayakanahalli Grama Panchayat and since they were unable to manage the affairs in respect of the sale of the sit....
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....n the period of two years. He further held this fact has been confirmed by the recital of the agreement entered into between the assessee and the Tibetan Childrens' Village wherein it is clearly stated that the land was converted in 1995-96 by virtue of the orders passed by the Assistant Commissioner, Ramanagara Sub-Division. Thereafter the schedule of the properties are detailed out at pages 9 and 10 of the assessment order. This property was purchased by Tibetan Childrens' Village through their representative Mr. Tenzin Chodak Gyalpo. A statement u/s.131 was recorded from him. 5. It was always the case of the assessee that though the land was converted into non-agricultural purpose, the assessee was continuing the agricultural activities and there were standing crops on the land purchased by the Tibetan Childrens' Village and, therefore, in the light of clause (10) of the conversion order, i.e., if the land is not used for the intended purpose within two years from the date of the order, it will be deemed to be restored to the original position, is an established fact. So as to verify the same, in the statement, Mr. Tenzin Chodak Gyalpo, was specifically asked whether at the ti....
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.... representative was that though the lands were converted, agricultural activities were going on. 7. The Assessing Officer held though the asessee's representative was harping that the agricultural activities were carried on till the date of the sale, even after availing more than 20 months since the survey action u/s.133A, the assessee could not adduce any evidence in support of the above claim. The Assessing Officer further noted as per the local enquiries conducted by the Income-tax Inspector ('ITI' for short), the land under reference and also the adjacent lands were not put to use for agricultural purposes for quite a long time as formation of layouts were under progress. He held there is no strength in the assessee's argument that he had carried on agricultural activities till the date of the sale. 8. Coming to the next point how the lands were utilized subsequent to transfer, he noted that the purchaser Tibetan Childrens' Village, bought the land only for the purpose of nonagricultural activities. The land was to be utilized for construction of schools for Tibetans. Tibetan Childrens' Village had purchased about 160 acres of land located in Sheshagirihalli and Manchanayak....
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....) from the capital gains tax. These points were considered by the various decisions of the Apex court and High Courts and he, particularly relied on the following decisions : i) CIT v. Gemini Pictures P. Ltd., (1996) 220 ITR 43 (SC); ii) Mahaveer Enterprises v. Union of India (2000) 224 ITR 789 (Raj); iii) CWT v. Officer-in-charge (Court of Wards) Paigah (1976) 105 ITR 133 (SC); iv) G. M. Omer Khan v. Addl. CIT (1992) 196 ITR 269 (SC); v) Smt. Sarifabibi Mohmed Brahim v. CIT (1993) 204 ITR 631(SC) On the basis of the above, the assessee was liable to pay capital gains tax. Aggrieved by the above assessee approached the first appellate authority. 10. The Commissioner of Income-tax (Appeals) vide page 3 of his order records the report of the Assessing Officer, dt.13.6.2008 which is as under : "None of the above factual position as contented by the LAO is disputed. However, what is disputed is his conclusion to contend that there was no agricultural cultivation carried out by the appellant. Though the lands were converted for non-agricultural purposes, it was never put to use for such converted purposes. This is evident from the governmental records, in the form of RTC....
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....ons in the dates of issuance of notice by the revenue authorities, area of the land sold, schedule of the property, date of conversion of the land etc., the facts are identical in the case of Dasappa in ITA.1465/Bang/2008. 14. The learned representative for the assessee produced a written submission in the case of Dasappa. Briefly his submissions are as under. The assessee sold 13 acres, 29 guntas lands in sy. No. 77, Seshagirihalli, Bidadi Hobli on 7.4.2004 for a total consideration of Rs. 137.25 lakhs to M/s. Tibetan Childrens' Village. These lands were bought by the assessee in the year 1995. These lands converted to non-agricultural and residential purposes on 29.4.1999 except an area of 31 guntas which was converted on 10.5.2004. The assessee claimed that the lands were sold as agricultural lands and, therefore, the assessee was not exigible to tax within the definition of capital asset as given in section 2(14) of the IT Act. However, the Assessing Officer did not accept the same, for the reason that the lands were not agricultural lands since they were converted for non-agricultural and residential purpose. According to the assessee, Assessing Officer did not consider the ....
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....venue jurisdiction of the State Government and this land has thus been shown to have been used for agricultural cultivation. The assessee's representative brought our attention to the paper book dt.27.1.1999, particularly page 4 which is the conversion order issued by the Assistant Commissioner, Ramanagara SubDivision. He particularly brought our attention to the condition No. 5 which stipulates as under : "5. In terms of Bangalore Mahanagar Regional Development Authority Order No. APABT/14-95-96 dt.22.7.85 prior permission be obtained before commencement of work" and submitted such permission has never been sought and obtained before commencement of the work. He further brought our attention to clause (10) which reads as under : "It may be construed that this converted land must be utilized for the purpose permission has been accorded within two years." It is an admitted position that no further action was taken by obtaining permission from the BMRDA or the assessee had complied with condition No. 10. No activity was undertaken within the two years. In other words the conversion has been now been deemed to have been cancelled. The assessee's representative further submitte....
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....s remained agricultural land which is also a fact not taken note off by the Assessing Officer. Within two years of the conversion, the land should have been utilized for the purpose it was intended ie., nonagricultural purpose. It was never acted upon. The assessee utilized the land for agricultural purpose only. On the premises of the above facts the assessee's representative submitted the decision of the Hon'ble Supreme Court in the case of CWT v. Officer-in-charge (Court of Wards) Paigah (1976) 105 ITR 133 is clearly in assessee's favour. The Hon'ble Supreme Court laid down the broad parameters as to what could be considered as agricultural land. He submitted originally the land was an agricultural land. The original owners made a request for conversion in order to fetch good price. But the converted land was never used for the intended purpose as per the conversion order which stipulates that if the land is not put to use for the intended purpose within two years from the date of conversion, then the land reverts to the original status, which was confirmed by the Assistant Commissioner, Ramanagara Sub Division in his sworn statement. In other words, the land on ....
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....oduced a letter from Tibetan Childrens' Village authorities dt.1.3.2005 that was addressed to Manchanayakanahalli Grama Panchayat to the effect that the Tibetan Childrens' Village authorities purchased land to the extent of 143 acres and 27 guntas and the land was converted for residential purpose between 1996 and 1999 in respect of different parts of the land. Though the conversion order was issued for the purpose of forming residential layout, no such activity was formed by the original owners. The land also remained on the records of the land revenue authorities as same. Further the Tibetan Childrens' Village authorities informed that they are intending to carry out educational activity. Therefore, they requested for renewal of the conversion order, because there was no application for renewal from the assessee, after the lapse of two years and therefore, the Tibetan Childrens' Village authorities intimated the concerned authorities that that they are willing to pay the requisite charges and conversion fees for renewal of the orders. Bringing our attention to the agreement for sale, the assessee's representative submitted the sale deed was dated 26.9.1995, therefore, he submitte....
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....n-agricultural use does not make the land non-agricultural. If the permission is not obtained before the date of sale and fetching of high price is not the potential criteria. He further submitted the smallness of the income derived from sale of agricultural land is also not relevant. 21. The learned counsel further relied on the decision of the Gujarat High Court in the case of Gordhanbhai Kahandas Dalwadi v. Commissioner of Income-tax (1981) 127 ITR 664 and submitted the mere obtaining of conversion order of agricultural land into non-agricultural land is not sufficient to hold that the nature of the agricultural land has been changed. In this case, assessee's representative submitted the assessee obtained permission from the land revenue authorities u/s.63 of the Bombay Tenancy and agricultural Lands Act for putting the land into non-agricultural activities. The land was situated near Amul dairy, Ganesh Dugghalaya and Charotar Tobacco Company. Charotar Iron Factory, Krishna Iron Factory and other industrial concerns were also in the vicinity of the land. In the Land Records, no entry of change i.e., from agricultural to nonagricultural was made and, therefore, looking to t....
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....lly a question of fact to be determined by the cumulative effect of all the relevant factors. The burden of establishing the above fact by cogent and reliable evidence that the land was used as agricultural land or was capable of being used so at the relevant point of the time is on the assessee. If the assessee carried out agricultural activities on the date of the transfer and if it is proved then it is agricultural land. Otherwise it is a capital asset within the meaning of section 2(14) of the Income tax Act, 1961. Even if at this stage the assessee, the learned DR submitted, is not in a position to prove that he has not carried out any agricultural activity, then it is a conclusive proof that the assessee had not carried out any agricultural activity till the date of transfer. Even after presuming but not admitting that the assessee had carried out agricultural activities, the land has to be treated as nonagricultural in character. 25. The assessee has not produced any evidence in support of the claim that he had carried out agricultural activity on the land under reference till the date of the transfer except furnishing of RTC obtained from village accountant. Though this i....
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....was purely non-agricultural in nature at the time of sale; h) The assessee had not shown any income from the so-claimed agricultural activity in the return filed by the assessee for Assessment Years 1995-96 to 2004-05. This was sufficient proof to show that no income from agricultural activities was derived by the assessee. In the premises of the above facts, the learned DR relying on the following judgements submitted the appeal by the assessee is liable to be dismissed and the appeal by the revenue is to be allowed : i) Merchant (ZM) v. Commissioner of Income-tax - 177 ITR 512(Bom); ii) Fazalbhoy Investment Co. P. Ltd., v. Commissioner of Income-tax - 176 ITR 523 (Bom); iii) Commissioner of Income-tax v. Shiv Chand Satnam Paul - 231 ITR 663 (P&H) 26. Replying to the above, the learned DR submitted the assessee made an application to the land revenue authorities to get the records changed from agricultural to non-agricultural lands. Subsequently, the buyer, the Tibetan Children's Village, paid non-agricultural tax on the land and also the penalty to get the land converted from agricultural to non-agricultural. It shows that the intention of the assessee at the time....
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....d. The learned DR submitted Section 80 the Karnataka Land Reforms Act, 1961, bars transfer of agricultural land to a non-agriculturist. If it is violated then u/s.84 of the above Act, uncultivated land may be required to be cultivated at the instance of the government and in the instant case of the assessees, no such steps have been taken by the government which goes to prove that the land was utilized for the converted purpose. In the instant case of the assessee, the purchaser is undisputedly the Tibetan Children's Village and the purchase was for starting educational institutions and in the long run to get recognition as a deemed university. 28. The learned DR further submitted in the case reported in Musthafa Ummer and Another v. Appropriate Authority and Others (2002) 254 ITR 135, the Hon'ble Kerala High Court held that the land ceases to be agricultural land when the assessee agrees to sell the same for use as house sites. The Hon'ble Supreme Court in the case of Sarifabibi Mohmed Ibrahim and Others v. Commissioner of Income-tax (1993) 204 ITR 631, held all these factors must be cumulatively considered. So also in the case of Gemini Pictures (supra). 29. The l....
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.... this time, there was no layout formed except the building constructed by the Tibetan Children's Village for their office. The land was agreed to be sold to Tibetan Children's Village in the early part of 2003-04. If the land was to be registered in their name, as per the rules the land need to be converted to nonagricultural purpose without which it could not have been registered in their name. The conversion charges were thus paid by them after registration. But what was being held by the assessee as on the date of agreement was agricultural land. He further submitted that revenue records were not changed at the time of sale of the land by assessee. This fact is evident from the fact that the land is mentioned by survey number and not the khata number, in the sale deed. The survey numbers is used for agricultural land and revenue khata number is used for nonagricultural land. On the sale date, lands are identified as 'survey numbers' and not 'khata numbers' which leads to an irresistible conclusion that in government records the land remained as agricultural land. The decision of the Supreme Court in the case of Officer-in-charge, Court of Wards (105 ITR 1....
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....ore us and the cases cited by both the parties, we are of the view that the appeal by all the assessees are to be allowed. The revenue mainly relies among others on Sections 80 and 84 of the Karnataka Land Reforms Act, 1961 to show that agricultural land cannot be transferred to a non-agriculturist. The above section read as under : Section 80 : Transfer to non-agriculturists barred. -(1)(a). No sale (including sales in execution of a decree of a civil court or for recovery of arrears of land revenue or for sums recoverable as arrears of land revenue), gift or exchange or lease of any land or interest therein, or (b) no mortgage of any land or interest therein, in which the possession of the mortgaged property is delivered to the mortgagee, shall be lawful in favour of a person. - (i) who is not an agriculturist, or; (ii) ..... By virtue of amendment brought to the section w.e.f.25.11.1980 the word 'valid' was changed to 'lawful'. In other words, prior to the amendment, the transfer to non-agriculturist was not valid, whereas after the amendment, the transfer is valid, but sale is unlawful. The intended purpose of the above change is that the transfer ....
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....nd Revenue authorities. In the absence of renewal application from earlier owners, they requested to renew the conversion granted and further submitted that they are willing to pay the requisite charges and fees for renewal of the conversion orders which impliedly proves the assessees stand that no taxes had been paid towards non-agricultural land taxes. There is a specific averment also in the written submission of the assessee (Dasappa), which is also applicable to other cases herein as well) that there was no change in the land records at the time of sale of land and the survey number used in the sale deeds were old survey numbers and not the Khata numbers. Another evidence produced by the assessee to show that the agricultural character of the land had not changed is the certificate issued by the village accountant in all the above assessees' case to the effect that crops were grown in the lands in question during the years under appeal. This will lead to no different conclusion either in assessee's favour or of revenue. This alone cannot lead to a conclusion in favour of neither of the parties. The next objection of the revenue is that the certificates issued by the ....
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.... assessee, it could not be treated as agricultural land. Coming to the instant case of the assessees i.e., Thimmegowda and Suresh gowda for the Assessment Year 2005-06, agricultural income was estimated at Rs. 53 lakhs and for Assessment Year 2004-05, ACIT estimated the income of the assessee group at Rs. 56 lakhs. Hence, on facts this decision is distinguishable. 35. Coming to the decision relied upon by the DR in the case of Fazalbhoy Investment Co. P. Ltd., v. Commissioner of Incometax - 176 ITR 523 (Bom), in this case land was acquired by the Government in the year 1951. A certificate was issued to the effect that the land was used for growing paddy during the Assessment Year 1941-42 and 1942-43. The Tribunal held in the absence of any evidence to establish that the land was agricultural, the Hon'ble High Court held that this is a reasonable conclusion because paddy had been grown on the land said land in 1941-42 and 1942-43 and because it ignored the Tahsildar's certificate which indicated that the said land was agricultural land till the year 1966. Coming to the instant case, assessee's claim that the assessee was using the land for agricultural purposes is with....
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....n the revenue records as agricultural land was not conclusive and such entries could raise only a rebuttable presumption. The Hon'ble Supreme Court further held, the character of the land and the purpose for which it meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What really is to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality which will only affect its valuation as part of "assets", but its actual condition and intender user which has to be seen for purposes of exemption from Wealth-tax. If there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be "agricultural land" for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence, the Hon'ble Supreme Court held. Coming to the instant case of the assessee, it is not disputed that in the revenu....
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....and the Tribunal, should be 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 factors in the case. While coming to the above conclusion, the Hon'ble High Court considered the following facts. The presumption for non-agricultural use 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, which compels to conclude that what the assessee held at the time of sale was agricultural land. It is true the facts is on border line, but the ev....
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....nt was not acted upon and therefore, he is not entitled to any income. However, the appellant has led no evidence in support of his contention. He has also not given any confirmation from the other party of the agreement that the lease agreement was not acted upon. Therefore, the action of the Assessing Officer in bringing to tax the above sum on the basis of lease agreement signed by both the parties has to be confirmed. This ground of appeal is, therefore, dismissed." The ground was dismissed by the Commissioner of Incometax(A) as no evidence was produced before him, in support of the contention that in spite of the entitlement as per the agreement the assessee did not receive it. Suffice to say that this finding of the Commissioner of Income-tax(A) has not been rebutted before us and no evidence has been produced before us to show that the finding of the Commissioner of Income-tax(A) is wrong. Appeal by the assessee on this ground fails and it is dismissed. 43. In the result, appeal by the assessee is allowed in part. ITA.1465/Bang/2008 - By the assessee, Shri. Dasappa - Assessment Year.2005-06 : 44. The first ground is general in nature and does not call for any specifi....
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.... assessee as agricultural land and assessee is entitled to get exemption from tax., 25. The Hyderabad Bench of the Tribunal in Tulla Veerender v. Addl. CIT (160 TTJ 435)(Hyd) held that when the land which does not fall under the provisions of section 2(14)(iii) of the Act and assessee is engaged in agricultural operations in such land and also being specific agricultural land in the revenue records, transfer of such land cannot be considered as a transfer of capital asset. 26. In the case of Harniks Park (P) Ltd. v. ITO (62 SOT 15)(Hyd) the Tribunal held that where land which does not fall under provisions of section 2(14)(iii) and an assessee who is engaged in agricultural operations in agricultural land and also being specified as agricultural land in revenue records, transfers such agricultural land as it is, in such circumstances, such transfer cannot be considered as a transfer of capital asset or transaction relating to sale of land was not an adventure in nature of trade so as to tax 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 ....
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....alli 17.01.2007 55 Page 15 MN Halli 17.01.2007 41/1A Page 16 Devarakagganahalli Not converted 41/1B Page 17 Devarakagganahalli 41/2 Page 18 Devarakagganahalli 41/3 Page 19 Devarakagganahalli 41/4 Page 20 Devarakagganahalli 75 Page 21 Devarakagganahalli 76 Page 22 Devarakagganahalli 77/1 Page 23 Devarakagganahalli 186/ Page 24 Devarakagganahalli P2 Return of income 16/P4; MN Halli arrangements with VBEHCSL 16/P4 Page 8&9 Manchanayakanahalli Agricultural lands Yes Rs. 63 lakhs VBEHCSL 2008- 09 Return of Income Sale deed with Goodlife Shelters Pvt Ltd 206 Page 25 Kiranagere 21.06.2005 Yes Rs. 0.7 crores (16.07.2007) Goodlife Shelters Pvt Ltd. 74 Page 26 Devarakagganahalli 16/P4; Manchanayakanahalli; arrangements with VBEHCSL 16/P1 Page 27 MN Halli Agricultural lands Yes Rs. 3.3 crores (18.04.2007) VBEHCSL 16/P2 Page 28 16/P3 Page 29 16/P4 Page 30 16/P6 Page 31 Return of income 16/P4; MN Halli arrangements with VBEHCSL 16/P4 Page 8&9 Manchanayakanahalli Agricultural lands Yes Rs. 63 lakh VBEHCSL 2009- 10 Return of Income Sale deed with Sri Maruti Education Trust 74 Page 26 MN Halli 2....