- (1.)Present Tax Appeal has been preferred by the revenue challenging the the impugned judgement and order dtd. 11/1/2013 passed by the learned Income Tax Appellate Tribunal, Rajkot in ITA No.1024/Rjt/2010 with respect to A.Y. 2006-07 with the following substantial question of law :
(A) Whether in the circumstances and the facts of the case and in law, the Tribunal erred in holding that the deposits made in the bank accounts of assessee was fully explained and thereby deleting the addition of Rs.22,68,510/- made by the AO on account of income from undisclosed sources ?

(B) Whether in the circumstances, and the facts of the case and in law, the Tribunal erred in reversing the action of the AO in adopting sale consideration of the land in question at Rs.5,03,51,250/- as against Rs.34,57,750/- claimed by the assessee and thereby arriving at a Short Term Capital gain of Rs.18,70,749/- and Long Term Capital gain of Rs.4,56,83,750/-?

(2.)That a search action under section 132(1) of the Income Tax Act (hereinafter referred to as "the Act") was carried out in one M/s.Radhe Group by issuing warrants of authorization on 4/8/2006. During the course of the search authorization, various documents/books of accounts and other valuable articles and other things were seized from the premises covered under section 132(1) and 132(1A) of the Act. On verification it was noticed that part of the said documents were pertaining to respondent herein assessee Rajshibhai Meramanbhai Odedara. That notice under section 153C of the Act was issued against the assessee on 3/2/2009. In response to the same, the assessee filed return of income for the year under consideration disclosing the income of Rs.18,750/- and agricultural income at Rs.2,81,680/-. The assessment proceedings were taken up and finalised under section 143(3) read with section 153C of the Act on 31/12/2009 and the total income was assessed at Rs.4,98,41,760/- for making various disallowance/addition. That while passing assessment order, the AO made addition of Rs.22,68,510/- on account of undisclosed sources and also made addition of Rs.18,70,749/- on account of long term capital gain, addition of Rs.4,56,83,750/- on account of short term capital gain. It appears that the AO made addition of Rs.18,70,749/- on account of long term capital gain and addition of Rs.4,56,83,750/- on account of short term capital gain, on the ground that the lands which was sold during the Assessment Year, more particularly in favour of M/s.Sahara India Commercial Corporation Ltd., was in favour of a non-agriculturist and as per the existing State law, the assessee cannot sell the agricultural land in favour of a non-agriculturist and therefore, the land which was sold was a capital asset its transfer is chargeable to tax under capital gain.
2.1. Being aggrieved by and dissatisfied with the order of assessment, the assessee preferred an appeal before the CIT(A), and the CIT(A) vide order dtd. 23/4/2010 allowed the said appeal of the assessee deleting addition of Rs.22,68,510/- made by the AO on account of income from undisclosed sources and also deleted the addition of Rs.18,70,749/- on account of long term capital gain, and also deleted addition of Rs.4,56,83,750/- on account of short term capital gain. The CIT(A) has specifically held that since the land sold in question was agricultural land, outside the purview of definition of capital asset, it was not liable to tax and accordingly deleted addition made on account of long term capital gain and short term capital gain.

2.2. Being aggrieved by and dissatisfied with the order passed by CIT(A), the revenue preferred an appeal before the ITAT being ITA No.1024/Rjt/2010 and the tribunal, by the judgement and order has dismissed the appeal preferred by the revenue confirming the order passed by the CIT(A) deleting addition of Rs.22,68,510/- made on account of income from undisclosed sources and also deleting the addition of Rs.18,70,749/- on account of long term capital gain, and also deleting addition of Rs.4,56,83,750/- on account of short term gain.

2.3. Being aggrieved by and dissatisfied with the impugned judgement and order passed by the ITAT in ITA No. 1024/Rjt/2010 dtd. 11/1/2013, revenue has preferred present Tax Appeal with the following proposed question of law :

(A) Whether in the circumstances and the facts of the case and in law, the Tribunal erred in holding that the deposits made in the bank accounts of assessee was fully explained and thereby deleting the addition of Rs.22,68,510/- made by the AO on account of income from undisclosed sources ?

(B) Whether in the circumstances, and the facts of the case and in law, the Tribunal erred in reversing the action of the AO in adopting sale consideration of the land in question at Rs.5,03,51,250/- as against Rs.34,57,750/- claimed by the assessee and thereby arriving at a Short Term Capital gain of Rs.18,70,749/- and Long Term Capital gain of Rs.4,56,83,750/-?

2.4. Heard Mr.Pranav Desai, learned counsel appearing on behalf of the revenue. So far as the proposed question of law No.(A) is concerned, it is not in dispute that the same is squarely covered by the decision of this Court in the case of Commissioner of Income-Tax Vs. Rajshibhai Meramanbhai Odedara, in Tax Appeal Nos.422 to 426 of 2013, wherein the Division Bench of this Court, in the case of the very assessee but with respect to another Assessment Year has considered and answered the issue in favour of the very assessee. Therefore, present Tax Appeal deserves to be dismissed so far as proposed question No.(A) is concerned.

2.5. Now, so far as the proposed question No.(B) is concerned, Mr.Desai, learned counsel appearing on behalf of the revenue has vehemently submitted that the learned tribunal has materially erred in holding that the land in question which was sold in favour of M/s.Sahara India Commercial Corporation Ltd. was not a capital asset and therefore, not liable to be taxed and therefore, there is no question of any long term capital gain and/or short term capital gain, as the case may be and has consequently erred in law in confirming the order passed by the CIT(A) deleting addition of Rs.18,70,749/- on account of long term capital gain, and also deleting addition of Rs.4,56,83,750/- on account of short term capital gain.

2.6. Mr.Desai, learned counsel appearing on behalf of the revenue has submitted that the learned tribunal has not properly appreciated the definition of Section 2(14) of the Act. It is submitted that in the present case, the assessee sold the land in favour of a non-agriculturist - M/s.Sahara India Commercial Corporation Ltd. It is submitted that as per the existing State law, there is ban to sell / transfer the agricultural land in favour of a non-agriculturist and therefore, the AO rightly treated the said land which was sold, as capital asset and rightly made addition of addition of Rs.18,70,749/- on account of long term capital gain, and also addition of Rs.4,56,83,750/- on account of short term capital gain.

2.7. Mr.Desai, learned counsel appearing on behalf of the revenue has further submitted that as observed by the AO, no documentary or other evidences were produced by the assessee to show that the land in question was agricultural land and/or he was carrying on any agricultural activities. It is submitted that, therefore, the tribunal has materially erred in holding the land which was sold in favour of M/s.Sahara India Commercial Corporation Ltd. as agricultural land and in any case not treating the same as capital asset.

(3.)Heard Mr.Desai learned counsel appearing on behalf of the revenue on the proposed questions of law.
3.1. Short question which is posed for consideration of this Court is, whether the learned tribunal has committed any error and/or illegality in confirming the order passed by the CIT(A) treating the land in question which was sold during the Assessment Year as agricultural land and/or not treating the same as capital asset and therefore, not liable to be taxed?

3.2. It is mainly argued on behalf of the revenue that as the agricultural land was sold in favour of non-agriculturist and as per the law prevailing in the State, there is a ban to transfer/sell agricultural land in favour of non-agriculturist without prior permission of appropriate authority and without getting the land converted into non-agriculture and therefore, the said land is to be considered as capital asset and therefore, liable to be taxed. It is not in dispute that what was sold by the assessee was an agricultural lands which were situated beyond 8 KMs of local limits of the Municipality. As rightly observed by the tribunal, merely because the land came to be sold during the year under consideration to non-agriculturist, the same will not change the characteristics of the land in the hands of the seller assessee. It is not in dispute that at the relevant time, the lands were held / used by the assessee as agricultural land. Merely because the said land came to be sold to a non-agriculturist, may be in breach of law prevailing in the State, character of the land would not be changed and the land still would continue as an agricultural land. At the most the sale in favour of non-agriculturist can be declared as illegal and/or invalid. There is no provision that if the agricultural land is sold in favour of non-agriculturist in breach of law prevailing in the State, it would lose its character as agricultural land and would be treated as non-agricultural land.

3.3. At this stage, definition of capital asset as provided under section 2(14) of the Act is required to be referred to. As per section 2(14) of the Act "capital asset" means property of any kind held by an assessee whether or not connected with his business or profession, but does not include...... (3) agricultural land in India which is situated in an area within such distance not being more than 8 KMs from local limits of any Municipality or Cantonment Board.

Considering the aforesaid facts and circumstances of the case, it cannot be said that the ITAT has committed any error in holding the land in question not as capital asset and not liable to be taxed. While holding that the land in question is not a "capital asset" within the meaning of section 2(14) of the Act and deleting addition of Rs.18,70,749/- on account of long term capital gain, and addition of Rs.4,56,83,750/- on account of short term gain, the tribunal in para 15 has observed and held as under :-

"15. We have heard the parties with reference to material on record. The impugned order has been perused carefully. The fact of he matter is that the assessee has laid on record of the authorities below the copies of Revenue record in Form No.7/12 which reveals that the land under consideration were being used for agricultural purpose. The Assessing Authority himself has accepted assessee's claim of deriving agricultural income therefrom and has made assessment accordingly. Merely because the State Law do not permit transfer of agricultural land to nonagriculturist that fact by itself cannot make the said land a "Capital Asset" within the meaning of section 2(14) of the Act. The assessee has laid on record a certificate from revenue department that the land is situated beyond 8 KM from the Municipal Limits. This certificate was available before the Assessing Authority in remand proceedings. The Assessing Authority brought no material to show that the certificate so produced is not a genuine document nor that the land is not situated beyond 8 KMs from the Municipal Limits and hence this is not a "Capital Asset". We, therefore, find no reason to interfere with such finding of fact reached by him and in his conclusion that the income assessed as "Long Term Capital Gains" in the name of the assessee and |"Short Term Capital Gains" in the name of his family members could not be assessed as capital gains in his hands as the same was not "Capital Asset". Thus deducting addition on that account by ld. CIT(A) is found justified."

3.4. Considering the above, and when the land in question was an agricultural land, which was situated beyond 8 KMs from the municipal limits, no error has been committed by the learned tribunal in not considering the land in question as "capital asset". We see no reason to interfere with the impugned judgement and order passed by the learned tribunal in dismissing the appeal preferred by the revenue and confirming the order passed by the CIT(A) deleting addition of Rs.18,70,749/- on account of long term capital gain and addition of Rs.4,56,83,750/- on account of short term gain.