Profit on sale of Agricultural Land not taxable as Business Income unless proved that Assessee is engaged in trading of the same
ITAT NAGPUR e-BENCH
Assistant Commissioner of Income-tax, Circle-1
Bhopindersingh R. Arneja
IT Appeal No. 166 (Nag.) of 2012
[ASSESSMENT YEAR 2007-08]
FEBRUARY 15, 2013
Rajendra, Accountant Member
Challenging the order dt. 24-05-2010 of CIT(A)-I, Nagpur, Assessing Officer (AO) has filed the following Grounds of Appeal:
1. On the facts and in the circumstances of the case, it is prayed that delay in filing the appeal may be condoned on the basis of the decision of the Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Ors  [167 ITR 471] (SC) and CIT v. Sothia Mining & Mfg. Corpn. Ltd. [46 Taxman 195] (Cal.).
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 1,08,31,978/- rightly held by the AO as income from an adventure in the nature of trade.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have considered (i) intention of the assessee, (ii) period of holding and (iii) development potential in the surrounding areas and held that sale of lands was adventure in the nature of trade.
4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in ignoring the ratio laid down by the Apex Court in the case of G. Venkatswamy Naidu & Co. v. CIT [35 ITR 594] (1959) and applied by the Hon’ble Mumbai High Court in the case of DCIT v. Gopal Ramnarayan Kasat reported in [328 ITR 556] (2011).
5. Any other ground which may be preferred at the time of hearing.
AO has also filed an application for condoning the delay of 620 days in filing the appeal before the Tribunal.
2. Assessee, an individual had filed his return of income on 26-03-2008 declaring total income of Rs. 34.17 Lakhs and Agricultural income of Rs. 1.09 Lakhs. Assessment was finalised by the AO u/s. 143(3) of the Income Tax Act, 1961 (Act) on 24-12-2009 determining the total income at Rs.1.42 Crores. Initially the return was processed on 27 -01-2009 u/s. 143(1) of the Act. Later on the case was selected for scrutiny. In the course of assessment proceedings, AO held that assessee was regularly trading in land, that he was showing the sale proceeds of plots of land as exempt income, that assessee had claimed that transaction in question was liable for capital gain. He asked the assessee as why the sale of plots of lands should not be treated as adventure in the nature of trade. After considering the submissions of the assessee, AO held that sale of Agricultural land was adventure in nature of trade, that sale consideration was not re-invested in agricultural land, that assessee had offered tax in respect of three pieces of land out of the five pieces of land, that assessee was frequently purchased/sold agricultural land in past/succeeding years, that intention of the assessee was not to hold agricultural land, but to reap a benefit when the price of land was at peak in that locality, that 7/12 extraction of land were not furnished by the assessee to prove that assessee was carrying out agricultural operation on the plot of land-in-question. In this regard, he relied upon the decisions of Hon’ble Supreme Court and Hon’ble Bombay High Court delivered in the cases of Gemini Picture Circuit Pvt. Ltd., and Kalpetta Estate Pvt. Ltd., respectively. He finally held that purchase and sale of pieces of land by the assessee has to be assessed under the head business, that agricultural income shown was very less, that sale proceeds of two pieces of land were to be taxed as adventure in the nature of trade as per the provisions of Sec.2(13) of the Act. He rejected the exemption claim made by the assessee in respect of piece of land No. 42/1 and 43/2 of Dongargaon and added Rs. 26.45 Lakhs and Rs. 81.86 Lakhs for the said assets respectively to the total income of the assessee.
3. Assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submissions of the assessee and two Remand Reports (dt. 12-04-2010 and 12-05-2010) of the AO in the appellate proceedings FAA found that during the relevant assessment year the assessee derived income from salary, house property and income from other sources and agricultural income, that these were the sources of income for the previous assessment years also, that during the relevant assessment year assessee had shown Shot Term Gain on sale of three plots, that three plots of land were situated in Municipal area and due to multiple claims on these properties the assessee had disposed off the same, that surplus arising thereon was offered for taxation as Capital Gain and was so assessee by the AO. He held that the undisputed fact and evidence on record was that the assessee had transferred agricultural land located at Dongargaon, that the 7/12 extracts in respect of the agricultural lands were submitted before the AO and also before him which clearly depicted that transferred assets were agricultural land, that extract in Form No. 7/12 in respect of the agricultural land sold proved that agricultural operation were being carried out on aforesaid agricultural land by the assessee, that the said extract of purchaser of these agricultural land submitted in the course of appellate proceedings made clear that the agricultural land was used for agricultural purposes by the purchaser in subsequent AYs. Also i.e. during the FY 2007-08 and FY 2008-09, that the plots of lands were not put to any other use other than agriculture subsequently, that the pieces of lands in-question were not converted to non-agricultural lands and were not under any Town Planning Scheme, that these facts were not controverted by the AO, that there was no development activity surrounding the lands and the lands were located beyond 8 KMs away from Nagpur Municipal Corporation limits. With regard to observation of the AO that the assessee was frequently purchasing and selling agricultural lands in earlier years, FAA held that AO had not confronted the appellant with such information during the assessment proceedings, that AO had also not brought out any such evidence neither in the assessment order nor in his remand reports. FAA further held that in the case of the assessee agricultural income declared at Rs.1,09,814/- was accepted by the AO, that agricultural income was disclosed in earlier assessment years also, that the agricultural income declared by the assessee also included the agricultural income derived from impugned agricultural land transferred during the previous year under consideration.
3.1 As per the FAA, following findings clearly emerged on the basis of facts and records:
(i) that agricultural operation was the appellant’s vacation.
(ii) that previous to this assessment year, there were no sales of agricultural lands.
(iii) that the appellant invested his own funds in the purchase of agricultural lands.
(iv) that actual cultivation of agricultural lands had been done by the appellant as was apparent from the 7/12 reports. His agricultural income was supported by bills etc. and was accepted by the AO.
(v) thatKh. No. 43/2 and 22/1 of Mouza : Dongargaon were purchased as agricultural lands. The Khasara Report, i.e., 7/12 report suggested that the appellant had cultivated these lands after the purchase as owner of agricultural land.
(vi) the lands in Kh.No. 43/2 and 22/1 of Mouza: Dongargaon were sold as agriculture lands only. This was apparent from the Sale Deeds. These lands were sold on Hector basis and not on per square feet or yards basis.
(vii) that from Khasra Reports (i.e., 7/12 Reports) of Kh. No. 43/2 and 22/1 after these lands were sold by the appellant clearly indicated that the agriculture operations were continued by the purchasers also. These Khasra Reports were for next 2/3 years subsequent to the sale.
(viii) that these lands were never converted as non-agricultural lands. The user of the lands had not undergone any change neither in the hands of the assessee nor by the purchaser of agricultural land from the assessee.
(ix) it was also not disputed that there is no developmental activity in land around the surrounding the lands. The surrounding lands were claimed to be agricultural lands only.Online GST Certification Course by TaxGuru & MSME- Click here to Join
(x) these two agricultural lands sold are assessed to land revenue as agricultural land.
(xi) the agricultural lands on Kh. No. 43/2 and 22/1 of Mouza: Dongargaon were beyond 8 KMs. away from Nagpur Municipal Corporation limits or for that matter from any Municipal Corporation limit.
(xii) there was no basis and facts, in the finds of the AO, as to how the assessee is regularly trading in land. There was no evidence on record to suggest so. The assessee’s past record also does not suggest that the appellant is regularly trading in land.
3.2 With regard to the decision of the AO to treat the transaction-in-question as an adventure in nature of trade, FAA held that the observation of the AO that assessee was regularly trading in land was contrary to evidence on record, that during the previous year under consideration the assessee had sold three pieces of land and income from the same was declared in return under the head ‘Capital Gain’, that the AO had accepted the income declared under the head ‘Capital Gain’ as shown without any adverse observation, that AO having accepted the capital gain as shown in respect to certain lands during this previous year under consideration could not have taken a different view in respect of the two other pieces of agricultural lands and treat the same as adventure in the nature of trade.
FAA also distinguished the cases relied upon by the AO during the assessment proceedings. FAA held that nothing adverse could be held against the assessee by ratio of decisions referred to by the AO in his assessment order. He further held that law was clear on the issue that the burden was on the Revenue to prove that assessee purchased the lands with intention to resell and hence it amounted to adventure in the nature of trade, there was no other evidence that lands were held not as investment, holding period of land itself could not establish that the purchase of land was with a view to trading therein-especially when it was apparent on record that the appellant was an agriculturist who owned other agricultural lands, that assessee was entitled to exemption claimed in his return of income. Finally, allowing the appeal filed by the assessee, addition amounting to Rs. 1.08 Crores ,made by the AO, was deleted by the FAA.
4. Before us, AO has challenged the findings of the FAA. First, we would like to take up the issue of condonation of delay in filing appeal by the AO. As stated earlier, AO has filed an application, dated 10-05-2012, for condoning delay in preferring appeal before the Tribunal. In the said application AO; after stating the facts of the case and order of the FAA; mentioned time limit for filing the appeal before the Tribunal had expired on 16-09-2010, that no appeal was filed on the reasoning that there was no infirmity in the order of the FAA in holding that surplus sale of proceeds was exempt as per the provisions of Sec. 2(14) of the Act. A photocopy of the note sheet of the office file of the CIT-I, Nagpur was enclosed with the application for ready reference. In the application, AO has further stated that in view of the decisions of the Hon’ble Jurisdictional High Court delivered in the case of Dy. CIT v. GopalRamnarayanKasat 328 ITR 556 it was decided to file appeal before the Tribunal. It was further stated that in Aug. 2010,while deciding the question of filing an appeal to the Tribunal, CIT did not have benefit of the decision of GopalRamnarayanKasat (supra),that CIT-I, Nagpur had authorised him to file condonation applications. In his support, he referred to the decisions of Collector, Land Acquisition v. MST. Katiji  167 ITR 471(SC) and CIT v. Sothia Mining & Mfg. Corpn. Ltd.  186 ITR 182 delivered by the Hon’ble Apex Court and Calcutta High Court respectively.
4.1 Before us Departmental Representative (DR) submitted that delay in filing appeal should be condoned considering the facts narrated in the appeal filed by the AO, that decision in the case Mst. Katiji (supra) should be considered in deciding the appeal. With regard to the merits of the case, he relied upon the order of the AO. Authorised Representative (AR) objected to condonation of delay in filing the appeal. He submitted that there was delay of 602 days in filing the appeal, that Addl. CIT had not recommended filing of appeal against the order dt.24-05-2010 of the FAA, that at paragraph No.6 of the note-sheet of the office of the CIT-I, Nagpur clear satisfaction was recorded by the CIT that on the facts and evidence on record there was no case which could be defended before the ITAT, that at paragraph No.6 of the said note-sheet no case was made out to treat the transaction in question as adventure in the nature of trade, that a conscious decision was taken by the Revenue to accept the order of the FAA, that the reasons given in application for condonation of delay were not sufficient, that finding of fact about intention of the assessee in not undertaking an adventure in the nature of trade was given by the FAA, that facts of the case of GopalRamnarayanKasat (supra) were not applicable to the case of consideration. AR placed reliance of SLP Appeal (Civil) No. 21087/2010 in the case of Indian Hotel Co. Ltd., in this regard. He further submitted that in the case of MST. Katiji (supra) delay was only four days. With regard to merits of the case, he submitted that surplus arose on sale of agriculture land that was located beyond 8 KMs from Municipal Limit, that onus to establish that purchase was made with the intention to trade was on revenue, that purchase of agriculture land was not with intention to undertake adventure in the nature of trade, that assessee was aged about 70 years and was agriculturist since long, that the AO had accepted and assessed surplus in respect of three lands under the head Short Term Capital Gain, that there was no reason to take different view in respect of agriculture lands sold; that assessee was bonafide agriculturist qua the impugned agricultural land and as per relevant Laws of Maharashtra Government vide Bombay Tenancy & Agricultural Lands (Vidarbha Region) Act, 1958 he could not be held as trader or dealer in agricultural lands, that ratios of cases of G. Venkataswami Naidu & Co., v. CIT 35 ITR 594 (SC) and GopalRamnarayanKasat (supra) were distinguishable on facts and inapplicable to the facts in the case of assessee. He relied upon the orders of the decisions of Shagun Infrastructure (P.) Ltd., [ITA No. 209/NAG/2009 AY 2006-07] and Satyanarayan O Agarwal [ITA No.169/NAG/12 AY 2007-08] delivered by the ITAT, Nagpur Bench on 27-06-2011 & 30-11-2012 respectively.
5. We have heard the rival submissions and perused the material before us. Before discussing the merits of the matter under consideration, we would like to deal with the application filed by the AO for condoning the delay. As per the application, after considering the decision of the jurisdictional High Court delivered in the case of GopalRamnarayanKasat (supra) it was decided that appeal should be filed before the Tribunal. If the submissions of the AO are accepted even for the sake of arguments only there is no explanation for the period from Nov.2011 and May, 2012 when the decision was published and appeal before the Tribunal was filed respectively. AO has nowhere explained the reasons for delay of this period. AO is also silent about the confidential letter of the CCIT, Nagpur which had triggered the chain of events which took place after the said letter was received by the CIT-I Nagpur. We find that vide his confidential letter dt.11-01-2012 (F. No. CCIT/ Jud/ITAT Appeals/2011-12) CCIT, Nagpur had sent a communication to the office of the CIT for ‘filing of appeal in the ITAT against the order of the CIT(A) in the case of ShriBhopinder Singh RatansinghArneja, Nagpur for the AY 2007-08.’ We have also noted that in the same note-sheet, it is further observed “pl. check whether an affidavit is required also. If yes, affidavit can be drafted…………………”.
5.1 From the copy of the note-sheet submitted by the AO, along with the condonation application, it is clear that CIT took a diagonally opposite stand regarding filing appeal before the ITAT. On 13-09-2010, after considering the report of the Addl. CIT and the noting of the DCIT(HQrs), he had taken an informed decision about not agitating the matter before the Tribunal. Application of his mind to the facts of the case is evidenced by the markings made in the note-sheet and his approval to the report/ noting of his juniors. But, similar kind of application of mind is not found when the decision to file second appeal was taken. In our opinion, only on the instructions of CCIT, he should not have filed the second appeal after arriving at a definite conclusion that order of the FAA was as per the provisions of law. As per our understanding, the only officer authorised to file appeal before the Tribunal is CIT. Sec. 253(2) of the Act dealing with filing of appeal before the ITAT reads as under:
“(2) The Commissioner may, if he objects to any order passed by a Deputy Commissioner (Appeals) @before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals) under section 154 or section 250, direct the Assessing Officer to appeal to the Appellate Tribunal against the order..”
Sections 116, 119, 124 of the Act, dealing with the powers of the various authorities of the department of Income-tax do not authorise the CCIT to issue any instruction with regard to filing of appeals before the Tribunal, nor does any other section of the Act envisages that CIT should follow such instructions. CCIT is authorised to file appeal before the Hon’ble High Courts as per the provisions of section 260A(2) of the Act. So, as per our humble understanding CCIT has no role in filing or not filing of an appeal before the Tribunal. But, the record in the case under consideration clearly show that CIT changed his stand after receiving confidential communication from the office of the CCIT. Application for condonation of delay, filed by the AO, can be dismissed only on this basis, but we would like to deal with prayer of condoning the delay along the merits of the case.
5.2Condonation of delay is governed by section 253(5) of the Act and the said section reads as under:
“(5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period.”
Over the decades, principles of condoning the delay have evolved. It is said that the law of limitation is enshrined in the maxim interest reipublicaeut sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties, rather the idea is that every legal remedy must be kept alive for a legislatively fixed period of time. But, said rules are meant to see that the parties do not resort to dilatory tactics and seek their remedy promptly. The law of limitation fixes a life span for such legal remedy for the redressal of the legal injury so suffered.
The condonation of delay is the discretion of the court and is governed by section 5 of the Limitation Act, 1963. Courts are of the view that the words “sufficient cause” under section 5 of the Limitation Act, 1963, should receive a liberal construction so as to advance substantial justice. Once the court accepts the explanation as sufficient, it is the result of positive exercise of discretion. Provisions of the said section do not envisage that such discretion can be exercised only if the delay is within a certain limit. The length of the delay is not the matter, acceptability of the explanation is the only criterion. In some cases the delay of the shortest range may not be condoned due to want of acceptable explanation whereas in certain other cases, the delay of a very long range could be condoned as the explanation thereof is satisfactory. Pioneer case, dealing with condonation of delay, delivered by the Apex Court in the matter of Mst. Katiji, (supra) has laid down following broad principles (167 ITR 471) :
(i) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
(ii) Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
(iii) “Every day’s delay must be explained” does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational, common sense and pragmatic manner.
(iv) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
(v) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
(vi) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds, but because it is capable of removing injustice and is expected to do so.
From the various decisions of other courts including the judgments of Hon’ble Supreme Court, other general principles of condonation of delay can be summarised as under:
(a) If sufficient cause for excusing delay is shown, discretion is given to the Presiding Officers (POs) to condone the delay and admit the appeal. This discretion has been conferred on the Pos, so that judicial power and discretion is exercised to advance substantial justice.
(b) The expression ‘sufficient cause’ is not defined, but it means a cause which is beyond the control of the party. For invoking the aid of the section any cause which prevents a person approaching the POs within time is considered sufficient cause. In doing so, it is the test of reasonable man in normal circumstances which has to be applied. The test whether or not a cause is sufficient is to see whether it could have been avoided by the party by the exercise of due care and attention. In other words, whether it is bona fide cause, inasmuch as nothing shall be deemed to be done bona fide or in good faith which is not done with due care and attention. What may be sufficient cause in one case may be otherwise in another. What is of essence is whether it was an act of prudent or reasonable man.
(c) In every case of delay, there is some lapse on the part of the concerned litigant. If there are no mala fides and it is not put forth as part of a dilatory strategy, the POs should consider the application of the litigant. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the POs conducting proceedings should lean against acceptance of the explanation.
(d) Party desirous of availing condonation of delay on account of non-availability of certified copy of a particular order, it should make any application for condonation of delay and stat the reasons why the certified copy could not be filed within a reasonable time.
(e) After the decision of the Supreme Court, an assessee is entitled to file appeal or revision petition though belatedly before the concerned authorities, because the decision/judgment of the Supreme Court amounts to declaration of law of the land as per article 141 of the Constitution of India. Same cannot be said about the decisions rendered by this Tribunal, though it is a judicial body and performs the judicial functions of the State in vetting, deciding and adjudicating the disputes brought before it in accordance with the provisions of the relevant tax statutes.
(f) No doubt that litigants are entitled to wait until the last date of the limitation for filing of the appeal, but when it allows the limitation to expire and come forward with a explanation enumerating reasonable causes for not filing the appeal within the time prescribed under the statute, then the causes so shown must establish that because of some event or circumstances arising before limitation expired, AO/assessee was not able to file the appeal within the stipulated time mandated in law. Any event, cause or circumstance arising after the expiry of the limitation period cannot constitute a sufficient cause.
(g) In the appellate proceedings before the Tribunal Revenue is represented the Commissioner. He is the only authority who has the discretion to file or not to file an appeal. His discretionary powers are not controlled by any mandatory / rigid provision of law. He is not supposed to follow instruction of any superior in this regard. He may authorise his juniors to file appeals after taking a decision of filing of appeal.
(h) If it is difficult in the Departmental hierarchy to expedite the authorisation being filed in time, that itself cannot form the basis for praying for condonation of delay. In other words taxation authorities cannot expect some kind of privilege while filing belated appeals. Like the assessees they also have to prove that for delay there was a reasonable cause.
(i) Just because there is merit in the appeal filed by the litigant, any amount of delay, however, negligently caused, cannot be condoned. In other words a very strong case on merits is not relevant for condonation of delay in filing the appeals.
(j) Requirement of sufficient cause for delay cannot be ignored and it becomes very important and significant when the delay is inordinate and abnormal.
(k) In the matter of J.B. Advani& Co. (P.) Ltd. (72 ITR 395) Hon’ble Supreme Court had held that explanation of delay for the entire period is necessary. In other words what is expected of the appellant in such matters is to show that delay was occasioned due to some sufficient cause. The cause pleaded should not only be a probable one but it should be real and sufficiently reasonable. It would not be any sort of assertion that would amount to sufficient cause and would justify the condonation of delay. The cause pleaded must fit in the facts and circumstances of the given case and the explanation offered regarding the delay occasioned by such cause should appeal to reasons so as to get judicial approval. In short in matters of delay it is neither practicable nor desirable to explain minute-to-minute and hour-to-hour delay, but delay has to be explained.
(l) When an application for condonation of delay is made; to consider whether a sufficient cause has been made out by the petitioner; the order of the POs should disclose that the authority had applied his mind to the question raised before it. Due exercise of judicial discretion is a pre-condition for allowing/refusing an application filed for condoning delay.
5.3 If above general principals are analysed, it becomes clear that touchstone for condonation of delay is ‘sufficiency/reasonableness of the cause’. Filing of an appeal in time is a normal judicial process, whereas filing a belated appeal is an abnormal step. It is said extraordinary remedies need existence of extraordinary circumstances. In the case under consideration, CIT/AO has not brought on record any ‘reasonable cause’ for condonation of delay. If we consider the facts of the case of GopalRamnarayanKasat (supra), it becomes clear that those facts are inapplicable to the facts of the case under consideration. In that matter, assessee was aware that piece of land he was purchasing was under acquisition proceedings of Government authorities. Assessee in that matter had not shown any other intention, in acquiring and selling the plot of land, other than the intention of earning of profit by way of compensation. Where as in the case under consideration plots of land were agricultural land and were used as such before and after the transaction. Secondly, question as whether a subsequent decision of a Court can constitute sufficient cause has been dealt by the direct ruling of the Mysore High Court in the case of V.V. Kudva v. Employees State Insurance Corporation AIR 1972 Mysore 204. The High Court, at p. 206 of the report held as follows :
“None of the decisions relied on by Mr. Hande supports his contention that a litigant who has acquiesced in the judgment of a Court by not preferring an appeal within the period of limitation, can wake up and prefer an appeal after a subsequent ruling ……. which he considers as being favourable to him. Nor can the advice of his counsel that his case is not a fit one for appeal, which advice may turn out to be a mistaken one in the light of a subsequent ruling of the Supreme Court or the High Court, be regarded as a sufficient ground for condoning such delay.”
5.4 We also find that AO has not filed any affidavit along with the condonation-application, though the note sheet talks of filing of an affidavit if necessary, as stated at paragraph No.5 of our order. Generally application filed for condonation of delay are accompanied by an affidavit, as it throws lights on the though process of the applicant for submitting the petition. For deciding the issue of reasonableness or sufficiency of cause affidavits play a vital role. But, in the matter consideration same is missing. In these circumstances, the condonation application filed by the AO is not sustainable. In our opinion sufficiency/reasonableness of cause is totally missing in the case under consideration. If the entire chain of events of the present matter is deliberated upon one can safely conclude that there was no cause at all for challenging the order of the FAA and filing belated appeal before the Tribunal. Therefore, the application filed by the AO for condoning the delay is rejected.
Ground No.1 is decided against the AO.
6. Now, we would like to decide the issue on merits also. AO has, as highlighted by the FAA, not produced any evidence that assessee was purchasing and selling plots of land in subsequent and earlier assessment years. AO is entitled to draw inferences and conclusions during assessment proceedings. But, the conclusion which adversely affect the interests of a tax-payer should be based on facts and same should be confronted to the assessee for rebuattal. FAA has given a categorical finding of fact that such a exercise was not undertaken by the AO. It is a fact that sale proceeds of plots of land situated in Municipal Area have been taxed under the head Short Term capital gains by the AO. If the said transaction was not assessed as an adventure in nature of business how the sale of agriculture land can be assessed as business income. It is also a fact that income from the plots in question has been assessed as agricultural income by the AO for the AY under consideration. Similarly, the factum that pieces of land were shown as agricultural land in Revenue records even after the sale has not been challenged by the AO.
6.1 We have also considered the matters relied upon by the AR i.e. M/s. Shagun Infrastructure Pvt. Ltd. and Satyanarayan O Agarwal (supra). We find that similar issue has been decided against the AO by the Tribunal. After perusing the decisions of G. Venkatswamy Naidu & Co., GopalRamnarayanKasat (supra), relied upon by the AO, we are of the opinion that same are not applicable to the facts of the case under consideration. In the case of G Venkatswamy Naidu & Co. (supra) the appellant-firm which acted as managing agents purchased, four contiguous plots of land adjacent to the place where the mills of the company managed by it were situated for a total consideration of Rs. 8,713. The first purchase was made in October 1941 the name of a benamidar covering land measuring about 28 cents and the second and subsequent purchases were made in November, 1941, June, 1942, and November, 1942, the plots of land measuring about 2 acres 79 cents, 28 cents and 1 acre and 90 cents, respectively. Appellant made no effort to cultivate them or erect any superstructure on them but allowed them to remain un-utilised. The appellant sold these lands to the company managed by it in two lots in September and November, 1947, for a total consideration of Rs. 52,600. Considerring the above facts Tribunal held that the plots were purchased by the appellant wholly and solely with the idea of selling them at a profit to the company, that the amount was not a capital accretion but was a gain made in an adventure in the nature of business and was therefore, taxable. On a reference, the High Court held that the transaction was an adventure in the nature of trade and that the Department was justified in taxing the amount. Hon’ble Apex Court confirmed the order of the High Court and dismissed the appeal filed by the assessee. Following was the final decision of the Hon’ble Supreme Court:
“Appellate Tribunal was right in inferring that the appellant knew that it would be able to sell the lands to the managed company whenever it thought it profitable so to do; that the appellant purchased the four plots of land with the sole intention of selling them to the mills at a profit which intention raised a strong presumption in favour of the view taken by the Tribunal; and that the High Court was right in holding that the transaction in question was an adventure in the nature of trade.”
Clearly, facts of the present case cannot be compared with that of G Venkatswamy Naidu & Co. (supra). We have already held that facts of the matter of Gopal RamnarayanKasat(supra) are totally different from the facts of the present case.
Therefore, after considering the ‘clear’ finding of facts of the FAA, mentioned at paragraph 3.1. of our order, we are of the opinion that his order does not suffer from any legal or factual infirmity. Upholding his order we decide ground Nos. 2 to 5 against the AO.
As a result, appeal filed by the AO stands dismissed.