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The Income Tax OfficerWard-4(1) Hyderabad Vs. Smt. M. Uma Ravinder Reddy, Hyderabad Appellant Respondent
August, 05th 2014
       IN THE INCOME TAX APPELLATE TRIBUNAL
          HYDERABAD BENCH "A", HYDERABAD

 BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
  AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

                 ITA No. 265/Hyd/2014
                Assessment year 2007-08
The Income Tax Officer      vs.   Smt. M. Uma Ravinder
Ward-4(1)                         Reddy, Hyderabad
Hyderabad                         PAN: ABMPM7563R
Appellant                         Respondent

                  C.O. No. 22/Hyd/2014
                In ITA No. 265/Hyd/2014
                Assessment year 2007-08
Smt. M. Uma Ravinder        vs.   The Income Tax Officer
Reddy, Hyderabad                  Ward-4(1)
PAN: ABMPM7563R                   Hyderabad
Appellant                         Respondent

               Appellant by: Sri R. Mohan Reddy
             Respondent by: Sri A.V. Raghu Ram

             Date of hearing: 09.07.2014
     Date of pronouncement: 31.07.2014

                         ORDER

PER ASHA VIJAYARAGHAVAN, J.M.:

      The above appeal by the Revenue is directed against
the order of the CIT(A)-V, Hyderabad dated 28.10.2013
and the Cross Objection (CO) by the assessee against the
appeal of the Revenue.

2.    The assessee is an individual and filed her return of
income on 31.3.2008 for A.Y. 2007-08 declaring income of
Rs. 87,878. The assessment was completed u/s. 143(3)
r.w.s. 147 of the Income-tax Act, 1961 determining the
income at Rs. 2,23,58,107 by making addition of Rs.
2,22,70,229 towards long term capital gains on sale of
                              2
                                              ITA No. 265/Hyd/2014 &
                                                  CO No. 22/Hyd./2014
                                          Smt. M. Uma Ravinder Reddy
                                          =======================

agricultural land for a total sale consideration of Rs.
2,29,75,000.

3.       Facts of the case are that a survey u/s. 133A of the
Act was conducted in the case of M/s. Sri Surakshita
Homes, a firm engaged in the business of real estate, by
the ITO, Ward-11(2), Hyderabad certain incriminating
material with regard to sale of lands by the assessee to
the above firm was found and forwarded the same to the
present Assessing Officer.     As per that information, the
assessee sold lands at Aushapur village, Ghatkesar
Mandal, Rangareddi District for a consideration of Rs.
2.39 crores including commission of Rs. 3 lakhs per acre
for 7 acres 10 guntas. As per Annexure 1B/SH/06 page
57, the assessee was paid an amount of Rs. 2,17,50,000
for Acres 7.10 guntas @ Rs. 30 lakhs per acre and Rs. 21.
75 lakhs towards commission @ 3 lakhs per acre, totalling
to Rs. 2,39,00,000. The above transaction was executed
through a registered sale deed document No. 18495/06
dated 4-11-2006 in Sub-Registrar's Office, Ghatkesar.
Since the assessee did not declare any capital gains on
sale of the above lands, the AO held that income
chargeable to tax escaped assessment and hence reopened
the assessment u/s 147 of the Act.




4.       During the assessment proceedings in reply to
show-cause notice the assessee submitted the following
as to why the sale consideration of Rs. 2.39 crores should
not be brought to tax under the head long term capital
gains:

         "At the outset I submit that the land
         admeasuring Ac. 7-10 Guntas situated in
                       3
                                      ITA No. 265/Hyd/2014 &
                                          CO No. 22/Hyd./2014
                                  Smt. M. Uma Ravinder Reddy
                                  =======================

Aushapur      Village  &    Gram      Panchayat
Ghatkesar Mandal, R. R. District is agricultural
land as land is not an asset within the
meaning of section 2(14), the gain arising on
sale of such land is exempted from capital
gain. Hence I humbly request your good-selves
not to subject the impugned gains to tax. I
submit that the sale consideration mentioned
Sale Deed is Rs. 65,25,000 only but not Rs.
77,50,000 as stated in your show cause
notice. I also submit that it is not true to say
that I have received Rs. 2.39 crores from the
purchasers. I am herewith enclosing a copy of
the Sale Deed. I further submit that I have
received a sale consideration of Rs. 65,25,000
only from M/s. Sri Surakshita Homes by way
of post dated cheques as under:

               Chq.
   Dale                    Bank         Amount
               No.
                       Development      20,25,00
10.12.2006   138754
                       Credit Bank             0
                       Development      45,00,00
05.01.2007   138755
                       Credit Bank             0

At this juncture I bring to your kind notice
though it has been mentioned in the sale deed
that the purchasers have paid the sale
consideration no mention has been made
therein the mode of payment. To avoid future
disputes and misunderstandings we have
entered into a Memorandum of Understanding
regarding the mode of payment of sale
consideration on the same day i.e.,
04.11.2006 on which the Sale Deed has been
executed. A copy of the same is enclosed.

Out of the above two payments Chq. No.
138755 to Rs. 45,00,000 was not honoured by
the purchasers.      Instead, they made part
payment by way of cheque & part payment by
way of cash, the details of which have already
been at the time of earlier hearing.

I submit that I have not received the various
sums as mentioned in your letter [para 3(b). I
reiterate that I have received only Rs.
                            4
                                            ITA No. 265/Hyd/2014 &
                                                CO No. 22/Hyd./2014
                                        Smt. M. Uma Ravinder Reddy
                                        =======================

     65,25,000 as sale consideration as agreed in
     the Sale Deed"

5.    During the assessment proceedings, the assessee
also submitted a note on exemption on capital gains,
which is as under:

     "During the course of hearing on 22.01.2013
     your good-selves have asked me to explain
     why the agricultural land sold by me is not a
     capital asset. In this regard I submit that the
     land which was sold by me is situated in a
     gram Panchayat and village known as
     Aushapur. There are no notified municipalities
     near the village.        Your good-selves have
     expressed that Ghatkesar is a municipality. I
     submit that Ghatkesar is not a municipality
     even today. Hence, I humbly submit that the
     land which was situated in the village and
     gram Panchayat known as Aushapur and the
     lands and the land was recorded as
     agricultural lands in the village adangal/
     pahani. To reinforce my submissions I draw
     your kind attention to Notification under
     section 2(1A)(c), proviso, clause (ii)(B) and
     section 2(14)(iii)(b) - Notification No. 50 Dated
     6th January, 1994 wherein the municipalities
     are notified for the purpose of section
     2(14)[1994] 205 ITR (Stat) 121. It is obvious
     that Ghatkesar did not find any place in the
     said notification. Even today the said
     notification is in force. Accordingly, I humbly
     reiterate the fact that the land which was sold
     by me and which was situated in Aushapur
     village and Gram Panchayat is purely an
     agricultural land and the gains derived from
     sale of such land are exempted from capital
     gains under the provisions of Income-Tax Act
     1961"

6.    After considering the explanation of the assessee,
the Assessing Officer in order to ascertain whether the
lands in question are agricultural lands or otherwise
                                 5
                                                  ITA No. 265/Hyd/2014 &
                                                      CO No. 22/Hyd./2014
                                              Smt. M. Uma Ravinder Reddy
                                              =======================

asked the assessee to furnish the details by letter dated
28.1.2013, the details asked by the Assessing Officer were
as under:

      (a) Pattadar Passbook
      (b) Name of the crops grown for the last three years
          in the said land.
      (c) Bills/vouchers etc., for expenditure and sale of
          agricultural produce.
      (d) Proof in support           of   taxes   paid    on     these
          agricultural lands.

7.       The Assessing Officer held that the lands were
converted into plots.          From the letter which was
addressed to MRO, Ghatkesar Mandal vide letter of even
no, dated 28.01.2013 requesting to furnish the details of
the lands in question along with survey numbers and
requested to confirm whether any agricultural activity was
being carried out in the said lands during the period 2002
to 2006.     In response to this, the Tahsildar, Ghatkesar
Mandal vide his letter No. B/84/13 dated Nil.02.2013
furnished the information which is reproduced here as
under:
      "I invite your attention to the references cited
      and it is to inform that the VRO, Aushapur
      village, Ghatkesar have enquired into the
      matter and reported the Sy. No. wise details:

     S.      Sy.    Extent
                                           Remarks
     No.     No.   (Ac. Gts)
     2.      252     1-21      Covered into plots
     3.      257     1-28      Covered into plots and some
                               extent padava.
      4.     262     0-21      Covered into plots.
      5.     263     0-07      Covered into plots
      6.     352     0-10      Padava
      7.     353     0-01      Padava and some extent is
                               covered into under By-pass
                               road.
         8   260     2-10      Covered into plots.
                                     6
                                                           ITA No. 265/Hyd/2014 &
                                                               CO No. 22/Hyd./2014
                                                       Smt. M. Uma Ravinder Reddy
                                                       =======================


        The same          is    furnished        for     favour       of
        information"

8.       The Assessing Officer held that the lands sold to
M/s. Sri Surakshita Homes are not agricultural lands and
no     agricultural    activity      was       carried     out      in     them.
Therefore,     he     brought       to    tax    the     amount          of   Rs.
2,22,70,229 as long term capital gains.

9.       On    appeal      before        the    CIT(A),       the    assessee
submitted the proceedings of the MRO Ghatkesar Mandal
vide No. B/2723/97 dated 8-10-1997, wherein it was
mentioned in Page 3 that all the survey numbers were
recorded plots and the Village Assistant, Aushapur
enquired on the spot and reported that after delivery of
possession by Court Commissioner, the petitioners have
fenced the land and were doing agriculture. The assessee
submitted the submissions in support of her contention
that the lands sold by the assessee are agricultural lands
and hence exempt from assessing the sale consideration
as capital gains u/s 2(14) of the Act.

10.      The   learned         AR   further      submitted           that     the
agricultural land in question was located in Aushapur
village, comprised in the area within the jurisdiction of
Gram Panchayat of Aushapur and as such it was situated
in an area outside any municipality or cantonment board,
having a population of not less than ten thousand, and
also    beyond      the   distance        notified       by    the       Central
Government from the limits of any such municipality or
cantonment board. Thus, the land in question does not
constitute a capital asset, as defined u/s 2(14) of IT Act,
                               7
                                                  ITA No. 265/Hyd/2014 &
                                                      CO No. 22/Hyd./2014
                                              Smt. M. Uma Ravinder Reddy
                                              =======================

1961. He further submitted that this position is also
evident from the Memorandum explaining the provisions
of Finance Act, 1970, whereby s. 2(14) was amended so as
to include the agricultural lands located within the
jurisdiction of a municipality in the definition of the
expression 'Capital Asset'.

11.    The AR submitted that even vide Notification u/s
2(1A)(c), proviso, clause (Il) (B) and Section 2(14)(iii)(b)
CBDT Notification No. 164/3/87-ITA-1 dated 6-1-1994,
wherein municipalities were notified for the purpose of
Section 2( 14) (1994) 205 ITR (Stat) 121, and vide
Notification No. 9947 dated 6-1-1994 and Notification No.
SO 1302 dated 28-12-1999 reported in 248 ITR 258,
published in the Gazette of India, Ministry of Finance,
Dept. of Revenue, Ghatkeshar under which the Aushapur
Village in which the lands of the assessee are located, was
not notified as Municipality and even today, the said
notification was in force.

12.    The AR submitted that the said land originally
belonged to Mr. Yadagiri and Mrs Bal Laxmamma, who
were declared as pattadars as per a Court decree, in O.S.
No. 23 of 1984, dt. 03.09.1997. Subsequently, the said
owners took possession of the lands and carried out
agricultural operations. As is evident from the orders of
the   MRO    Ghatkesar       Mandal,   vide     proceedings          dt.
08.10.1997 giving effect to the Court Decree, though the
lands in question were reflected as plots in records, the
V.A. of Aushapur conducted a physical inspection of the
spot and reported that the land owners had fenced the
land and were actually doing agriculture. Thus, the
                               8
                                                ITA No. 265/Hyd/2014 &
                                                    CO No. 22/Hyd./2014
                                            Smt. M. Uma Ravinder Reddy
                                            =======================

allegation of the AO that the land in question was in the
nature of plots is factually incorrect.

13.    He further submitted that as is evident from the
assessment order itself, the report of the MRO obtained by
the AO suggests that it was based on the enquiry
conducted in 2013 and as such does not reflect the
factual position relevant to 2006 it was pointed out that
the Assessee purchased the said land in 2002 from the
person, who bought from the original owners and
agricultural operations were carried out upon such land
regularly throughout the period of holding till the date of
sale and it was informed to the AO during the assessment
proceedings, that the impugned land was dry land, which
was basically rain-fed without any alternative water
resource, and the crop grown on such land was Maize. It
was stated that unfortunately, as the rain fall during the
period was not sufficient, there was hardly any surplus
from agriculture activity and the fact remains that
agricultural operations were actually carried out by the
Assessee.    The    learned   counsel     submitted        that    the
observation of the AO, that the claim of the Assessee was
unverifiable as she failed to produce Pattadar Passbook, is
not tenable as the pass book proves only ownership of the
land, which, in the case of the Assessee, is proved beyond
doubt by the registered purchase deeds. With regard to
the observation of the AO, that the Assessee failed to
produce     bills   and   vouchers   in   respect     of    sale    of
agricultural produce, it was submitted that it was clearly
stated during the assessment proceedings that as the
yield from the crops grown was not considerable the same
was sold to the petty traders from the local area and such
                             9
                                            ITA No. 265/Hyd/2014 &
                                                CO No. 22/Hyd./2014
                                        Smt. M. Uma Ravinder Reddy
                                        =======================

sale of produce at field to the local buyers is a regular
practice in this region.

14.    The AR relied on the decision of Vizag Bench of the
Tribunal in the case of M. Narayana Chalamaiah vs ITO, in
ITA No. 343 of 2007 dt. 24.09.2010, wherein the Tribunal
that the claim of the assessee regarding actual cultivation
of lands cannot be lightly rejected unless' some material is
brought on record to reject such claim. He also relied on
decision of the Tribunal, Hyderabad Bench in the case of
Mr. T.C. Reddy, in ITA No. 469/Hyd/2009 and ITA No.
228/Hyd/2010, wherein held that as agriculture in this
country is an unorganised sector and sale of agricultural
produce is also not properly organized, one cannot blame
the assessee for not maintaining the books of account for
the purpose of cultivation and therefore non maintenance
of books of account cannot be a ground to reject the claim
of the assessee. It was submitted that non-production of
tax payment receipts cannot be the basis for denial of the
claim, in view of the fact that the revenue authorities
never raised any tax demand and as such the question of
payment of tax does not arise.

15.    The AR relied on the judgement of Hon'ble High Court
of Bombay, in the case of CIT vs. Debbile Alemao (Smt.)
(2010) 46 DTR 341 (Born.), that agricultural land which
was never sought to be used for non agricultural purpose
by the assessee till it was sold has to be treated as
agricultural land, even though no agricultural income was
shown by the assessee from this land, and therefore, no
capital gain was taxable on the sale of the said land.
                             10
                                              ITA No. 265/Hyd/2014 &
                                                  CO No. 22/Hyd./2014
                                          Smt. M. Uma Ravinder Reddy
                                          =======================

16.    The AR submitted that the land had never been used
by the assessee for non-agricultural purpose any time
before the date of sale. It was pointed out that nothing
has been brought on record by the AO that it was used for
non-agricultural purpose and the Assessee did not seek
any permission from the relevant authorities to put it to
non-agricultural use. The Assessee submitted that as per
the Andhra Pradesh Agricultural Land (Conversion for
Non-Agricultural Purposes) Act, 2006, conversion of
agricultural lands for any other purpose is prohibited
except with specific permission by the authority under
that Act. It was further submitted that the Hon'ble High
Court of Karnataka, in the case of CIT v. Smt. K.
Leelavathy 341 ITR 287, approved the order of the ITAT
wherein it was held that the land sold by the Assessee
retained its agricultural character till the date of the order
permitting non-agricultural use and could be treated as a
capital asset only thereafter. It was pointed out that the
impugned land was sold on acreage basis and had it been
converted into plots, as alleged by the AO, the registering
authorities would not have permitted the transfer of land
on acreage basis.

17.    The AR submitted with regard to the decision in the
case of Sarifabibi Mohmed Ibrahim v. CIT 204 ITR 631,
relied on by the AO, the Hon'ble Supreme Court approved
as many as 13 tests laid down by the High Court in CIT v.
Siddharth J. Desai 139 ITR 628 (Guj) for ascertaining the
character of land at the time of sale. At the same time, the
Supreme    Court    held   that   whether    a    land     is    an
agricultural land or not is essentially a question of fact,
which has to be answered in each case having regard to
                              11
                                              ITA No. 265/Hyd/2014 &
                                                  CO No. 22/Hyd./2014
                                          Smt. M. Uma Ravinder Reddy
                                          =======================

the facts and circumstances of that case. It was further
observed that there may be factors both for and against a
particular point of view and the court has to answer the
question on a consideration of all of them by a process of
evaluation and inference has to be drawn on a cumulative
consideration of all the relevant facts, The Supreme Court
has further stated that not all these factors or tests would
be present or absent in any case and that in each case
one or more of those factors may make appearance and
that the ultimate decision will have to be reached on a
balanced consideration of the totality of the circumstances.
Accordingly, on a cumulative consideration of all the facts
as existing in that case, the land in question was held to
be non-agricultural.

18.       The AR further submitted that the Hon'ble High
Court of Bombay, after elaborately discussing the decision
in the cases of Sarifabibi Mohmed Ibrahim cited above,
held the land in question to be agricultural land in a later
case i.e., CIT v. Minguel Chandra Pais 282 ITR 618 (Born),
wherein the land under reference was adjacent to 4 five
star hotels and the person to whom the land was sold,
was said to be a sister concern of one of those hotels.
While coming to the conclusion, the High Court made a
cumulative consideration of the facts vis-a-vis the tests
laid down and the facts which weighed in favour of the
assessee were asunder:
   (i)      the subject land was situated in a village and at
            a distance of about 15 km from the municipal
            limits.

   (ii)     All documents produced by the Appellants
            showed that the said land was agricultural.
                                12
                                               ITA No. 265/Hyd/2014 &
                                                   CO No. 22/Hyd./2014
                                           Smt. M. Uma Ravinder Reddy
                                           =======================

   (iii)     The Appellants had neither converted nor made
             any plans nor taken any steps towards the
             conversion of the said land into non-agriculture.

   (iv)      The subject land had continued to be put to
             agricultural    use     and    that   it was
             always used for agricultural purpose.

   The Hon'ble High Court observed that as the
   appellants had satisfied most of the tests which were
   laid down by the Hon'ble Supreme Court in the case of
   Sarifabibi, the lands in question were agricultural in
   nature.

   (i)       The AR further submitted that inflation or
             escalation in price of the agricultural land would
             not change the basic character of the land. This
             view was also upheld by the Hon'ble High Court
             of Bombay, in the case of CIT v: Minguel
             Chandra Pais 282 ITR 618 (Born), wherein it was
             held that the price paid is not decisive to say
             whether the land is agricultural or not. Further,
             it was held in the case of CIT v. Smt. Debbie
             Alemao 331 ITR 59 (supra), that the use to
             which the purchaser would put could not be a
             factor for the inference that the land is not
             agricultural in the hands of the Assessee at the
             time of transfer. Reliance is also placed on the
             decision of the Hon'ble High Court of Madras in
             the case of M.S. Srinivasa Naicker Vs ITO
             (supra).

19.        The CIT(A) after considering the submissions of the
assessee agreed that the land in question does not
constitute capital asset as defined u/s. 2(14) of the IT Act,
1961.

20.        Regarding the report called for from the MRO,
Ghatkesar       Mandal    on   28.1.2013    and     received       in
February, 2013 reporting the status of the land falling in
various Sy. Nos. "as covered into plot" and covered with
weaker section colony and plots etc., the CIT(A) was of the
                               13
                                               ITA No. 265/Hyd/2014 &
                                                   CO No. 22/Hyd./2014
                                           Smt. M. Uma Ravinder Reddy
                                           =======================

opinion that the report cannot be given credence since the
factual position reported pertains to the year 2013 and
not before 5 years i.e., 2006 which is the year in which
the assessee sold the land.      The CIT(A) observed that the
Assessing Officer did not given any opportunity to the
assessee to rebut the contents of the report and cross
examine the authorities who has received the report. The
CIT(A) further agreed that the ratio laid down in the case
of CIT vs. Sashiben (280 ITR 319) (Guj) wherein it has
been held that the fact of non-agricultural user by the
buyer will not alter the character of land in the case of
seller.     The CIT(A) held that the assessee satisfied the
various steps laid down in the case of Sarifabibi Mohd.
Ibrahim & Ors (204 ITR 631) for considering the land was
agricultural land and, therefore, directed the Assessing
Officer to delete the addition of Rs. 2,22,70,229 under the
head long term capital gains and accepted the income
returned by the assessee.




21.       With respect to the ground No. 4 of the assessee
against the determination of the sale consideration of Rs.
2,29,75,000 as against Rs. 77,50,000 claimed by the
assessee he did not go into the merits of the sale
consideration of Rs. 2,29,75,000 determined by the
Assessing Officer as against sale consideration of Rs.
77,50,000 as claimed by the assessee and held the same
to be redundant.        Aggrieved, the Revenue is in appeal
before us and raised the following grounds:

          (1) The order of the learned CIT(A) is
              erroneous both in law and on facts of the
              case;
          (2) The   Learned   CIT(A)   ought   to     have
                       14
                                       ITA No. 265/Hyd/2014 &
                                           CO No. 22/Hyd./2014
                                   Smt. M. Uma Ravinder Reddy
                                   =======================

   appreciated the action taken by the
   Assessing
   Officer treating that the lands sold by the
   assessee are not agricultural lands;
(3) The learned CIT(A) ought to have
    considered that the assessee failed to
    declare agricultural income either in the
    Asst. Year under consideration or in
    earlier years and should have treated that
    the lands sold by the assessee are non-
    agricultural lands;
(4) The learned CIT(A) ought to have
    considered that the assessee failed to
    produce any material evidence to prove
    that there is agricultural activity (Basic
    and subsequent operations) in the lands
    under consideration and should have
    treated that the lands as non-agricultural
    lands;
(5) The learned CIT(A) ought to have
    considered that the assessee failed to
    furnish any proof that she has paid Land
    Revenue and accordingly treated that the
    lands as non-agricultural;
(6) The learned CIT(A) ought to have
    appreciated that the lands sold by others
    adjacent to the lands in question declared
    the income on sale of the said lands and
    paid the taxes for the A.Y. 2007-08.
    Accordingly the learned CIT(A) should have
    treated the lands in question are also
    taxable under the head Long Term Capital
    gains as admitted by other sellers in the
    same project;
(7) The learned CIT(A) ought to have
    considered that the assessee failed to fulfil
    all the 13 characters (Except Character
    No. 12) as approved by the supreme Court
    in the case of Sarifabibi Mohamed Ibrahim
    Vs. CIT 204 ITR 631 for ascertaining the
    status of the land at the time of sale and
    should have treated the land in question
    as non-agricultural land;
                               15
                                              ITA No. 265/Hyd/2014 &
                                                  CO No. 22/Hyd./2014
                                          Smt. M. Uma Ravinder Reddy
                                          =======================

22.       The learned DR relied on the order of the Assessing
Officer and submitted that the AO mainly treated the
lands as non-agricultural in nature for the following
reasons:

  (i)       The Assessee did not produce pattadar pass
            book, bills in respect of sale of agricultural
            proceeds and receipts of taxes paid.

  (ii)      As per the information gathered from MRO,
            Ghatkesar, the lands were converted into plots.

  (iii)     In the case of Sarifabibi Mohd Ibrahim & Others
            204 ITR 631, the Hon'ble Supreme Court held
            that the land sold for non-agricultural purpose is
            assessable to Capital Gains.

23.       The learned counsel for the assessee Sri A.V.
Raghu Ram reiterated the submissions as made before
the CIT(A).       He produced the registered sale deed
pertaining to the purchase and sale of agricultural land
by way of Paper Book. He further pointed out to page 23
of the Paper Book wherein it has been stated by order of
the MRO, Ghatkesar Mandal as follows:


         "Verified the Form-1 of RO, wherein except the
         Sy. Nos. 351 to 354, all the survey numbers
         are recorded as plots."

The MRO in his report has reported that the petitioners
are in possession of the land and were doing agriculture
operations.

24.       The learned counsel for the assessee relied on the
ITAT Cochin Bench in the case of M.K. Abdul Rehiman vs.
DCIT (16 Taxman 406).
                            16
                                             ITA No. 265/Hyd/2014 &
                                                 CO No. 22/Hyd./2014
                                         Smt. M. Uma Ravinder Reddy
                                         =======================

25.   We have heard both the parties. We shall draw our
opinion based on the following points:
      (a) The agricultural land in question is located in
          Aushapur village and is situated in an area
          outside any notified municipal and cantonment
          board both having population of less than 10000
          and also beyond distance notified by the Central
          Government from the limits of any such
          municipality or cantonment board. Thus the
          land in question does not constitute capital asset
          as stipulated u/s. 2(14) of the IT Act, 1961.

      (b) The land originally belongs to M. Yadaiah and
          Mrs. Balalaxmamma who were declared as
          Pattadar as per the court decree. The said
          persons seems to have taken possession of the
          land and have carried out agriculture operations,
          according to the order of the MRO, Ghatkesar
          Mandal which was passed to give effect to the
          court decree. From this, the land in question
          seems to be agricultural land.

      (c) The report of the MRO obtained by the AO is
          based on the enquiry conducted in 2013 and not
          in the year 2006 as observed by the CIT(A).

      (d) The land happens to be rain fed and the
          argument of the assessee that there might not be
          much surplus from agricultural activity and,
          therefore, non disclosure of market income can
          be excused.

      (e) The production of Pattadar passbook as insisted
          by the Assessing Officer does not serve much
          purpose since the passbook proves the
          ownership of land and does not throw much
          light on agricultural operations.

      (f) The crops having been grown not being
          considerable, sale of agriculture produce has
                                17
                                                ITA No. 265/Hyd/2014 &
                                                    CO No. 22/Hyd./2014
                                            Smt. M. Uma Ravinder Reddy
                                            =======================

             been accounted as the same might have sold to
             the local buyers.

          (g) That the land was sold in acreage and not in
              square yards also shows that the registering
              authority was aware that the same was
              agriculture land.
          (h) The assessee has not obtained any permission
              from the appropriate authorities for non-
              agriculture use of land or for development into
              plots i.e., the assessee has not put the land into
              alternate use other than agriculture.

          (i) Both purchase and sale deeds when perused say
              that the land is specified as agriculture in the
              schedule.

26.       We are of the opinion that the lands sold by the
assessee are agricultural lands and the assessee satisfied
most of the tests which are laid down by the Hon'ble
Supreme Court in the case of Sarifabibi Md. Ibrahim &
Others (supra).


27.       The following picture emerges when the facts of the
assessee's case are tested on the touchstone of the guidelines,
approved by the Apex Court in the case of Sarifabibi Mohmed
Ibrahim:


   (i) The impugned land was situated in a village
         comprised in the area within the jurisdiction of a
         Gram Panchayat and as such it was situated in
         an area outside any municipality or cantonment
         board, having a population of not less than ten
         thousand, and also beyond the distance notified
         by the Central Government from the limits of
         any such municipality or cantonment board.

   (ii)      As can be seen from the proceedings of the MRO
             dt. 08.10.1997, the land in question was
             actually agricultural in nature.
                               18
                                              ITA No. 265/Hyd/2014 &
                                                  CO No. 22/Hyd./2014
                                          Smt. M. Uma Ravinder Reddy
                                          =======================


  (iii)     The land was actually used for agricultural
            purposes throughout the period of holding till
            the date of sale and the AO has not brought any
            concrete evidence on record to suggest that it
            was not put to agricultural use at the relevant
            point of time.

  (iv)      With regard to the observation of the A.O. that
            the land was sold for non-agricultural use, the
            assessee submitted that the Hon'ble High Court
            of Delhi observed, in the case of Hindustan
            Industrial Resources Ltd. v. Asst. CIT 335 ITR
            77, held that whether the Assessee intended to
            use the land for industrial purpose or that the
            Assessee had not carried out any agricultural
            operation did not in any way alter the nature
            and character of the agricultural land. The
            intention of the land acquiring authority was a
            wholly irrelevant consideration for determining
            the character of land at the time of sale. It was
            observed that where the nature of the land both
            at the time of purchase and sale/compulsory
            acquisition was agricultural, it cannot be held
            that its character had undergone any change
            during the transitional period i.e., between the
            date of purchase and the date of sale/
            compulsory acquisition and as such the said
            land retained the character of agricultural land
            at the time of sale. For coming to the conclusion,
            it relied upon the decisions of the Delhi High
            Court in D. L. F. Housing and Construction (P.)
            Ltd. v. CIT 141 ITR 806 (Delhi), D. L. F. United
            Limited v. CIT 161 ITR 714 (Delhi) and D. L. F.
            United Limited v. CIT 217 ITR 333 (Delhi).

28.       Further a plethora of decisions support our view
some of them are as under:
         (j) On almost identical facts, the land was held to
             be. agricultural in the following cases:

            (a) Surjeet Kaur Vs CIT 74 TTJ 722 (Hyd)

            (b) Harish V. Milani Vs ]CIT 111 TTJ 310 (Pune)
                            19
                                            ITA No. 265/Hyd/2014 &
                                                CO No. 22/Hyd./2014
                                        Smt. M. Uma Ravinder Reddy
                                        =======================

         (c) M.S.Srinivasa Naicker Vs ITO 292 ITR 481
               (Mad)

         (d) Tulla Veerender and Vijayender (Hyd ITAT)
                vide order dt. 04.07.2013 in ITA Nos. 550
                and 551/2012.

         (e) Further, it was held by the Hon'ble High
               Court of Gujarat, in the case of CIT v.
               Shashiben 288 ITR 319 (Guj), that the fact
               of non-agricultural user by the buyer will
               not alter the character of land in the case
               of the seller. The relevant portion of the
               decision is extracted hereunder:

                "If somebody, thinking that the said land
                can be put to some other purpose,
                purchases the land for a higher price and
                thereafter, changes the use, for the first
                holder, the property would not change its
                character so long as he himself does not
                change the use or put the land to some
                other use after getting the conversion of
                use from the competent authority/officer."

29.   However, we would like to point out that the CIT(A)
has observed that the Assessing Officer had not given
opportunity to the assessee to rebut the contents of the
report called for from the MRO, Ghatkesar Mandal on
28.1.2013. Further, no opportunity of cross examination
of the authorities who had issued the report was given to
the assessee.   The CIT(A) was constrained in giving a
direction to the Assessing Officer inasmuch as many
years have lapsed from the time the transaction taken
place which was in the year 2006-07 and also the case
was heard by the CIT(A) which was on 4.10.2013. Hence
giving the benefit of doubt to the assessee, we are of the
opinion that the MRO, Ghatkesar had given a report
evidencing the correct status of the land at page 33 of the
Paper Book wherein he has mentioned that agriculture
                                       20
                                                         ITA No. 265/Hyd/2014 &
                                                             CO No. 22/Hyd./2014
                                                     Smt. M. Uma Ravinder Reddy
                                                     =======================

operations were being carried on the said land. Based on
the above points, from which we gather that the lands
sold by the assessee are agricultural lands, and the CIT(A)
has rightly allowed the assessee's appeal on this issue.
Accordingly, we confirm the order of the CIT(A) and
dismiss the grounds taken by the Revenue.

30.      In    the    result,    appeal       of   the   Department          is
dismissed.


C.O. No. 22/Hyd/2014

31.      In the Cross Objection by the assessee the assessee
raised        the    ground     that    the    CIT(A)    erred      by     not
adjudicating on the ground relating to the actual sale
consideration of the land sold by the assessee and the
CIT(A) ought to have decided the issue based on merits of
the case.


32.      With regard to this ground the CIT(A) held that the
lands sold by the assessee are agricultural lands and
covered by s. 2(14)(iii)(a)(b) of the Act and not as a capital
asset and exempt from capital gains and directed the AO
to delete the addition of Rs. 2,22,70,229 made under the
head 'long term capital gains', the question of going into
the merits of sale consideration of Rs. 2,29,75,000 as
opined by the AO, as against the sale consideration of Rs.
77,50,000 as claimed by the assessee, does not arise.


33.      As we have decided the appeal of the Revenue
against the Department and confirmed the order of the
CIT(A), this ground needs no adjudication and becomes
                           21
                                           ITA No. 265/Hyd/2014 &
                                               CO No. 22/Hyd./2014
                                       Smt. M. Uma Ravinder Reddy
                                       =======================

infructuous.   Accordingly, this ground is dismissed as
infructuous.



     Pronounced in the open court on 31st July, 2014


         Sd/-                             Sd/-
   (B. RAMAKOTAIAH)             (ASHA VIJAYARAGHAVAN)
 ACCOUNTANT MEMBER                 JUDICIAL MEMBER

Hyderabad, dated the 31st July, 2014

tprao
Copy to:
1.   The Income Tax Officer, Ward-4(1), 5th Floor,
     Aayakar Bhavan, Basheerbagh, Hyderabad.
2.   Smt. M. Uma Ravinder Reddy, # 1-1-648/3/B&C,
     Plot No. 505, Tapani Ratna Towers, Gandhinagar,
     Hyderabad.
3.   The CIT(A)-V, Hyderabad.
4.   The CIT-IV, Hyderabad.
5.   The DR, A-Bench, ITAT, Hyderabad.

 
 
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