TaxTMI 
TaxTMI 
2022 (4) TMI 1624
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.... of Rs. 3,50,630/-, which was filed before the AO on 24-09-2011 and no separate return was filed for the AY.2010-11 consequent to the notice u/s.153A of the Act. 3. For the AY.2011-12, the assessee filed a copy of return u/s.139(1) of the Act on 24-08-2016, which was filed before the AO on 29-12-2012. For AY.2013-14, the assessee filed a copy of return filed u/s.139(1) of the Act on 29-08-2014. For AY.2014-15, the assessee filed a return of income in response to notice issued u/s.153A of the Act, dt.23-07-2016, declaring income of Rs. 2,66,010/-. Thus, the assessee filed new return u/s.153A only for AY.2014-15. Consequently, in these cases, after receiving notice u/s.143(2) of the Act, fresh assessment order u/s.153A r.w.s.143(3) of the Act was framed for all these assessment years. 4. First common ground in all these appeals is with regard to notice u/s.153A of the Act, dt.10-07-2015 which were issued to the assessee all these assessment years to frame the assessment u/s.153A r.w.s.143(3) of the Act is bad in law. 4.1. As seen from the assessment order, there was a search in this case at the premises of the assessee, situated at #344, Ganigara Beedi, 6th Ward, Devanahalli....
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....s there were no incriminating materials found during the course of search and the assessment was completed purely on the basis of change of opinion and not out of the search materials. 6.1. Further it is submitted that the Appellant has declared all the Agricultural income in the Return of Income filed u/s.139(4) and the same was shown under exempt income. The A.O. has not made any addition out of the search materials found during the search conducted u/s.132 of the Act. Further, for the captioned year scrutiny assessment u/s.143(3) has completed vide order dt 06.02.2015. In the said order, the A.O. has disallowed agricultural income of Rs. 19,50,000/- out of Rs 20,03,000/-. The said disallowance of Agricultural income was relating to leasing of Agricultural land. Accordingly the A.O. has assessed total income of Rs. 28,06,663/-. In proceeding u/s.153A, the A.O. has retained the assessed income as per original order passed u/s.143(3). However, in the said order, the A.O. has wrongly arrived total assessed income of Rs. 46,56,630/- instead of Rs. 28,06,633/-. The clerical error is on account of double disallowance of Rs. 19,50,000/- agricultural income, which is added in original....
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.... are valid seized material during the course of search action on the basis of which assessments were framed. He also drew our attention to various observations made by the AO with regard to the seized material specifically following seized materials. 1. The seized document A/GNV/01 pg nos.76-89 being agreement of sale dated 15/11/2010 by smt. Ramukka and Others in favour of G.N.Venugopal for the sale of land measuring 4 acres 31 guntas at Guttahalli village, KasabaHobli, Devanahalli Tq., Bengaluru for a consideration of Rs. 4,77,5000. 2. The seized document A/GNV/01 pg nos.30-36 being Deed of declaration dated 8/6/2011 between Sri Munivenkatappa and others and Sri G N Venugopal for the land measuring 51/2 guntas as Guttahalli village, Kasabahobli, Devanahalli Taluk, Bangalore Rural Dist. 3. The seized document A/GNV/01 pg nos.5-9 being Absolute sale deed dated 2/3/2013 between Smt Rekha Venugopal and Sri B G Channappa for the sale of agricultural land measuring 5 acres at Manepalli Village, Hindupur, A.P for a consideration of Rs.2,50,000/-. The seized document A/GNV/01 pg. nos.10-15 being Absolute sale deed dated 2/3/2013 between Smt G N Venugopal and Sr....
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....enugopal 100 25 Deposit Slip on 31/07/2013, Favouring to Sub Registqr Devanahalli , Applicant name G.N.Venugopal 101 26 Deposit Slip on 31/07/2013, Favouring to Sub Registar Devanahalli , Applicant name G.N.Venugopal 102 27 Deposit Slip on 31/07/2013, Favouring to Sub Registar Devanahalli , Applicant name G.N.Venugopal 103 28 Deposit Slip Favouring to Bharathi , Applicant name G.N.Venugopal 104 29 Deposit Slip on 31/07/2013, Favouring to D C Munishamappa , Applicant name G.N.Venugopal 105 30 Deposit Slip on 31/07/2013, Favouring to Radhamma , Applicant name G.N.Venugopal 106 31 Deposit Slip on 31/07/2013, Favouring to Manjula , Applicant name G.N.Venugopal 107 32 Deposit Slip on 31/07/2013, Favouring to M.Chandrika , Applicant name G.N.Venugopal 108 33 Deposit Slip on 31/07/2013, Favouring to D M Gajendra , Applicant name G.N.Venugopal 109 34 Deposit Slip on 31/07/2013, Favouring to M Ravi Kumar , Applicant name G.N.Venugopal 110 35 Payment details 111 36 Payment details 112 6.7. As seen from the above, there were valid seized material so as to frame assessment for the ....
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....he Appellant has arrived net gain of Rs. 27,33,930/- on sale of Agricultural land and the same is shown as exempt income u/s.2(14) in the Return of Income Filed u/s.139(4) of the Act. 8.4. The A.O. has treated the said net gain as Business Income holding that the sale transaction is a business transaction and income so earned by the Appellant was business income and CIT (A) also re-iterated the same without appreciating the facts that the Appellant sold the Agricultural land and all the conditions are fulfilled as contemplated u/s.2(14) of the IT Act. Further the A.O. has fully relied upon the statement recorded from the Appellant u/s.132 dated 09/10/2014. The A.O. has completely erred in drawing an inference from the above statement to treat the net gain as business income instead of Agricultural income. 8.5. Further the A.O. has stated n the Assessment order that the Appellant was continuously purchasing and selling the land and therefore the said income should constitute as business income under the income Tax Act. It is submitted that this cannot be reason to treat the business income on sale of Agricultural land, without verifying, that the Appellant has really doing bus....
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....gricultural income on sale of Agricultural land, which is exempt from Tax. 8.11. In this regard, the assessee relies on the following decisions: 1. J.K. Bros Constrafin Ltd Vs ITO Ward 2(1) ITA No.1997/Hyd/2017, AY 2013-14 (Hyd Trib), Where it is held that Since the assessee before us has purchased the agricultural land and had sold it as agricultural land and there is no evidence brought on record that ITA No 19$7 of 2017 JK Bros Constrafin Ltd Hyderabad. Page 6 of 6 the assessee has carried on any developmental activities on the said land and since the land was described by the Revenue authorities as agricultural land only, we accept the contention of the assessee and hold that the land, in question, is agricultural land and the profit there from is not taxable in the hands of the assessee either as business income or as capital gains. 2 Mr. Desham Satyanarayana vs. ITO in ITA No 1825/Hyd/2014. (Hyd Trib) dated 20.01.2016 wherein it was held that where a property purchased and sold was agricultural land and there was no intention or evidence that the land was converted to non- agricultural land or put to use for non-agricultural purposes, then it cannot be considered as ....
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....nerated from buying and selling of land to be treated as business income of the assessee. Accordingly, income generated from sale of land by continuously purchasing and selling of land to be treated as business income and he relied on the order of the lower authorities. 9. We have heard the rival submissions and perusal the materials available on record. In these cases, the assessee purchased the landed property and in some assessment years, the assessee used the land for agricultural operation and declared such income from these lands as agricultural income. A.Y. Agricultural income declared in the return of income Rs. 2010-11 3,33,200 2011-12 3,94,340 2012-13 53,000 2013-14 95,850 2014-15 185000 9.1. The assessee in the assessment years under consideration i.e., AYs.2010-11 to 2014-15 sold various lands as below (Annexure-I): 9.2. It is also an admitted fact that this impugned land is situated beyond 8 Kms of the any municipal limits. The only reason by AO to treating the income generated from sale of land is that the assessee has been continuously buying and selling the agricultural land and on this count, he treated the income genera....
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....ake the character of business or an adventure in the nature of trade or realization of capital asset or a mere conversion of asset has to be decided depending upon facts of each case. (iv) In deciding as to whether a particular transaction is an adventure in the nature of trade, the Assessing Officer must consider all the relevant and proved facts and circumstances. Realization of investments consisting of purchase of agricultural land and resale, though profitable are clearly outside the domain of adventure in the nature of trade. (v) The assessee treated the assets as investment in agricultural land. Therefore disposal of the same would not convert, what was a capital accretion, to an adventure in the nature of trade. To make it more clear, sale of agricultural land by the assessee and realisation of good price would not alter the basic nature and characteristic of the transaction. In the case of the assessee, land was acquired by the assessee and reflected in the balance-sheets of the concern as fixed-assets. The assessee never treated the land as stock-in-trade and reflected in profit and loss account (closing stock). There was no element of trade attached to the activ....
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....ase having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. We have to answer the question on a consideration of all of them, a process of evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. It may be stated here that not all the factors or tests would be present or absent in any case and that in each case one or more of the factors may make appearance and that ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances. 9.6. The expression 'agricultural land' is not defined in the Act, and now, whether it is agricultural land or not has to be determined by using the tests or methods laid down by the Courts from time to time. 9.7. The Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT [1993] 204 ITR 631/70 Taxman 301 has approved the decision of a Division Bench of the Gujarat High Court in the case of Siddharth J. Desai (supra) and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the land is an agricultural lan....
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....tural or agricultural user? 12. Whether the land was sold on yardage or on acreage basis? 13. Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield?" 9.8. A reference could be made to the case of CWT v. Officer- incharge (Court of wards) [1976] 105 ITR 133(SC) wherein the Constitution Bench of the Supreme Court stated that the term 'agriculture' and 'agricultural purpose' was not defined in the Indian IT Act and that we must necessarily fall back upon the general sense in which they have been understood in common parlance. The Supreme Court has observed that the term 'agriculture' is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term 'agriculture' receives a wider interpretation both in regard to its operation a....
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.... It is, therefore, obvious that the assessee had abundantly proved that the subject land sold by them was agricultural land not only as classified in the Revenue records, but also it was subjected to the payment of land revenue and that it was actually and ordinarily used for agricultural purpose at the relevant time. 9.11. We may also refer to the case of CIT v. Manilal Somnath [1977] 106 ITR 917(Guj.), wherein the Division Bench of the Gujarat High Court observed that the potential non- agricultural value of the land for which a purchaser may be prepared to pay a large price would not detract from its character as agricultural land on the relevant date of sale. 9.12. We may also refer to the case of Gopal C. Sharma v. CIT [1994] 209 ITR 946/72 Taxman 353(Bom), in which, the case of Smt. Sarifabibi Mohamed Ibrahim (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the Bombay High Court has stated that the profit motive of the assessee selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the p....
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....th an intent to purchase another land within two years had also been permitted to claim exemption under s. 54B of the IT Act, 1961. In the instant case, even though there was no sale as such, the assessee owned agricultural land within the limits of Tirunelveli Corporation and he had not put up any construction thereon, the assessee is entitled to claim exemption from the WT Act for the assessment of wealth-tax. That the land in question is adjacent to the hospital is totally irrelevant." 9.14. Adverting to the facts of the present case, the land in question is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the earlier years as agricultural income. It is also an admitted fact that the AO has not brought on record any evidence to show that the agricultural land was used for nonagricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. It is also an admitted fact that neither the impugned property was subject to any developmental activitie....
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....ommittee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;" 9.17. It is very clear from the above that the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a municipality only, irrespective of the name by which such municipality is called. This fact is further substantiated by the provisions contained under ....
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....nture in the nature of trade. 9.19. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. Accordingly, the ground of appeal raised by the assessee is allowed. 9.20. In view of this, we allow this ground of appeal in all these assessment years. 10. Ground Nos.6,7,8, and 9 in AY.2010-11 (ITA No.303/Bang/20), Ground Nos.5 & 7 in AY.2011-12 (ITA No.304/Bang/2020), Ground Nos.5,6,7,8,9 & 11 in AY.2013-14 (ITA No.215/Bang/2020), Ground Nos.5,6 and 8 in AY.2014-15 (ITA No.306/Bang/2020) are infructuou....