G.N. Venugopal Vs ACIT (ITAT Bangalore)
Conclusion: Merely because of the fact that the land was sold for profit, it could not be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. Where land was not subjected to any conversion as non-agricultural land by assessee transferred such agricultural land as it was and where it was basis, in such circumstances, such transfer could not be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income.
Held: AO treated the net consideration received on the sale of agricultural land as business income though assessee had declared agricultural income, which was exempt income u/s.2(14). During the course of search proceedings, it had found some documents, and based on that AO had initiated the proceedings u/s. 153A. Appellant submitted that the land was always an investment and not at all converted into stock in-trade. There was no material on record to show that he carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the appellant as adventure in the nature of trade. The land was sold by him in acreage and not by making plots. It was held that the intention of assessee from the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to the boom in real estate market came into picture at a later stage, the assessee had sold the land. Merely because of the fact that the land was sold for profit, it could not be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade. Further, it was cleared that when the land which did not fall under the provisions of section 2(14)(iii) and an assessee who was engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land was not subjected to any conversion as non-agricultural land by assessee or any other concerned person, transferred such agricultural land as it was and where it was basis, in such circumstances, such transfer could not be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These five appeals by the assessee directed against the order of the CIT(A)-11, Bengaluru for the AYs.2010-11 to 2014-15. Since, certain issues in these appeals are common, these appeals are clubbed together and disposed-of, by way of this common order for the sake of convenience.
2. The facts from the case are that there is a search action u/s.132 of the Income Tax Act (Act) in the case of assessee-premises situated at #344, Ganigara Beedi, 6th Ward, Devanahalli, Bengaluru Rural on 9th October, 2014. Consequent to the search action, notice u/s.153A of the Act, dated 10-07-2015 was issued to the assessee. For the AY.2010-11, the assessee filed a copy of the return u/s.139(1) of the Act declaring an income of Rs.3,50,630/-, which was filed before the AO on 24-09-2011 and no separate return was filed for the AY. 2010-11 consequent to the notice u/s.153A of the Act.
3. For the AY. 2011-12, the assessee filed a copy of return u/s.139(1) of the Act on 24-08-2016, which was filed before the AO on 29-12-2012. For AY. 2013-14, the assessee filed a copy of return filed u/s.139(1) of the Act on 29-08-2014. For AY.2014-15, the assessee filed a return of income in response to notice issued u/s.153A of the Act, dt.23-07-2016, declaring income of Rs.2,66,010/-. Thus, the assessee filed new return u/s.153A only for AY. 2014-15. Consequently, in these cases, after receiving notice u/s.143(2) of the Act, fresh assessment order u/s.153A r.w.s.143(3) of the Act was framed for all these assessment years.
4. First common ground in all these appeals is with regard to notice u/s.153A of the Act, dt.10-07-2015 which were issued to the assessee all these assessment years to frame the assessment u/s.153A r.w.s.143(3) of the Act is bad in law.
4.1. As seen from the assessment order, there was a search in this case at the premises of the assessee, situated at #344, Ganigara Beedi, 6th Ward, Devanahalli, Bengaluru Rural on 9th October, 2014, u/s.132 of the Act. Consequent to search action, case was notified by the PCIT, Central Circle, Bengaluru vide F.No.23(42)/CIT(C)/2014-15, dt.06-01-2015. Subsequently, the case was centralised to the office from ITO, Ward-6(3)(4), Bengaluru by CIT, Bengaluru, vide notification u/s.127 in F.No.PCIT/BLR/6/Centralization/2014-15, dt.19-01-2015. Notice u/s.153A was issued on 10-07-2015 to the assessee requiring him to the file the return of income within thirty days from the receipt of the notice by him. Consequent to this, the assessee filed a copy of return of income earlier filed u/s.139(1) of the Act for all the assessment years from 2010-11 to 2013-14. However, the assessee filed new return of income u/s.153A on 23-07-2016 for the AY.2014-15, declaring income of Rs.2,66,010/-. Latter the AO issued notice u/s.143(2), dt.26-08-2016 independently and separately for each assessment year so as to frame assessment u/s.143(3) r.w.s.153A of the Act.
5. The AR submitted that the assessee could not find the notice issued u/s.153A dt 10.07.2015 while filing Appeal before Hon’ble ITAT. However later the Appellant has found the same. Hence, the assessee did not press this ground and accordingly, this ground is dismissed as not pressed.
6. Ground No.2:The proceedings u/s.153A are bad in law as there were no incriminating materials found during the course of search and the Assessment was completed purely on the basis of change of opinion and not on the search materials (AY.2011-12).
The Appellant’s case was subjected to an action u/s 153A of the Act in connection with search proceedings in the group case of Sri K Muniraju and others. Accordingly the search was conducted on Appellant u/s.132 on 09.10.2014. During the course of search proceeding. it has found some loose sheets, sale deeds, sale Agreements documents relating to land transaction and were seized from Appellant’s premises. The such impounded documents contain 112 sheets/pages which are mainly agreements of sale, sale deeds, deed of declarations and other sheets being cheque leaves, deposit slips etc.(The said seized materials containing 112 pages are enclosed in the submission of AY 2010-11). Based on above documents, the A.O. has initiated the proceedings u/s. 153A. In this regard the Appellant is objecting for proceedings conducted u/s.153A as there were no incriminating materials found during the course of search and the assessment was completed purely on the basis of change of opinion and not out of the search materials.
6.1. Further it is submitted that the Appellant has declared all the Agricultural income in the Return of Income filed u/s.139(4) and the same was shown under exempt income. The A.O. has not made any addition out of the search materials found during the search conducted u/s.132 of the Act. Further, for the captioned year scrutiny assessment u/s.143(3) has completed vide order dt 06.02.2015. In the said order, the A.O. has disallowed agricultural income of Rs.19,50,000/- out of Rs,20,03,000/-. The said disallowance of Agricultural income was relating to leasing of Agricultural land. Accordingly the A.O. has assessed total income of Rs.28,06,663/-. In proceeding u/s.153A, the A.O. has retained the assessed income as per original order passed u/s.143(3). However, in the said order, the A.O. has wrongly arrived total assessed income of Rs.46,56,630/- instead of Rs,.28,06,633/-. The clerical error is on account of double disallowance of Rs.19,50,000/-agricultural income, which is added in original assessment and also proceedings u/s.153A. Hence, the Appellant prays before Hon’ble ITAT to direct A.O. delete the double disallowance made in the order passed u/s.153A rws 143(3).
6.2. Further the A.O. has not brought any fresh material out of search proceedings as contemplated u/s.153A of the Act and no addition is made out of the search material as the addition/disallowance made in 153A proceedings are purely a change of opinion on the Income declared in the Return of Income filed u/s.139(4) of the IT Act. Further it is pertinent to note that the search material found during the course of search conducted ws.132 on 09.10.2014, are relating to income declared in the original return filed u/s.139(4) being sale of Agricultural land. Apart from this there are no other tangible material found during the course of search.
6.3. Hence, the order passed u/s.153A rws 143(3) is bad in law and not as per provisions of section of the Act and prays before Hon’ble Tribunal squash the order of A.O.
6.4. In this regard the Ld.AR relied on the following decisions:
1. CIT Vs Kabul Chawla, [2016] 380 ITR 573 (Del) (Del – HC) „ where it is held that On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.
2. Rajat Minerals Pvt. Ltd. Vs DCIT (ITAT Ranchi), 1.T(SS).A.Nos.41 to 47/Ran/2019 order dt 20/01/2020, where it is held that AO were clearly beyond the scope of authority vested under s.153A owing to absence of any incriminating material or evidence deduced as a result of search in so far as completed assessments were concerned and the same was not permissible in law.
3. ACIT Vs Moon Beverages Ltd. ITA Nos.115 to 118/Del/2018, AY 2009-10 to 2012-13 dt 27.11.2020 (Del – Trib)
4. CIT Vs M/s. SKS Ispat & Power Limited (Bombay High Court)
5. Commissioner of Income Tax v. Gurinder Singh Bawa reported in [2016] 386 ITR 483 (Born)
6. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD [2015] 374 ITR 645 (Born – HC)
7. Sanjana Mittal Vs DCIT (ITAT Amritsar), ITA No. 487/Asr/2018 order dated 11/03/2019
8. Shri Amit Arora Vs ACTT (ITAT Delhi), ITA No. 3481/Del/2015 order dated 26/11/2019
6.5. On the other hand, Ld.DR submitted that there are valid seized material during the course of search action on the basis of which assessments were framed. He also drew our attention to various observations made by the AO with regard to the seized material specifically following seized materials.
1. The seized document A/GNV/01 pg nos.76-89 being agreement of sale dated 15/11/2010 by smt. Ramukka and Others in favour of G.N.Venugopal for the sale of land measuring 4 acres 31 guntas at Guttahalli village, KasabaHobli, Devanahalli Tq., Bengaluru for a consideration of Rs.4,77,5000.
2. The seized document A/GNV/01 pg nos.30-36 being Deed of declaration dated 8/6/2011 between Sri Munivenkatappa and others and Sri G N Venugopal for the land measuring 51/2 guntas as Guttahalli village, Kasabahobli, Devanahalli Taluk, Bangalore Rural Dist.
3. The seized document A/GNV/01 pg nos.5-9 being Absolute sale deed dated 2/3/2013 between Smt Rekha Venugopal and Sri B G Channappa for the sale of agricultural land measuring 5 acres at Manepalli Village, Hindupur, A.P for a consideration of Rs.2,50,000/-. The seized document A/GNV/01 pg. nos.10-15 being Absolute sale deed dated 2/3/2013 between Smt G N Venugopal and Sri B G Channappa for the sale of agricultural land measuring 5 acres at Manepalli Village, Hindupur, A.P for a consideration of Rs.2,50,000/-.
4. The seized document A/GNV/01 pg nos.52-56 being MOU dated 13-3-2007 between Sri G N Venugopal and M/s.Expat Properties Ltd., for procuring 500 acres at Thottagunahalli Thadur Kolar Dist. @ 15.5 lakhs per acre.
6.6. Further, it is also noticed that the following documents are seized during the course of search:
6.7. As seen from the above, there were valid seized material so as to frame assessment for the AY.2010-11 to 2014-15. Hence, it cannot be said that there is no seized material so as to frame assessment u/s.143(3) r.w.s.153A of the Act. Accordingly, placing reliance on the above judgment of the Hon’ble jurisdictional High Court in the case of PCIT Vs. Delhi International Airport in ITA No.322/2018, dt.29th Sept. 2021. We uphold the framing of assessment in these assessment years. This ground of appeal in all these assessment years is dismissed.
7. Ground No.3 is with regard to CIT(A) not adjudicating the additional ground during the course of hearing, in respect of legal ground. This ground is with regard to framing of assessment u/s.143(3) r.w.s.153A of the Act. Since we have already adjudicated this ground, which relates to framing of assessment u/s.153A of the Act, this ground has become infructuous in all these appeals. Accordingly, this ground of appeal is dismissed as infructuous.
8. Ground No.4 in all these appeals is with regard to treating the net consideration received on sale of agricultural land as business income though the assessee has declared agricultural income, which is exempt income u/s.2(14) of the Act. This ground is common in AYs.2010-11, 2011-12, 2012-13, 2013-14 & 2014-15. The assessee declared the agricultural income on sale of the landed property as follows:
