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2015 (7) TMI 934 - ITAT PUNE

2015 (7) TMI 934 - ITAT PUNE - TMI - Sale of agricultural land - AO treating the income from sale of agricultural land as business income also upheld by CIT(A) - assessee claimed the same as exempt from income tax treating the same as agricultural land which is situated at a distance of more than 8 kms from the limit of any municipality - Held that:- There is no dispute to the fact that the land sold in question are agricultural lands. We do not find logic behind the argument of the Revenue that .....

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business to direct or advise the assessee to manage his affairs. We find an identical issue had come up before the Tribunal in the case of the brother of the assessee wherein the Assessing Officer treated the surplus from sale of agricultural land as business income which was held by the CIT(A) as exempt being surplus from sale of agricultural land.

Since in the instant case the assessee has sold the agricultural land in the year 2005 which were held by him for more than 7 years exce .....

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o tax and no addition has been made in orders passed u/s.143(3) for A.Yrs. 2001-02 and 2003-04, therefore, we are of the considered opinion that the CIT(A) was not justified in bringing to tax the surplus on sale of agricultural land as business income. - Decided in favour of assessee.

Treating agriculture income as undisclosed income under section 69A - Held that:- The agricultural income shown by the assessee during the impugned assessment year appears to be on the higher side. It i .....

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8/PN/2011 - Dated:- 24-7-2015 - Shri R.K. Panda and Shri Vikas Awasthy, JJ. For the Petitioner : Shri Sunil Pathak & Shri Nikhil Pathak For the Respondent : Shri P.S. Naik. Singh ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 17-01-2011 of the CIT(A)-I, Pune relating to Assessment Year 2005-06. 2. Grounds of appeal No.1 to 5 by the assessee which relates to a single issue read as under : 1. Without considering facts and circumstances of the c .....

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tal income returned by the assessee and the learned Commissioner of Income Tax (Appeals) -I has erred in confirming the same. 3. The learned Deputy Commissioner of Income Tax, Central Circle- 1(1), Pune (DCIT) has erred in treating agriculture income earned from sale of Agricultural lands of ₹ 65,67,973/- as taxable income, without considering provisions of the law and facts of the case and the learned Commissioner of Income Tax (Appeals) - I has erred in confirming the same. 4. Without co .....

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s of the case, the teamed Deputy Commissioner of Income Tax, Circle-1(1), Pune (DCIT) has erred in holding that assessee is engaged in business activity of purchasing and selling land and assessing the income from sale of agricultural land as taxable income and the learned Commissioner of the income Tax (Appeals) - I has erred in confirming the same. 3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 21-10-2005 declaring total income of ͅ .....

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and along with the group there was a survey action u/s.133A of the I.T. Act, 1961 at the business premises of the assessee. During the said survey it was noticed that the assessee was regularly selling agricultural lands. The assessee is a partner in couple of construction firms engaged in the construction activities. Looking at the frequency of transactions relating to sale of agricultural land the Assessing Officer asked the assessee to clarify as to why the profits on account of agricultural .....

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een assessed in the past, as well. 2. The assessee is not in the business of purchase and sale of lands. The assessee was engaged in construction activity, during the relevant previous year. However, this engagement was as supervision over a construction project. No activity of purchase and sale of land was carried out. No activity of development of land was carried out. 3. Therefore, any conclusion that the assessee is trading in land is not based on facts and circumstances of the case. 4. The .....

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illy, cauliflower, etc. depending upon season. Sugar cane is also grown. 6. The assessee had to purchase residential home and an Office and diversify into some business activity. Substantial financial outlay was required for the purpose of purchase of a residential house and an office place, and capital for business with a view to generate resources, the assessee has sold some of his holding of agricultural lands. 7. Your honour, will therefore, appreciate that the assessee has acquired the land .....

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nation given by the assessee. He noted that the assessee has not furnished the details of agricultural land sold by him till date and has furnished only details of land held by him during the year and the subsequent sale out of these lands. From the details furnished by the assessee the Assessing Officer further noted that the agricultural land has been sub-divided by the assessee and the same has been sold. From the details of land sold subsequent to A.Y. 2004-05 he noted that the frequency of .....

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e. The approximate area of the land purchased by me from various land owners is 40 acres. Out of these lands, I have sold some of the land to various buyers from the year 1995 till date. I have sold approximately 30-32 acres of land. Approximate cost of land purchased is around ₹ 80 Lacs whereas the total considerations of lands sold is around ₹ 310 lakhs. I have purchased lands from nearly 30-35 land owners and sold the lands to nearly 6-8 buyers. Some of the lands purchased by me a .....

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. Till that time, the assessee may be doing some agricultural activities to earn some additional income. He further noted that the assessee s brother is a reputed builder engaged in the construction activity. For one of his firms, the assessee has done supervision activity for which ₹ 10 lakhs has been received during the year. He further noted that the assessee in his statement recorded on 18-12-2007 has stated that in some of the lands his brothers are co-purchasers but the assessee has .....

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f the intension of the assessee was to retain the agricultural land for agricultural activity, he would not have sold the land under any circumstances. Therefore, the activity of the assessee according to the AO is nothing but an adventure in nature of trade. He therefore was of the opinion that the profit on account of such act needs to be taxed under the head. He observed that during the year the assessee has sold the following lands : Sr.No. Details of property Purchases cost Sale considerati .....

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ltural land as business income. It was submitted that the agricultural land sold are situated outside the municipal limits. It was emphasized that the assessee has been engaged in agricultural activity for the past 10 years and the part of the said lands were sold for purchasing the residential house and an office place to diversify his business activities. It was argued that the assessee was only engaged as supervisor in the construction projects and he had not indulged in sale and purchase of .....

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ted that the record of sale and purchase of land prior to 2000 has not been retained by him as it is not necessary to maintain the records for a period of more than 6 years. It was argued that merely because his brother is engaged in the business of construction inference cannot be drawn that the assessee is also engaged himself in the activity of trading of land. The assessee further produced 7/12 extracts, copy of intimation issued u/s.143(1)(a) and a certificate from Talathi that agricultural .....

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different years out of the same. It was also admitted in his statement that he received approximately ₹ 3.10 crore on sale of the above referred lands against the cost of ₹ 80lakhs. It was also admitted in the said statement that the land purchased from 30 to 35 owners were sold to 6 to 8 buyers. AO has also pointed out in the assessment order that during the course of survey it was revealed that assessee was also engaged in the subplotting of the land. However, the same was denied b .....

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ant has not inherited the agriculture land which has been sold. He has purchased them from 1985 onwards from several persons over a period of time. In the process, huge amount was invested. This group was covered under search/ survey after carrying out necessary pre-search investigation. During survey, it was found that the appellant is engaged in regular sale and purchase of land. The appellant admitted and agreed to submit all the details in respect of sale and purchase during the course of th .....

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and therefore, as per the established principle of Taxation Law, the appellant had the legal responsibility cast u/s 143(2) to submit evidences before the Assessing Officer in support of the claim made in the return to the satisfaction of the Assessing Officer and also to submit details and evidences required u/s 142(1) by the Assessing Officer to enable him to arrive at the proper decision. Having failed on both these accounts, he cannot claim relief at any stage. It is also a trite law that t .....

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uired to submit the necessary details in support of the claim but was also required to submit details called for by the Assessing Officer for deriving his satisfaction. The objection raised in respect of the time limit upto which a document is required to be maintained, cannot be entertained as the said restrictions have been imposed in different context and these restrictions are definitely not available for an assessee to obliviate from his legal responsibility, more so when it relates to his .....

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e are generally preserved and retained safely by the involved persons. Therefore, on these considerations, it cannot be accepted that the appellant had any difficulty in obtaining and submitting such details. In such a view of the matter, none compliance on these issues has to be considered adversely assuming that the appellant deliberately prevented its submission as he was knowing that its production before the competent authority would nail him with the taxation of the receipts claimed exempt .....

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d that the lands were sold as he needed money for his personal use as well as the use of his family. It was also claimed that the sale proceeds were used for buying the house, office and diversification of business. On consideration of facts available on record, these are irrelevant issues. If, however, the appellant wanted to convey the compelling circumstances for carrying out these sales, these are not correct. Appellant is definitely a man of means. He is a person who has invested hugely in .....

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m numerous sellers and then sale it to different persons. From whatever details submitted also, it is clear that the sale and purchase were frequent and in certain cases within the same year. The claim of the appellant that he was only an agriculturist and was not associated with real estate is incorrect. It is very clear that the entire group was engaged in real estate and other businesses. Assessee himself admits that he has acted as supervisor with huge earning from this source before becomin .....

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e. In the case of Smt. Parvatidevi and Others Vs. CIT (AP) 164 ITR 675, it has been held that joint purchase of land by four persons and joint sale thereof of lands fit for housing is an adventure of the nature of trade. In the case of Hemchand Hirachand Shah Vs. CIT, Gujarat, 206 ITR 55, it was held that agriculturist purchasing land in a series of transactions and selling them within a reasonable short period would be of the nature of business. In the case of appellant also, it was shown that .....

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rchased and sold by the assessee. He submitted that the main activity of the assessee is agriculture and transportation business. To meet his business requirement the assessee sold some of the agricultural land. Referring to the copy of the partnership deed dated 14-02-2005, a copy of which is placed at pages 33 to 55 of the paper book, he submitted that he has become a partner in the firm Suyog Developers w.e.f., 14-02-2005 and the business of the partnership firm is to carry on the business of .....

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submitted that the AO in the order passed u/s.143(3) on 27-02-2010 had accepted the sale of agricultural land amounting to ₹ 96,61,250/- as exempt and the gain has not been taxed by him. Referring to pages 230 to 237 of the paper book, he drew the attention of the Bench to the copy of the return of income and computation statement with annexures filed giving the above details. Referring to the copies of the assessment orders for A.Yrs. 2001-02 and 2003-04 passed u/s.143(3) and copies of w .....

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he attention of the Bench to the sale of agricultural produce and the expenses incurred for the year 2004-05 and 2005-06. Referring to page 246 of the paper book he drew the attention of the Bench to the certificate obtained from the Talathi stating that the land situated in the village is beyond 8 kms from any municipal corporation and the population of the village is less than 10,000. Referring to page 17 of Paper Book No.2 the Ld. Counsel for the assessee drew the attention of the Bench to th .....

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08/2002 Dhyaneshwar Balwadkar 6,10,000 21.08.1998 3 Chandkhed 140 19/08/2006 Bhagwat 1,65,000 20.04.1998 139,124 4 Chandkhed 135 and 18/10/2006 Dr.Arjun Rao 15,600,000 16.06.2005 450,000 137 11.09.2000 1,380,000 5 Chandkhed 140 23/08/2006 Mistri Santosh 2,00,000 20.04.1998 95,948 12. Referring to the order of the Tribunal in the case of the brother of the assessee for A.Y. 2007-08 vide ITA Nos. 551 and 554/PN/2012 order dated 30-07-2013 he submitted that the Tribunal has dismissed the appeal fil .....

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s neither sub-divided the land into pieces nor done any plotting on the said agricultural land. 13. Relying on the following decisions he submitted that the income arising on sale of agricultural land is not to be treated as business income : 1. Bhogilal H. Patel Vs. CIT reported in 74 ITR 692 (Bom.) 2. CIT Vs. Delhi Apartments Pvt. Ltd., reported in 352 ITR 322 (Del.) 3. S.K. Kaintal reported in 231 CTR 531 (P&H) 4. CIT Vs. Suresh Chand Goyal reported in 298 ITR 277 (MP) 5. CIT Vs. Kasturi .....

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ssee on account of sale of agricultural land has been accepted by the AO in the order passed u/s.143(3) and in the case of the brother of the assessee the Tribunal has allowed exemption by dismissing the appeal filed by the Revenue. Under these circumstances the claim of the assessee that the profit on sale of agricultural land is exempt from tax has to be upheld. 15. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the assessee i .....

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sel for the assessee in his rejoinder referred to the copy of the assessment order for A.Y. 2001-02, a copy of which is placed at pages 215 to 217 of the paper book, and submitted that the assessee has incurred loss. He submitted that the assessee therefore had to sell a part of his agricultural property for business purpose. Referring to the copy of the assessment order for A.Y. 2003-04 he submitted that because of the brought forward loss the business income has been determined by the AO at NI .....

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d be treated as exempt. 17. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. From the various details furnished by the assessee in the paper book at page 242 we find the assessee during the impugned assessment year has sold the agricultural land at ₹ 78,90,000/- and the purchase cost of the same is ₹ .....

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sale of agricultural land as business income which has been upheld by the CIT(A). It is the case of the assessee that the land has been held by him for agricultural purpose for more than 8 years, he is not directly engaged in any land trading and it is only the partnership firm which is trading in land. It is also the case of the assessee that no borrowed fund has been utilised and in the subsequent year the Assessing Officer in the assessment order passed u/s.143(3) has accepted such surplus a .....

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ere was no compelling circumstance to sale the land and therefore, such income has to be taxed as business income. In our opinion, if any income is otherwise exempt from tax as per the statute, the same cannot be brought to tax merely because assessee is a man of means or that the money so obtained has been utilised for some business in an organised manner etc. It is for the assessee to decide his affairs in the way he likes and the Revenue has no business to direct or advise the assessee to man .....

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n this case are that in the year 2000-01 assessee purchased certain agricultural land which has been sold during the year under consideration. In the interregnum, assessee declared agricultural income from the said land during the assessment years 2002-03, 2003-04 and 2004-05. Ostensibly, there is no dispute to the fact that the land in question was an agricultural land. It is also clear from the orders of the authorities below that at no stage, assessee undertook any development activity on suc .....

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has also come to a finding that there was no material to show that land use was sought to be changed from agricultural to non-agricultural land. It is also relevant to note that assessee held the land for almost 7 years before selling it. All the aforesaid features are not in dispute. 13. No doubt, assessee is otherwise engaged in the business of promoters/developers of real estate. Naturally, in the first impression, it might seem that the present transaction of the sale of agricultural was un .....

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(A) has correctly asserted the same. In-fact, there is no such allegation even in the assessment order. Therefore, on this fact, we find no error on the part of the CIT(A) to conclude that in the absence of any development undertaken or rather in the absence of any legally permissible development of the impugned land, the transaction of sale of land cannot be considered as a business transaction. At this point, it would also be appropriate to notice that the lands have been held by the assessee .....

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eciation in land values due to efflux of time. Therefore, case of the Assessing Officer that the lands were purchased to earn quick profit cannot be justified having regard to the period of holding and also the manner in which assessee has held the agricultural lands prior to its sale. 14. We may also refer to the decision of the Pune Bench of the Tribunal in the case of Gopal Kasat (supra) relied upon by the Assessing Officer to say that the income by selling of agricultural land was to be asse .....

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s income and not as capital gains . In the present case, the facts stand on an entirely different footing inasmuch as there is no material to show that at the time of purchase assessee had any intention of doing any business of dealing in agricultural lands. In-fact, in our view, the CIT(A) rightly relied upon the judgement of the Hon ble Bombay High Court in the case of CIT vs. Bombay Oilseeds & Oil Exchange Ltd., 202 ITR 198 (Bom.) to hold that it was for the Revenue to prove that the land .....

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the assessee has sold the agricultural land in the year 2005 which were held by him for more than 7 years except in one case where the same was held for about 4 years, the details of which are extracted at para 11 of the impugned order and since there is also no dispute to the fact that the assessee was deriving regular agricultural income from the same land and further considering the fact that the Assessing Officer in the assessment order for A.Y. 2008-09 passed u/s.143(3) on 27-12-2010 has ac .....

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far as the decision of the Tribunal in the case of Shri Dilip Panraj Sonigara relied on by the Ld. Departmental Representative is concerned, we find the facts in that case are different. In that case, the Tribunal following the decision of the Coordinate Bench of the Tribunal in the case of the brother of the assessee has held that the surplus on such sale of land has to be treated as business income. Since the assessee s land was adjacent to the land sold by his brother and the surplus was hel .....

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bed the claim of the assessee that such income is exempt from tax being sale of agricultural land. Therefore, the decision relied on by the Ld. Departmental Representative is not applicable to the facts of the present case. In this view of the matter the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed. 21. Ground of appeal No.6 by the assessee reads as under : 6. The learned Deputy Commissioner of Income Tax, Central Circle 1(1), Pune (DCIT) has erred in treat .....

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nditure on account of agricultural activity at ₹ 2,40,485/-. Thus, the assessee has shown net agricultural income at ₹ 5,25,630/-. The Assessing Officer confronted the assessee to justify the claim of such huge agricultural income. He further noted from the details filed by the assessee that assessee had shown agricultural income of ₹ 1,50,000/- in A.Y. 2001-02, ₹ 3,26,478/- for A.Y. 2002-03, ₹ 47,011/- for A.Y. 2003-04 and ₹ 4,50,000/- for A.Y. 2004-05. Furth .....

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₹ 7,69,115/- in the profit and loss account and the net profit of ₹ 5,25,630/- the Assessing Officer calculated such net profit margin which works out to 68% with respect to gross receipts. This according to the Assessing Officer was very high. According to him the assessee has received only an amount of ₹ 3 lakhs by cheque and the balance amount was in cash. Therefore, he considered the net agricultural income of the assessee at ₹ 3,25,000/- as reasonable as against S .....

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r during the course of assessment, that the relevant details which can support the claim of agriculture income in terms of receipt and expenses are not completely available. Thereafter however the appellant has tried to cover up the matter by making round about submissions. However, the Assessing Officer after considering the facts and circumstances of the case accepted the agriculture income of ₹ 3,25,000/- and treated the balance income of ₹ 2,00,630/- introduced in the books in th .....

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olding around 40 acres of land. In A.Y. 2004-05, the assessee has declared ₹ 4,50,000/- as agricultural income which was accepted by the Assessing Officer in the summary assessment. He submitted that the disallowance made by the Assessing Officer is not justified and therefore the agricultural income declared by assessee should be accepted. 26. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 27. We have considered the rival arguments made by .....

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