RAJENDRA B. RAISONI,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 12, Pune dated 31.03.2015 for the assessment year 2007-08.

Assessee is an individual. A search action u/s 132 of the Act was conducted on 30.04.2010 at the residential / business premises of different members / associates / business concerns of Ashoka Buildcon Group, Nashik. Assessee was also covered by the search

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action. Accordingly, notice u/s 153A of the Act was issued on

25.02.2011 and served on the assessee on 07.03.2011. In response to

the notice, assessee filed the return of income on 17.10.2011 declaring

total income of Rs.10,34,372/- and agricultural income of

Rs.4,07,000/-. Thereafter, the case was taken up for scrutiny and

assessment was framed vide order dated 26.03.2013 passed u/s

143(3) r.w.s. 153A of the Act and the total income was determined at

Rs.1,27,07,120/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who vide order dated31.03.2015 (in appeal

No.PN/CIT(A)-12/NSK CIT(A)-I/339/2013-14) granted partial relief to

the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in

appeal before us and has raised the following grounds :

“1. The appellant had acquired agricultural land at Hinjewadi in the financial year 1999-2000. The appellant had sold the said agricultural land vide sale deed dated 31st August 2006 and 18th December 2006. The appellant had claimed the surplus arising on sale as exempt as according to the appellant the said agricultural land was not the asset within the meaning of section 2(14) of the I. T. Act. The learned AO did not accept the contention of the appellant and brought to tax the surplus under the head "Profit & Gains of Business" instead of Long Term Capital Gain. The honourable CIT(A) confirmed the action of the learned AO treating the surplus as Profits and Gains of Business.

On the facts and in the circumstances of the case and in law the honourable CIT(Appeals) - Pune erred in confirming the action of the learned AO in treating the surplus/profit on sale of agricultural land at Hinjewadi Rs. 1,04,94,502/- as "Profits and Gains of Business" instead of "Long Term Capital Gain" without appreciating the facts of the case in the proper perspective. The appellant hereby prays that the surplus/profit arising on sale of agricultural land may please be treated as long term capital gain.

2.On the facts and in law the honourable CIT(A) erred in confirming the addition of Rs. 4,33,745/- made by the learned AO by treating the long term capital gain / arising from sale of land at "Mann" as Profits & Gains of Business and treating the claim of the appellant of Long Term Capital Gain/Loss as incorrect without appreciating the facts of the case in the proper perspective. The appellant hereby prays that the addition may please be deleted.

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ground No.3. In view of the aforesaid submission of Ld.A.R., ground

No.3 is dismissed as not pressed. Ground Nos.1 and 2 being inter-

connected are considered together.

assessee had sold land at Hinjewadi on a profit of Rs.1,04,94,502/-

and claimed it as exempt. The assessee was asked to justify his

contention. Assessee inter-alia submitted that the land was

agricultural land and was beyond 8 Kms from the boundaries of Pune

Municipal Corporation (PMC) apart from other submissions. The

submissions made by the assessee were not found acceptable to the

AO. AO noted that assessee along with other persons had entered into

deed of conveyance along with Indoglobal Erectors Pvt. Ltd., Pune for

sale of land at Hinjewadi resulting into profit of Rs.1,04,94,502/-

which was claimed as exempt. He noted that in the sale deed nowhere

the land has described as ‘agricultural land’. He also noted that

assessee had not substantiated his stand that the land is an

agricultural land. The submission of the assessee that the distance of

Hinjewadi is beyond 8 Kms from the boundaries of PMC was also not

accepted by the AO. He accordingly considered the profit on sale of

land of Rs.1,04,94,502/- as business income of the assessee.

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consideration of Rs. 7 lac. The cost of acquisition was shown at

Rs.3,89,014/- and the cost of improvement was shown as

Rs.2,86,500/- which was claimed to have been done in 2001-02. AO

also noticed that on sale of land, assessee had shown to have incurred

capital loss of Rs.38,060/-. AO noted that in the Balance-Sheet the

land was shown as under current asset as on 31.03.2005. AO

therefore held that since the land was shown as current asset the profit

on its sale was business income. He further noted that assessee had

not furnished the details with respect to cost of improvement of

Rs.2,86,500/-. In the absence of these details, he concluded that

improvement cost was to reduce the income. He accordingly re-worked

the income on the sale of land and worked out the profits at

Rs.3,95,685/- and added it as business income.

Aggrieved by the order of AO, assessee carried the matter before

Ld.CIT(A), who granted partial relief to the assessee. Aggrieved by the

order of Ld.CIT(A), assessee is now before us.

Ld.CIT(A) and further submitted that assessee was engaged in the

business of dealing in cement under the name and style of “Shubham

Agencies”, the Proprietary concern of the assessee. During the year

under consideration assessee had sold agricultural land situated at

Hinjewadi, Pune and shown the surplus on the sale of land as exempt.

But AO treated the profits received on transfer of land as business

income. He submitted that the observation of the AO that assessee has

been dealing in land is incorrect as assessee is not dealing in lands. He

submitted that assessee had acquired the land from Waghmare family

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by separate registered conveyance during the Financial Year 2000-01

by paying full stamp duty applicable to the transaction. The land was

sold by two separate registered sale deeds during the financial year

2006-07 to Indo Global Erectors Pvt. Ltd., and Base Reality Pvt. Ltd.

He submitted that assessee did not carry out any development work in

the land and the addition to the cost of the land was only on account of

capitalization of the interest. He submitted that the land was held for

around 6 years and it is was a Mahar Vatan land and could not be used

for the development or any other purpose mentioned in grant of Mahar

Vatan without payment of Nazarana. He submitted that he did not pay

any najarana and it was paid by Base Reality and Indigo Global

Erectors on 27.06.2007 i.e., after the transfer of land. He further

submitted that the land was not converted into an agricultural land

from the date till it was sold. In respect of sale of second land at Mann,

he submitted that though the land was shown under current asset in

the Balance-Sheet as on 31.03.2005 but the entries in the books of

accounts were not conclusive for determination of character of asset

and for which he placed reliance on the decision of Hon’ble Apex Court

in the case of Kedhrnath Jute Manufacturing Co., Vs. CIT reported in

82 ITR 363. He further submitted that Hon’ble Ld.CIT(A) did not

decide as to whether the profit has arisen from the sale of land was

capital gain or profits and gains from the business but mixed the issue

of fresh claim in the original return vis-à-vis returns submitted and in

response to notice u/s 153A of the Act. He further submitted that

Ld.CIT(A) did not consider several contentions of the assessee in

response of the status of agricultural land. He further submitted that

since assessee was never engaged in the land dealing, the gains arisen

on sale of transaction being the solitary transaction, cannot be

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considered to be adventure in nature of trade and for which he placed

reliance on the decision of Hon’ble Bombay High Court in the case of

Ashok Kumar Jalan Vs. CIT reported in 187 ITR 316. CIT Vs. Jalan

Kumar 316 (Bom). He further placed reliance on the decision of

Hon’ble Apex Court in the case of G. Venkata Swami Naidu & Co. Vs.

CIT reported in 35 ITR 594. Ld.D.R. on the other hand, supported the

order of AO and Ld.CIT(A).

record. The issue in the present ground is with respect to the

treatment of profit on sale of land. It is Revenue’s contention that the

profit is business income whereas it is assessee’s contention that it is

exempt income. Before us, assessee submitted that the land at

Hinjewadi which has been sold is a Mahar Vatan land and the same

cannot be used for development or any other purpose under the grant

of Mahar Vatan and assessee had also not paid any nazarana to the

Government till its sale for converting the purpose of land. It is further

assessee’s contentions that assessee has also not taken any action for

development of land. The aforesaid contention of the assessee has not

been controverted by Revenue. The land held by assessee for number of

years is investment made by assessee and its sale cannot be held to be

adventure in nature of trade as assessee was not engaged in land

dealing. Further, merely because the land has been shown under the

head current assets, it cannot be considered to be business asset, in

view of the ratio of the decision of the Hon’ble Apex Court in the case of

Kedarnath Jute Manufacturing Co., (supra) wherein it has been held

that entries in the books are not conclusive proof for determining the

character of the asset. We further find that the Hon’ble Apex Court in

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the case of G. Venkatswami Naidu (supra) has held that various

factors which are to be considered in deciding the nature of

transaction. When the facts of the present case are seen in the light of

the factors stated in the decision of Hon’ble Apex Court in the case of

Kedarnath Jute Manufacturing Co., (supra) and in view of the

submissions of the assessee, we find force in the submission of the

assessee that assessee is not in the business of dealing of land more so,

when no business from sale of land has been shown by the assessee in

earlier years. Further assessee has not converted the land into non-

agricultural land. The so called addition in asset is on account of

capitalization of interest. Considering the totality of the aforesaid facts,

we are of the view that AO was not justified in holding the income on

sale of land at Hinjewadi and Mann as business income. Accordingly,

we hold that gain arising from sale of land is to be assed as Long Term

Capital Gains. However, AO may verify the claim of assessee that land

was beyond 8 Kms., from municipal limits. The assessee is directed to

file necessary evidence in this regard and AO shall decide the taxability

of Long Term Capital Gains in accordance with the law, after giving

reasonable opportunity of hearing to assessee. Thus, the grounds of

the assessee are partly allowed.

Order pronounced on 18th day of April, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 18th April, 2019. Yamini

ITA No.737/PUN/2015

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.