TMI Blog2014 (5) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court in the case of CIT vs. Debbie Alemao [ 2010 (9) TMI 560 - BOMBAY HIGH COURT] wherein as held that when land is shown by the Govt. as agricultural land and that land is never used as non agricultural land till it was sold. The assessee is not liable for capital gain. The Hon ble High Court has further held that the land has to be treated as agricultural land even though no such agricultural income is shown by the assessee as the assessee stated that the agricultural income received on sale of coconuts grown on the land was just enough to maintain the land and there was no surplus CIT(A) is justified in his action and our interference is not required. We also find from the decision of Karnataka High Court in the case of CIT Anr. vs. Smt. K. Leelavathy [ 2012 (3) TMI 151 - KARNATAKA HIGH COURT] wherein High Court has held that the land sold by the assessee retained its agricultural character till the date of the order permitting non agricultural use and could be treated as capital asset only thereafter. In the instant case there is no evidence on the record that this property in use is converted from agricultural land to non agricultural land moreover the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side and order of Assessing Officer restored. 2. In this case issue nos.1,2,3 and 4 all are interconnected, therefore, disposed by the common order. 2.1. The short facts of the case are that the DDIT(Inv), Panaji was carried out certain investigation. As per the report assessee has sold certain landed property and claimed exemption u/s. 2(14) of the Income Tax Act which the assessee is not entitled for as per the finding of the DDIT (Inv). The assessee has filed the return and claimed the exemption in respect of sale proceeds of ₹ 1,81,50,000 from capital gains within the meaning of section 2(14), being the land sold is an agricultural property. The property was situated at Usgaon-Ganje, Taluka Ponda, Goa. The assessee was given show cause notice. The assessee has filed the copy of agreement of sale on 13.12.1988 and sale deed dated 21.06.2007 for the purchase of agricultural property. The copy of sale deed dated 24.07.2008 in respect of transfer of above property to M/s. Mahalakshimi Real Estate Investment Pvt. Ltd. The assessee has also submitted Form No. I IV issued by the Mamlatdar of Ponda, Goa, in support of his claim for the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any agricultural activities on it and assessee was not having any agricultural income for last years, therefore, the Assessing Officer was of the view that assessee never utilized the land for any cultivation. The assessee acquired land on 21.06.2007 and as it is transferred to M/s. Mahalakshmi Real Estate Investment Pvt. Ltd., Margao, on 24.07.2008 without carrying out any agricultural operation for non-agricultural purpose. The company has purchased the land for non-agricultural purpose i.e. for commercial use, thus it is a business income of the assessee and Assessing Officer has treated the amount of ₹ 1,81,50,000/- is brought to tax under the head Profit Gains from Business/ Profession. 2.2. The matter carried to CIT(A) and CIT(A) has allowed the claim by observing as under: 6.4 In connection with the above findings of ITO in support of his taxing of profit of ₹ 1,75,13,500/- and also various detailed submissions made by the appellant against the said findings, I have to make the following observations: ( i) From the assessment order passed by the ITO I have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains made on the sale of the agricultural land sold during the year by the appellant cannot be also considered as long term/short term capital gains since the ITO failed to establish in the assessment order that the agricultural land sold by the appellant is not an agricultural land. However on the other side the appellant has brought on my record sufficient evidence to establish that the agricultural land sold by him does not come within the ambit of section 2(14) of the Income Tax Act so as to consider it as a capital asset, the sale of which is liable to capital gains tax. 6.5 At the time of hearing of appeal, the appellant produced before me the certificate issued by the Gram Panchayat stating that various fruit bearing trees existed in the agricultural land sold by the appellant. I have however observed that the assessment order passed by the ITO is totally silent as regards the above certificate which was according to the appellant brought on the records of the ITO at the item of hearing of assessment. 6.6 Further the ITO has stated in his assessment order that the appellant had not shown any agricultural income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or was perverse i.e., to say that no prudent man versed in law would come to the said finding. In our view, the finding is neither perverse nor is it arrived at by wrong application of any principle of law and it is not open for us to interfere in the possible finding of fact in an appeal under Section 260A of the Income Tax Act. The Assessing Officer has noted that the said land was entered in the revenue record as an agricultural land i.e. garden or orchard. The ITAT also held that the land was recorded in the revenue records as an agricultural land. This is not disputed by the revenue. It is however contended that the land was not actually used for agricultural in as much as no agricultural income was derived from this land and was not shown by the respondents in their income tax return. This was explained by the respondents by saying that there were coconut trees in the land but the agricultural income derived by sale of the coconuts was just enough to maintain the land and there was no actual surplus. Hence, no agricultural income was shown from this land. In our opinion, if an agricultural operation does not result in generation of surplus that cannot be a ground to say that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position I hold that the land sold during the year is an agricultural land and hence the said land cannot be considered as capital asset by applying provisions of section 2(14) of the Income Tax Act. Consequently the ITO was in error in taxing the gains made by the appellant on sale of said agricultural land. I therefore direct the ITO to delete the addition of ₹ 1,75,13,500/- made to the returned income of the appellant. 2.2. The learned DR submitted before us that the assessee has purchased an agricultural land on 13.12.1988 by agreement of sale but the sale deed was execute on 21.06.2007. The Assessing Officer has verified Form No. I XIV obtained from the Mamlatdar of Ponda Taluka, and it was found that the land was categorised an agricultural land but it does not mention that the land is utilized for agricultural purposes moreover, the Assessing Officer has also verified the Mutation Registration and it found that in the year 1988 the assessee was not shown the occupier of the property. The assessee became owner on 14.08.2008 and property was transferred on 24.07.2008 as per sale deed entered into by the assessee. Therefore, assessee was not owner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l fruit bearing trees existed in the said agricultural land for a number of years. The fruits grown in the land included cashews, mangoes, jack fruits and coconuts. v. The certificate issued by the Sarpanch of Usgao Village Panchayat which was brought on the records of the ITO clearly revealed that the land sold by the appellant was agricultural land and that several fruit bearing trees existed in the property. 3.3 The sole picture which emerges from the above clarifications/ information/details/documents available on the records of the ITO is that the land sold by the appellant was an agricultural land which cannot be treated as a capital asset liable to capital gains on its sale. In this backdrop it was requisite on the part of the ITO not to tax the gain made by the appellant by selling the above land. Instead he passed an assessment order treating the above land as non agricultural land. Further he erroneously considered the gain arising from sale of land as profits from business and added the same to the returned income of the appellant. While taxing the above profit he has made several contentions in support of his action. In this conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO in para 5.4 of his order in respect of not bringing of certain evidences on his record by the appellant, the appellant would like to emphasize that carrying on of agricultural operations is not synonymous with the carrying on of business activity. The ITO while requiring the receipts/bills in support of agricultural expenses should have kept in mind that he is not assessing the business income of the assessee. No agriculturist would be in a position to submit the details of above nature to the tax authorities as the Income Tax Act does not require him to keep records for the purpose of generating the said details. Further it would be next to impossible for any agriculturist to make available the said details after the expiry of almost three years from the date of sale of the land. Notwithstanding the above position, the ITO cannot treat the agricultural land as non agricultural land just because the details mentioned above have not been produced for his verification. 3.9 In connection with the contention of the ITO made in para 5.6 of the order that the appellant has not furnished details of any agricultural income derived by him for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial and the sale of land will not attract capital gains tax. 3.11 Further The ITO in his assessment order passed for the year has made remarks over the of sale deed dated 2 1/06/2007 executed by the appellant with the vendor of the land. In para 5.5 of his order the ITO has charged the appellant for fabricating the sale deed by mentioning therein that he purchased the property covered by the above sale deed in 1988. According to the ITO this has been done by the appellant to claim exemption and avoid tax on capital gains which may arise on sale of the property as there in no valid reason to substantiate the facts why the formal sale deed was executed only in the year 2007 and not in the year 1988. The ITO has further stated that there is no reason why the assessee was to pay money for the disputed property without any formal sale deed in the year 1988. 3.12 In above connection the appellant would like to point out that the ITO has made the above allegations without acquainting himself with the laws relating to the execution of agreements of sale and sale deeds. It is perfectly legal on the part of the seller/purchaser of properties to first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO in the above para in respect of the continuation of the name of the vendor till 14/08/2008 in the mutation register, the appellant would like to clarify that the changes in mutation records are carried out only after the execution of the sale deed. In this regard the appellant would like to further submit that the ownership right can be acquired by the purchaser of the property by executing agreement of sale and by taking over the possession of the property. The changes required to be made in mutation records is simple formality to be carried out at any time for safeguarding the interest of the purchaser against the wrongful acts of any outside third party claiming rights in the concerned property. 3.16 The appellant would also like to bring on record that while making the above statement regarding the acquisition of ownership rights by the appellant by executing the agreement, the ITO completely overlooked the provisions of section 2(47) of Income Tax Act which states that the transfer in relation to capital asset includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the ratios laid down by the jurisdictional Bombay High Court in the case of CIT v. Smt Debbie Alemao Joaquim Alemao reported in 331 ITR 59 cited by the appellant in the earlier para. The ITO has overlooked the fact that the appellant has never carried out in the past any business activity of buying and selling of land. Leave aside this activity of trading in lands the appellant did not carry out any other business activity during the year under consideration or in the past many years. It is therefore not correct on the part of the ITO to consider single transaction of sale of land that too agricultural land as adventure in the nature of trade with the object of earning profit. 3.21 The only reason given by the ITO to tax the gains as business profits is that the land was held by the appellant only for a year and the same has been sold to a company carrying on real estate business. The above land holding period of one year has been wrongly computed by him from the date of execution of sale deed in the year 2007 and not as per the agreement of sale executed in the year 1988. In this connection the appellant had already clarified in the earlier paras that ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.24 The references to the above judgments were very much crucial for the ITO since the Income Tax Department in Goa comes under the jurisdiction of Bombay High Court and any decision of this court has to be mandatorily followed by the Income tax authorities in Goa. Additionally the above two cases decided by the high court pertain to the sale of agricultural lands in Goa. In these judgments the court held that the lands sold by the concerned assessees were agricultural lands on account of their complying with the tests and factors laid down by the Supreme Court for considering any land as agricultural land. The Bombay High Court in the above matters also ruled that the sales of agricultural lands made by the concerned assessees were not liable for payment of capital gains tax. 3.25 Further the appellant would also like to stress that the ratios laid down by the Bombay High Court in the above two cases squarely apply to the present case of the appellant. Considering the applicability of these judgments of the Bombay High Court to the case of the appellant as also in view of the detailed explanations given in the matter by the appellant in earlier paras, the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The matter was in the Court and after vacating stay order the sale deed was executed. We have also verified from the sale deed which is on page 45 to 71 in paper book wherein it has mentioned on page on page 56 of the paper book that Late Dr. Manuel Francisco Dias, and his wife Mrs. Elvira Dias has entered into an agreement with the purchaser therein to sell the said property described in the Scheduled No.1 for consideration of ₹ 6,36,500/- and he has already paid full amount in the year 1988 and possession was handed over to the assessee and now only a formal deed of sale was executed. The assessee also submitted that the property was purchased by agreement to sale in 1988 thereafter said property went under litigation. The matter was in court and after vacation of stay order was issued, sale deed was executed. The Assessing Officer was of the view that the agreement of sale was not executed by the assessee but it is a fake agreement to sale. We find from the above documentary evidence that assessee has first executed the agreement of sale and when assessee has made payment by demand draft and he has given the number of demand draft and it is mentioned in the sale deed also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted property is agricultural land and it is liable to be exemption under section 2(14) of the Income tax Act on capital gain. We find that the assessee has sold agricultural land and this agricultural land is situated in village Panchayat and the same was not coming within 8 kms from notified Municipality. The form No. I XIV shows that the land in question is agricultural land. The agricultural operation were carried in the property till the date it was sold and the several fruits bearing trees were existed in the said agricultural land for a number of years, thus, it is a garden land. Therefore, we are of the view that it is not liable to be a capital gain. We find that the CIT has relied upon the decision of Bombay High Court in the case of CIT vs. Debbie Alemao (2010) 331 ITR 59 wherein the Hon ble Jurisdictional High Court has held that when land is shown by the Govt. as agricultural land and that land is never used as non agricultural land till it was sold. The assessee is not liable for capital gain. The Hon ble High Court has further held that the land has to be treated as agricultural land even though no such agricultural income is shown by the assessee as the assessee st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived the payment of ₹ 10,00,000/- from the said company for the reason stated above is not acceptable for the reasons that the source of CIB information is authentic. ( ii) That it is learnt from local enquiries that the assessee‟s wife is one of the directors of TRTIPL and she was in receipt of rental income from the said company. ( iii) That the assessee is somehow connected to TRITPL which must have entered some transaction in the name of TRITPL and the company must have entered some transaction in the name of the assessee. Hence the transaction reflected in CIB data is treated as genuine and ₹ 10,00,000/- is required to be considered as income of the assessee. In my view the above remarks are made by ITO on suspicion/surmises and here say in order to bring to tax an amount of ₹ 10,00,000/- in the hands of the appellant. In fact the ITO should have brought on record some concrete material to prove that the appellant received ₹ 10,00,000/- from TRITPL. In the absence of this the addition of ₹ 10,00,000/- is totally unjustified. I therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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