ITO, WARD-2(1)(2),, AHMEDABAD vs. KRINESH FARMS PVT. LTD., AHMEDABAD

This revenue’s appeal and assessee’s cross objection for A.Y. 2008- 09, arise from order of the CIT(A)-2, Ahmedabad dated 26-03-2018, in proceedings under section 143(3) r.w.s. 263 of the Income Tax Act, 1961; in short “the Act”.

This appeal filed by revenue and cross objection filed by assessee are adjudicated together as similar issue and identical facts are involved in these two appeal and cross objection.

The revenue has raised following grounds of appeal:- “1 The Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 5,62,128/- made by the AO and holding that the AO was not justified to consider gain on sale of land as a business income. 1.1 The Ld. CIT(A) has erred in not appreciating the fact that the assessee company had indulged in systematic activity of dealing in land.

The fact in brief is that return of income declaring income of Rs. 4,33,010/- was filed on 25th July, 2009. Thereafter ld. CIT-2 Ahmedabad has passed order u/s. 263 of the Act on 14 May, 2014. The ld. CIT-2 has stated assessment u/s. 143(3) was passed on 22nd October, 2010 determining the total income at Rs. 4,83,010/-. On verification of the case record, it was noticed that assessee derived income from capital gain and interest. The assessee had shown two types of income viz. profit on sale of land Rs. 73/Ahd/2019 A.Y. 2008-09 Page No 3 ITO vs. Krinesh Farms Pvt. Ltd. 8,51,987/- and interest received of Rs. 8,73,389/-. It is further noticed that assessee had claimed long term capital gain exemption of Rs. 5,06,968/- being profit on sale of agricultural land and long capital gain of Rs. 3,45,019/- being profit on sale of agricultural land. It was noticed that the said profit on sale of agricultural land was derived from 15 transactions of sales during the year. The ld. CIT-2 observed that selling of agricultural land was the business of the assessee therefore income of the assessee required to be treated as business income in respect of profit arising on sale of land and income from other sources in respect of interest income. It was further stated that no evidences has been placed that the claim made by the assessee was objectively examined or considered by the Assessing Officer either on record or in the assessment order. Therefore, it was held that the assessment order was erroneous as it was passed without proper examination or inquiry or verification or objective consideration of the claim made by the assessee. In pursuance of the order u/s. 263, the Assessing Officer has completed assessment u/s. 143(3) r.w.s. 263 of the Act on 28th Feb, 2014 stating that as per memorandum of association the main object of the assessee company was that: “To own, occupy, purchase, sell, deal-in, acquire, hold, hire, possess, exchange, 'lease, license, mortgage, improve, grow, develop, manage, control land and to set up agriculture farms, agriculture house, farm house, orchards, gardens and to carry on the business as agriculturist, farmers, millers, gardeners, cultivators, planters, processors in connection with the agricultural and farming activities."

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee stating that assessee has sold 15 agricultural lands purchased in the year 1995-96, 1996-97 and 2000-2001 and computed the income under the head capital gain on the basis of supporting evidences filed by the assessee. The ld. CIT(A) has also stated that the Hon’ble Supreme Court in the case of Sultan Brothers has held that the intention of the assessee is or to decide the nature and character of the income and merely because memorandum of association contains words “purchase and sale” does not mean that appellant is dealing in land. Further, the memorandum also contains the work “ to own and to set up agricultural farm” which has been ignored by the Assessing Officer. The ld. CIT(A) has also referred a number of cases by the different CIT(As’) in which land in the same vicinity of the assessee has been held to be agricultural land.

Heard both the sides and perused the material on record. On perusal of the material it is observed that agricultural land purchased by the assessee company was very old purchased in F.Y. 1995-96 and 1996-97 and the same had been treated as fixed assets. The correctness of the aforesaid facts is demonstrated from the audited accounts of the assessee for the financial year 2007-08 and from the findings of the ld. CIT(A) in the appellate order. It is undisputed fact that assessee has sold the agricultural land as fixed asset in its balance sheet. After perusal of the assessment order, it is observed that without specifically controverting the relevant material and claim of the assessee, the Assessing Officer simply on the basis of memorandum of association has held that income derived from purchase and sale was a business income. In the light of the above facts and circumstances, we do 73/Ahd/2019 A.Y. 2008-09 Page No 5 ITO vs. Krinesh Farms Pvt. Ltd. not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue is dismissed.

In the result, the appeal filed by revenue and cross objection filed assessee both are dismissed. Order pronounced in the open court on 16-12-2020 Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) VICE PRESIDENT ACCOUNTANT MEMBER Ahmedabad : Dated 16/12/2020 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,