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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI SANDEEP GOSAIN & SHRI ARUN KHODPIA
The aforesaid appeal has been preferred by the assessee challenging the impugned order dated 10th December 2015, passed by the Commissioner of Income Tax (Appeals)–4, Nagpur, [in short “the learned CIT(A)”] under section 250 of the Income Tax Act, 1961 (in short "the Act") for the assessment year 2008–09-09.
The assessee has filed this appeal on the following grounds:-
Smt. Chandrika Kantilal Patel “1. On the facts and in the circumstances of the case the learned CIT(A)-4 was not justified in confirming the order of the A.O. that the sale of Agricultural Land at Rs.57,88,2407-, to be income arising from "An Adventure In The Nature of Trade" and this honourable court be pleased to delete the same as one passed without considering the facts in their proper perspective and in utter derogation of Principles of Natural Justice..
2. Without prejudice to the forgoing ground and on the facts and in the circumstances of the case the learned CIT (A)-4, was not justified in confirming the order of the learned A.O., who did not apply his mind and simply coppied the order of the learned A.O. at Mumbai in case of the other co-owner of the appellant, ad verbatim and this honourable court be pleased to delete the said addition of Rs.57,88,2407-, as the same has been blindly confirmed by the learned CIT(A)-4 by passing a Non-Speaking Order.
3. Without prejudice to the forgoing grounds and on the facts and the circumstances of the case, the learned CIT(A) was not justified in law in confirming the addition of Rs.57,88,2407-, without considering the actual marketability or profitability of lands in an area called as MIHAN, which is still a doubtful location for any Industry to commence its business and this honourable court be pleased to annual the assessment framed u/s148.
Without prejudice to the forgoing grounds and on the facts of the circumstances of the case, the learned CIT(A)-4 was not justified in law in not Distinguishing the appellate order passed by honourable ITAT Mumbai 'D' bench, which was passed, due to the misrepresentation by the department as to the real facts of the case as regards the actual and pathetic condition of MIHAN, which is a doubtful starter even on the date of filing this appeal.”
The only issue that arose out of the aforesaid grounds of appeal by the assessee is, whether or not the learned CIT(A) was justified in in confirming the order of the Assessing Officer holding that the sale of agricultural land at ` 57,88,240 to be income which arose from "An Adventure In The Nature of Trade".
Smt. Chandrika Kantilal Patel
4. During the course of assessment proceedings, the Assessing Officer noticed that that the assessee had sold the property and received a part of sale consideration within eleven months from the date of purchase of property. The Assessing Officer further noticed that the assessee had received around 40% of the total sale consideration within eleven months from the date of purchase of property. It was further observed by the Assessing Officer that the assessee had not filed any details of agricultural products, seeds manure or any other details regarding agricultural operation. Based on these facts, the Assessing Officer observed that the land which was sold at Bothali in Nagpur District was not an agricultural land but a commercial / trading asset. The assessee had sold the land to Shri Kondavar Group of Builders. It was also noticed by the Assessing Officer that the assessee had purchased one more property during F.Y. 2008-09 at Wathoda and had sold the same on 30th August 2007 for consideration of ` 4,00,000/-. The gains of ` 32.250/- were not shown in the return of income filed by the assessee. The Assessing Officer further made observations that agricultural operations were not carried out on the said land and the land was situated on Wardha Road, which is a fast developing commercial area. Based on these facts, the Assessing Officer concluded that since no agricultural operations were taking place and the intention of the assessee was to Smt. Chandrika Kantilal Patel ale the land and earned profit, therefore, the income could not be treated as exempt. The Assessing Officer accordingly treated the income of the assessee as business income and made addition of ` 57,88,240 to the total income of the assessee. The assessee being aggrieved by the order of the Assessing Officer, filed appeal before the first appellate authority.
The learned CIT(A) confirmed the order of the Assessing Officer by observing as under:–
“3.0 I have gone through the order of the assessing officer, the grounds of peal and the submissions given by the appellant. From the details, it is see that property was jointly owned by the appellant alongwith his father, Shri Ratansi Mulji Patel. Both of them were having 50% share in the property. It is seen that the assessments were also completed in case of appellants father and similar additions were made. The appellants father filed an appeal before the CIT(A)-33 Mumbai vide Appeal No.CIT(A)- 33/IT/248/10-11 order dtd. 27/05/2011. The CIT(A)-33 Mumbai, deleted the addition made by the AO on the ground that the land was recorded in revenue records as agricultural land and it remained so even in the immediate next year. The CIT(A) held that the said land was covered u/s 2(14)(iii) and accordingly the profit from the said land were not taxable. 3.1 Against this order of the CIT(A), the Department had filed an appeal before the ITAT Mumbai 'D' Bench Mumbai. The ITAT Mumbai D Bench Mumbai vide its order in ITA No.5499/Mum./ 2011 for Asst. Year 2008-09 has sustain the addition made by the AO and reverse the order of CIT(A). The ITAT has sustained the additions made by the AO on account of fact that the land was sold within 11 months from the date of purchase and about 40% of the sale consideration was received within period of 11 months from the date of purchase of land. Further ITAT noted that no agricultural operations were carried out by the appellant on the said land in question and the intention of the appellant was not to hold the land for cultivation but sell the same at the earliest possible time. The ITAT relied on the judgment of 4
Smt. Chandrika Kantilal Patel
Hon'ble Supreme Court in case of Gemini Pictures Circuit Private Ltd. where the Supreme Court has held that the deciding factor whether a land is agricultural land or not is a question of fact. It is important to see whether the land have been put to agricultural purpose for a reasonable span of time prior to the date of sale and further whether on the date of purchase the land was intended to be put to use for agricultural purposes for a reasonable span of time in future. 3.2 Considering that the Hon'ble ITAT Mumbai 'D' Bench Mumbai has sustained the additions made by the AO regarding 50% of the profits of the same property, it is held that the AO was justified in adding income of Rs. 57,88,2407- as income from business. Accordingly, the additions made by the AO is sustained and grounds of appeal are dismissed.”
6. The learned Counsel for the assessee submitted that in assessee’s father’s case before the Tribunal, Mumbai Bench, the learned Departmental Representative appearing for the Revenue has given a false picture of the area where the land is situated as huge profit making sale. He submitted that this is nothing but a misleading facts brought before the Tribunal. He further submitted that it is wrong to call it as income in the nature of adventure in trade which is without any financial advantage. The learned Counsel thus prayed that a proper and true assessment be made with regard to the sale of land in question.
The learned Departmental Representative submitted that Nagpur city has a big business potential in land development and that with a view to earn huge profit, the assessee had sold the land. He prayed that the learned CIT(A) and the Assessing Officer were fully 5
Smt. Chandrika Kantilal Patel justified in treating the said sale of land at ` 57,88,240 to be income which arose from "An Adventure In The Nature of Trade"
We have carefully considered the rival contentions, perused the orders of the authorities below and the material placed on record. We find that the assessee herein was a co–owner of an agricultural land situated at approx. eight kilometers on Wardha Road, Nagpur and as per the revenue records the said land is still agricultural land. The said land was sold by the assessee at ` 57,88,246. The return of income was filed by the assessee, however, no enquiry was made by the authorities below. The other co–owner was assessee’s father Shri Ratanshi Malji Patel who was residing at Ghatkopar, Mumbai. We observe that if the Revenue have doubt over the sale of the said piece of land by the assessee, the Assessing Officer was at Nagpur and the property of the assessee was situated at Nagpur and the Assessing Officer ought to have visited the site and found the fact. In this regard, both the authorities below have failed to make any enquiry on the sale of land. Since the said plot is still vacant, it is obvious that the assessee had not derived any benefit out of the said plot. We have also gone through the order passed by the Co–ordinate Bench of the Tribunal, Mumbai Bench, rendered in assessee’s father’s case on the same issue, wherein the Co–ordinate Bench of the Smt. Chandrika Kantilal Patel Tribunal restored the issue to the file of the Assessing Officer by observing as under:–
“5. We have considered the rival submissions as well as relevant material on record. The assessee purchased the land in question on 17/11/2005 for a consideration of Rs. 2,25,000/– as 50% share of the assessee comes to ` 60 lakhs. The Assessing Officer has given the details of sale consideration received by the assessee at Page number 3 of the assessment order as under:– Received by assesses!s Received by Assessee daughter as co-owner 01.10.2006 ` 23,82,667 01.10.2006 ` 23,82,667 11.05.2007 ` 6,17,333 11.05.2007 ` 6,17,333 11.05.2007 ` 30,00,000 11.05.2007 ` 30,00,000 ` 60,00,000 ` 60,00,000 Total: Total 5,1 The details of consideration show that the assessee received the consideration in 3 instalments and about 40% of the consideration was received on 01/10/2006, which means that the sale deaf was finalised prior to the receipt of part consideration on O!/10/2006 and the fine! payment was received on 11/05/2007. in other words, the assesses decided to self the sold land prior to 01/10/2006, which is within 11 months from the date of purchase, The Assessing Officer held that the transaction of purchase and sale ore in the nature of adventure and therefore, it is in the nature of trade and not acquisition of capital asset for agricultural purposes. 5,2 In order to determine the real nature of transaction of purchase and sale various factors ore to be token Info consideration viz the intention of the assesses ai the time of purchase, treatment of the land in question, holding period, actual use of land, location of land in question, holding period, actual use of land, location of land, surrounding circumstances, near future use of land etc. Thus, the question that a particular land is acquired and retained as an agricultural land has to be decided on the basis of totality of !he relevant facts and circumstances and no? by applying any single factor or test. 5.3 In the case in hand, no agriculture operation was carried out by the assesses on the land in question, immediately after purchase, the assesses decided to sell it which demonstrates the Intention of the assessee not to hold the land for cultivation or agriculture operation but to resale the same at the earliest 7
Smt. Chandrika Kantilal Patel possible occasion. Undoubtedly, the land is situated at the main road near the city of Nagpur and In the vicinity of SEZ which means, the entire surrounding area Is commercially developed. Further, the land was sold within a short period of 11 month to the builder for non-agricultural use and purpose. All these facts clearly reflects the commercial and profit element in the purchase and sole transactions of land in question. 5.4 The honourable Supreme Court in case of Gemini Pictures Circuit Private ltd. (supra} has observed and held in paragraph 5 and 6 as under: "5 A recent decision of this court in Sarifabibi Mohmed Sbrahim v. CIT, [1993] 204 ITR 63], rendered by a Bench comprising one of us (P. P. Jeevan Reddy J) is relied upon by learned counsel for the Revenue. The Bench observed : “Whether the land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of this court and the High Courts, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The court has to answer the question on a cons/deration of all of them a process of evaluation. The inference has to be drown on a cumulative consideration of all the relevant facts.” Several judgments of this court and the High Courts were referred to including a judgment of the Bombay High Court in C/T v. V. A. Trivedi [1988] 172 ITR 95. On a consideration of the factors for and against, the Bombay High Court observed in V.A, Trrivedi’s case [1988J 172 ITR 95 that for ascertaining the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the date of sa/e and further whether on the date of sale of the land was intended to be put to use for agricultural purposes for a reasonable span of time in future. Examining the case from fhe" said poinf of view, the High Court held that the fact that the agreement of safe was entered into by the assesses with a housing society is of crucial relevance since it showed that the assessee had agreed to sell the land for admittedly non–agricultural purposes. The ratio of the said decision was approved In Sarifabibi’s case [1993] 204 ITR 631 (SC).
We do not think it necessary to multiply the cases, since, in our respectful opinion, no other conclusion is reasonably possible in the facts of the case before us than the one arrived at by us. 8
Smt. Chandrika Kantilal Patel
All the three authorities under the Act too arrived at the same conclusion. With great respect to the learned Judges of the High Court, we find their conclusion fully unsustainable and unacceptable.” 5.5 The real use of land is very relevant and material for deciding the true intention of the assessee in acquiring the land and selling the same. To apply the exception of capita! asset as per section 2(14)(iii), the character of land being agriculture has to be decided with reference to the Intention and purpose of acquiring the land. Once it is borne out from the facts and circumstances of the case that the intention of the assesses was not to put to the land for agricultural use and accordingly, it was not used for agriculture purpose by the assessee as welt as even by the purchaser, who is a builder, then the provisions of section 2(14)(iii) would not apply in the case of the assesses. 5.6 In the case of Smt. Debbie Alemao (supra), the Assessing Officer assessed the capital gain arising from sale of agricultural land; therefore, the said decision would not apply in the case in hand where the Assessing Officer has assessed the gain from sate of the land as business income. 6 in view of the above discussion and in the facts and circumstances of the case, we hold that the nature of transaction of purchase and sale was rightly held by the Assessing Officer as trading. Accordingly, we set aside the impugned order passed by the CIT(A) and restore that of Assessing Officer.”
As we have been intimated at the Bar that the aforesaid decision of the Tribunal has been challenged before the Hon’ble Jurisdictional High Court by the assessee and the matter is pending final disposal, therefore, we have no other choice except to follow the aforesaid decision of the Tribunal rendered in assessee’s Father’s case wherein the Tribunal has set aside set aside the order passed by the learned CIT(A) and restored the order of the Assessing Officer. Consequently, in view of the decision of the Tribunal rendered in Smt. Chandrika Kantilal Patel assessee’s Father’s case, we uphold the impugned order passed by the learned CIT(A) by dismissing the grounds raised by the assessee.
In the result, assessee’s appeal is dismissed. 20. Order pronounced in the open court on 28.04.2022