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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Mohammed Iqbal Mohd. Afaque Khan Shri M.P. Ahuja
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO. 1421/MUM/2019 (A.Y. 2012-13) Income Tax Officer – 24(2)(5) v. Shri Mohammed Iqbal Mohd. Afaque Khan A-602, plot No. 447 Room No. 611, Piramal Chambers Highland Park CHS Ltd., Lalbaug, Mumbai – 400 012 Opp. Morarji Takka, Panvel -410206 PAN: AACPK7522M (Appellant) (Respondent) Assessee by : None Department by : Shri M.P. Ahuja
Date of Hearing : 23.05.2022 Date of Pronouncement : 21.06.2022
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the revenue against order of Learned Commissioner of Income Tax (Appeals)-36, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.12.2018 for the A.Y. 2012-13.
2 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan 2. Brief facts of the case are, the return of income was filed by the assessee on 31.03.2014 declaring total income of ₹.21,87,030/-. The return of income was filed delayed by twenty (20) months and the case was selected for scrutiny under CASS and notice u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response AR of the assessee attended and submitted the information as called for.
Assessee is an individual derives income from business, share of profit from partnership firm and income from other sources. The Assessing Officer observed that assessee has declared agricultural income in the computation of income. He observed that assessee has earned short term capital gain out of sale of land. Therefore, it is clear that assessee has shown profit from sale of land as agricultural income in the return of income and the above situated lands are within 8 Kilometers of the Municipal Limits of Panvel Municipal Corporation. The Assessing Officer observed that the same is confirmed by DCIT, Panvel Circle, Thane who has assessed the assessee’s joint property owner Shri Arvind Laxman Patil Parker for the A.Y. 2012-13 after making field enquiry by deputing his ward inspector and treated the share of income as short term capital
3 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan gain. The assessee was asked to explain that the assessee has disclosed agricultural income as exempt income and he was asked to submit details of agricultural income as well as details of unsecured loans and sale/purchase of properties during the Financial Year 2011-12 with documentary evidences. The Assessing Officer has issued several notices and opportunities to assessee to explain the above exempt income. However, AR of the assessee attended the hearing on 19.03.2015 and submitted the letter dated 19.03.2015, the same is reproduced below: - “The assessee is a partner in two firms and has shown introduction of additional capital during the year ended 31/03/2012. The bank statement of the assessee has already been submitted to your goodself vide letter dated 16th March 2015. The tally printout of the same showing the details of the entries is attached herewith for your perusal and record. The sources of the same is income in the current year and borrowings. The assessee has shown Agricultural income being Capital Gain income of Rs.3,10,37,840/- on sale of land. The details of the sale of Land are enclosed herewith: a) All agreements of purchase and sale have been provided, b) The details of Land with previous (when owned by us) old and present 7/12 extract, c) All subject Lands 6/12 Mutation Entries of transfers taken place till date, d) Mutation Entries showing details whether there is N.A. done on the land, if yes, when, e) Agricultural Yield Record since the year 1986-87 till date showing the details of “crops grown, yields every year on the said land, etc.
4 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan f) Certificate that the said lands are Agriculture and is beyond the town/city limits of Panvel Municipal Council, and the subject lands comes under Group Gram Panchayat Chiple, and the populations as per census 2011 is 1175 persons. All the above are enclosed herewith for your kind perusal and record. The assessee has declared Agricultural income of Rs.4,85,600/- from land. The details of the same are also enclosed herewith for your perusal and record. The assessee has received loans from various parties. The loan confirmations showing the PAN's of the parties alongwith with the Bank statements of Parties and their ITR has already been submitted to your goodself vide our letter dated 16/03/2015. All the payments are through account payee cheques and reflected in the Bank statements of both the parties. Under the circumstances, no addition can be made u/s. 68 of the Act. Regarding loan repaid to Kings Finance Credit Cropn, all the repayments are by cheque and reflected in the Bank statements. The sources are other borrowings and/ or own sources. The same can be seen from the Bank statements. Two vehicles have been purchased during the year by the assessee. Please find attached herewith the ledger account of the same in the books of the assessee. The Xerox copies of the Bills for the purchase are also enclosed herewith for your perusal and record. All bank statements have already been submitted to your goodself vide our letter dated 16/03/2015. We enclose herewith the details for the bank entries for your perusal and record. The assessee has investments in land. All the lands are agricultural Lands. The other investments are in share, balances with firms, etc. All the assets are productive assets and are exempt from wealth tax. The assessee does not have taxable wealth. Please find enclosed herewith statement showing the details of advance for land and details of what has happened for the same in future. The assessee has taken loan for making investment in land. All costs incurred on ' purchase of an asset, including interest cost is allowed to be considered as part of the cost to determine the correct
5 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan gain made. No section can disallow the deduction of a legitimate cost incurred on the asset. Out of the above Rs.8,85,150/- is cost of improvement on the land sold. Hence the same is deducted. The interest has been considered on Land sold for the last two years. Details is attached. The interest is paid and TDS has been duly deducted.”
After considering the submissions of the assessee, Assessing Officer observed that the attempt was made to claim exempt income u/s. 54B of the Act on the above short term capital gain on transfer of agricultural land. He observed from the chart of purchase and sale of land at Vihighar and Chikle it is seen that the land has been held for less than two years. Under these circumstances, he held that the gain on account of sale of these agricultural land does not qualify for investment and decision u/s. 54B of the Act. Accordingly, he rejected the assessee’s contention. Further, Assessing Officer observed that the assessee purchased this land jointly with others and sold the same within two years. In case the motive of purchase of land was for doing agriculture activity, as claimed by the assessee in the above submission then this land would not have been sold by them. He observed that it clearly shows that assessee made an adventure by purchasing and selling of land in the nature of trade with a motive make profit. It is also fact that assessee has not shown any agricultural income in his return of income for A.Y. 2009-10, 2010-11 and
6 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan 2011-12. It is clear that though some of the land was agricultural as per land records no agricultural activities in reality were carried out by the assessee on this land. Further, he observed that if the agricultural land transferred is situated in rural area there is no capital gain as the agricultural land in rural area is not treated as capital asset. Since the assessee has not fulfilled the conditions prescribed u/s. 54B of the Act assessee is not eligible to claim any benefit and also assessee has not proved that lands were used for agriculture purpose at the relevant time Financial Year 2011-12. Accordingly, he proceeded to make the income from capital gain as short term capital gain to the extent of ₹.3,34,89,782/-.
Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions before him. After considering the detailed submissions Ld.CIT(A) allowed the assessee to claim exemption u/s. 54B of the Act with the following observation: - “4.2.6 After going through the above queries, and finding that the answer to each of the queries raised is answered in favour of the appellant, I have arrived at the conclusion that the lands sold by the assessee were agricultural lands and the capital gains arising from sale of these lands is eligible for deduction u/s 54B as other conditions of section 54B are satisfied and as the assessee has purchased further agricultural lands by investing the entire capital gains. I am also of the opinion that purchase and sale of the agricultural lands by the assessee cannot be considered as an
7 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan
adventure in the nature of trade. It is settled law that incentive provisions of the Income tax Act are required to be interpreted liberally. In my opinion, the purchase and sale of the agricultural lands by the assessee in the facts of this case cannot be considered as an adventure in the nature of trade. As has been discussed in the earlier part of this order the assessee has sold these lands in an atmosphere of anxiety generated by a large number of litigations cropping up in land deals because of the increase in the prices of the agricultural land due to the speedy development taking place in an around the town of Panvel. In the case of Shailesh Gangaram Ramani 89 taxmman.com 76 (Rajkot) the Hon’ble Tribunal has held that where assessee purchased land for agricultural operations but on account of getting good price said land was sold and higher volume of agricultural land was purchased subsequently at different places, assessee could not be regarded as trader of land and, thus, profit arising on sale of land was not taxable as business income. It is also seen that the AO failed to appreciate that agricultural land was possessed by the appellant as fixed asset in his Balance sheet and not as stock in trade wherein land was sold as a whole and not into plots/parts. Accordingly, deduction u/s 54B also being an incentive provision has to be interpreted liberally. The AO was not correct in concluding that no agricultural activity was carried or the lands sold by the assessee and that the appellant was mainly engaged in trading in land based on suspicion and surmises.
AGRICULTURE LAND PURCHASE & SALE SUMMARY - SHORT TERM CAPITAL GAINS STATEMENT CORPS GROWN AS PER 7/12 GAINS IN YEARS REVENUE RECORD Date of conversion VILLAGE SR SURV EY DATE OF DATE OF HONDING PRESENT Held for into NA. Share of Held for 2 N0. NO. PURCHASE SALE PERIOD STATUS less than (Non- the Rice Grass Fallow corps 2 crops Agriculture) Assessee seasons seasons CHIKHLE 1 90/1 AGRICULTURAL NOT YET 26-8-2011 34% 918 _ _ 21-02-2012 6 months 15,51,715 DONE 2 96/2 12 31,01,510 AGRICULTURAL NOT YET 25-10-2010 34% 1734 _ _ 25-10-2011 months DONE VIHIGHA 1 15/3 589. AGRICULTURAL NOT YET 45% - - 03-12-2011 R 15 DONE 15 09-01-2010 23^3,612 months 2 16/14 AGRICULTURAL NOT YET 45% 409.5 _ 13.5 03-12-2011 DONE 3 15/5 20 14-04-2010 45% 661.5 45 45 03-12-2011 18,50,503 NON AGRIL 28-10-2013 months 4 88/3 45% 2538 _ 558 NON-AGRIL 28-10-2013 5 94/3 AGRICULTURAL NOT YET 45% 864 _ 22.5 DONE 22 03-05-2010 1,13,35,515 6 100/2 AGRICULTURAL NOT YET months 45% 693 _ _ DONE 2922012 7 102/2/ 4 AGRICULTURAL NOT YET 45% 517.5 _ _ DONE 8 89/1 23 10,54,744 AGRICULTURAL NOT YET 30-03-2010 45% - 409. 5 - 29-2-2012 months DONE
8 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan
AGRICULTURE LAND PURCHASE & SALE SUMMARY - SHORT TERM CAPITAL GAINS STATEMENT CORPS GROWN AS PER 7/12 GAINS IN YEARS REVENUE RECORD Date of conversion VILLAGE SR SURV EY DATE OF DATE OF HONDING PRESENT Held for into NA. Share of Held for 2 N0. NO. PURCHASE SALE PERIOD STATUS less than (Non- the Rice Grass Fallow corps 2 crops Agriculture) Assessee seasons seasons 9 89/2 20 13,41,976 AGRICULTURAL NOT YET 21-04-2010 45% _ 544. 5 - 03-12-2011 months DONE 10 89/6 24 15^9,733 AGRICULTURAL NOT YET 24-11-2009 45% _ 621 _ 03-12-2011 months DONE 11 91/1 25 15,50,349 AGRICULTURAL NOT YET 13-1 12009 45% 608 _ _. 03-12-2011 months DONE 12 91/2 25 16,60,824 AGRICULTURAL NOT YET 13-11 2009 45% 643 _ _ 03-12-2011 months DONE 13 100/3 18 20,84,787 AGRICULTURAL NOT YET 03-11-2010 45% 810 _ _ 03-12-2011 months DONE 14 102/2/ 3 29-04-2010 20 15,52,572 AGRICULTURAL NOT YET 45% 630 - - 03-12-2011 months DONE TOTAL 15,51,715 2,93,86,125
4.2.7 In view of the discussion in the earlier paragraphs, out of the 16 Gat numbers of the land sold by the assessee, as per the Table submitted by the appellant reproduced above and respectfully following the decision of the Hon’ble Pune Bench of the Tribunal in the case of Ramesh Narhari Jakhadi 41 ITD 368(Pune) wherein it was held that if the land has been used or the whole of the immediately preceding year and some days of the earlier to the preceding year the requirement of section 54B would be satisfied, I hold in the interest of justice and fair play that the Gat nos. wherein agricultural land was held for 18 months and more would be fulfilling the requirement of section 54B. It is the finding of the courts that where land has been used for cultivation and held as agricultural land over 2 successive seasons which would correspond to a year and a half or 18 months, the basic premise of section 54B would be complied. Hence, the AO is directed to allow deduction u/s 54B to the appellant in Gat nos/lands held for 18 months or more. The Grounds of appeal nos. 2, 4, 5, 6 & 7 is Partly Allowed”
Aggrieved revenue is in appeal before us raising following grounds
in its appeal: -
“1 On the facts and circumstances of the case and in law, the Ld.CIT had allowed the claim of the assessee on account of deduction u/s.54B without appreciating the following facts:
9 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan a. The land which was sold by the assessee never utilized for agricultural purpose and the agriculture operation was not carried out at any point of time. b. The assessee had not offered any agricultural income in the previous years. c. The revenue last record does not indicate anything about the name of crop was cultivated. d. The assessee had not held all the plots of land, which are under consideration, for more than 2 years.” 2. “On the facts and circumstances of the case, e Ld.CIT(A) has held the assessee’s land as e agricultural land without considering various factors enumerated by the Hon’ble Supreme Court in the case of Smt. Sarifabibi Mohammed Ibrahim Vs. CIT (1993)204 ITR 631”
At the time of hearing, none appeared on behalf of assessee nor any adjournment was sought, therefore we decided to complete the hearing with the assistance of Ld.DR.
Ld. DR explained the facts from the Assessment Order and order of the First Appellate Authority, however, he relied on the findings of the Assessing Officer.
Considered the Ld.DR submissions and material placed on record, we observe from the record that assessee has purchased the land jointly with others and hold the land for a period of eighteen (18) months and then sold and purchased another agricultural land. The main contention
10 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan of the Assessing Officer is that assessee has not declared any agricultural income or earned any agricultural income during this period and assessee has not brought on record any cultivation carried on by him in the above said land. And revenue is aggrieved that the assessee held the land for less than two years, still Ld.CIT(A) has granted relief to the assessee.
After considering the findings of the Ld.CIT(A) and Ld.CIT(A) gave a detailed finding that during the period of holding of the land two crop seasons were carried and during this period these agricultural land status was remained as agricultural land. Ld.CIT(A) has addressed the following points in detail in his order. i.e. Whether the original land sold are within the municipal limits and he held that the land situated within the municipal area cannot be reason to qualify the same as non-agricultural land and capital gain arising from the urban agricultural land are eligible for deduction u/s. 54B of the Act. Further, he addressed the evidences to establish the carrying of the agricultural activity in the land and he addressed and held that even if no agricultural income is declared from the agricultural land which is shown as agricultural land in the revenue records and was never used for non-agricultural purpose till it was sold, the land is to be treated as agricultural in nature.
11 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan 11. He also addressed whether land sold were held and used as agricultural land for two years and more in order to claim exemption u/s.54B of the Act prior to sale, and whether the agricultural land was purchased from the proceeds of sale of original agricultural lands. After discussing in detail all these aspects he came to the conclusion that agricultural land was held for eighteen months and more would be fulfilling the requirement of section 54B of the Act, where the land was used for cultivation and held as agricultural land for over two successive seasons which would correspond to year and a half, the basic premise of section 54B would be complied by relying on the decision of Ramesh Narahari Jakhadi [41 ITD 368 (Pune)]. After considering detailed findings of the Ld.CIT(A), we do not find any infirmity with the above, therefore we are inclined to dismiss the ground raised by the Revenue.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 21st June, 2022.
Sd/- Sd/- (ABY T. VARKEY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 21.06.2022 Giridhar, Sr.PS
12 ITA NO. 1421/MUM/2021 (A.Y. 2012-13) Shri Mohammed Iqbal Mohd. Afaque Khan Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum