TaxTMI 
TaxTMI 
2022 (4) TMI 1609
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.... 2. The Hon'ble Commissioner of Income Tax (Appeals)-11 erred in dismissing the ground relating to assumption of jurisdiction u/s 153A of the Act. 3. The Hon'ble Commissioner of Income Tax (Appeals)-11 ought to have appreciated that the ratio of the Karnataka High Court decision in M/s. Canara Housing Development Company is not applicable on the facts of the present appeal. 4. The Hon'ble Commissioner of Income Tax(Appeals)-11 ought to have held that there being no material/ documents found during the course of search revealing undisclosed income, the initiation of proceedings and passing of the order u/s 153A is bad in law. 5. The Hon'ble Commissioner of Income Tax(Appeals)-11 without considering the material on record and the written submissions, erred in upholding the addition of Rs. 3,38,75,000/- as business income 6. The Hon'ble Commissioner of Income Tax (Appeals)-11 failed to appreciate that mere agreement of sale will not create any right, title or interest in favour of the agreement holder and the amount received is only an `advance' not liable for income tax. 7. The Hon'ble Commissioner of Income Tax(Appeals)....
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....e action was conducted on the residential premise of the Appellant. It is stated that, however, no documents or materials were seized from the Appellant; it was seized only from the premises of SPR Developers Private Limited ('SPR Developers'), in whose case, proceedings were initiated separately. As a result, proceedings under section 153A of the Income-tax Act, 1961 ('the Act') were initiated in the Appellant's case. Proceedings under section 153A are bad in law 7. The ld. AR submitted that assessment under section 153A is bad in law since the additions made do not arise out of any material seized during the search. An assessment can be made under section 153A of the Act only if there is incriminating material. 8. The Appellant submits that the additions in respect of the agricultural lands at Hampapura and Ramnagara Taluk do not emerge from the incriminating material seized during the course of search. Since the additions are made without any reference to incriminating material, the proceedings under section 153A are bad in law. 9. In relation to the above, reliance is placed on the following rulings: a. CIT v. IBC Knowledge Park (69 taxmann.com 108)(Kar); ....
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...., either under Section 143(1))(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search /requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any unearthed during the search. For this purpose. the fetters imposed upon the Assessing Officer by the strict procedure to assume Jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which such section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section I53A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out the Assessing Officer under Sectio....
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....re subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending, in this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151 and determine the total income of the assessee. Such determination in the orders passed under Section 153A it would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made. 35. Thus, it is clear that once a search/requisition is made u/s 132 of the IT Act, the Assessing Officer is bound to issue notice u/s 153A to the assessee to furnish the retur....
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....can be done only on the basis of some incriminating material unearthed during the course of search or requisition all documents or undisclosed income or property discovered in the course of search which are not produced or not already disclosed or made known in the course of original assessment. It is also submitted that in the case of pending assessments, the jurisdiction to make original assessment and assessment u/s. 153A merges into one. Only assessment shall be made separately for each assessment year on the basis findings of search and other material existing or brought on record by the AO. 39. In the case of first category, where the assessment is not pending on the date of initiation of search or making requisition, as the case may be, the assessment u/s. 153A would be in the nature of reassessment. Thus, the legislature has carved out the nature of assessment u/s 153A as assessment or reassessment in two different situations. According to the ld. AR, for AYs 200910 to 2012-13, wherein already assessment orders were passed u/s. 143(3) or time limit to issue notice u/s 143(2) is lapsed, the assessment u/s. 153A of the Act can be framed only on the basis of seized in....
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....Development Co. (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (211Taxman 453 Delhi) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO "shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order. 42. It is important to note that Canara Housing (supra) was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the de....
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....sence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to complete assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 44. In the above decisions it was further considered judgement in the case of Filatex India Ltd. v. CIT-IV ....
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.... should not be arbitrary or made without any relevance or nexus with the seized material, is basically clarificatory that the assessment under Section 153A emanates and starts on the foundation of the search, which is the jurisdictional precondition. The additions cannot and should not be arbitrary...." 46. The above passage in Filatex India Ltd. (supra), paraphrases inter alia, the following line in CIT v. Chetan Das Lachman Das (supra): "This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material". However, the immediately next line in CIT v. Chetan Das Lachman Das (supra)reads: "Obviously an assessment has to be made under this Section only on the basis of seized material....". 47. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 1 ITR-OL 371 (Raj) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same ....
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.... 49. In CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bombay) the question addressed by the Bombay High Court was whether the scope of assessment under Section 153A encompasses additions, not based on any incriminating material found during the course of search? It was held that no addition could be made in respect of the assessments that had become final in the event no incriminating material was found during search. The Bombay High Court relied on the earlier decision in CIT v. M/s. Murli Agro Products Ltd. (supra) and discussed the scope and ambit of the proceedings for assessment and reassessment of total income under Section 153A (1) of the Act and the provisos thereto. One of the specific pleas taken by the Assessee was that if no incriminating material was found during the course of search in respect of an issue then no addition in respect of any issue can be made to the assessment under Sections 153A and 153C. It was observed that the assessment or reassessment under Section 153A arises only when a search has been initiated and conducted and, therefore, "such an assessment has a vital link with the initiation and conduct of ....
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....ions where assessment shall be framed in connection with search u/s 132 or requisition u/s 132A. As per the said provision, notwithstanding anything contained in section 139, 147, 148, 149, 151 and 153, in the case of a person where search was initiated u/s 132 or books of account are requisitioned u/s 132A, the AO shall issue notice to such person requiring him to furnish within the said period as may be mentioned in the notice, the return of income of each assessment Years falling within six assessment years referring to in clause- (b). Sub-clause-(b) of section 153 A, empowers the AO to assess or reassess, the total income of six Assessment Years immediate to preceding assessment year relevant to the previous year in which search is conducted or requisition is made. The proviso provided to section 153A, however made it clear that assessment or reassessment, if any relating to any assessment year falling within the period of six Assessment Years referring to in this sub- section pending on the date of initiation of search u/s 132 or making of the requisition u/s 132A as the case may be shall abate. From the reading of above provision, it is very clear that although the legislatur....
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....ial found during the search action u/s. 132 of the Act to show that the assessee has concealed any part of his income. Once search is conducted u/s. 132 of the Act, the AO is bound to issue notice u/s. 153A and then has to frame assessment order thereafter. Therefore, the AO is justified in issuing notice u/s. 153A of the Act to the assessee in these assessment years. Further, the issue is squarely covered against the assessee by the judgment of jurisdictional High Court in the case of Canara Housing Development Co. Ltd. (supra) wherein it was held as under:- "Section 153A starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of section 153A opens. The time-limit within which the notice under section 148 can be issued, as provided in section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer before issue of notice to reopen the assessment under section 148 has also been excluded in a case ....
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....spect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under section 153A, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the 'total income' of each year and then pass the assessment order." 53. Hence we are of the view that this contention of the learned counsel for the assessee cannot be accepted. As rightly contended by the DR, there is no requirement for an assessment made under section 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending ....
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....required to acquire land and undertake development activities for formation of residential sites to be transferred to the members of VBEHCSL and SBREWA. For this purpose, lands were transferred by the Appellant and his family members in favour of VBEHCSL and SBREWA. 14. The AO noted that one such person who facilitated the purchase and sale of lands by Shri. C H Krishnappa of SPRD and taxed the same in the hands of assessee. He held that since the lands are converted, the surplus arising on transfer of such converted lands is brought to tax as 'Short Term Capital Gains'. Further, based on the admission made by the Appellant during the course of search, the short term capital gains earned by Shri C H Krishnappa are taxed in the hands of the assessee. 15. During the year, the Appellant entered into agreement for sale with SPRD for transfer of converted land situated at Hampapura. The AO opined that since the lands are acquired and sold within a short duration, the activity carried on by the Appellant is 'adventure in the nature of trade' liable for tax under the head 'Income from Business'. As an alternative, the AO also sought to tax the surplus arising on the transfer of land....
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....intended purpose, the lands has automatically restored to its original nature of agriculture land on the expiry of two years. Without prejudice, the arrangement vide unregistered agreements for sale is not a valid transfer for the purpose of the Act 20. It is submitted that the AO has sought to levy tax based on the unregistered agreements for sale ('UAFS') entered by the Appellant with SPR Developers Private Limited ('SPR Developers'). These UAFS do not create any right in favour of SPR Developers. Hence, it cannot be said that income accrues to the Appellant by executing the UAFS. 21. It is also to be noted that the UAFS would not be recognized for the purpose of section 53-A of the Transfer of Property Act, 1882 since for the purposes of those provisions, the agreements for sale are required to be registered for section 53-A to apply. Hence, section 2(47)(v) of the Act would not apply to the UAFS. 22. It is also submitted that merely because the Appellant has reflected the above transaction in his 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 taxa....
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....vidence 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 permissions were obtained from the concerned authority. 24. In light of the above, the ld. AR submitted that it cannot be stated that the Appellant carried on an 'adventure in the nature of trade'. In this regard, reliance is placed on the following rulings: a. Madhya Pradesh HC in CIT v. Suresh Chand Goyal (163 Taxman 54); b. Chennai ITAT in ITO v. Mrs. Chitra Rajendran (81 taxmann.com 155); c. Hyderabad ITAT in Goutham Construc....
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....have heard both the parties and perused the material on record. Similar issue came up for consideration before this Tribunal, in the case of D. Dasappa v. DCIT in ITA Nos.2222 & 2223/Bang/2016 dated 9.2.2022 wherein it was held as under:- "16. We have heard both the parties and perused the material on record. The assessee sold the agricultural land for Rs. 1,95,00,000 by Sale Deed Sale Deed dated 16.7.2007 entered into between 1. Sri. T Prasanna Kumar Gowda (aka T. Prasanna Gowda) S/o. Sri. M Thimme Gowda 2. Smt. K Leelavathi W/o. Sri. M Thimme Gowda & 3. Sri. Dasappa, S/o. Late Sri. Singrigowda (The Vendors) and M/s. Goodlife Shelters Pvt Ltd., having its Registered Office at 25/6, AG 6 Brigade Majestic First Main, Gandhinagar, Bangalore-560009. The description of schedule of properties has already been extracted in the earlier part of this order. 17. According to the AO, it is clear from the description of schedule of properties that the lands are converted from 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, 196....
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....omes questionable. In fact, the land which was hitherto agricultural land does not automatically become a capital asset on the mere fact of conversion to non-agricultural purpose. The land even though converted for non-agricultural purpose continues to be agricultural land and does not become capital asset u/s. 2(14) if agricultural activities are being carried out on such land and no piece of land was used for non-agricultural purpose. 21. In the present case, even though the subject property was converted into non-agricultural land by the competent authority, the assessee continued agricultural operations in converted land and there was no evidence regarding non-agricultural activities brought on record by the AO. On the other hand, the assessee has filed copies of RTC which were obtained much after the date of sale of the land which shows that the crops Ragi and Paddy were cultivated in the said land. In such circumstances, it is not possible to hold that the land was 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 materia....
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....gly, admitted an income of Rs. 14,17,87,795/- as Capital Gains from the above transaction in its original return of Income furnished to the Department. Subsequently, in its revised return of Income dated 15.6.2009, the assessee had admitted income of Rs. 22,90,570/-, on the ground that the capital gains which arose on the sale of the said lands was wrongly offered in the original return in as much as the same was exempt from tax being agricultural lands and hence excluded from the definition of 'capital asset' as per the provisions of s. 2 (14)(iii) of the Act. 7.2.1. The prime issues for consideration before us are two-fold, namely: (i) Whether the land can be treated as agricultural land even after conversion of agricultural land for non- agricultural/residential purpose? (ii) Whether the authorities below were justified in treating 'BIAAPA' as a municipality? 7.2.2. Before analysing the arguments of the assessee on the issue, 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 ....
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....y, the subject property was inspected on 10-42014 by us accompanied by the learned DR, the AO and the learned AR of the assessee. During the course of inspection, we have noticed that the subject property was a part of large track of land having agricultural operations which consist of fully grown up fruits-yielding trees such as mangoes, sapota, coconut, jackfruit, apple, guava etc., appear to be existing in the subject property even on the date of sale. This clearly attributes the assessee's assertion that even on the date of transfer, the subject land was held to be agriculture. In this regard, we would like to refer to the Certificate of Senior Assistant Director of Horticulture (Zilla Panchayat) Devanahalli, Government of Karnataka, dated 23.4.2014 wherein it has been certified as under: "This is to certify that M.R.Seetharam, s/o (of) Late M. S. Ramaiah residing at Gokula House, Dr M. S. Ramaiah Road, Gokula, Bangalore, have, in their land situated in Akkelenahalli - 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-fr....
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....t was obtained in the past, what was the nature of the user of the said portion of the land on the material date; (vi) Whether the land, on the relevant date, had ceased to be put to agricultural use, if so, whether it was put to an alternative use; whether such ceaser and / or alterative user was of a permanent or temporary nature; (vii) Whether the land, though entered in the revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled; whether the owner meant or intended to use it for agricultural purposes? (viii) Whether the land was situated in a developed area; whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? (ix) Whether the land itself was developed by plotting and providing roads and other facilities; (x) Whether there were any previous sales of portions of the land for 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 ....
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....et upon a mere fact of its conversion to non-agricultural purpose. The land even though converted for non-agricultural purpose, continues to be agricultural land and does not become a capital asset u/s 2 (14) of the Act, if agricultural activities were being carried out on such a land as on the date of its sale despite a fact that the land stands converted for non-agricultural purpose. 7.3.2. In the present case, as already discussed, even though the subject property was converted for non-agricultural purpose vide Conversion Order dated 19.7.2004, the assessee continued the agricultural operations in the converted lands which was evident on our site visit and also from the fact that incomes derived from such agricultural operations on the said lands declared by the assessee in its returns of income which were accepted by the Revenue for the AYs 2004-05 to 2009-10. 7.3.3. At this juncture, we would like to refer to the findings of the earlier Bench of this Tribunal 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 di....
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....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 facts of the case clearly point out that the land in question continued to be agricultural land and was put to use as such, prior to sale to Indian Oil Corporation, despite the permission obtained from the concerned authorities, we accept the contention of the assessee and hold that agricultural land in question are not a capital asset and, thus, the levy of capital gains is bad in law. 6.5. Before parting, we feel that mere evidences of Government Notification or orders on a likely use of a particular land would not ipso facto affect or on the same day change the character of the land. For example, the Government has notified many areas for setting up of special economic zones or industrial parks or for infrastructural developments such as road ways and railways. After identifying particular areas, the Government 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 just....
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....ted June 2,2004, it was taken as a sale of capital asset as this sale was after the date of permission for non-agricultural use granted by the Asst. Commissioner, viz., after May 10,2004, whereas the earlier sale transaction dated April 7, 2004, is held to be in respect of an agricultural land. We do not find the reasoning and the principle enunciated by the Tribunal for making a distinction as to whether 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?....
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.... developed area where the potential use of the land as non-agricultural land was very high but the Hon'ble High Court held that the use of the land as nonagricultural is totally immaterial. Entries in the record of rights are good prima facie evidence regarding land being agricultural and if the presumption raised either from actual user of the land or from entries in revenue records is to be rebutted, 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 ....
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....dential purpose before the sale and, therefore, it is immaterial whether the land was situated outside the city limits or beyond 8 KMs. He further held that the cultivation of land till disposal is also irrelevant. He further held that no documentary evidence was produced to the effect that the land converted was treated as agricultural land within the meaning of s. 2 (14)(iii)(b). ......................................................................................................... 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 si....
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....s in Karnataka cannot do so due to the Land Reforms Act prevailing in the State. As such, an agriculturist in Karnataka is on a different footing from his counterparts in other States. If one were to conclude that since the present assessee had obtained a conversion order to enable it to sell its lands to a non- agriculturist (a Corporate), the subject land ceased to be a non- agricultural and, thus, 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 agr....
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.... no regular return for the year under consideration on the date of survey. On the basis of the evidence found, notice u/s.142(1) was issued on 2.2.2006 calling the assessee to file the return on or before 15.2.2006. The assessee filed a belated return on 13.3.2006 declaring income of Rs. 7,67,570/-. There was no offer of any income on account of sale of property or investment in property. To the return 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 ....
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.... assessee to negotiate on terms for and enter upon and conclude any contract, agreement or sale in respect of the scheduled property either in full or in part to any purchaser or purchasers of his choice and gave the assessee an absolute discretion to cancel or repudiate the contracts etc., Further, they authorized the assessee to receive any earnest money or to receive advance and also the full amount 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 ....
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....osition, but he confirmed that Tibetan Childrens' Village had not paid any amount towards the standing crops at the time of sale. Thus the Assessing Officer concluded that since the land was already converted and put to use for formation of layout by the original owners, way back in the financial year 1995-96 itself, the assessee's version that the land was being used for non-agricultural purpose, was 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....
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.... of the assessee, sold for Rs. 14 acres during the financial year 2004-05. He further noted the statement recorded from the buyer, Mr. Tenzin Chodak Gyalpo. In his statement, Mr. Tenzen stated that the intention was to construct building for education like nursing college, degree colleges etc., They were also taking steps to get recognition as a deemed university. The Assessing Officer found that the 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 disp....
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....ently showed that there was a cultivation of ragi". The Commissioner of Income-tax (Appeals) further held that the assessee was not disputing the above facts which was clear from the assessee's rejoinder dt.21.7.08, but only objection of the assessee was that though the assessee's land was converted for non-agricultural purpose, but it was never put to use for such converted purpose which was evident 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,....
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....id not consider the following important factors. Though the conversions were done, it was mandatory that the purpose for which it was converted should be implemented within two years from the date of conversion order or else the conversion order becomes null and void. This fact is highlighted by the statement of the State Government Officer, Shri. Karigowda, Assistant Commissioner, Ramanagar Sub Division, 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 ther....
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....ancelled. The assessee's representative further submitted the assessee never paid any amount as tax to the Grama Panchayat. The learned representative for the assessee brought our attention to paper book pages 10 to 13 i.e., RTC form No. 16 in which the land revenue authorities have mentioned that the assessee had carried on certain agricultural activities. We find at page 12 the land used was to the extent 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 Mbefore 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 pro....
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....ub Division in his sworn statement. In other words, the land on the date of sale was retaining the character of agricultural land. The finding of the Assessing Officer that the RTC entries are not relevant is an archaic finding. Inviting our attention to the written submission before the CIT(A), dt.20.10.08, the assessee's representative submitted since the land which was converted to non-agricultural purposes 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....
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....ive submitted the sale deed was dated 26.9.1995, therefore, he submitted that from the certificate issued by the competent authority on 22.6.2006, it is clear that the land remained as agricultural land and the conversion took place only after the sale took place. The assessee purchased the land from Smt. Narasamma by deed dt.26.9.95. It is almost similar in the case of other assessee where they have purchased 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 al....
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....no entry of change i.e., from agricultural to nonagricultural was made and, therefore, looking to the claim of the assessee that assessee was doing agricultural activity though on a small scale, the Hon'ble High Court held that the nature of the land had not been changed. 22. The learned representative for the assessee submitted the decision relied by the revenue authorities in the case of Commissioner 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 a....
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....the land under reference till the date of the transfer except furnishing of RTC obtained from village accountant. Though this is prima facie evidence of agricultural holdings in the name of the assessee, but this is not sufficient evidence to prove the case of the assessee that he carried out agricultural activities on the land. The assessee has not adduced any evidence in support of the claim of acticultural 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 orig....
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....r, 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 of selling was that the land should be treated as non-agricultural land, and it is clear from the sale deed. The learned DR submitted the RTC certificate was not in existence and even if it existed, 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 ....
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....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 learned DR invited our attention to page 10 and 11 of the assessee's paper book dt.20.2.95 i.e., order of the Addl.Deputy Commissioner, Ramanagaram, 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....
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.... 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 133) (supra) laid down parameters as to what is to be considered as agricultural land. The assessee does not fall into the broad 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 stat....
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....nbsp;(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 is no longer invalid but the person who violates the 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 Com....
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....lage 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 village accountant were randomly 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 spe....
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.... 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 without any evidence 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....
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....ax. 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 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....
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....cultural 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 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....
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....ement 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 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 a....
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....h 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 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 imp....