Commissioner of Income-tax, Panchkula v. Sunil Kumar Sood
[Citation -2014-LL-1027-29]

Citation 2014-LL-1027-29
Appellant Name Commissioner of Income-tax, Panchkula
Respondent Name Sunil Kumar Sood
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 27/10/2014
Judgment View Judgment
Keyword Tags adventure in nature of trade • sale of agricultural land • purchase and sale of land • capital gain tax • question of law • business income • capital asset • agricultural land
Bot Summary: Counsel for the assessee submits that the question that is germane to the controversy is not whether the land was stock in trade or that the sale and purchase was an adventure or concern in the nature of trade but whether the land in dispute was agricultural land. The Assessing Officer has himself recorded that maize and vegetable crops grow on the land but strangely enough, proceeded to hold that it is not agricultural land as neither 'lagan' nor 'land revenue' is paid. The Assistant Commissioner of Income Tax, Panchkula Circle, Panchkula, held that the land is not 5 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 -6- agricultural as the assessee is a practicing Chartered Accountant, who has purchased and sold a number of properties and, the sale under the head business income earned from business activities of purchase and sale of land and has to be treated as business income of the assessee. The Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh, vide the impugned order allowed the appeal, set aside the order passed by the CIT(Appeal) and the Assessing Officer, by holding that as per the revenue record the land, in question is agricultural land assessed to land revenue and as the assessee had not taken any steps to convert agricultural land to non-agricultural use, it does not fall within the definition of capital asset, as clarified under Section 2(iii) of the Act. On relevant date the above land was agricultural land and the purchase has purchased this land for setting up an industrial undertaking and when the industry is set up on khasra number then land become non-agriculture land. We have considered the argument but in the absence of any evidence much less an assertion that the assessee sold anything other than agricultural land or that at any stage sought conversion of the land, for industrial use or carved out separate plots for sale, hold that as at the time of sale the land was agricultural and was sold as such. The assessee having sold agricultural land admittedly, to various industrial units, has merely sold agricultural land and cannot be held to be a dealer in agricultural land nor can the land, in dispute, be held to be stock and trade and business income.


ITA No. 230 of 2012 (O&M) -1- IN HIGH COURT OF PUNJAB & HARYANA, CHANDIGARH (1) ITA No. 230 of 2012 (O&M) Date of decision: October 27, 2014 Commissioner of Income Tax, Panchkula ....... Appellant Versus Sunil Kumar Sood ........ Respondent (2) ITA No. 231 of 2012 (O&M) Commissioner of Income Tax, Panchkula ....... Appellant Versus Sunil Kumar Sood ........ Respondent (3) ITA No. 288 of 2012 (O&M) Commissioner of Income Tax, Panchkula .......Appellant Versus Sunil Kumar Sood ........ Respondents (4) ITA No. 289 of 2012 (O&M) Commissioner of Income Tax, Panchkula ....... Petitioner Versus Sunil Kumar Sood ........ Respondent 1 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -2- (5) ITA No. 175 of 2014 (O&M) Commissioner of Income Tax, Panchkula ....... Appellant Versus Sunil Kumar Sood ........ Respondent (6) ITA No. 176 of 2014 (O&M) Commissioner of Income Tax, Panchkula ....... Appellant Versus Sunil Kumar Sood ........ Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA AND HON'BLE MR. JUSTICE AMIT RAWAL Present:- Mr. Yogesh Putney, Advocate for appellant. Mr. Ravi Shankar, Advocate for respondent. **** RAJIVE BHALLA, J (ORAL) By way of this order we shall decide ITA Nos. 230,231,288,289 of 2012 and 175 and 176 of 2014 as they relate to same assessee but to different assessment years but raise common questions of law. facts are being taken from ITA No.230 of 2012. question that arises for adjudication and has been framed as substantial question of law by revenue reads as under:- 2 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -3- Whether on facts and in circumstances of case learned ITAT is justified to hold income from sale and purchase of lands as agriculture income as against findings recorded by Assessing Officer. and duly concurred by CIT (A) that assessee is dealer in purchase and sale of agricultural lands without putting lands to agriculture use and hence income derived is business income in nature of adventure in nature of trade of dealing in purchase and sale of agriculture land? Counsel for revenue submits that sale of separate parcels of land by assessee, should be construed as adventure in nature of trade as defined by Section 2(13) of Income Tax Act, 1961 (hereinafter to be referred to as 'the Act') and his stock in trade and, therefore, capital asset. As consequence, profit and gain arising from sale of separate parcels of land is assesses' business income, exigible to tax. Counsel for revenue further submits that whether land was agricultural or not or whether it was put to agriculture use or not or whether assessee derived agricultural income or not is not germane to issue in hand. question that should have been answered by Tribunal was whether purchase and sale of land in short intervals of time, admittedly sold to industries, is exempted from capital gain. Counsel for revenue submits that apart from aforesaid argument, as Assessing Officer and CIT(A) had recorded 3 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -4- concurrent findings of fact that land in dispute is not agricultural land, ITAT had no jurisdiction to reverse these findings and then also without assigning clear and cogent reasons. Admittedly, assessee purchased land and then immediately sold it to industrial houses. failure of assessee to prove any agricultural income proves that land in dispute was not being put to agricultural use and therefore was acquired by assessee, as part of his business thereby partaking nature of adventure or concern in nature of trade or commerce. assessee has no right to claim that as land is agricultural, it is not exigible to capital gain tax and income derived from these sales cannot be construed as income from business. Counsel for assessee, however, submits that question that is germane to controversy is not whether land was stock in trade or that sale and purchase was adventure or concern in nature of trade but whether land in dispute was agricultural land. perusal of jamabandi, chart prepared by Assessing Officer and report obtained by Assessing Officer from concerned Tehsildar reveals that land is agricultural in nature. Assessing Officer has himself recorded that maize and vegetable crops grow on land but strangely enough, proceeded to hold that it is not agricultural land as neither 'lagan' nor 'land revenue' is paid. payment of any rent, lagan, batai or land revenue, is irrelevant for determining nature of land. jamabandi clearly records land as 'barani abal' that is land which is not irrigated by any canal or river but is generally irrigated by 4 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -5- rain or by other means of irrigation. It is further submitted that at no stage of proceedings whether before Assessing Officer, CIT (A) or ITAT was question based upon definition of business, as provided under Section 2 (13) of Act raised and therefore, cannot be raised for first time before this Court, particularly, when assessing officer and CIT(A) have passed orders by holding that land in dispute is not agricultural land. order passed by ITAT is legal and valid and as substantial question of law as framed does not arise for adjudication appeal may be dismissed. We have heard counsel for parties, perused impugned order as well as orders passed by Commissioner of Income Tax(Appeals) and Assessing Officer. assessee filed return of income on 30.10.2007, declaring total income of Rs.24,04,503/-. return was processed under Section 143(1) of Income Tax Act, 1961 (hereinafter referred to as 'the Act') and, thereafter, taken up for scrutiny. notice under Section 143(2) of Act was issued to assessee on 26.09.2008 and served upon assessee on 29.09.2008. notice under Section 142(1) of Act along with detailed questionnaire was issued to assessee on 30.10.2009. In response to these notices, representative of assessee attended proceedings. assessee claimed that land, which was subject matter of transactions, was agricultural land situated in rural area of Himachal Pradesh and, therefore, its sale would not invite capital gains tax. Assistant Commissioner of Income Tax, Panchkula Circle, Panchkula, held that land is not 5 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -6- agricultural as assessee is practicing Chartered Accountant, who has purchased and sold number of properties and, sale under head business income earned from business activities of purchase and sale of land and, therefore, has to be treated as business income of assessee. Assessing Officer computed total income of assessee as Rs.1,38,27,700, Rs.24,04,503 and Rs. 51,12,533. assessee filed appeal, which was dismissed by Commissioner of Income Tax (Appeal), Panchkula. Aggrieved by these orders, assessee filed appeal. Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh, vide impugned order allowed appeal, set aside order passed by CIT(Appeal) and Assessing Officer, by holding that as per revenue record land, in question is agricultural land assessed to land revenue and as assessee had not taken any steps to convert agricultural land to non-agricultural use, it does not fall within definition of capital asset, as clarified under Section 2 (14)(iii) of Act. On question of adventure in business and business income from sale of land, Tribunal held as follows:- 14. revenue has failed to bring material on record to demonstrate that assessee is dealer in lands. assessee has shown lands in his audited balance sheet as fixed assets and this factum remained un-rebutted by revenue, and is relevant factor in unfolding intention of assessee. Mere frequency of purchase and sale of land is not conclusive evidence of carrying on 6 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -7- business activities as trader or dealer in land. Hon'ble Bombay High Court, in case of Indian Hume Pipe Co. Ltd. v. CTR 195 ITR 386(Bom) held that where no development has been carried out, to make land readily marketable and sale of plot of lands during different years, would not constitute transactions as trader. Similarly, Madhya Pradesh High Court in case of CIT v. Smt. Bilkishbai 225 ITR 570 (MP) held that repeated sales and purchases of agricultural land is not adventure in nature of trade, as no systematic business activities involve. Therefore, surplus on sale of land cannot be assessed as business income. Similar view has been held by jurisdictional High Court, in case of Cit v. Sushila Devi Jain 259 ITR 671. 15. Having regard to fact-situation of present case, it is evident that present lands in question do not constitute capital asset within meaning of Section 2(14)(iii) of Act. Therefore, surplus realized on sale of such lands cannot be taxed as capital gains u/s 45 r.w. Section 10(37) of Act. provisions of Section 10(37) were inserted by Finance Act 2004 (No.2) w.e.f. 1.4.2005. revenue merely made assertion and treated surplus realised from sale of 7 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -8- rural agricultural lands as business profit, which don't fall u/s 2(14) of Act. Therefore, having regard to fact situation of present case, relevant record and judicial verdicts, surplus realised on sale of such land, is not taxable receipts. In view of above legal and actual discussions, we are of considered opinion that findings of CIT(A), based on bare assertions, in face of documentary evidence, filed by assessee, to support his claim, as discussed above, cannot be upheld. Accordingly, appeal of assessee is allowed. perusal of revenue record reveals that relevant jamabandi, records that land is Barani Abal , i.e. agricultural land which is not irrigated by canal or river but is rain fed or is irrigated by other means. Admittedly, land is situated in rural area, beyond municipal limits. presumption of truth is attached to entry in jamabandi. entry in jamabandi describing land as Barani Abal , raises presumption of truth as to its nature namely, that it was rural agricultural land. This apart Tehsildar, Nalagrah, District Solan, Himachal Pradesh, in response to information sought, addressed letter dated 07.01.2008 to Assistant Commissioner of Income Tax, Panchkula, which reads as follows:- To Asstt. Commissioner of Income Tax, 8 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -9- Panchkula Circle, Panchkula. On above cited subject refer your office letter No.ACIT/PKL/Cir/Pkl/07-08/IA/3073, dated 31.10.2007, and in this regard, we have got investigated information from our field employees and report is as under:- 1. Copy of jamabandi of land bearing khasra 1341/3, 1341/2-1338-1339-1336-1337-1335-1319- 1345/1, 1347/1, in village Bhatoli Kalan is prepared and submitted. 3(a) above land does not fall under M.C. Corporation, NAC. (b) Nagar Panchayat Baddi to above khasra (land) distance is approx, 10 K.M. (c) Distance of land is more than 8 K.M. 4. land is away from Nagar Panchayat. details of census are not available. 5(a) above sold land was used for agricultural purposes before selling. (b) above said land was used for agricultural purposes regularly. (c) Not applicable and not related to our records. (d) Himachal Agriculturist does not require any permission from Government while buying or selling of land but if purchaser is non-agriculturist then it is necessity that he he has to obtain permission 9 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -10- from Govt. u/s 118 of H.P. Tenancy and Land Reforms Rules, 1972. above said land was agricultural land at time of purchase and sale. (f) On relevant date above land was agricultural land and purchase has purchased this land for setting up industrial undertaking and when industry is set up on khasra number then land become non-agriculture land. (g) above said land was regularly used for agricultural purposes. (h) above land falls under rural area and at that time was not developed and all lands surrounding these were used for agricultural purposes. (i) Above land has not developed into any plots and roads. (j) No. (k) permission for purchase of land is obtained by non-agriculturist purchaser. (l) land was sold according to bighas biswas and not by yards. (m) land is purchased and sold on basis of average value. perusal of report reveals that it is clearly recorded that land was regularly used for agricultural purposes before it was sold. Income Tax Appellate Tribunal, has also 10 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -11- noticed that khasra girdhwaries from 2002 to 2007, contain complete details of land, area, name of owner, khasra numbers and crop sown on this land were available with Assessing Officer but were ignored. jamabandis and khasra girdawaris in our considered opinion, prove that land was used for agricultural purpose during relevant period and was rural agricultural, before it was sold. revenue conscious of this legal flaw has tried to bring income to tax by asserting that land is not agricultural as it was never subjected to agricultural operations. findings with due deference to two officers concerned is contrary to revenue record, certificate issued by Tehsildar, jamabandies and khasra girdwaries which prove with degree of certainty agricultural nature of land. Counsel for revenue despite our repeated request to refer to any material to contrary to rebut presumption of truth attached to entries in jambandi is not in position to refer to any evidence much less any material that would enable us to hold that land was not agricultural. land being rural agricultural land situated beyond municipal area and beyond prescribed limits from boundaries of municipal area, could not possibly have been held to be capital asset. Assessing Officer and CIT(A) in their apparent zeal to bring transaction to taxation discarded or should we say intentionally ignored revenue record and interest without discussing revenue record, particularly jamabandies, khasra girdwaries and information made available by Tehsildar, proceeded to 11 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -12- erroneously hold that land is not agricultural. Tribunal therefore rightly held that land purchased and sold by assessee is rural agricultural land. Assessing Officer and CIT(A), though, conscious of fact that land is agricultural in nature, made attempt to side track issue and treated income from sale of agricultural land as trade from business and brought same to taxation. Counsel for revenue, therefore, asserts that sale of land to industrialists, who thereafter set up industries proves that assessee was dealer who purchased and sold land, derived income from these sales and therefore these transactions partake nature of business income in nature of adventure in trade. We have considered argument but in absence of any evidence much less assertion that assessee sold anything other than agricultural land or that at any stage sought conversion of land, for industrial use or carved out separate plots for sale, hold that as at time of sale land was agricultural and was sold as such. fact that land was sold to industries would not alter transaction into adventure in business, or partake nature of business income. It would be appropriate to point out that land, in dispute, was sold by assessee and purchased by vendees as agricultural land. Whether purchaser, used it for commercial or industrial purposes is irrelevant for determining nature of transactions in hands of assessee. We therefore find no error in opinion recorded by 12 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: ITA No. 230 of 2012 (O&M) -13- Tribunal that land, in dispute is rural agricultural land and is consequently not capital asset. assessee having sold agricultural land, though, admittedly, to various industrial units, has merely sold agricultural land and, therefore, cannot be held to be dealer in agricultural land nor can land, in dispute, be held to be stock and trade and, therefore, business income. Consequently question of law is answered against revenue and appeal is dismissed. (RAJIVE BHALLA) JUDGE October 27 , 2014 (AMIT RAWAL) archana/nt JUDGE 13 of 13 ::: Downloaded on - 01-01-2019 09:41:50 ::: Commissioner of Income-tax, Panchkula v. Sunil Kumar Sood
Report Error