TMI Blog2014 (10) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out of sale of agricultural land is exempt from tax – thus, there is no scope for levy of any penalty u/s 271(1)(c) – Decided in favour of assessee. - ITA. No. 1803/Hyd/2013 - - - Dated:- 16-9-2014 - Shri B. Ramakotaiah And Smt. Asha Vijayaraghavan,JJ. For the Petitioner : Mr. I. Rama Rao For the Respondent : Mr. Kiran Katta ORDER Per B. Ramakotaiah, A. M. This appeal by assessee is directed against the order of the Ld. CIT(A)-III, Hyderabad dated 8th October, 2013 confirming penalty under section 271(1)(c) levied by the A.O. to an extent of ₹ 23,22,615 on the reason of furnishing of inaccurate particulars. 2. Briefly stated, assessee is a company engaged in the business of real estate, construction of residential and commercial complexes leasing and trading in shares and securities and also leasing agricultural land. While completing the assessment under section 143(3) assessee s claim of exemption of capital gains on sale of agricultural lands of ₹ 69,00,224 was negatived by the A.O. on the reason that assessee is indulging in adventure in the nature of trade in purchase and sale of agricultural lands and accordingly, the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main object clause as per the memorandum of association clearly stating that the company was formed to do and to be in the business of real estate. The relevant clause is reproduced below :- To do and be in Real Estate business and for the purpose by, sell, take early is given on lease or on licenses, maintain, develop, demolish, alter construct, build and turn to account any land or buildings owned or a quiet or leased by the company or in which the company may be interested as owners, lessers, lessees, licensors, licensees, architects, builders, interior decorators and designers, as when does, contractors, property developers, and real estate owners and agents whether such land or building was a development thereof be four or in respect of residential or commercial purposes such as multi-storeyed buildings, complexes, houses, flats, offices, shops, grudges, cinemas, theatres, hotels, restaurants, motels or other structures of whatsoever description including prefabricated and Precast houses, buildings, and erections and to enter into contracts, sub contracts, and arrangements including the raising of finances from whatsoever sources and giving of loans and advances to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee on an assumption the land is fit for agriculture and was used for agriculture purpose by somebody on behalf of the' assessee. The assessee's intention is to be seen. It is on record that there is a series of transactions by which the assessee bought the land and sold for profit. It is a well settled principle that the Court in each case has to determine the nature of transaction with reference to its volume, frequency, continuity and regularity. If a assessee invests money in land intending to hold it for longer period, enjoys its income for some time and then sells at a profit, it would be a clear case of capital accretion and not profit derived from adventure in the nature of trade. Cases of realisation of investment consisting of purchase and sale, though profitable are clearly outside the domain of adventure in the nature of trade. While deciding the character of such transaction one has to see various relevant facts. We have to see whether buying and selling activities is in the course of main business activity of the assessee or incidental thereto. As we discussed earlier, the assessee firm is a private limited company with the main object to deal with in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gap arrangement and the evidence brought on record is not enough to show there was actual agricultural operation. The land was sold for non-agricultural purposes at heavy price. The intention of the assessee was to deal in the land and earn profit. Being so, in our opinion, the facts and circumstances brought on record clearly demonstrate that the assessee is a dealer in real estate and carried on the business of buying and selling of land and income arising out of this activity is nothing but business income and it has to be taxed accordingly. 26. The learned AR made one more argument that in earlier year the Assessing Officer accepted the income arising out of sale of such land as income from agriculture and consistency is to be followed for this assessment year also. More so, in the Wealth-tax returns for A. Ys. 2003-04 till 2007-08 this land was treated as exempted asset for the purpose of Wealth-tax by the Department. We are unable to appreciate this contention of the AR. Time and again it has been stated that each assessment year is a separate unit of assessment and principles of res judicata did not apply to the income-tax proceedings. The- issues in the present year may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leas to get out of its legal liability of paying taxes to the nation. The appellant had deliberately provided incorrect particulars of income in its return. This was further buttressed by false evidence and misleading pleas. The factual matrix clearly indicates that there was no debatable issue involved in this case. It is not a case of bona fide belief, rather as discussed it is a case of deliberate tax evasion strategy. 5.8. In view of the aforementioned facts and circumstances I hold that this is a fit case for levy of penalty and I find no reason to interfere in the order of the assessing officer . 4. Aggrieved, assessee filed appeal before the Tribunal. Ld. Counsel before us reiterating the submissions made before the Ld. CIT(A) submitted that the ITAT confirmed the transaction as an adventure in the nature of trade only on the reason that assessee s memorandum of association contains main clause of transaction in real estate while ignoring the fact that the lands were agricultural lands and sale of agricultural land does not yield any agricultural income. Ld. Counsel relied on the decision of the Coordinate Bench in the case of Tulla Virender vs. ACIT 36 Taxmann.com 545 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar, Shameerpet Mandal which was not controverted. Therefore, there is a bonafide claim made by assessee that sale of agricultural lands does not yield any taxable income by virtue of provisions of section 2(14). Not only that the Hon ble A.P. High Court in the case of Raghotham Reddy vs. ITO 169 ITR 174 has held that the profit or gain resulting from sale of agricultural land is a revenue derived from land i.e., agricultural income within the meaning of clause (1) in section 2 of the I.T. Act. Therefore, based on the jurisdictional High Court Judgment, it can be stated assessee was under bonaifde impression that gain resulting from sale of agricultural land was exempt from tax. It was only A.O. on interpretation of the information available considered that assessee is indulging in adventure in nature of trade which opinion was upheld by the ITAT. The ITAT also accepted that assessee has shown agricultural income and differed from the contention of wealth tax return being accepted. The findings of the ITAT in paras 25 and 26 are as under: 25. . . . . . .Though, in the present case the land registered as agricultural land in Revenue records, payment of land revenue and leasing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is exempt from tax. 7.1. Hon ble Punjab Haryana High Court in the case of CIT vs. Rajeev Bhatara 360 ITR 121 on similar facts, where assessee has claimed that land was away from the municipality of more than 8 KM, consequently exempt from capital gains which contention was not accepted by the Revenue, considered the scope of inaccurate particulars and held as under : There is no evidence to prove that there was deliberate concealment of income by the assessee because the certificate relied upon by the assessee is not acted upon and that itself cannot lead to levy of penalty and it cannot be said that the assessee has committed an offence under section 271(1) (c) of the Act. The department has not proved that the certificate furnished by the assessee was found to be false and thus it is not possible to infer that the assessee has furnished inaccurate particulars of income. The proceedings under section 271(1) (c) of the Act being in the nature of penal proceedings, the onus is on the revenue to prove that the assessee was guilty of offence of deliberate non disclosure and procurement of the multiple certificates from the various authorities, there was no evidence broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty form the municipal limit of Sonepat, there was a confusion regarding correct distance of the property from the municipal limit of Sonepat. Because of this the Tribunal directed the learned CIT(A) to once again determine the correct distance of the property from the municipal limits of Sonepat and thereafter assessment was completed. There was no positive and definite material with the AO to show that the certificate was bogus. The SDE, Maintenance Sub Division, PWD (B R) is a Government authority and this was procured by the assessee for the purpose of assessment which was not acted upon and there was no finding regarding the fact that the authority is not competent person to issue the certificate and there was no finding that the assessee has followed the devices to reduce the tax burden by procuring certificate from the wrong authority. Further, there was no fresh material apart from the material procured in the course of assessment proceedings. Penalty proceedings and assessment proceedings are two independent proceedings and the penalty order cannot be solely based on the reasons given in the original order of assessment. The authorities are expected to consider the fresh m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness but that is not enough for considering penalty proceedings. Assessee has not found the explanation of assessee to be false in assessment. He only deferred on the basis of the memorandum and articles of assessee company and also the fact that very high price was received by assessee at the time of sale. These factors may be enough for bringing amount to tax as business income but cannot establish that assessee has consciously concealed particulars of income or deliberately furnished in accurate particulars of income . Ld. CIT(A) also in our opinion, has wrongly considered that assessee has falsified accounts ignoring the fact that at the time of purchase way back in 3-4 years before, assessee could not have imagined that price will go up and assessee would get a good price for the land purchased. The fact that assessee has shown lands as assets in the books of accounts consistently cannot be brushed aside just because A.O. took a different view which was upheld by ITAT. On the facts of the case, we are of the opinion that it is only a difference of opinion on a debatable issue which does not lead to furnishing of inaccurate particulars. 7.3. Hon ble Apex Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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