SMT JANAKI AMMA ,SHIVAMOGGA vs. THE INCOME TAX OFFICER WARD-2 , SHIVAMOGGA

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC-B” BENCH : BANGALORE

BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER

ITA Nos.2807 to 2810/Bang/2018 Assessment Years : 2010-11 to 2013-14 Smt. Janaki Amma, Vs. The Income Tax Officer, “Sri Nikethan”, Ward – 2, 5th Cross, 1st Lane Left, Shivamogga. Kuvempu Road, Shivamogga – 577 201. PAN: ACIPJ 1721 H APPELLANT RESPONDENT

Appellant by : Shri. V. Srinivasan, Advocate Respondent by : Smt. P. Renugadevi, JCIT

Date of hearing : 10.01.2019 Date of Pronouncement : 13.03.2019

O R D E R Per Jason P Boaz:

These four appeals by the assessee are directed against the separate orders of CIT(A)-Davangere, all dated 06.08.2018, for Assessment Years 2010-11 to 2013-14. Since the issues involved in all these appeals are identical and the background facts common, we deem it appropriate to

ITA Nos. 2807 to 2810/Bang/2018 Page 2 of 22 dispose off these appeals by way of this common order for the sake of convenience.

2.1 For Assessment Year 2010-11, the assessee filed her return of income on 31.07.2010 declaring total income of Rs.2,23,590/- and agricultural income of Rs.2,07,000/-. The income declared included capital gains in respect of sale of sites formed on land measuring 2 acres and 12 guntas at Mathod Village, Shivamogga. The aforesaid land purchased on 17.02.19973 was agricultural land, which was subsequently converted for non-agricultural purposes, thereafter plotted into residential sites and the assessee declared ‘Long Term Capital Gains’ (LTCG) on sale of these sites. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) vide order dated 31.03.2012, accepting the returned income. Subsequently, the Assessing Officer (AO) initiated proceedings under section 147 of the Act on the ground that income of the assessee exigible to tax had escaped assessment since the income declared by the assessee under the head “LTCG” was incorrect and the same had to be assessed under the head “Business Income”. On receipt of the reasons recorded by the AO, the assessee filed objections on the re-opening of the assessment and also put forth submissions on merits. The AO, however, rejected the claims put forth by the assessee and completed the re-assessment under section 143(3)

ITA Nos. 2807 to 2810/Bang/2018 Page 3 of 22 r.w.s. 147 of the Act, vide order dated 10.03.2016; wherein the income on sale of sites declared by the assessee as LTCG was assessed under the head ‘Business’. In view of this, the assessee’s claims for setting off of brought forward loss of Rs.1,19,407/- and exemption under section 54F of the Act of Rs.13,21,540/- was disallowed by the AO.

2.2 For Assessment Year 2011-12, the assessee field her return of income on 29.07.2011 declaring total income of Rs.1,03,710/- and agricultural income of Rs.1,03,710/-. The case was taken up for scrutiny and the assessment completed under section 143(3) of the Act vide order dated 17.02.2013; wherein, inter alia, an addition of Rs.17,37,800/- was made under ‘Short Term Capital Gains’ (STCG) on account of sale of agricultural land as against Rs.1,35,000/- declared by the assessee; and the assessee’s income was assessed at Rs.17,11,707/- after allowing deduction of Rs.1 lakh under section 80C of the Act. Thereafter, the AO initiated proceedings under section 147 of the Act, after noticing that the assessee’s income liable to tax had escaped assessment as the assessee had not declared income on sale of sites, on the aforesaid land at Mathod Village, Shivamogga, during the year under consideration and issued notice under section 148 of the Act dated 31.12.2015 to the assessee. In response thereto, the assessee filed a return of income on 12.08.2016, offering income from “Capital Gains” on sale of sites at Mathod Village, Shivamogga. In the course of assessment, the assessee had filed objections to the re-opening of assessment for this year, as well as the proposed treatment of income from sale of sites as

ITA Nos. 2807 to 2810/Bang/2018 Page 4 of 22 “Business Income”. The AO rejected the assessee’s claims and completed the re-assessment under section 143(3) r.w.s. 147 of the Act vide order dated 27.12.2016; wherein the income on sale of sites declared by the assessee as ‘LTCG’ was assessed by the AO under the head “Business Income”, by taking the same view as in the earlier Assessment Year 2010-11.

2.3 For Assessment Year 2012-13, the assessee, as in the earlier Assessment Year, had not declared income from sale of sites at Mathod Village, Shivamogga in the return of income filed on 28.07.2012, wherein total income declared was Rs.85,650/- and agricultural income of Rs.4,45,000/-. The return of income was processed under section 143(1) of the Act, accepting the returned income. Subsequently, the AO initiated re- assessment proceedings under section 147 of the Act on account of the assessee’s failure to declare income from sale of sites at Mathod Village, Shivamogga and issued notice under section 148 of the Act dated 09.02.2016 to the assessee. In response thereto, the assessee filed a return of income on 09.08.2016 showing capital gains on sale of site and claimed exemption under section 54F of the Act. The AO rejected the assessee’s claims and completed the re-assessment under section 143(3) r.w.s. 147 of the Act vide order dated 28.12.2016; wherein the income on sale of sites declared by the assessee as LTCG was assessed as ‘Business Income’ and the assessee’s claim for exemption under section 54F of the Act was denied.

ITA Nos. 2807 to 2810/Bang/2018 Page 5 of 22 2.4 For Assessment Year 2013-14, the assessee filed the return of income on 02.08.2013 declaring total income of Rs.1,97,740/- and agricultural income of Rs.6,95,321/-; which included capital gains on sale of 3 sites. The return of income was processed under section 143(1) of the Act, accepting the returned income. Subsequently, the AO initiated proceedings under section 147 of the Act for this Assessment Year on the ground that the assessee’s income liable to tax on account of sale of sites in Mathod Village, Shivamogga had escaped assessment and issued notice under section 148 of the Act dated 09.02.2016. In response thereto, the assessee filed return of income on 12.08.2016 showing the same income as ‘Capital Gains’, as declared in the original return of income and reiterated the stand taken in the earlier years. The AO rejected the assessee’s contentions and completed the assessment under section 143(3) r.w.s. 147 of the Act vide order dated 28.12.2016; wherein the income declared by the assessee under the head ‘LTCG’ was assessed by the AO as ‘Business Income’.

ITA Nos. 2807 to 2810/Bang/2018 Page 6 of 22 06.08.2018; by holding that the AO had clearly brought out the facts of the case establishing that the income arising from sale of sites at Mathod Village, Shivamogga has been correctly assessed as ‘Business Income’. The CIT(A) also upheld the re-opening of the assessment for the said Assessment Years 2010-11 to 2013-14.

Assessment Year 2010-11

The orders of the authorities below in so far as they are 1. against the appellant are opposed to law, equity, weight of evidence probabilities, facts and circumstances of the appellant's case. The order of re-assessment is bad in law and void-ab-initio 2. for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re- assessment requires to be cancelled. 2.1 The learned CIT[A] ought to have appreciated that the A.O. had failed to pass a speaking order following the decision of the Hon'ble Supreme Court in the case of M/s. GKN DRIVESHAFTS INDIA LTD reported in 259 ITR 19[SC] before finalizing the re- opened assessment on the objections raised by the appellant and hence, the impugned order passed is bad in law and the same ought to have been cancelled. 3. The learned CIT[A] has erred in upholding the taxation of the income from sale of sites under the head "Business" instead of capital gains, which finding is based on erroneous appreciation of

ITA Nos. 2807 to 2810/Bang/2018 Page 7 of 22 the facts and law and hence, the assessment of income under the head "Business" ought to have been vacated. 3.1 The learned CIT[A] failed to appreciate that the aforesaid sale of site in the Layout formed by the appellant was the only transaction done by the appellant and there was no JDA or Power of Attorney executed by the appellant with any person for the land conversion under the facts and in the circumstances of the appellant's case and hence, the same cannot be regarded as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. 3.2 The learned CIT[A] failed to appreciate that the appellant could not continue any agricultural operations in the said land on account of non availability of water and it was only with an intention to get back her investment, she converted this land and sold under the facts and in the circumstances of the appellant's case and thus, there is no justification to treat the transaction as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver before the Hon'ble DG/CCIT, the appellant denies herself liable to be charged to interest u/s.234-B and 234-D of the Act, which requires to be cancelled under the facts and in the circumstances of the appellant's case. 5. For the above and other grounds that may be urged at the time of hearing of the appellant, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2011-12

The orders of the authorities below in so far as they are 1. against the appellant are opposed to law, equity, weight of evidence probabilities, facts and circumstances of the appellant's case.

ITA Nos. 2807 to 2810/Bang/2018 Page 8 of 22 The order of re-assessment is bad in law and void-ab- 2. initio for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re-assessment requires to be cancelled. 2.1 The learned CIT[A] ought to have appreciated that the A.O. had failed to pass a speaking order following the decision of the Hon'ble Supreme Court in the case of M/s. GKN DRIVESHAFTS INDIA LTD reported in 259 ITR 19[SC] before finalizing the re- opened assessment on the objections raised by the appellant and hence, the impugned order passed is bad in law and the same ought to have been cancelled. 3. The learned CIT[A] has erred in upholding the taxation of the income from sale of sites under the head "Business" instead of capital gains, which finding is based on erroneous appreciation of the facts and law and hence, the assessment of income under the head "Business" ought to have been vacated. 3.1 The learned CIT[A] failed to appreciate that the aforesaid sale of site in the layout formed by the appellant was the only transaction done by the appellant and there was no JDA or Power of Attorney executed by the appellant with any person for the land conversion under the facts and in the circumstances of the appellant's case and hence, the same cannot be regarded as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. 3.2 The learned CIT[A] failed to appreciate that the appellant could not continue any agricultural operations in the said land on account of non availability of water and it was only with an intention to get back her investment, she converted this land and sold under the facts and in the circumstances of the appellant's case and thus, there is no justification to treat the transaction as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. Without prejudice to the right to seek waiver before the 4. Hon'ble DG/CCIT, the appellant denies herself liable to be charged to interest u/s.234-B and 234-D of the Act, which

ITA Nos. 2807 to 2810/Bang/2018 Page 9 of 22 requires to be cancelled under the facts and in the circumstances of the appellant's case. For the above and other grounds that may be urged at the 5. time of hearing of the appellant, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2012-13

The orders of the authorities below in so far as they are 1. against the appellant are opposed to law, equity, weight of evidence probabilities, facts and circumstances of the appellant's case. The order of re-assessment is bad in law and void-ab- 2. initio for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re-assessment requires to be cancelled. 2.1 The learned CIT[A] ought to have appreciated that the A.O. had failed to pass a speaking order following the decision of the Hon'ble Supreme Court in the case of M/s. GKN DRIVESHAFTS INDIA LTD reported in 259 ITR 19[SC] before finalizing the reopened assessment on the objections raised by the appellant and hence, the impugned order passed is bad in law and the same ought to have been cancelled. 3. The learned CIT[A] has erred in upholding the taxation of the income from sale of sites under the head "Business" instead of capital gains, which finding is based on erroneous appreciation of the facts and law and hence, the assessment of income under the head "Business" ought to have been vacated. 3.1 The learned CIT[A] failed to appreciate that the aforesaid sale of site in the layout formed by the appellant was the only transaction done by the appellant and there was no JDA or Power of Attorney executed by the appellant with any person for the land conversion under the facts and in the circumstances of the

ITA Nos. 2807 to 2810/Bang/2018 Page 10 of 22 appellant's case and hence, the same cannot be regarded as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. 3.2 The learned CIT[A] failed to appreciate that the appellant could not continue any agricultural operations in the said land on account of non availability of water and it was only with an intention to get back her investment, she converted this land and sold under the facts and in the circumstances of the appellant's case and thus, there is no justification to treat the transaction as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. The learned CIT[A] is not justified in not disposing off the 4. ground relating to the computation and taxation of Rs.20,12,933/- on the sate of a flat as Short term Capital Gains instead of Long term Capital Gains and the consequent denial ofd deduction claimed u/s. 54F of the Act, under the facts and in the circumstances of the appellant's case. Without prejudice to the right to seek waiver before the Hon 5. tie DG/CCIT, the appellant denies herself liable to be charged to interest u/s.234A and 234-B of the Act, which requires to be cancelled under the facts and in the circumstances of the appellant's case. For the above and other grounds that may be urged at the 6. time of hearing of the appellant, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.

Assessment Year 2013-14

The orders of the authorities below in so far as they are 1. against the appellant are opposed to law, equity, weight of evidence probabilities, facts and circumstances of the appellant's case. The order of re-assessment is bad in law and void-ab- 2. initio for want of requisite jurisdiction especially, the mandatory

ITA Nos. 2807 to 2810/Bang/2018 Page 11 of 22 requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re- assessment requires to be cancelled. 2.1 The learned CIT[A] ought to have appreciated that the A.O. had failed to pass a speaking order following the decision of the Hon'ble Supreme Court in the case of M/s. GKN DRIVESHAFTS INDIA LTD reported in 259 ITR 19[SC] before finalizing the reopened assessment on the objections raised by the appellant and hence, the impugned order passed is bad in law and the same ought to have been cancelled. 3. The learned CIT[A] has erred in upholding the taxation of the income from sale of sites under the head "Business" instead of capital gains, which finding is based on erroneous appreciation of the facts and law and hence, the assessment of income under the head "Business" ought to have been vacated. 3.1 The learned CIT[A] failed to appreciate that the aforesaid sale of site in the layout formed by the appellant was the only transaction done by the appellant and there was no JDA or Power of Attorney executed by the appellant with any person for the land conversion under the facts and in the circumstances of the appellant's case and hence, the same cannot be regarded as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. 3.2 The learned CIT[A] failed to appreciate that the appellant could not continue any agricultural operations in the said land on account of non availability of water and it was only with an intention to get back her investment, she converted this land and sold under the facts and in the circumstances of the appellant's case and thus, there is no justification to treat the transaction as an adventure in the nature of trade under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver before the Hon'ble DG/CCIT, the appellant denies herself liable to be charged to interest u/s.234-B and 234-D of the Act, which requires to be cancelled under the facts and in the circumstances of the appellant's case.

ITA Nos. 2807 to 2810/Bang/2018 Page 12 of 22 5. For the above and other grounds that may be urged at the time of hearing of the appellant, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.

5.1 These grounds (supra), being general in nature, and not urged before me, require no adjudication and are accordingly dismissed as infructuous.

6.1 In the above grounds (supra), the learned AR of the assessee submitted that the AO had furnished the reasons recorded to the assessee and thereafter the assessee had filed objections. It was submitted that the assessee’s objections were not disposed off by way of a speaking order and on this score contended that the orders of assessment framed for Assessment Year 2010-11 to 2013-14 have to be cancelled. In support of this proposition, the learned AR placed reliance on the following judicial pronouncements:

(i) Shri A. S. Chinnaswamy Raju and Others in ITA Nos. 1559 to 1562/Bang/2010 dated 25.07.2016 and

ITA Nos. 2807 to 2810/Bang/2018 Page 13 of 22 (ii) Smt. P. G. Sunandamma in ITA No.1670 to 1672/Bang/2016 dated 30.12.2016.

6.2 Per contra, the learned DR submitted that the failure to dispose off the objections of the assessee by way of separate speaking orders was not an illegality and the same was only a procedural error. In support of this contention, the learned DR placed reliance on the rejection of the SLP by the Hon’ble Apex Court in the case of Home Finders Housing Ltd., Vs. ITO in (2018) 94 taxmann.com 84 (SC), whereby the judgment of the Hon’ble Madras High Court reported in (2018) 93 taxmann.com 371 (Madras) was upheld.

6.3 In rejoinder, the learned AR of the assessee submitted that mere rejection of the SLP does not amount to law declared by the Hon’ble Apex Court and that there are other judgments of the Hon’ble Bombay High Court in Rabo India Finance Ltd., (346 ITR 81) and Hon’ble Gujarat High Court in Pushpak Bullion Pvt. Ltd., Vs. DCIT (371 ITR 81) (Guj.) which have decided the issue in favour of the assessee. It was pleaded that the aforesaid decisions (supra) should be followed.

6.4 I have considered the rival submissions / contentions and perused the material on record, and am inclined to hold that the failure to dispose off the objections of the assessee by passing separate speaking orders is only a procedural irregularity and the same cannot be considered as rendering the assessment order a nullity in the light of the rejection of the SLP by the

ITA Nos. 2807 to 2810/Bang/2018 Page 14 of 22 Hon’ble Apex Court in the case of M/s. Home Finders Housing Ltd., (supra) relied upon by the learned DR. Therefore, this contention raised by the assessee is dismissed.

6.5.1 For Assessment Years 2010-11 and 2011-12, the assessee has also argued that the re-opening of assessment for these years is bad in law, as it amounts to a change in opinion. It was submitted that in each of these two assessment years, there was an earlier scrutiny assessment passed under section 143(3) of the Act and therefore the assumption of jurisdiction by issue of notice under section 148 of the Act for re-opening the assessments is not justified.

6.5.2 Per contra, the learned DR for Revenue submitted that the issue of capital gains was not examined by the AO in the original scrutiny proceedings and therefore it does not amount to change of opinion.

6.5.3 On an appraisal of the rival contentions; perusal of the orders of assessment for these 4 Assessment Years and the material on record, I find that the pela of ‘change of opinion’ cannot be urged for Assessment Year 2011-12 since the assessee has not shown the income from sale of sites in the original return of income filed for Assessment Year 2011-12. Similar factual position prevails for Assessment Years 2012-13 and 2013-14 also. With regard to Assessment Year 2010-11, the assessee’s plea of ‘change of opinion’ is acceptable as the assessee had reported income from sale of sites in the original return of income filed on 31.07.2010 in respect of which

ITA Nos. 2807 to 2810/Bang/2018 Page 15 of 22 a scrutiny assessment was completed under section 143(3) of the Act vide order dated 31.03.2012. Therefore, the re-opening of assessment for Assessment Year 2010-11 is quashed and the assumption of jurisdiction for re-opening of the assessments for Assessment Years 2011-12, 2012-13 and 2013-14 are upheld.

7.1 The above grounds (supra), raised for Assessment Year 2010-11 are academic since the order of assessment for Assessment Year 2010-11 passed under section 143(3) r.w.s. 147 of the Act vide order dated 10.03.2016 has been quashed.

7.2 In respect of the above grounds raised for Assessment Years 2011- 12 to 2013-14, the learned AR of the assessee submits that the facts on record evidence that the assessee is an agriculturist by profession and has been declaring agricultural income over the last many years cannot be disputed. She does not carry on any business and had purchased 2 acres and 12 guntas of agricultural lands at Mathod Village, Shivamogga on 17.02.1997. These lands were converted into 39 residential plots / sites of different sizes during February, 1998. Therefore, the assessee sold these sites during the Financial Years 2010-11 to 2012-13. It was submitted that the assessee intended to carry on agricultural activities on these lands, but due to non-availability of water, the assessee discontinued agricultural

ITA Nos. 2807 to 2810/Bang/2018 Page 16 of 22 operations. According to the learned AR, the formation of residential sites on the said land was only to realize a higher price for the lands and not to carry on any business; especially because after forming the sites in 1998, the assessee has not made any attempt to sell these sites until Financial Year 2009-10. In other words, the assessee held the property for 12 years; though in the form of residential sites and not agricultural lands. The assessee also produced the record of rights for the period 1994-95 to 1997-98 to show that agricultural operations were carried out thereon even after the purchase of these lands on 17.02.1997.

7.3 Per contra, the learned DR strongly opposed the aforesaid contentions / submissions put forth by the assessee. Placing reliance on the impugned Assessment Orders, the learned DR pointed out that the assessee had converted the said lands at Mathod Village, Shivamogga in February, 1998; within one year from the purchase thereof on 17.02.1997; and this shows that the assessee was not into agriculture, but in real estate business. Therefore, according to the learned DR, the income arising from sale of the residential sites was correctly brought to tax as ‘Business Income’ by the AO for the aforesaid Assessment Years. In this regard, the learned DR placed reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Shri R. Ramaiah (1984) 146 ITR 39 (Karnataka).

7.4 In rejoinder, the learned AR for the assessee submitted that the decision of the Hon’ble Karnataka High Court in the case of Shri. R. Ramaiah

ITA Nos. 2807 to 2810/Bang/2018 Page 17 of 22 (supra) is distinguishable as the facts therein showed that there was an intention to trade as the several assessee who purchased the lands had come together and started selling the sites immediately after formation of the sites.

7.5.1 I have considered the rival contentions / submissions and perused the material on record. The question of whether a transaction constitutes an adventure in the nature of trade was considered by the Hon’ble Apex Court in the case of Shri. G. Venkataswamy Naidu reported in 351 ITR 594, wherein at page 609 thereof, the Hon’ble Apex Court observed as under:

“……………Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border line that cause difficulty. If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it ? Affirmative answers to these questions may furnish relevant data for determining the character of the transaction. What is the nature of the commodity purchased and - resold and in what quantity was it purchased and resold ? If the commodity purchased is generally the subject-matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resaleable ? What were the incidents associated with the purchase and resale ? Were they similar to the operations usually associated with trade or business ? Are the transactions of purchase and sale repeated?...................”

ITA Nos. 2807 to 2810/Bang/2018 Page 18 of 22

7.5.2 The aforesaid judgment of the Hon’ble Apex Court (supra), laid down several parameters to judge whether the transaction constitutes an adventure in the nature of trade or not. Generally speaking, where a property is purchased for being resold it could be an adventure in the nature of trade; whereas properties that are purchased and intended to be held as investments would be liable for assessment as capital gains. Applying the ratio of the aforesaid judgment (supra) and considering the totality of the factual matrix and circumstances of the assessee’s case, I am of the considered view that the assessee purchased the agricultural lands with the intention to cultivate them and has also cultivated them for a short period of about a year after purchase thereof; as borne out by the RTC produced. Subsequently, according to the assessee, finding that there is no proper source of water, the assessee converted the said lands into residential sites. It is also seen from the material on record that even after forming the residential sites, the assessee did not immediately sell the sites to infer that there was any intention by her to carry on trade. The assessee continued to hold these residential sites for 12 years without selling these sites. Therefore, in my view, from the factual circumstances of the case on hand, as discussed above, it is manifestly clear that there was no intention on the part of the assessee to carry on any business or trade with regard to this property.

ITA Nos. 2807 to 2810/Bang/2018 Page 19 of 22 7.5.3 I have also perused the other details of the purchase and sale of properties mentioned in the orders of assessment and find that the assessee has purchased an agricultural land in 1997 and sold the same during the Financial Year 2009-10. Similarly, the assessee has purchased the flats in Malnad Residency in the Financial Year 2009-10 and sold the same after three years. These transactions can hardly be described as giving rise to any inference that the assessee intended to trade with the residential sites way back in 1998. In my view, nothing much turns on the observations made by the AO. On an overall consideration of the factual matrix of the case, as discussed above, I am of the view and hold that the income from the sale of sites during the period relevant to Assessment Years 2010-11 to 2013-14 have to be treated at ‘Capital Gains’ and not ‘Business Income’. Consequently, the grounds raised by the assessee on this issue is allowed.

8.1 In respect of this ground (supra), the learned AR submitted that the assessee had acquired a flat at Malnad Residency, Bangalore vide sale deed dated 03.10.2009. The said property was sold on 24.12.2011 for consideration of Rs.34,00,000/- and the assessee declared LTCG of Rs.13,52,617/- thereon; for which exemption was claimed under section 54F of the Act. It is submitted that since the assessee was in possession of this

ITA Nos. 2807 to 2810/Bang/2018 Page 20 of 22 flat since 10.08.2006 itself, therefore it constituted a long term capital asset, as it was held for a period of more than 3 years.

8.2 Per contra, the learned DR supported the order of the AO in denying the assessee the exemption under section 54F of the Act as the re- investment was made in acquisition of agricultural land which is not an eligible asset. The date of allotment of the flat is therefore irrelevant.

8.3 After hearing the rival contentions and considering the material on record, I am of the considered view that the assessee cannot be denied the benefit of the holding period; by ignoring the date of allotment of the flat. The execution of the sale deed subsequently cannot render the assessee’s claim for computation of the LTCG as erroneous. However, as rightly observed by the learned DR for Revenue, the assessee cannot claim deduction under section 54 of the Act which has been denied by the AO since the assessee has purchased agricultural lands and not a residential house. In the light of the above, it is held that the assessee’s computation of LTCG is to be accepted and the denial of the assessee’s claim for 54/54F of the Act by the AO is upheld. The AO is accordingly directed.

ITA Nos. 2807 to 2810/Bang/2018 Page 21 of 22 9.1 In this ground (supra), the assessee denies himself liable to be charged interest u/s 234A, 234B and 234D of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon’ble Apex Court in the case of Anjum H. Ghaswala (252 ITR 1) (SC) and I, therefore, uphold the action of the AO in charging the assessee the aforesaid interest u/s 234A, 234B and 234D of the Act. The AO is, however, directed to re-compute the interest chargeable u/s 234A, 234B and 234D of the Act, if any, while giving effect of this order.

Pronounced in the open court on 13. 03.2019.

Sd/- Sd/- Sd/- (N. V. VASUDEVAN) (JASON P BOAZ) Vice President Accountant Member Bangalore. Dated: 13.03.2019. /NS/*

ITA Nos. 2807 to 2810/Bang/2018 Page 22 of 22 Copy to:

Assistant Registrar ITAT, Bangalore.