TMI Blog2016 (1) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... corrected, since there is no estoppels against the law. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to exclude the gains arising on sale of impugned land from the total income of the assessee for the year under consideration. - Decided in favour of assessee - I.T.A. No. 2736/Mum/2013 - - - Dated:- 16-12-2015 - Shri B. R. Baskaran (AM) And Sanjay Garg, (JM) For the Appellant : Shri Vimal Punamiya For the Respondent : Shri Abhinay Kumbhar ORDER Per B. R. Baskaran, Accountant Member The appeal filed by the assessee is directed against the order dated 01-02-2013 passed by Ld CIT(A)-23, Mumbai and it relates to the assessment year 2008-09. The assessee is aggrieved by the decision of Ld CIT(A) in rejecting the claim of the assessee that the gain arising on sale of agricultural land is exempt u/s 2(14) of the Act. 2. The facts relating to the issue cited above are stated in brief. The assessee is engaged in the business of trading in Iron Steel and other Ferrous/Non-ferrous metals. He has sold certain agricultural lands during the year under consideration and earned a gain of ₹ 232.23 lakhs. The assessee declared the same as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it is stated that the assessee is engaged in the business of purchase and sale of properties such as residential flats, office premises, lands etc. Accordingly, the Ld CIT(A) came to the conclusion that the buying and selling of properties has been carried out by the assessee as part and parcel of his regular business activity. He further noticed that the assessee has not carried out any agricultural activities on the land. He also observed that the assessee has failed to clarify as to why he has sold the sold within a short span of time. He further noticed that the assessee has been purchasing the land continuously in installments. Accordingly he came to the conclusion that the intention of the assessee was to trade in agricultural land‟ in order to earn quick profits. Accordingly he held that the profits arising on sale of agricultural land is required to be assessed as business income. In this regard, he placed reliance on the decision rendered by Hon ble Bombay High Court in the case of DCIT Vs. Gopal Ramanarayan Kasat (2010)(328 ITR 556), in which the Hon ble Bombay High Court had placed reliance on the decision of Hon ble Supreme Court rendered in the case of G.Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een sold to a person who proposed to use the same for non-agricultural purposes. (c) The assessee did not carry on any agricultural activity and did not generate any agricultural income. (d) The lands have been sold within a short period of six months to one year from the date of purchase. The Ld CIT(A) has also observed about the sale of land before its purchase. The same defines common sense, since a person cannot sell something which he cannot hold. However, the Ld A.R has clarified that the MOU for purchase of land was entered into much earlier to sale. He also clarified that the place called Lavasa is situated far away from the impugned agricultural lands and hence the Ld CIT(A) was not justified in referring to the same. Both these factual aspects were not controverted by the revenue. 7. The Ld CIT(A) also placed reliance on the decision rendered by Hon ble Bombay High Court in the case of Gopal Ramnarayan Kasat (supra). We notice that, in the case of Gopal Ramnarayan Kasat, the assessee therein aggregated the land in series of transactions of purchase of lands. It was further noticed that the said lands have been notified for acquisition by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of the assessee and surrounding circumstances. Though the Ld CIT(A) has placed reliance on the recitals made in the Power of Attorney, yet no material was brought on record to show that the assessee was engaged in the business of the real estate. Hence, we are of the view that the same cannot be taken as a determinative factor, though the same can be used to support the other materials, if any brought on record. 10. The next reason given by Ld CIT(A) is that the land was proposed to be used by the buyer for non-agricultural use. We have already noticed that the lands in question are agricultural lands and they remained as agricultural land at the time of sale of them by the assessee. Hence the prospective use of the same for non-agricultural purposes by the buyer of the land, in our view, cannot change the character of land from agricultural to non-agricultural. We notice that the Ld CIT(A) has gathered this information from the conveyance deed. However, a careful perusal would show that the parties have stated that the impugned lands are capable of being converted into non-agricultural land, meaning thereby, they remained to be the agricultural land at the time of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relating to presence or absence of agricultural activity may be relevant to determine the character of land, but in our view, the same may not be relevant to determine the intention of the assessee to hold the same as investment or as stock in trade. Accordingly, we are of the view that the absence of agricultural activity, per se, will not be useful to determine the intention of the assessee. 14. The next reasoning given by Ld CIT(A) is that the lands have been sold within a short period. There should not be any dispute that the intention of the assessee at the time of purchase of land is to be gathered from the surrounding circumstances, of which the sale of land within short span of time is one of the factor, but the same cannot be conclusive one. The Ld A.R submitted that the assessee has held and disclosed the same as Investment in its books of account. We have earlier noticed that the Ld CIT(A) has not brought on record any material to show that the assessee has been indulging in continuous purchase and sale of lands. In the instant case, the assessee has purchased the lands and sold them in two installments. Hence, in our view, the assessee cannot be held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to get rid of the land. It was further stated that the purchaser of the land also suffered huge losses thereafter. Accordingly, the assessee has tried to substantiate the reasons for selling the land in a short span of time. Be that as it may, as observed by the Hon ble Bombay High Court, the Ld CIT(A) has not brought on record any material to show that the intention of the assessee at the time of purchase of land was to held the same as stock in trade. 15. In view of the foregoing discussions, we are of the view that the intention of the assessee at the time of purchase of lands cannot be held to be holding the same as stock in trade. Accordingly, we agree with the contentions of the Ld A.R that the assessee has held the impugned agricultural lands as investment only and hence they cannot be categorized as Capital asset within the meaning of sec. 2(14) of the Act. Hence the gains arising on sale of the same is not liable for taxation under the provisions of the Act. Even though the assessee has initially declared the same as short term capital gain, yet the same is required to be corrected, since there is no estoppels against the law. 16. Accordingly, we set aside the o ..... 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