Ita/94/2014 Of Kunhaysu v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU WEDNESDAY, THE 3RD DAY OF SEPTEMBER 2014/12TH BHADRA, 1936 ITA.No. 94 of 2014 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 184/Coch/2012 of I.T.A.TRIBUNAL,COCHINBENCH DATED 24/05/2013 APPELLANT(S)/APPELLANT/ASSESSEE: -------------------------------------------------------------- KUNHAYSU PARAVAKKAL HOUSE, B.H.ROAD, KOTTAKKAL POST MALAPPURAM DISTRICT-676503. BY ADVS.SRI.T.N.SEETHARAMAN SRI.S.ARUN RAJ RESPONDENT(S)/RESPONDENT/REVENUE: ------------------------------------------------------------------ COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, CALICUT-673001. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX ADV.SRI.P.K.R.MENON (SR) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20/8/14ALONG WITH I.T.A.No.95/14 & CONNECTED CASES, THE COURT ON 03/09/2014DELIVERED THE FOLLOWING: ITA NO.94/14 APPENDIX APPELLANT'S EXHIBITS ANNEXURE A:A TRUE COPY OF THE ASSESSMENT ORDER DT31.12.2010 FOR THE ASSESSMENT YEAR 2008-09. ANNEXURE B:A TRUE COPY OF THE ASSESSMENT ORDER DT31.12.2010 FOR ASSESSMENT YEAR 2009-10. ANNEXURE C:A TRUE COPY OF THE COMMON ORDER DT28.3.2012 OF THE COMMISSIONER (APPEALS) FOR ASSESSMENTYEARS 2008-09 AND 2009-10. ANNEXURE D:A TRUE COPY OF THE IMPUGNED COMMON ORDERDT 24.5.13 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHINBENCH, COCHIN FOR THE AY 2008-09. //True Copy// Rp PA to Judge ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. ================================ I.T.A.Nos. 94, 95, 96, 97, 98, 100, 101, 102, 103, 107, 108, 109, 112, 113, 114, 115, 116, 117, 118, 119, 120, 122, 123, 124, 126, 128, 129, 130, 143, 144 OF 2014 ============================== Dated this the 3[rd]day of September, 2014 J U D G M E N T Antony Dominic, J. These appeals filed by the assessees are directed against theorder of the Income Tax Appellate Tribunal, Cochin Bench in ITANo.184/Coch/2012 and connected cases, which in turn were directedagainst the orders of the Commissioner of Income Tax (Appeals) - I,Kochi arising out of the assessment orders passed for theassessment years 2008-2009 and 2009-10. 2.The appellants were joint owners of a plot of land havingan extent of 222.93 cents in R.S.No.45/3 of Kottakkal Amsom Desomand they sold it to Sri.Abdu Haji, who constructed on it a commercialcomplex by name “Smart Trade City”. Subsequently, on 9/7/2008,the Department carried out search and seizure operations in thecase of M/s.Smart Trade City, during the course of which, saleagreement dated 13/1/2006 entered into between the appellantsand Sri.Abdu Haji for the sale of the property mentioned above wasseized. The agreement revealed that the property was agreed to be sold at a sale consideration of `3,27,500/- per cent and the aggregatesale consideration worked out `7,30,09,575/- which was to be paidwithin 1-1½ years after measurement of the property. However, inthe sale deeds that were executed in respect of the property, the saleconsideration declared was only `99,95,000/-. sold at a sale consideration of `3,27,500/- per cent and the aggregatesale consideration worked out `7,30,09,575/- which was to be paidwithin 1-1½ years after measurement of the property. However, inthe sale deeds that were executed in respect of the property, the saleconsideration declared was only `99,95,000/-. 3.In view of the above, the assessing officer initiatedproceedings against the assessees under Section 153C of the Act andaccordingly notices were issued and the assessees filed returns ofincome, claiming exemption of capital gains arising on sale of theland on the ground that the land is an agricultural land. Thiscontention was rejected and adopting `3,27,500/- per cent as the saleconsideration, the assessing officer computed the long term capitalgain. For this purpose, the assessing officer adopted the market valueas on 01/04/1981 as the cost of land which was determined at `100/-per cent. Accordingly, long term capital gain was computed at`7,28,86,741/- and this was allocated among the assessees inproportion to the rights held by them and was assessed in theassessment year 2008-09. In view of the above, the assessing officer initiated : 3 : 4.The Assessing Officer also found that the assessees havesold two more plots of land comprised in Sy.Nos.45/3 and 158/16having an extent of 32.19 cents and 16.17 cents. The propertyhaving an extent of 32.19 cents was sold to Sri.Saidalavi, Sri.Ashrafand Sri.Moideenkutty as per sale deed No.1917/2008 dated16/5/2008 for a total sale consideration of `6,50,000/-. The plothaving an extent of 16.17 cents was sold to Sri.Abdu Haji, Sri.AbdulKhader and Sri.Ummer Haji vide sale deed No.1933/2008 dated12/5/2008 for a total consideration of `8,95,000/-. On the findingthat these properties were located adjacent to 222.93 centsmentioned above, in the case of these properties also, the assessingofficer adopted `3,27,500/- per cent as the sale consideration and onthat basis, the long term capital gain was computed in theassessment year 2009-10. Here also, the contention that theproperties were agricultural land was rejected and capital gain wasallocated in the hands of the assessees in proportion to the sharesheld by them. 5.All the assessees challenged the assessment orders byfiling appeals before the Commissioner of Income Tax (Appeals). The : 4 : CIT(A) held that the land sold by the assessees are not agriculturallands and therefore constitute “capital asset” in terms of Section 2(14) of the Act. The CIT(A) found that the assesses received the saleconsideration in instalments falling in the financial years relating tothe assessment years 2006-07 to 2009-10 and accordingly took theview that the transfer has to be considered as having taken place inthe assessment years 2006-07 to 2009-10 in proportion to theamount of sale consideration received in those years. 6.The CIT(A) also found that the assessees have sold 18.98cents of land vide document No.614/2008 dated 13/2/2008 toSri.Moideen Haji for a total consideration of `4,80,000/-. Since theassessing officer did not assess the capital gain arising from thistransaction, the appellate authority sent enhancement proposal to theassessees, proposing to adopt the sale consideration at `3,27,500/-per cent. Rejecting the plea of the assessees that the sale transactionhad been completed much earlier and that the registration was donemuch later, the appellate authority directed the assessing officer toassess the capital gain in respect of this plot of land adopting`3,27,500/- as the sale consideration. : 5 : 6.The CIT(A) also found that the assessees have sold 18.98cents of land vide document No.614/2008 dated 13/2/2008 toSri.Moideen Haji for a total consideration of `4,80,000/-. Since theassessing officer did not assess the capital gain arising from thistransaction, the appellate authority sent enhancement proposal to theassessees, proposing to adopt the sale consideration at `3,27,500/-per cent. Rejecting the plea of the assessees that the sale transactionhad been completed much earlier and that the registration was donemuch later, the appellate authority directed the assessing officer toassess the capital gain in respect of this plot of land adopting`3,27,500/- as the sale consideration. : 5 : 7.In the appeals filed for the assessment years 2009-10, theassessees contended that the assessing officer erred in assessing thecapital gain in respect of 16.17 cents of land on the ground that thesaid land formed part of 222.93 cents mentioned above. This wasaccepted by the appellate authority but however the appellateauthority confirmed the action of the assessing officer in adopting`3,27,500/- per cent as the sale consideration in respect of 32.19cents of land. Before the First Appellate Authority the assessees alsodisputed the adoption of `100/- per cent as the market value as on01/4/1981. However, the First Appellate Authority found that thisdetermination was on the basis of the information collected about thecomparative sale from the Sub Registrar's Office and also for thereason that the assesses did not furnish any other evidence tocontradict the value determined, the First Appellate Authority upheldthe rate of `100/- per cent determined by the Assessing Officer asthe market value as on 01/4/1981. 8.Aggrieved by the orders of the assessing authority asconfirmed by the appellate authority, the appeals were filed beforethe Appellate Tribunal which partly allowed the appeals by its : 6 : impugned order. It is in these circumstances, the appellants have filedthese appeals raising the following questions of law for consideration. “1.“Whether, on the facts and in thecircumstances of the case, the Tribunal is right inlaw in holding that the lands at Kottakkal sold by theappellant fall within the meaning of “Capital asset”as defined under section 2(14) and the profit arisingon sale thereof is exigible to tax u/s 45 of theIncome Tax Act, 1961?” 2.“Whether, on the facts and in thecircumstances of the case, the Tribunal's viewregarding the nature of the impugned lands as nonagricultural being contrary to the evidence in theform of Certificates issued by responsible localofficials of the Government of Kerala viz.,Agricultural Officer, Kottakkal, Village Officer,Kottakkal and the Additional Tahsildar, Tirur andwithout the assessing authority bringing in anyevidence/material in rebuttal is sustainable in law?” 3.“Whether, on the facts and in thecircumstances of the case, the Tribunal's viewregarding the nature of the land as non-agriculturalis consistent with its finding that the transfer of theimpugned land (measuring 222.93 cents) took placein January, 2006, the date for determination as towhether the impugned land was agricultural or notand is correct in law?” 4.“Whether on the facts and in thecircumstances of the case, the Tribunal was right inlaw in inferring that the use of a portion of the land(50 cents out of 222.93 cents) temporarily for a non-agricultural purpose alters the character of theentire land from agricultural to non-agricultural torender it liable for capital gains tax on its sale?” 9.Before this Court, the only contention urged was that the finding that the land was not an agricultural land is incorrect and : 7 : 4.“Whether on the facts and in thecircumstances of the case, the Tribunal was right inlaw in inferring that the use of a portion of the land(50 cents out of 222.93 cents) temporarily for a non-agricultural purpose alters the character of theentire land from agricultural to non-agricultural torender it liable for capital gains tax on its sale?” 9.Before this Court, the only contention urged was that the finding that the land was not an agricultural land is incorrect and : 7 : against the evidence on record. Answer to this question woulddetermine whether the computation of long term capital gain and theconsequent assessment of tax was legal or not. Therefore, we shallexamine whether the finding of the lower authorities on this aspectwas legal or not. 10.A reading of the orders passed itself would shows that theappellate authority applied the tests laid down by the Gujarat HighCourt in CIT v. Siddharth J Desai (139 ITR 628) to determinewhether the land is an agricultural land or not. Each of the tests laiddown by the Gujarat High Court were applied and appreciating theevidence available before it, including the certificates of theAgricultural Officer, Village Officer, Additional Tahsildar and otherdocuments, the assessing officer and the first appellate authoritycame to the conclusion that the land in question is not an agriculturalland. Having considered these factual findings, which was confirmedby the Tribunal, we do not find any reason to hold the conclusions tobe incorrect. 11.In so far as the certificates produced by the assessesbefore the first appellate authority, which are also referred to in the : 8 : Tribunal's order are concerned, copies of these certificates wereproduced before us for our perusal also. We have gone through thesecertificates and in our view, these documents were totally insufficientto conclusively prove that the land in question was an agriculturalland at the time of the sale. The first appellate authority also hasexamined whether the character of the land sold is as an agriculturalland or not. This question has been again examined in the context ofthe facts which are laid down by the Gujarat High Court in RasiklalChimanlal Nagri v. CWT (56 ITR 608). Accordingly, the situation ofthe land and its surroundings, physical characteristics of the land, theintention of the owner as gathered from the relevant circumstances,environment and situation of land, the previous, present and futureuse to which the land is put and the intention of the assessees at thetime of sale were also appreciated by the lower authorities.Proceeding further, the question was again examined in the light ofthe judgment of the Apex Court in CWT v. Officer-in-Charge(Court of Wards) (105 ITR 133) and considering the condition of theland and the intention of the owners and such other tests also, thelower authorities have concluded that the land is not an agricultural : 9 : land. Therefore, in the absence of any satisfactory evidence producedby the assessees to hold that the land in question was an agriculturalland, the finding of the lower authorities cannot be disturbed. : 9 : land. Therefore, in the absence of any satisfactory evidence producedby the assessees to hold that the land in question was an agriculturalland, the finding of the lower authorities cannot be disturbed. 12.Admittedly, none of the assesses had declared anyagricultural income even in the returns filed after the date of searchand even though the assesses had admitted that the possession ofthe land was given in January, 2006, for the subsequent years alsothey showed agricultural income. This showed that the cash flowstatements were without any basis. The assessees could not provethe existence of any coconut trees or cashew plants nor could theyshow any proof that they carried on agricultural activities in the landin question. It is also their own case that the land in question wasused for conducting football tournament and they themselvesdescribed the land in the conveyance deed as stadium land. Inaddition to all these, the land was located very near to the KottakkalBus stand. Immediately after the land was handed over to thepurchaser, he constructed a commercial complex in that land. 13.All these facts, coupled with the absence of documentaryproof produced by the assessees proving to the contrary, show that : 10 : the conclusion of the lower authorities that the land in question wasnot an agricultural land cannot be held illegal. In such circumstances,in our view, these cases do not involve any question of law to beconsidered by this Court. Appeals fail and are dismissed. Sd/- ANTONY DOMINIC JUDGE Rp Sd/- DAMA SESHADRI NAIDU JUDGE //True Copy//PA TO JUDGE