SAURABH GARG, DCIT, CC-1(4), ABD., AASHRAM ROAD, AHMEDABAD vs. MEHULKUMAR BALDEVBHAI PATEL, AHMEDABAD

PER ANNAPURNA GUPTA, AM:

The present appeal has been filed by the Revenue against the order of the Office of the Commissioner of Income Tax (Appeals)- 11, Ahmedabad (hereinafter referred to as “CIT(A)”) dated 22.02.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 2 – 2. Ground No. 1 raised by the Revenue reads as under:- 1). Whether in the facts and on the circumstances of the case and in law, the ld.CIT(A) is correct in deleting the addition made on account of Long Term Capital Gain from the sale of capital assets of Rs.6,37,07,746/-, inspite of the fact that, the assessee had already taken the permission from the District Collector under provision of section 63 of the Mumbai Tenancy Administrative and Agricultural land Act, 1948 before sale of the land to M/s. Siddhi Developers, in which assessee himself was a partner

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 3 – accordingly, held that the three parcels of land sold were in nature of capital assets and the assessee was liable for payment of long term capital gains on the said transaction. He accordingly, made addition of Rs.6,37,07,746/- being long term capital gain from the sale of capital assets. 4.1. The Ld. CIT(A), however deleted the addition noting:- i) That the Talati had certified the impugned lands for use for agricultural purposes at para 4.3 of his order wherein he reproduced the certificate of Talati. ii) Form No.12 of the impugned lands reflecting agricultural activity relating to paddy crops being carried out on the impugned lands during FYs 2016-17 to 2018-19. Copy of the Form no.12 was reproduced by the Ld. CIT(A) at para 4.3.1 of his order wherein he recorded the aforesaid fact. 4.2. Noting the above the Ld. CIT(A) held that the AO’s finding that no agricultural activity was being carried out on the said lands was incorrect and he categorically recorded the fact that agricultural activity was established to be carried on in the said land at para 4.3.2 of his order. 4.3. Ld. CIT(A) further noted that, the assessee had taken permission under provision of Section 63 of the Mumbai Tenancy Administration and Agricultural Lands Act, 1948 from the District Collector which was granted to it on 04.02.2016, shortly before the sale of agricultural land in June 2016. Copy of the order was reproduced and his findings as above are contained at para 4.4 of his order.

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 4 – 4.4. Ld. CIT(A) also noted from the records that NA permission was taken for the said lands from the District Collector Ahmedabad on 15.02.2019, on the basis of application of purchaser M/s Siddhi Developers dated 29.07.2016. Copy of the permission order and the above facts are recorded at para 4.5 of the order of the ld. CIT(A). 4.5. On the basis of the above, he found that the land was converted to non-agricultural purpose only after transfer of land, and at the time of transfer of the land, the nature clearly was agricultural. The Ld. CIT(A) further, noted that in the preceding three previous years i.e. AYs 2014-15 to 2016-17, the assessee had earned and offered agricultural income in its return of income filed, which fact is recorded at para 4.8 of his order, and further at para 4.8.1, the Ld. CIT(A) has noted that the assessee had demonstrated the fact of having earned agricultural income during the impugned year to the tune of Rs.6,40,571/-during assessment proceedings by producing copy of agricultural bills to the AO, who had not doubted the genuineness of the same. The Ld. CIT(A) further noted, that in the case of other co-owner of the impugned land ,Sh.Dipak B. Patel, the AO had made no addition in his order passed u/s 143(3) of the Act. The Ld. CIT(A) also referred to the decision of the Jurisdictional High Court in the case of Commissioner of Income-tax Vs. Siddharth J. Desai [1982] 10 taxmann.com 1 (Guj.), wherein it was held that permission u/s 63 of the Bombay Tenancy and Agricultural Lands Act, was obtained by the assessee to sell the lands to the society for residential

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 5 – purposes would not militate against the land continuing to be agricultural on the date of its sale, as the permission was obtained only about two and a half months prior to its sale. That therefore, till the land was held by the assessee its character as agricultural land was not changed either as a result of its reclassification in the revenue records or by the actual alteration of its use. 4.6. Ld. CIT(A) further relied on the decision of the ITAT Ahmedabad Bench in the case of Hiten Tulshibhai Engineer Vs. Income-tax Officer [2023] 157 taxmann.com 81 (Ahmedabad- Trib.), for the same proposition. 4.7. As is evident from the above, the Ld. CIT(A) noted all facts which established that the impugned lands were agricultural lands used for agricultural purposes till the date of transfer of land by the assessee and were converted for non-agricultural purposes only immediately before transfer or thereafter by the approval granted by the Collector for the said purpose, and referring to the decision of the Jurisdictional High Court holding that where facts establish use of lands for agricultural purposes till the date of transfer of land, the agricultural nature of the said land cannot be disturbed merely on the basis of intention of sale, he deleted the addition made by the AO of capital gain amount ting to Rs. 6,37,07,746/- 5. The above facts remained uncontroverted before us ,as also the proposition of law relied upon by the ld. CIT(A). The Ld DR was unable to demonstrate any infirmity in the order of the Ld.CIT(A). In view of the same, we see no reason to interfere in the order of Ld. CIT(A) holding the lands sold by the assessee to

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 6 – be agricultural in nature and therefore not capital assets in terms of Section 2 Sub-section (14) of the Act, so as to treat the capital gains earned thereon as exempt from taxation. 6. Ground of appeal No.1 raised by the revenue is therefore, dismissed. 7. Ground of appeal No.2 raised by the revenue reads as under:- 2). "Whether in the facts and on the circumstances of the case and in law, the ld.CIT(A) is correct in deleting the addition made on account of undisclosed agricultural income of Rs.6,40,571/-."

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 7 – noted that the assessee had furnished agricultural income of similar amount in the preceding three years also i.e. AYs 2014-15 to 2016-17, and further, found the agricultural income earned during the year to be recorded in his books of accounts. He accordingly, directed the AO to delete the addition made of the agricultural income received by the assessee u/s 68 of the Act and further directed him to consider the said agricultural income while calculating the taxable income for rate purposes. 10. It is evident from the above, that the Ld. CIT(A) deleted the addition recording the fact that the evidences produced by the assessee substantiated his claim of having earned agricultural income to the tune of Rs.6.40 lakhs was not doubted by the AO for its genuineness, but however, the AO had made the addition only because the assessee had not disclosed the said agricultural income in his return of income. He deleted the addition noting that, the assessee was regularly returning agricultural income in his return of income filed in past also and had also accounted for the said agricultural income in his books of accounts. Thus, noting that, the nature of the agricultural income earned was sufficiently established by the assessee, he deleted the addition made by the AO of the said income as income from other source u/s 68 of the Act. 11. Before us, ld. DR was unable to controvert the factual findings of Ld. CIT(A) as above ,nor did he point out any infirmity in the order of the Ld.CIT(A).

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 8 – 12. In view of the same, we see no reason to interfere in the order of Ld. CIT(A) deleting the addition made u/s 68 of the Act of Rs.6,40,571/-.

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 9 – Rs.29.28 crores to Essem Infra Pvt. Ltd., and the assessee was Director of the said Company. 16.1. He further found, the assessee to have control over the management and affairs of the Company, noting that the assessee along with Sh. Dipak Baldevbhai Patel had attended 6 Board of Directors meeting of the Company, and the Company had been floated for the purpose of execution and development of residential-cum-commercial project in the name of Maple Tree and consequently, the decision of the promoters of Siddhi Group to exit the Company was a business decision and the consideration received, therefore, could not be treated as capital gain. The Ld. CIT(A) however, found the facts to the contrary. He noted, that the controlling stake in Essem Infra Pvt. Ltd., whose shares the assessee had sold during the year, was with M/s Ganesh Housing Ltd., which was the holding company of Essem Infra Pvt. Ltd. having 75% shares of the said Company. He noted this fact from the annual report of Essem Infra Pvt. Ltd. for AY 2016-17 and 2017-18. 16.2. He further noted, the fact of the control and management of Essem Infra Pvt. Ltd lying with M/s Ganesh Group on the basis of the facts stated in the annual report of Essem Infra Pvt. Ltd., wherein the promoters of M/s Ganesh Group were found to be holding key position in all the important committees such as Nomination Committee, Remuneration Committee and Audit Committee etc. Ld. CIT(A) noted that, the Nomination Committee and Remuneration Committee of Essem Infra Pvt. Ltd. had been

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 10 – awarded various management responsibilities, which are listed at para 6.2.4 of his order, and he found that the promoters of Ganesh Group were holding position in the said Committee. 16.3. Based on the above, he held that the control and management of Essem Infra Pvt. Ltd. was in the hands of Ganesh Group and the assessee was never part of any management and or holding control over the business of the said Company. His factual findings are recorded at para 6.2.3 and 6.2.4 of his order. 16.4. He further noted, that in the case of co-owner Sh. Dipak Baldevbhai Patel, no addition was made by the AO. 17. Noting the above facts, the Ld. CIT(A) deleted the treatment of the capital gains returned by the assessee on the sale of shares of Essem Infra Pvt. Ltd. as business income of the assessee by the AO.

ITA No.926/Ahd/2024 Mehulkumar Baldevbhai Patel - 11 – 20. In effect, appeal of the Revenue is dismissed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 07.07.2026

Sd/- sd/- (SIDDHARTHA NAUTIYAL) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 07/07/2026 Mittali आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad