RADHA DAGA,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R

PER INTURI RAMA RAO, ACCOUNTANT MEMBER:

For the sake of convenience and clarity the facts relevant 3. to the appeal in in respect of Shri. Ramesh Kumar Daga for assessment year 2011-12 are stated herein.

The Assessee raised the following grounds of appeal: 4.

‘’a) The order of the Commissioner of Income Tax (Appeals)-2, Chennai-600 034, dated 31.03.2016 is erroneous, illegal, contrary to law and liable to be cancelled. b) The Assessing Authority erred in assessing Rs.57,92,000I- as long term capital gains on sale of agricultural land at Uthandi in the impugned order. c) The Assessing Authority has failed to consider the explanations and evidences furnished by the Appellant showing that the land sold is agricultural land and is not a capital asset as per sec 2(14). d) The Assessing Authority should have taken cognizance of the fact that the land was purchased as an agricultural land and the Appellant has not converted the same into a ITA Nos.1630 &1102/2016 :- 3 -: non-agricultural land till the date of sale. Therefore, it continues to be an agricultural land. e) The Appellant submits that land was used for agricultural purposes and has repeatedly offered explanations and supporting to show the land at Uthandi village was used for agricultural purposes and Shri Mohana Kumar was engaged in this regard. The Assessing Authority has failed to consider the same as well as the existence of pumps for irrigation and has proceeded to erroneously treat the land as a capital asset. This is perverse to the facts of the case. f) The Assessing Authority has failed to consider the various judicial decisions submitted by the Appellant supporting the fact that the land sold was agricultural in nature and not a capital asset. g) The Assessing Authority has erred in assessing Rs.24,41 ,400/- as income from other sources representing the gross receipts as per the land development agreement. h) The Assessing Officer having accepted that the appellant had transferred the land along with compound walls, bore well with submersible pumps, gates and developed land ought to have allowed the expenditure incurred for the same and ought not to have assessed the entire gross receipts as income.

I) Any other ground that may be raised at the time of personal hearing’’.

The brief facts of the case are as under: 5.

The appellant is an individual deriving income under the head business and other sources. The return of income for the AY 2011-12 was filed on 29.08.2012 disclosing total income of Rs.11,59,612/-.

Against the said return of income, the assessment was completed by the Income Tax Officer, Business Ward II(3), Chennai (in hereafter

ITA Nos.1630 &1102/2016 :- 4 -: referred as Assessing Officer) vide order dated 28.03.2014 passed u/s. 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) at total income of �93,93,010/-. While doing so, the AO brought to tax capital gains arising out of sale of land measuring 14,523.42 sq.ft situated at Samudra Dwar Road, in Uthandi Village on 25.10.2010 for consideration of �1,45,24,000/-. The land was sold by registered document No.6331/2010 with Sub Registrar Office, Neelankarai. Out of the above consideration, 50% of the sale consideration belongs to his wife and balance was assessed in the hands of the assessee.

Assessee had not admitted any capital gains claiming it to be agricultural land. However, the Assessing Officer after recording the statement from the tenant one Mr. Mohan Kumar who has been using this land for nursery packets and also noting that Tamil Nadu Government had published the classification in their official website, the land at Samuthra Dwar Road as Residential area- Special Type of Land – Class I and the Assessing Officer further inferred that no agricultural activities was carried on by the assessee or by the said tenant and accordingly treated the land as non agricultural and brought to tax capital gains of �57,92,000/-. The Assessing Officer also brought to tax �24,41,400/- under the head income from other sources being amount of consideration received by the assessee in terms of development agreement dated 25.11.2010 entered with one

ITA Nos.1630 &1102/2016 :- 5 -:

Mrs. Sharmila Sukumaran alongwith his wife. This development agreement is an unregistered agreement. The Assessing Officer rejected the contention of the assessee that amount was received as part of the sale consideration and by holding that this is not part of sale consideration and also rejected the contention of the assessee that the land sold was not developed by the assessee and no expenditure was incurred. Accordingly, he brought a sum of �24,41,400/- to tax under the head income from other sources.

Being aggrieved by the above additions, an appeal was 6. preferred before ld. CIT(A), who vide impugned order confirmed the additions.

On the other hand, the ld. Sr. Departmental Representative 8. placed reliance on the orders of lower authorities

ITA Nos.1630 &1102/2016 :- 6 -:

We heard the rival submissions and perused the material on 9. record. The grounds of appeal a) and i) general in nature therefore, does not require any adjudication.

Admittedly, the land was not situated within 8 Kms of Municipal Corporation. Further, assessee had not converted the land for non agricultural purpose. Even assuming that the information gathered by the Assessing Officer that land was not used for cultivation is correct, the fact remains that land remain agricultural land and mere fact that land was not capable of used for agricultural purpose will not render the land non agricultural. Admittedly, assessee had not derived any income from the land for putting for non agricultural purpose and also the submission of the assessee that land was not converted for non agricultural purpose remain uncontroverted.

Therefore the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. P. Ashok Kumar in T.C. No.268 of 2011, dated 02.01.2019, is squarely applicable, wherein it was held as held:-

‘’5. The Assessing Officer conducted inspection of the property in the presence of revenue officials and submitted a remand report, in which, it has been categorically stated that the land is situated at a distance of more than 8 kms away from the outer limits of St.Thomas Mount Cantonment Board. Thus, the remand report was taken into consideration by the CIT (A) as one of the factors

ITA Nos.1630 &1102/2016 :- 7 -: for allowing the appeal filed by the assessee. Apart from that, CIT (A) also referred to the certificate issued by the Tahsildar and one of the important entry in the said certificate is by stating that the lands are classified as agricultural lands. Though the certificate may state that there is no cultivation carried on the lands as per the land records, there is nothing on record to show that the land in question was put to use for any non~agricultural purposes. Apart from that the assessee has also paid taxes which has been recorded by the CIT(A)’’.

In view of the above judgment, the land in question cannot be treated as non agricultural land and therefore we reverse the order of the lower authorities and allow grounds of appeal (b) to (f) filed by the assessee.

The grounds of appeal (g) & (h) challenges the action of the 11. lower authorities to bring into tax a sum of �24,41,400/- received from the buyers of the land in terms of development agreement. It is an admitted fact that the development agreement was entered in respect of same land which was sold as discussed by us in preceding para. In the given circumstances, it will be treated as part of sale consideration of the land since we held that consideration received on sale of land cannot be brought to tax as non agricultural. The Assessing Officer is not justified in bring to tax the sum of �24,41,400/- under the head other sources. Accordingly, we allow the grounds of appeal (g) and (h) raised by the assessee.

ITA Nos.1630 &1102/2016 :- 8 -:

The appeal of the assessee in for 12. assessment year 2011-2012 in respect of Shri. Ramesh Kumar Daga is allowed.

2011-12 in respect of Smt. Radha Daga.

Since, the facts in the present appeal are identical to the facts 13. in for the reasons mentioned therein, we allow the appeal filed by the assessee the same lines indicated in appeal ITA No.1630/Chny/2016 supra. Hence, the above captioned appeal filed by the assessee is allowed.

In the result, the appeals of the assessees in 14. &1102/CHNY/2016 for assessment year 2011-2012 stand allowed. Order pronounced on 20th day of August, 2019, at Chennai.