MR.DINESH KUMAR ,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-7(2)(1), BANGALORE

This appeal is filed by the assessee which is directed against the order of the ld.CIT(A)-10, Bengaluru, dated 02/01/2018 for the assessment year 2007-08.

The grounds raised by the assessee are as under:

Ld.AR of the assessee submitted a copy of the affidavit dated 18/11/2013 and in particular, our attention was drawn to paras.10 to 13 of the said affidavit. It was submitted that in para.10 of this affidavit, it has been stated by the assessee Mr. Dinesh Kumar that the land in question had not been converted for Page 3 of 6 non-agricultural purposes even till the date of this affidavit. Before us, it was also submitted that in the affidavit, it was stated that M/s. Jaipadmavathi Developers Pvt. Ltd. is prohibited from purchasing the said land being agricultural land in terms of the restrictions and embargo stipulated in sections 79A, 79B and 80 of the Karnataka Land Reforms Act 1961 and therefore, the assessee could not have sold the said laid as contemplated either u/s 54 of the Transfer of Property Act 1882 or could have given possession thereof to the said company in part performance of the said agreement as contemplated u/s 53A of the Transfer of Property Act 1882. He placed reliance on the judgment of the Hon’ble Apex Court rendered in the case of Godhra Electricity Co. Ltd. vs. CIT (225 ITR 746)(SC) in support of his contention that if income does not result at all, there cannot be a tax even though in book keeping, an entry is made as hypothetical income which does not materialize. The ld.AR of the assessee submitted that since assessee could not sell the agricultural land to a company without converting the same into non-agricultural land, income does not result at all and therefore, same cannot be taxed although entry in the books had been passed. He also submitted that in fact, in the next year, the said MOU was cancelled on 16/10/2008 i.e. in the financial year 2008-09 relevant to assessment year 2009-10 and entry in the books were also reversed. The ld. DR of the Revenue supported the orders of the authorities below.

We have considered rival submissions. The issue in dispute was decided by the ld.CIT(A) as per paras.5.1 to 5.2 of his order which are reproduced herein below for ready reference:

From the above paragraphs reproduced from the order of the ld.CIT(A) it is seen that there is no discussion on this aspect that the Page 5 of 6 land in question was agricultural land and the same was not converted for non-agricultural purposes. In this regard, we reproduce below the relevant paragraphs being 10 to 13 of the Affidavit of the assessee dated 18/11/2013:

In our considered opinion, this factual aspect is very much pertinent because if as per Karnataka Land Reforms Act 1961, agricultural land cannot be sold to a company without converting the same into non-agricultural land, then it cannot be accepted that transfer of land from the assessee to this company has taken place and any income has accrued to the assessee. But in the absence of finding of the authorities below on this factual aspect, we feel it proper that the matter should go back to the file of the ld.CIT(A) for fresh decision after giving a categorical finding on this factual aspect. Hence, we set aside the order of the ld.CIT(A) and restore the matter back to his file for fresh decision with a direction that he should examine this factual and legal aspect of the matter as to whether land in question is agricultural land or not and whether the same can be transferred to a company without first converting it Page 6 of 6 into non agricultural land. He should also examine this aspect whether the land in question has been converted into non- agricultural land and if yes then what is the date of such conversion. He should also examine this aspect as to whether sale of agricultural land can be made to a company without first converting the same into non-agricultural land. After examining all these factual and legal aspects, the ld.CIT(A) should decide the issue afresh and pass necessary orders as per law. Needless to say, adequate opportunity of hearing should be provided by the ld.CIT(A) to both sides and he should pass a speaking and reasoned order. In view of this position, the other contentions raised and various other judgments cited before us do not require any mention or adjudication at the present stage and when the matter is decided by the ld.CIT(A), such contentions can be raised before him and reliance on various judgments can be placed before him.

In the result, the appeal of the assessee stands allowed for statistical purposes.