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ACIT Versus Shri K. Janardhan

2015 (4) TMI 220 - ITAT HYDERABAD

Sale of agricultural land - AO disallowed the claim of exemption of surplus on sale of agricultural land and brought the same to tax under the head short term capital gains - CIT (A) observed that as per the certificate given by the Director (Planning) HMDA, the land does not fall within the prescribed municipal limits, therefore, cannot be treated as capital asset u/s.2(14)(iii) and to be considered as as agricultural land, thus the gain on sale of land cannot be brought to tax

Held .....

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e seen from the photographs the land seems to be unploughed and unutilized, whereas according to the assessee, the land has been actually put to use for agricultural purpose.

In these circumstances, we are of the opinion that the issue of land being agricultural land has not been proved beyond doubt and hence the issue is set aside to the file of the AO who shall verify all the necessary documents as well as the bills and vouchers for the sale of agricultural produce before concluding .....

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Sridhar ORDER Per Smt. Asha Vijayaraghavan, J.M. This is an appeal filed by the Revenue against the order of the CIT (A) II Hyderabad dated 11.06.2014 passed for A.Y 2007- 08. 2. Briefly stated, assessee is an individual. Originally he filed his return of income for A.Y 2007-08 on 25.07.2007 admitting salary income of ₹ 95,915 and agricultural income of ₹ 14,000. A search and seizure operation u/s 132 were conducted in the case of Sri Venigalla Ananda Prasad, M.D. of M/s Bhavya Cons .....

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le income of ₹ 95,920 for A.Y 2007-08 and agricultural income of ₹ 14,000 and claimed surplus on sale of agricultural land of ₹ 97,50,000 as exempt u/s 10. The said surplus has arisen on the sale of the agricultural land to Varun Constructions during the previous year 2006-07 relevant to A.Y 2007-08. The agricultural land is situated in Sy. No.667, Dundigal Village, Quthbullapur Mandal, Ranga Reddy District which was sold to M/s Varun Constructions. 3. During the course of asse .....

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on of ₹ 97,50,000 under the head capital gains to the returned income of ₹ 95,920 thus arriving at an assessed income of ₹ 98,45,920 and a tax demand of ₹ 56,03,797 (inclusive of interest). The amount of ₹ 95,50,000 is the difference between the sale price ₹ 1,00,00,000 and purchase price of ₹ 2,50,000. 5. AO disallowed the claim of exemption of surplus on sale of agricultural land and brought the same to tax under the head short term capital gains. In d .....

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nd for construction of apartments. • The land was sold at a whooping price of ₹ 1.00 crore per acre which is very high from agricultural land. 6. AO relied on the statements recorded by the DDIT from VRO, Quthbullapur Mandal, MD of Bhavya Constructions and others and on photographs taken during search operations on buyer of land in coming to the conclusion that the landis not agricultural land and the assessee has not carried out agriculture, and tehrefore, the same should be taxed un .....

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of the CIT to para 11 on page 4 of the assessment order, wherein the AO observed that land is not being registered as agricultural land in the revenue records and concluded that the land was put to non-agricultural use by the assessee . • The ld Counsel further submitted that AO seems to have arrived at this conclusion on the basis of verification of revenue records in respect of various survey numbers in the area including Sy. No.667 which are annexed to assessment order. • The ld Co .....

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rds with respect to theland in question no doc with us and no details are the details found in the records. Assessee also submitted that the AO based his opinion on this not so clear information in determing the nature of the land. The phrase no doc with us and no details does not in any way reflect the use of land and does not in any way prove that the land is nonagricultural land and more importantly it does not by any streth of imagination show that the landis not put to agricultural use (or .....

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te from the Director Planning, HMDA clarifying to the effect that theland in Sy.No.667 of Dundigal Village Quthubullapur Mandal is more than 8 kms outside the limits of municipality. In other words, the land is not within 8 kms from the municipal limits. The said clarification is also supported by the certificate from Dy.Collector and Tahsildar, Quthubullapur Mandal. The 1 acre sold by the assessee to Varun Constructions is located in Sy.No.667. • The ld Counsel for the assessee submitted a .....

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whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name or a cantonment board and which has a populationof not less than ten thousand or two it should not be located in any area within such distance not being more than 8 kms from the limits of any municipality as may be notified. • The section in connection with the facts and circumstances of the assessee s case would apply as under: a) The land in Sy.No.667 D .....

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he land in sy. No.667 satisfies both the conditions laid down by section 2(14)(iii) (the certificates from concerned authorities confirm this fact) and as such it is outside the definition of the term capital asset and as such the AO erred in law and on fact in treating it as a capital asset so as to bring to tax the surplus arising on sale of land as short term capital gain. • That the AO is incorrect in stating that the land was ot put to agricultural purposes by the assessee, before sale .....

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cultural use, crops have been grown and agricultural income derived. • That the statement of VRO and photographs relied upon by the AO, do not in any way confirm that the assessee had not carried out any agricultural activity in the said land. • AO bliendly believed the statement of Village Revenue Officer, Bowrampet, Quthbullapur Mandal who stated that as per his knowledge no land were being cultivated in that area and that these lands could not be cultivated easily. The assessee subm .....

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see had no intention to put the land for agricultural purposes, as seen from the photographs . • That the photographs nowhere speak the intentions of an assessee. They are mere pictures taken at a particular point of time and depict things as they stand at that time. • That the land was sold by the assessee in the year 2006-07 (12-03- 2007) relevant to A.Y 2007-08 and search and seizure operations u/s 132 of the I.T. Act,1961 were conducted in the case of Sri Vengilla Ananda Prasad, MD .....

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l. Activity in 2005-06 & 2006-07 and the AO has called for the evidence as above in the year 2013 i.e. almost 7 years after the activity has taken place. • The ld Counsel for the assessee submitted that the AO having accepted the agricultural income in quantum cannot say that the agricultural activity has not been carried out. • AO relied on the fact that the land was sold at a whooping price of ₹ 1.00 crore per acre which is more than the normal price which is sold as per ac .....

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on 2(14) of the Income Tax Act and therefore, is exempt from tax: i) Income Tax Officer vs. P. Prakasam (2014) 62 SOT 127 Chennai ii) Gouthan Constructions Co. vs. Income Tax Officer (2013) 39 taxmann.com 181 (Hyd.Trib). iii) CIT vs. Rajshibhai Meramanbhai Odedra (2014) 42 taxmann.com 497 (Guj.) iv) Land Acquisition Collector cum ACA, Punjab Urban Planning & Dev. Authority (PUDA) vs. Income Tax Officer, TDS Circle Range III Jalandhar (2011) 12 taxmann.com 446 (P&H) . v) CIT vs. Smt. Debb .....

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perations were never carried on and there is no proof submitted by the assessee that the land is located beyond 8 kms from the municipal limits, therefore, liable to short term capital gains, as the period between the purchase and sale is less than 3 years. 9. According to the CIT, the issues for consideration were as follows: (a) Whether the land was agricultural land or not? (b) Whether it is a capital asset u/s.2(14)(iii) or not? (c) Whether the transaction is adventure in nature of trade or .....

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; 14,000/-was shown in his individual return, whereas there was income from ancestral lands taxable in HUF Capacity. , since HUF does not have any other taxable income, no return was filed. The land was purchased in March, 2005, therefore, agricultural income was offered in F.Y.2006-07 for A.Y.2007-08 In his individual return as the land was purchased in individual capacity and carrying out agricultural operations was question of fact. It was pointed out by the ld CIT (A) that enquiries conducte .....

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2(14)(iii), In this regard the definition of capital asset as per the said section was reproduced by the CIT (A). 12. The ld CIT (A) pointed out that the certificate given by Director (Planning) HMDA, dated 23.05.2012 read as under: (This is to state that the land in Sy.Nos.667, 668 and 669 of Dundigal (V), Qutbullapur Manda as on 15-3- 2007 are located outside the Municipal limits and as per the available Base maps in HMDA are at an aerial distance from the following Municipal limits: (a) Appro .....

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e Assessing officer relied on the decision of G.Venkataswamy & Co., Vs. CIT 35 ITR 494 (SC). 15. The CIT (A) opined that the facts of the case of the assessee are totally different. The CIT (A) observed that the assessee is not a trader, he simply invested in land and has received capital accretion out of it, realisation of investment consisting of purchase and sale though profitable are clearly outside the domain of adventure in the nature of trade, the property was sold as it is without an .....

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4/Hyd/2012 dated 05.09.2013 held as under: 10.24 Further we make it clear that when the land which does not jall 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 .....

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ue records namely Adangal/pahani, growing crops like jowar. The land was recorded as agricultural land in purchase and sale' deeds also. Further, the competent Municipal limits and 9.3 kms. outside erstwhile Kukatpally municipality authority has certified that the land is located at 15 kms. Distance outside Greater Hyderabad, therefore, the land cannot be considered as capital asset u/s.2(14)(iii). Therefore, the gain on sale of land cannot be brought to tax . .: 17. Aggrieved, the Departmen .....

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Revenue Officer and the evidence of photographs of the land taken by the investigation wing as per which it clearly indicates that the land is a fallow land not suitable for cultivation . 18. We find that relevant evidence/documents were not produced during the assessment proceedings with respect to carrying out agricultural activities. Also income from sale of agricultural produce (Jowar) was not substantiated by supporting the claim and furnishing bills and vouchers. 19. The photographs which .....

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oubt and hence the issue is set aside to the file of the AO who shall verify all the necessary documents as well as the bills and vouchers for the sale of agricultural produce before concluding whether the land is agricultural land. 21. Further for the exclusion of land from the definition of capital asset, the definition of capital asset is to be as per section 2(14)(iii). Hence, the AO shall verify whether the land is a capital asset as per section 2(14)(iii) which read as follows: (14) " .....

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