ITO, NCW - 1 (5), CHENNAI vs. MS. ESTHER JASPER, CHENNAI

Ms. Vijaya Prabha, Additional CIT represented on behalf of the Revenue and Ms. Nithya Sankaran, Chartered Accountant represented on behalf of the Assessee.

In the Revenue’s appeal, the Revenue has raised the following common grounds for both the assessment years: i. The learned CIT(A) erred in holding the long term capital gain of Rs.7.35 crores, on transfer of land holding that the lands transferred are Agricultural lands, ignoring that there was no evidence to show that the assessee performed any agricultural operations nor had the assessee returned any Agricultural income from the said lands for any of the previous assessment years. ii. The learned CIT(A) erred in allowing the appeal of the assessee, when proof of cultivation, purchase of seeds and saplings payment of labour charges, presence of water sources, electricity connection (in case of Borewell) etc., have not been established by the assessee.

iii. The learned CIT(A) erred in holding that the transferred land was Agricultural land and not liable for capital gains tax, when the Hon’ble Supreme Court in the case of State of Uttar Pradesh Vs. Nand Kumar Agarwal and others, reported at AIR 1988 476 (SC) has held that mere categorization as agricultural land in revenue records would not suffice and unless the land is actually cultivated, the benefit has to be denied. iv. The learned CIT(A) erred in granting relief by treating the obvious real estate transaction between the assessee and a company engaged in developing real estate, as transfer of Agricultural lands, whereas the actual intention behind the transaction is only development of the land for commercial purposes. v. The learned CIT(A) erred in the circumstances of the case and in law the Hon’ble ITAT is correct in granting exemption, by treating the lands transacted as Agricultural lands, whereas the legislative intention behind granting exemption to agricultural land transactions are with a view to promoting Agricultural activities and to prevent conversion of agricultural lands into commercial lands / properties and such intentions are openly defeated by the assessee in this case.

It was submitted by the learned Departmental Representative that the assessee had sold 14 acres of land, which was classified as residential land. It was a submission that the learned CIT(A) had allowed the assessee’s appeal by simply following the order of the Co-ordinate Bench of this Tribunal in the 263 matter, wherein the Tribunal had erroneously held that the lands sold were agricultural lands. It was a submission by the learned Departmental Representative that the order of the Tribunal holding that ‘the lands sold were agricultural lands’, is liable to be reversed and the learned CIT(A) having not passed a detailed order on an independent appreciation of the facts, the order of the learned CIT(A) is liable to be reversed.

In reply, the learned Authorized Representative submitted that originally the assessments had been completed u/s.143(3) read with ITA Nos.2855 & 2856/Chny/2019 :- 4 -: section147 of the Act, wherein the Assessing Authority had brought to tax the long term capital gains in respect of the said lands. It was a submission that in the 263 proceedings, the learned Principal Commissioner of Income Tax had denied the assessee’s claim of the deduction u/s.54F. It was a submission that both the issues came up for hearing before the Tribunal. In & 2884/Chny/2017 for the Assessment Years 2009-2010 and 2010-2011, the Tribunal had held that “the land held and sold by the assessee is agricultural land satisfying the conditions stipulated in u/s.2(14)(iii) of the Income Tax Act, 1961 and therefore, was not exigible for long term capital gains”. Consequently, the Tribunal had directed the Assessing Officer to delete the long term capital gains assessed in the hands of the assessee. Further, the Tribunal in its order in I.T.A. Nos.2040 & 2041/Chny/2018 which was against the order passed u/s.263 by the Commissioner of Income Tax, had held that as the lands which had been sold by the assessee with respect to both the assessment years, were agricultural lands, therefore, the same was not exigible for long term capital gains. Consequent to the order, the issue of non-applicability of the provisions of Section 54F held that the order passed by u/s.263 was infructuous. It was a submission that as the order u/s.263 no more survives, the order of the learned Commissioner of Income Tax (Appeals) annulling the assessment order & 2856/Chny/2019 :- 5 -: u/s.143(3) read with Section 263 by the Assessing Officer was liable to be upheld.

We have considered the rival submission and perused the materials available on record.

A perusal of the present appeals filed by the Revenue show that the same is out of the order of the learned Commissioner of Income Tax (Appeals) quashing the assessment order passed as consequent to an order passed u/s.263 by the learned Principal Commissioner of Income Tax-1, Chennai. A perusal of the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own assessee for the assessment years 2009-2010 and 2010-2011 in & 2041/Chny/2018 dated 30.05.2019 clearly shows that the Co-ordinate Bench of this Tribunal has categorically held that in view of its findings in these appeals in relation to the assessment passed u/s.143 read with section 147, wherein the lands sold by the assessee has been held to be agricultural lands and consequently not liable for taxation under the head, ‘Capital Gains’, the question of allowability of the deduction applicable to the levy of capital gains no more survives and on this ground had treated the order passed u/s.263 by the Principal Commissioner of Income Tax-1, Chennai is & 2856/Chny/2019 :- 6 -: infructuous. The present appeal clearly is against the assessment order passed as a consequence to the annulled order passed u/s.263. As the order u/s.263 has been annulled, the consequential assessment order cannot survive. This being so, we find no error in the order of the learned Commissioner of Income Tax (Appeals) quashing the assessment order passed u/s.143(3) r.w.s.263 of the Income Tax Act, 1961.

In the result, the appeals of the Revenue in I.T.A.Nos.2855 & 2856/Chny/2019 stands dismissed.