Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: S/SHRI GEORGE MATHAN & ARUN KHODPIA
O R D E R Per Bench This is an appeal filed by the assessee against the order of the ld Pr.CIT passed u./s.263 of the Act, dated 12.3.2022 in Appeal No. ITBA/ReV/F/ReEV5/2021-22/10540634159(1) for the assessment year 2017-18.
2. Shri P.K.Mishra, ld AR appeared for the assessee assisted by Ms.Sugyanee Kuanr and Ms. Simran Samal, intern from Birla School of Law (BGU), Bhubaneswar and Shri M.K.Gautam, ld CIT DR appeared for the revenue assisted by Shri Dharmashoka Panda, intern from Birla School of Law (BGU), Bhubaneswar.
3. It was submitted by ld AR that the assessee is an individual, who is a professor of Mathematics at P.N.College, Khurda. The assessee had filed her return of income for the relevant assessment year on 5.8.2017,
P a g e 1 | 47 Assessment Year : 2017-18 wherein, the assessee had claimed exemption from taxation of the agricultural land sold by her. The assessee had also claimed long term capital loss (LTCL) in respect of flat sold by her. It was the submission that the assessment came to be completed u/s.143(3) of the Act on 19,.12.2019 by the Assessing Officer after examining all the issues in the return. It was the submission that the assessment order dated 19.12.2019 was the subject matter of revision by the Pr. CIT, Bhubaneswar on three issues, i.e. (i) on the taxability in respect of sale of agricultural land by the assessee and (ii) in respect of taxability of capital gains on the sale of flat by the assessee and (iii) in respect of penalty proceedings u/s.271D of the Act on the sale of flat, the consideration of which has been received in cash. It was the submission that the penalty proceedings u/s.271D had been dropped by the Pr. CIT after considering the reply of the assessee. In regard to taxability on the sale of agricultural land, it was submitted by ld AR that the assessee had purchased 19.180 acres of agricultural land in Chandrabali, Shyampur, Thana: Gurudijhatia, on 22.7.2010. It was the submission that these lands had been purchased from 41 different land owners. It was the submission that the assessee had grown paddy on the said land and on account of destruction by the elephants, the assessee was unable to get any agricultural income out of the said lands and whatever produce the assessee could derive, had been used by the assessee’s family members. It was the submission that subsequently, the assessee had also given the land for sharing cultivation also known as “ BHAGA CHASA” basis. The assessee had purchased the said land for nearly Rs.1.6 crores. It was the submission
P a g e 2 | 47 Assessment Year : 2017-18 that as the assessee was unable to carry on the agricultural activities, the assesse had sold the said land to M/s. Shree Cement Limited on 30.8.2016. As the agricultural land sold by the assessee was beyond the prescribed distance under the Act, the assessee had claimed the income from the sale of the said land as agricultural income. It was the submission that in the course of assessment, the Assessing Officer had issued a notice u/s.142(1) on 15.10.2019, wherein, the Assessing Officer had raised a query regarding the income from the sale of the land claimed as exempt. Ld AR showed us the copy of the notice u/s.142(1), which reads as follows: “
P a g e 3 | 47
4. It was the submission that the assessee had replied to the said notice, wherein, the assessee had categorically mentioned and submitted the copies of the purchase deed and sale deed and copy of the Khatiana (Record of Right) in respect of the said land. The reply of the assessee is as follows: P a g e 4 | 47 Assessment Year : 2017-18 “BEFORE THE DEPUTY COMMISSIONER OF INCOME TAX' SALARY CIRCLE-3( 1), BHUBANESWAR In the matter of: Reply to show cause notice dated 15-10-2019 issued by your Honour in connection with Assessment proceeding for Assessment year: 2OL7 -18, matter regarding AND In the matter of: Smt. Purnima Das W/O:Biswajit Das Plot No.9, Budha Nagar P.O:Budheswari, P.S: Laxmisagar Bhubaneswar, Dist: Khurda PIN:751O06. ASSESSEE Humble reply of the above named assessee Most respectfully sheweth:
1. That, the Assessee has been served with a show cause notice, wherein she is required to answer four queries raised by your Honour' In response to this notice, the Authorized Representative is present today and respectfully submits as follows; 2. That in the said show cause notice in query No.1, the Assessee is required to answer, as to why the claim of exempted income of Rs.2,00,53,528.00 shall not be disallowed and shall not be treated as Taxable income' In response to it, it may be submitted here that, during the Assessment year under consideration, the Assessee had sold Agricultural land owned by her. The claim of exempted income is the net value of sale of Agricultural land. For better clarification of this income, your Assessee wants to draw' your Honours kind attention to the corrected statement of income its Annexure attached here under'
That, the land sold are agricultural land and are situated near Khuntuni Gram panchayat area, which is more than 25 kilometers from Cuttack Municipality and also 22 Kilometers from Dhenkanal Municipality' It being situated in village area and fulfills all necessary conditions mentioned in sub-clause (iii) to sub-section t4 of section (2) is not a capital asset' Since, it is not a capital asset, there is no capital gain, your Assessee has declared it in the return of income as exempted income, for which she is lawfully entitled to. your Assessee submits herewith copies of purchase Deed and sale Deed and copy of Khatiyan for your reference and record On perusal of Deeds, it will be clear that the lands sold are purely agricultural land and are situated in village area beyond the prescribed territory limit as mentioned in section 2 n (14). Therefore, the receipt arising out of sale proceeds from such agricultural land are exempted from tax. Therefore, the claim of exemption by the Assessee being true and correct, needs to b€ accepted and it is requested not to draw any adverse inference on this issue. P a g e 5 | 47
4. That, in query No.2, your HOnoUr has observed that, from the bank statement of the Assessee, it is found that, Rs.21,47,000.00 was deposited in cash at Bank Account No.438010100142410 of Axis bank and an amount of Rs.72,500.00 was deposited in cash at Bank Account No.32600 622660 of state Bank of India. Therefore, your Honour required the Assessee to show cause as to why cash deposits in the bank account of Rs.22,19,500.00 should not be treated as unexplained investment in bank u/s.69 of I.T. Act, 1961. In response to this query, the Assessee respectfully submits that, during the year Assessee sold the Flat No.H-3 situated in under consideration, the 3rd Floor at Sai Suman (Sai Anandam) Apartment, situated at Patia, Bhubaneswar to Smt Laxmi Priya Prusty for a sale consideration of Rs.43,98,800'00 on 18.10.2016' The said sale consideration was received by the Assessee in cash on 18.10.2016 i.e. on the date of registration.( confirmation letter attached with sale Deed) After receipt of the sale proceeds, the Assessee had utilized a sum of Rs.21,79,300.00 and the balance amount was lying in her house. She, being a working lady could not get sufficient time to go to bank for deposit. The Assessee has been working as a Senior Lecturer in Mathematics in P.N. College, Khordha which is around 50 km from the residence of the Assessee, She being busy in the college work from Monday to Saturday hardly gets time to go to her bankers for deposits. This is the reason for which the cash after utilization was lying in her house. Your Honour will find that, the said amount of Rs.21,47,000.00 deposited in Axis bank and Rs.72,500.00 deposited in State Bank of India in cash during demonetization period. When, Government declared ban on utilization of old denomination of Rs.500/- and Rs.1,000/-, your Assessee had no other option than to deposit it in bank. Further, your Assessee submits herewith copies of Agreement towards Booking of flat, possession letter, purchase deed and sale deed of flat and the confirmation letter received from the so called purchaser Smt. Laxmi Priya Prusty. On perusal of said documents, it will be revealed that, the said amount were received by the Assessee prior to the date of demonetization and it were received from valid sources and do not form part of any unaccounted money. It may be pointed out here that, after demonetization period, your Assessee has been served with a notice from the learned Assessing Officer and your Assessee submitted all these documents before him earlier' However, your Assessee submits today all these documents for your Honour's reference and record. These documents proves it beyond any reasonable doubt that, the amount so deposited by the Assessee in Axis Bank and State Bank of India were out of sale proceeds of flat. While filing her return of income, your Assessee has declared sale proceeds of flat and computed capital gain/loss on the said sale. After computation by applying cost inflation index rate, there was long term capital loss of Rs.(-)6,94,627.00. Since, your Assessee has produced sufficient evidences and has already declared the computation of capital gain/loss in her Return of income for this Assessment year, it is requested before your Honour to verify and accept the same in the interest of justice. Since, the computation of capital loss istrue and correct, it is requested to accept the same and not to draw any adverse inference on this issue"
5. That, in query No.3, your Honour has observe that, in the return of income for the Assessment year 2Ot7-18, the Assessee had shown sale of land / building of Rs.43,98,880.00 and deduction u/s. 48 of the I'T' Act was P a g e 6 | 47 Assessment Year : 2017-18 claimed against such sale ,but the detail corroborative evidences has not been produced. Therefore, the Assessee is required to explain as to why claim of deduction u/s.48 amounting to Rs.43,98,880'00 should not be disallowed and added back to the total income' In response to this' the Assesseerespectfullysubmitsthat,aftercalculationofcostinflationindex' the cost of property came to Rs.50,93,427.00 whereas the sale consideration was of Rs.43,98,880.00, therefore there was a long term capital loss of Rs.(-)6,9 4,627.00. The Assessee wants to draw your kind attention to the computation of income (revised statement of Income) and Annexure appended to it, wherein detail calculation of capital gain/loss has been Provided. Further, it is requested to have a glance on the copy of Agreement for Book of flat, Purchase deed and sale deed appended to this reply. On Perusal of the computation of income as well as of sale deed and purchase deed, your Honour will find that, the claim of the Assessee is justified and in accordance with law' Therefore, it is requested to accept the same and not to draw any adverse inference on this issue' 6. That ,in query No.4,your HOnour has pointed out that during the year under consideration, Rs.4,60,32,000.00 were deposited through DD in the Axis Bank Account of the Assessee. Therefore, the Assessee is required to explain sources of such deposits in the said Bank Account and further to explain as to why Rs.4,60,32,000.00 should not be treated as unexplained investment in Bank Account U/s.69 of the LT. Act, 1961. In response to this, the Assessee respectfully submits that, during the year under consideration, she has sold the agricultural land owned by her to M/s.Shree Cement Limited for a consideration of Rs.4,60,32,000.00 on 30.O8. 2016. The said sale considerations were deposited in the Axis Bank Account of the Assessee. In the show cause notice, your Honour has already pointed out the DD Numbers, date of deposits and the amount deposited. The said deposits were received from M/s.Shree Cement Limited against the sale consideration of land. On perusal of sale deed, your Honour will get confirmation of the amount deposited of Rs.4,60,32,000.00. Since, the said amount were received against sale consideration of agricultural land and were received from M/s.Shree Cement Limited, section 69 of the Act cannot be attracted under the facts and in the circumstances of the case. It is therefore, requested to accept the claim of the Assessee and not to draw any adverse inference on this issue"
7. That, in addition to show cause replay, your Assessee also produces here with today, copies of revised statement of income with Annexure, 26AS statement and TDS Certificates against claim of interest income and copy of Form No.16 to justify salary income for your Honour's reference and record. Since the Assessee has explained all the queries in detail and substantiated all her claims made in the return of income with sufficient documentary evidences, it is requested to accept the same and to complete the Assessment by accepting the return of income in the interest of justice..”
P a g e 7 | 47 Assessment Year : 2017-18 5. After receipt of the reply of the assessee, the Assessing Officer had issued notice u/s.133(6) of the Act to the Tahasildar, Athagarh, who was the concerned Tahasildar in respect of the said area. In the notice u/s.133(6) of the Act, the Assessing Officer had requested for furnishing the character of the land and such other details. Notice u/s.133(6) of the Act reads as follows:
6. The Tahasildar, Athagarh responded to the notice vide his letter dated 16.12.2019, wherein, he has identified the lands owned by the assessee as ‘TAILA’ and ‘PURATAN PATITA’. The Tahasildar has also P a g e 8 | 47 Assessment Year : 2017-18 attached the report of the Revenue Inspector, Nidhipur, which mentions that the said lands were used for cultivation purposes as per section 2(OLR) Act. The reply of the Tahasildar reads as follows:
P a g e 9 | 47
P a g e 10 | 47 Assessment Year : 2017-18 7. It was the submission that after doing necessary enquiry with the Tahasildar and after being satisfied, the Assessing Officer had accepted the claim of the assessee that the income from the sale of agricultural land of 19.180 acres was exempt from income tax insofar as it was agricultural land.
8. It was the submission by the ld AR that the Pr. CIT in his order u/s.263 of the Act had issued show cause to the assessee and the assessee had responded to the same and without doing any further examination or enquiry interpreted the reply of the Tahasildar to draw a conclusion that the land sold could not be treated as agricultural land. It was the submission that the show cause notice was issued on 1.6.2021 and the assessee had responded to the same on 24.8.2021 and the order u/s.263 was passed on 12.3.2022 without causing any further enquiry. In respect of second issue being the taxability on the sale of the flat, it was the submission that the assessee had purchased a flat in Sai Suman Apartment, Patia, Bhubaneswar. The flat No. was H3, on the third floor. It was the submission that the assessee had purchased the said flat for Rs.26,35,000/- + registration charges. It was the submission that the assessee had sold the flat during the relevant assessment year for a consideration of Rs.43,98,800/-. It was the submission that after calculation of cost inflation index, the cost of the property comes to Rs.50,93,427/- and the sale consideration was of Rs.43,98,880/-, therefore, the assessee derives long term capital loss, which has been disclosed in the return. It was the submission that in the notice u/s.142(1) of the Act, extracted above, the P a g e 11 | 47 Assessment Year : 2017-18 Assessing Officer in para 3 has raised the issue to which the assessee had replied dated 4.11.2019, which is extracted above. It was the submission that after considering the explanation of the assessee, the Assessing Officer had accepted the contention and had not proposed any addition nor draw any adverse inference. It was the submission that the Pr. CIT in his order u/s.263 has taken a stand that the purchase deed being the registered deed of purchase showed the cost of the Flat as Rs.14,80,103/- and the stamp duty of Rs.29,639/- totaling to Rs.15,09,742/- and consequently took the view that the cost of the flat shown at Rs.26,35,000/- was not liable to be accepted. It was submitted by ld AR that the sale agreement and the sale deed, possession letter were before the Assessing Officer and as per the agreement of sale, the cost of the flat was Rs.26,35,000/- and this included the cost of the car parking and undivided interest in the land. This fact of receipt of Rs.26,35,000/- against the purchase of flat was also confirmed by the seller in the possession letter. It was the submission that when the registration was done, the registration was only in respect of the constructed area. It was the submission that the car parking and other amenities were not recorded in the sale deed. It was the submission that the possession certificate clearly recognizes that the assessee has made full and final payment as per the agreement. The possession certificate reads as follows: “To Mrs Purnima Das, Flat No.H-3, 3rd floor, Sai Suman Apartment, Patia, Bhubaneswar Dear Sir/Madam, we are pleased to give the possession of house No.Flat No.H-3, in Sai Suman Apartment, Kanan Vihar, Bhubaneswar. We acknowledge that P a g e 12 | 47 Assessment Year : 2017-18 you have given your full & final payment as per the agreement. We also confirm through this letter that the house is handed over to you as per the specification & to your satisfaction. We are taking this opportunity to draw your kind attention to the following points. (a) You should form the Society within one year from the date of taking possession of the house. The builder will not be responsible the maintenance of the building if you don't form the society within 1st January'2010. (b) You should contribute Rs.14400/- towards the Annual rnaintenance cost of the apartment before taking possession of the house, After formation of the Society you should pay the charges directly to the Society. (c) Each flat is connected vertically & horizontally with one another. You are requested to maintain in such a way that other flats connected to you vertically or horizontally will not get affected. For example water, electrical lines of each flat are connected vertically & horizontally. Any kind misuse may affect your immediate neighbor or the entire building. You are therefore, requested to take care of your flat and advise your respective tenants accordingly. (d) We will provide 24 hours Security Services to the apartment. The Security personnel will be posted at the Ground Floor (Parking Area). You should take assistance of them while parking or driving away your car. No car should be parked on the drive way of the building. Visitors should park their cars on the parking space at the front or rear of the building. (e) Any person staying overnight should inform the security through the resident of the respective flat. f) The building is provided with STP system, which will take care of the Sewerage treatment. However, you are requested not to put any insoluble material into your commodes or basins, which may result in choking of the entire system. (g) Due to non availability of PH network we have provided our own source of water. We have also provided two spare pumps to the society to take care of the exigencies. (h) Two nos. of six passenger lifts are provided for the residents of the building. The residents can either use the lift or the stair case to go to the respective floors. (i) An open space is provided in the middle of the building (first floor), which can only be used as a passage. (j) For one year the rules and regulations framed by the builder for smooth running of the Society will be binding on all the residents. After the formation of the society (which should be formulated within one
P a g e 13 | 47 Assessment Year : 2017-18 year) the rules and regulations formed by the society will be binding on everybody. (k) This building is provided with an intercom and backup generator system. (l) If you want to enclose your balcony, please do it with' Aluminium section only. This decision has been taken to maintain uniformity and maintain the elevation of the building. (m)Regulation related to parking, use of lifts, domestic animals, and cleaning maintenance of the building and related accessories, discipline Security (n) One caretaker will be provided to look after the building. He should not be used for any of the residents. A small room with attach bathroom will be provided to the caretaker in the ground floor. (o) One society room is provided at the top of the building (front portion of the roof top) which can be used as an office of the Society. The room towards the back side of the roof top will be exclusively used by Srishakri pasupati (p) Encon (p) Ltd. (p) You are requested to immediately take up the holding tax issue with BMC. This is very important. This should be done before any occupation of your flat takes place. (q) Sufficient light has been provided in the common areas. However, you are requested to use minimum possible lights in order to reduce the electricity consumption of common areas in order to reduce the electricity bill. (r) Each flat is provided. with a covered parking space and you are expected to park your vehicles as par the allotted space. Each parking slot is numbered. (s) You should not undertake any construction work which will affect the structure of the building. A written permission either from the builder or the society has to be obtained if you want to make any changes. The builder will not be responsible for any damage to the building if you undertake any civil/related work without the builders permission. We are taking this opportunity to request you to give your internet ID along with your present address. Otherwise we will communicate in the address mentioned in the agreement.” The agreement in respect of purchase of flat is extracted in respect 9. of pages 1 & 2(relevant portion) -
P a g e 14 | 47
P a g e 15 | 47
P a g e 16 | 47 Assessment Year : 2017-18 10. The registered sale deed pages 1, 2 & 3 is extracted as follows (relevant portion) :
P a g e 17 | 47
P a g e 18 | 47
11. It was the submission that the Pr. CIT without considering the explanation given by the assessee nor conducting any further enquiry on the issue has set aside the assessment by holding the assessment order as erroneous and prejudice to the interest of the Revenue and set aside the P a g e 19 | 47 Assessment Year : 2017-18 assessment to be done denovo. It was the submission that both the issues having been examined by the AO in depth and the Assessing Officer having drawn a conclusion, same could not be disturbed by the Pr. CIT by invoking his powers u/s.263. It was the prayer that the order passed u/s.263 by the Pr. CIT be quashed.
In reply, ld CIT DR submitted that the land sold to Shree Cement Limited was for Rs.4.6 crores. The land had been purchased being 19.180 acres of land from 41 sellers on 22.7.2010. The same was sold on 30.8.2016. The assessee has shown registration and stamp duty in respect of purchase of land at Rs.10.74 lakhs whereas the actual figure as determined by the Pr. CIT was Rs.3.07 lakhs. It was the submission that in respect of sale of the flat, the assessee has shown a loss of Rs.6.94 lakhs whereas the Pr. CIT has determined the same at again of Rs.14.80 lakhs. It was the submission that the Assessing Officer has passed a non-speaking and cryptic order and there is no discussion on the issues. It was the submission that a perusal of the notice issued u/s.142(1) shows that the Assessing Officer has asked corroborative evidence in respect of both the issues, which was the subject matter of revision u/s.263. It was the submission that in respect of agricultural land, no proof of agricultural activities has been shown by the assessee before the AO nor before the Pr. CIT. It was the submission that the assessment order has been passed without any corroborative evidence produced by the assessee and the order has been passed in a mechanical manner. It was the submission that the Assessing Officer has gone on the premises that the land sold is situated P a g e 20 | 47 Assessment Year : 2017-18 beyond 8 kms limited and, therefore, it is agricultural land. It was the submission that no evidence was produced in regard to crops grown, expenditure in relation to the agriculture nor any sales bills in respect of agriculture produced. Ld CIT DR further drew our attention to the return of income, wherein, in column 10 ‘exempt income as agriculture income has been shown as Nil. It was the submission that right from the assessment year 2010-2011 to 2016-17, the assessee has not shown any agricultural income and the assessee has been silent in respect of nature of crop. It was the submission that it was only when the notice u/s.263 was issued, the assessee has mentioned that the assessee had incurred loss in the agricultural operation and there was no scope for disclosing loss in the agricultural operation. It was the submission that after receiving the notice, the assessee came up with explanation that the rice crop was destroyed by the elephants and the land has been given to the local farmers on BHAG CHASA (crop sharing). It was the submission that the assessee is a professor who is staying in Bhubaneswar.
It was the submission that the quantity of rice which has also been mentioned by the assessee is miniscule quantity compared to the size of the land and the market value of the said quantity would be only about Rs.15,000/- to Rs.20,000/-. It was the submission that admittedly no sale bill of any agricultural produce has been produced before the ld. AO and before the ld. Pr.CIT. It was the further submission that in the notice issued u/s.133(6) of the Act to the Tehsildar, no question in respect of agricultural operation have been asked, nor was there any reply from the Tehsildar in P a g e 21 | 47 Assessment Year : 2017-18 respect of agricultural operation being conducted by the assessee. It was the submission that the Revenue Inspector had visited the property only in 2019 when Shree Cement has already been set up a factory on the impugned land. It was the submission that Revenue Inspector could not have given any confirmation that agricultural operations were done on the said lands in 2019. The ld. CIT-DR further drew our attention to page 44 of the paper book, which was the sale deed of the said land and it showed the lands to be identified as vacate land. It was the submission that there was no mention of any standing crops or trees on the said land. It was the submission that both the purchase deed and the sale deed in respect of the alleged agricultural land showed the land as vacate land. It was further submitted that Section 2(14)(iii) of the Act simply says agricultural land which are not within the specified distance from the municipalities or such municipalities whose population under the prescribed limit. The basic requirement for an agricultural land to be an agricultural land is the agriculture operations. It was submitted that as the assessee has not been able to show any agricultural operations, the claim of agricultural land cannot be accepted.
In regard to the flats sold, it was the submission that the possession certificate is undated and what is to be considered is the registered sale deed and not the agreement. It was the submission that the registered sale deed showed the purchase consideration as Rs.14.80 lakhs and the assessee has not produced any proof to show that Rs.26 lakhs has been P a g e 22 | 47 Assessment Year : 2017-18 paid for the said flat. It was the submission that the order of the ld. Pr.CIT is liable to be upheld.
Ld. CIT-DR has filed his written submissions as under :- 15.
In this case, the Pr. CIT-1, Bhubaneswar has held in the revision order dated 12.03.2022 U/s.263 of the Act that the A.O. had failed to conduct inquiry in respect of claim of exempt long term capital gains of Rs.2,00,53,528/- and long term capital loss of Rs.6,94,627/- on sale of flat in Sai Suman Apartments (Flat No. H-3) On the other hand, the ld. AR of the appellant has argued that the A.O. had made the necessary inquiries in this regard and hence the Pr. CIT was not authorized to revise the assessment order.
In this regard, the assessment order u/s.143(3) of the Act passed by the A.O. on 19.12.2019 may kindly be perused. It must be appreciated here that it is a totally non-speaking and cryptic order. It also does not refer to any enquiries being conducted by him as regards the above two issues which were subject matter of revision u/s.263 of the Act. It must be noted here that the A.O. vide letter dated 15.10.2019 had specifically asked the appellant to furnish corroborative evidences in support of her claim that long term capital gains of Rs.2,00,53,528/- on sale of lands was exempt (question-1 on page-5 of the paper book furnished by the appellant). Similarly the A.O. asked the appellant to justify her claim in respect of deduction u/s.48 against sale of flat with corroborative evidences (question-3 on page-5 of the paper book furnished by the appellant). The appellant vide reply dated 04.11.2019 had only given general explanation without submitting any documentary evidences in support of carrying out agricultural activities on the impugned lands. It was only submitted before the A.O. that lands in question were situated more than 25 km from Cuttack Municipality and 22 km from Dhenkanal Municipality (page-9 of the paper book submitted by the appellant). Except for legal jargon in respect of section 2(14)(iii), the appellant had not submitted any proof/corroborative evidences in support of her claim of carrying out agricultural operations before the A.O. Similarly in respect of deduction u/s.48 against sale of flat, the appellant only explained that after calculation of cost inflation Index, the cost of property stood at Rs.50,93,427/- (page-11 of the paper book submitted by the appellant). The A.O. did not examine the purchase deed dated 29.01.2009 (page-25 of the paper book filed by the appellant) wherein the cost of acquisition was at Rs.14,80,103/- (paid in cash). In view of above facts, the Indenture of agreement with the P a g e 23 | 47 Assessment Year : 2017-18 seller (Srisakti Pasupati Encon Pvt. Ltd.) wherein it was agreed to purchase the flat at Rs.26,35,000/- had no relevance. In any case, the mode and sources of balance payment of Rs.11,54,897/- (alleged to be towards car parking/maintenance costs) were never explained to the A.O. Therefore he should not have allowed higher deduction u/s.48 of the Act to the appellant. The A.O. also turned blind eye to such vital documents and allowed relief to the appellant. Hence there is no doubt that the assessment order dated 19.12.2019 passed by the A.O. was not only erroneous but also prejudicial to the interests of Revenue.
3. The following findings of Pr. CIT-1, Bhubaneswar are very pertinent for the issue under reference: i.) The appellant has purchased 19.180 acres of land (comprising of 21 plots) at Mouza Chandrabalishyampur from 41 sellers for an amount of Rs.1,53,44,000/- on 22.07.2010. The registration fee/stamp duty of Rs.3,07,194/- was paid on said purchase of land. It is not understood as to how the registration fee/stamp duty of Rs.10,74,394/- was claimed by the appellant in her computation of capital gains. ii.) The abovementioned land was sold to M/s. Shree Cement Ltd. for industrial purposes on 30.08.2016 for an amount of Rs.4,60,32,000/-. The long term capital gains of Rs.2,12,67,453/- worked out by the Pr. CIT-1, Bhubaneswar in para-3(ii) on page-2 of revision order is at variance with that of Rs.2,00,53,528/- as computed by the appellant (page-4 of paper book submitted by the appellant). iii.) The Pr. CIT-1, Bhubaneswar has held that claim of exemption of said long term capital gains u/s.2(14) of the Act is not tenable for various reasons. As per Revenue Records, out of total lands of 19.180 acres, lands admeasuring 7.52 acres (Plot no.29 & 65) were "Puratan Pitata". Hence it could not have been regarded as agricultural land by the Assessing Officer. In these circumstances & facts, at least the A.O. should not have allowed alleged claim of exempt long term capital gains to the extent of 39.20% (amounting to Rs.83,36,841/-) to the appellant. iv.) The appellant did not furnish any evidence on record to the effect that remaining lands (Taila) in question were actually cultivated by her. The Assessing Officer also put blind eyes to such a vital evidence and mechanically allowed the claim of exempt long term capital gains without seeking such vital evidences. The appellant on her part did not furnish any evidence of actually earning any agricultural income by furnishing sale bills, quantity of harvest, sale price and mode of receipt etc. along with agricultural expenses such as purchase of seeds, fertilizers, labour charges etc. Please see that in the return of income for A.Y. 2017-18 (page-1 of the paper book filed by the appellant), as per column-10 (exempt income), the appellant had herself declared nil agricultural income. P a g e 24 | 47 Assessment Year : 2017-18 v.) The A.O. also did not examine the fact that between the intervening period from 2010 to 2016, no agricultural income was shown by the appellant in her returns of income. The claim of exempt long term capital gains suddenly appeared out of blue in the return of income for A.Y. 2017-18. The Pr. CIT has rightly observed in para-3(ii) (d) on page-3 of revision order that even in the return for A.Y. 2017-18, no such agricultural income was shown by the appellant.
As regards sale of flat in Sai Suman Apartments (Flat No. H-3), Bhubaneswar, the Pr.CIT-1, Bhubaneswar found out that that purchase cost of said flat was Rs.14,80,103/- as per purchase deed dated 29.01.2009 and stamp duty/registration fee of Rs.29,639/- was also paid. On the other hand, the appellant had taken purchase cost at Rs.26,35,000/- instead of actual cost of Rs.15,09,742/-. This itself showed that the purchase deed in question was overlooked by the Assessing Officer. In fact, there was taxable long term capital gains of Rs.14,80,485/- on sale of said flat whereas the appellant had shown long term capital loss of Rs. 6,94,627/- in the computation of income. This clearly showed that the A.O. had not seen/examined the documents furnished by the appellant.
5. Before the Pr. CIT-1, Bhubaneswar during the revision proceedings u/s.263 of the Act, the appellant explained that since there was a loss in the agricultural activities, there was no scope to declare any activity in the returns of income. However neither any details of alleged agricultural loss were furnished before the Pr. CIT nor any evidence to that effect was furnished before him. The appellant also claimed that every year, the rice crops were destroyed by the elephants. But same should be discarded as a fanciful explanation. Similarly the alleged claim that lands were being given to local farmers on Bhaga Chash System, also remained unproved. It was also alleged that lands were purchased with an intention of doing organic farming with modern technology but this claim was never substantiated with corroborative evidences. It was further alleged that since she was staying at Bhubaneswar with her in-laws, she could not visit the alleged agricultural lands. It was further alleged that limited agricultural harvest was self-consumed by the family members. The Pr. CIT has rightly inferred in para-6.4.4 on page-22 of the revision order that fact remains that there was no agricultural activity on impugned lands. The appellant had made investments of Rs.1.5 crores in 2010 and as per appellant's claim, the harvest every year did not exceed 4 to 5 quintals of rice from 19.180 acres of land (market value being Rs.15,000/- to Rs.20,000/- (page-24 of the revision order). These facts themselves expose the falsity in the explanation of the appellant.
P a g e 25 | 47 Assessment Year : 2017-18 6. As far as issue of notice u/s.133(6) to the local govt. revenue authority (Tehsildar, Athagarh) in 2019 is concerned, the land had already been sold to M/s. Shree Cement Limited for industry purposes at that time. The visit of Revenue Inspector, Nidhipur in 2019 was of no purpose as well as of any consequence. In these facts & circumstances, the appellant was required to lead the requisite evidences that agricultural operations were actually carried out in the impugned lands. The Pr. CIT has pointed out in para- 6.2.2 on page-19 of the revision order that no question was asked by the A.O. as to whether impugned lands were being used for agricultural activities or not. On the other hand, the Tehsildar, Athagarh vide letter dated 10.12.2019 had clearly informed the A.O. that 7.5 acres of land was "Puratana Patita" and balance was "taila". "Puratana Patita" would mean that 7.5 acres of lands were grassy/sloppy/sandy lands which were lying fallow. This should have alarmed the A.O. to carry out further investigations. It was also stated that as per report of revenue inspector (RI), Nidhipur, the above plots were used for cultivation purposes as per section-2 of OLR Act. However said report did not mention the period or year of cultivation or nature of cultivation. In fact, he did not comment on any agricultural activities in the impugned lands. Moreover section- 2 of OLR Act also mentions about raising of grass, dairy farming, breeding of live-stock, use of lands for pastures, use of lands for forests etc. which can't not be regarded as an agricultural activity for Income Tax Act. Moreover the Tehsildar did not spell out Kisam (Type of land) in his report. This type of over-emphasis on Tehsildar's Report is totally out of context. The fact that the appellant was growing rice crops on 19.180 acres of land only to get 4 to 5 quintals of rice (which was allegedly self-consumed), shows that it is a mere claim without being substantiated.
As per purchase deed dated 22.07.2010, as many as 21 owners had declared that plots in question were vacant (para-6.3.1 on page-21 of the revision order). Similarly at the time of sale in 2016, the sale deed with M/s. Shree Cement Limited dated 30.08.2016 mentioned in para-2 that lands in question were vacant lands (para-3 on page-44 of the paper book filed by the appellant). There was not a whisper in the deeds about lands being cultivated at the time of purchase or even at the time of sale.
The findings of Pr. CIT-1, Bhubaneswar are contained in para-6.8 on page-27 of the revision order. It is obvious that purchases of seedlings, fertilizers, other inputs etc. have not been proved by the appellant. Even the report of revenue inspector is conspicuously silent on the nature of crops or agricultural activity being carried out by the appellant on the impugned lands. The Pr. CIT has rightly held that it is hard to believe that lands admeasuring 19.180 acres of lands would yield 4 to 5 quintals of rice. Considering P a g e 26 | 47 Assessment Year : 2017-18 that many industries had been set up in the vicinity of impugned lands such as Aarti Steels Ltd., Maheshwari Ispat Ltd., Raw Met India Ltd., Sri Hardev Steel Pvt. Ltd., Biraja Steel & Power Pvt. Ltd. Hence the Pr. CIT has rightly held that no one would purchase lands in such area for Rs.1.5 crores just for doing agricultural activities. It must be noted here that the appellant was a lecturer in mathematics in Prana Nath College at Khurda. She had declared salary of Rs.7,60,892/- in A.Y. 2017-18. Thus there was no way that she could have done agricultural activities on impugned lands.
Reliance is placed on the decision of Hon'ble Bangalore Tribunal in the case of Jairam G. Kimmane vs. DCIT (119 taxmann.com 99) wherein the Assessing Officer took the view that to be called an agricultural land, the land must have been used for Agricultural purposes. According to the Assessing Officer, the assessee did not establish use of the land for agricultural purpose and other circumstances showed that the assessee's land was not agricultural land and sold as a capital asset and not as agricultural land. Hence the gain on sale of the property was chargeable to tax as income under the head capital gains. On appeal, the Hon'ble Bangalore ITAT held that there is no dispute to the fact that the property that was sold by the assessee, did not fall within clauses of section 2(14)(iii)(a) or (b). The mere fact that a land is situated in an area outside the area referred to in clause (a) or (b) of section 2(14)(iii), does not automatically make it an Agricultural land and such land has to be used for agricultural purposes as laid down in several judicial pronouncements. It was held in para-16, 18, 19 & 21 as under: "In the present case, the claim of the assessee that agricultural operations were carried out over the property and the property was actually used for agricultural purpose was sought to be established by relying on the classification of the property in revenue records. The Revenue contends that there is no evidence of the assessee having carried out agricultural activities over the property. The assessee has not established as to how agricultural activities were carried out and what expenses were incurred in carrying out agricultural operations over the property. The revenue also contends that the assessee has not declared any income from Agriculture from the property in question. There is no evidence of availability of Agricultural produce and how they were dealt utilized. The Revenue also contends that the burden of proof that the property was agricultural land at the time of transfer to claim exemption was on the assessee. As already observed, the question whether the land was Agricultural land P a g e 27 | 47 Assessment Year : 2017-18 has to be decided on facts of each case and decided cases are only guidelines to be kept in mind. Facts and all the circumstances are to be considered as a whole and an overall view is to be taken in deciding whether the land was an agricultural land. In a given case, large number of circumstances may be indicative of agricultural character, but one circumstance may outweigh all of them and on its basis the land would be held to be a non-agricultural land.
18. Factors in favour of the assessee: i.) The land in question is entered as agricultural land in revenue records and is assessed as such. ii.) The land is not converted to non-agricultural user. iii.) The assessee as well as the purchaser are agriculturalist.
19. Factors against the assessee: i.) The land is too small for carrying out agricultural operations, considering the fact that the assessee is basically a trader in betel nuts and carries on agricultural operation in Chikamagalur-Shimoga, a place far away from the land at Agarsure. ii.) The land is sold at a price comparable to the price fetched by building sites. iii.) The price is such that no bona fide agriculturist would purchase the same for genuine agricultural operations. iv.) No Evidence of Agricultural operations carried out have been placed on record. The assessee was owner of the property in question for 16 years. The evidence filed regarding use of the land for agricultural purpose are sporadic not sufficient to discharge the burden on the Assessee.
21. If one considers the facts and circumstances of the present case as a whole and an overall view is to be taken in deciding whether the land was an agricultural land, one would come to a conclusion that the property cannot be considered as Agricultural land. Though the circumstance that the land is classified as Agricultural in the revenue records is in favour of the assessee, in our view, the other circumstances pointed out above outweighs all of the circumstances in favour of the assessee and on the basis of those circumstances, we are inclined to conclude that the property was not an agricultural land. We therefore find no merits in this appeal and hence dismiss the same". P a g e 28 | 47
The Hon'ble Madras High Court in the case of CIT vs. GRK Reddy & Sons (HUF) (123 taxmann.com 291) held that mere classification of land in revenue record, as agricultural land, will not conclusively prove that nature of land was an agricultural land, hence, where no evidence was produced by assessee to establish character of land sold by it as agricultural land, the Assessing Officer had rightly held that land was not an agricultural land.
In the case of Fazalbhoy Investment Co. (P.) Ltd. (42 Taxman 22), before the Tribunal, the assessee contended that the said land was agricultural land for the reasons that it was assessed to land revenue; that it was utilized for the growth of mangoes and grass; that no certificate under section 230A had been called for by the Sub-Registrar of Assurances; that extracts of its record of rights showed that paddy had been grown upon it in 1941-42 and 1942-43 and grass thereafter; and that the Tahsildar concerned had issued a certificate stating that the lands bearing various survey numbers (which included the said land) were agricultural lands till the year 1966. The Tribunal, after considering the submissions of the assessee and the revenue and the relevant law, found that the details of agricultural expenses that had been filed by the assessee showed no expense in relation to agricultural operations on the said land. The details showed that there were only petty sale proceeds from the sale of mangoes and grass. This indicated that the assessee had been selling mangoes from such trees as had existed on the said land and the grass that grew spontaneously thereon. The Tribunal, thus, observed that in the absence of any evidence to show that the land was put to any agricultural use at any particular point of time even in the past apart from the sale of some mangoes and grass, it could not be held that the lands could be treated as agricultural lands. on appeal, the Hon'ble Mumbai High Court held that this was not a case where the finding of the Tribunal could be said to be perverse or such that no person, acting judicially and properly instructed, could have arrived at. The Tribunal took into account all the evidence before it and, upon weighing it, found against the assessee. The Tribunal found the evidence insufficient to establish that the land was agricultural land. That was a reasonable conclusion for paddy had been grown on the land as far back as 1941-42 and 1942-43 and the Tahsildar's certificate related to a mass of land which was assessed to land revenue as agricultural land. Accordingly, the order of the Tribunal was upheld by the Hon'ble Mumbai High Court. 11. The Hon'ble Kerala High Court in the case of Sreedhar Asok Kumar vs. CIT (89 taxmann.com 145) held that where assessee was not an agriculturist and land sold by him was never put to any agricultural use, mere categorization of land as 'Nilam' in revenue records was not suffice to raise a presumption that it was a P a g e 29 | 47 Assessment Year : 2017-18 case of sale of agricultural land. The observations of the Hon'ble Kerala High Court in para-9 are reproduced as under: "9. It is observed by the Tribunal that the assessee is not an agriculturist and is the Proprietor of a Management Institute, and there is no evidence to indicate that the land has been put to any agricultural use. In the decision reported in Smt. Sarifabibi Mohmed Ibrahim vs. CIT [1993] 70 Taxman 301/204 ITR 631 (SC), it is held that the question whether a particular piece of land is agricultural or not is essentially a question of fact, to be decided after a consideration of circumstances appearing for and against the assessee. In the decision reported in Smt. Asha George v. ITO [2013] 30 taxmann.com 334/214 Taxman 236/351 ITR 123 (Ker.), this Court held thus: "The crucial question is whether the land was actually being used for agricultural purpose during the two years prior to the date of transfer. We do not think that we can overturn a finding on fact, at any rate, based on our reappreciating the material which was considered by the Tribunal which is the final fact finding authority." It is also held in the above decision that a Certificate of the Village Officer showing the land as "Nilam" (paddy land) alone may not be sufficient for the crucial question is whether the land was actually used for agricultural purposes during the two years prior to the date of transfer. The mere categorization of the land as 'Nilam' in the revenue records would not hence, suffice to raise a valid claim of exemption. In the instant case, the Tribunal has concluded that the subject land has to be treated as capital asset within the meaning of Section 2(14) of the Act. Ordinarily, the question whether a land is an agricultural land or not is a question of fact and the finding on the question of fact recorded by the Tribunal is final. We are not inclined to upset the decision of the Tribunal, and therefore, there is no merit in the argument advanced by the learned Senior Counsel for the assessee. The appeal will stand dismissed finding no question of law arising from the impugned order. No costs."
12. In the case of Smt. G. Vijay Padma vs. ITO (119 taxmann.com 441), the Assessing Officer disallowed claim of assessee and treated land as capital asset. It was noted that records of land produced by assessee did not show any crop grown on said land by assessee. Thus, such records of land could not be considered as conclusive evidence to prove that assessee's land was agricultural land. The assessee had not placed any other evidence on record to show that impugned land was an agricultural land and it had only relied on said record. Further, the assessee had not claimed any expenses incurred in carrying out any agriculture operations. There was no evidence of agriculture produce having been sold by P a g e 30 | 47 Assessment Year : 2017-18 assessee. Further, land was situated in area which was an upcoming residential area with many upcoming private residential flats to be built. The land sold by assessee was in middle of area where huge development activity was carried out by builders. Further sale price received by assessee was very high which a normal agriculture land would not fetch. The Hon'ble Bangalore Tribunal held that on facts, land sold by assessee could not be considered as agricultural land and same was to be treated as a capital asset liable to be taxed. The observations of the Hon'ble Tribunal in para-5, 5.1 & 5.2 & 6 as under: "
We have heard the rival contentions and also considered various orders cited by the parties. The first contention of the AR is that the impugned land is an agricultural land and it is not a capital asset since it is the land covered by section 2(14)(iii)(a) & (b) of the Act. Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000. Section 2(14)(iii)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by clause (a) to section 2(14)(iii) of the Act, but also requires the fulfillment of the condition that the Central Government has issued a notification under this clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a "Capital Asset. According to AR, the subject land is located within the limits of Devanahalli Municipality therefore, clause (a) to section 2(14)[iii] of the Act is not attracted. Further contented that though it is located within 8 KM,, of the municipal limits of Devanahalli Municipality in the absence of any notification issued under clause (b) to section 2(14)(iii) of the Act, it cannot be considered as a capital asset within the meaning of section 2(14)(iii)(b) of the Act also and therefore the subject land cannot be considered as a 'capital asset'. In our opinion that itself is not sufficient to hold that the land in question is an agricultural land. In our opinion, it is an agricultural land, only if the said land is subject to agricultural operation and agricultural activities is carried on in that land. There is no presumption that all land situated outside the notified area are agricultural land and there is no automatic treatment of land as an agricultural land on the ground that it is covered by section 2(14)(iii)(a) & (b) of the Act. 5.1 Now question as to whether a land is agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. We have to answer the question on a consideration of all of them, a process of P a g e 31 | 47 Assessment Year : 2017-18 evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. It may be stated here that not all the factors or tests would be present or absent in any case and that in each case one or more of the factors may make appearance and that ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances. The expression 'agricultural land' is not defined in the Act, and now, whether it is agricultural land or not has got to be determined by using the tests or methods laid down by the Courts from time to time. The Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim vs. CIT [1993] 70 Taxman 301/204 ITR 631 (SC) has approved the decision of a Division Bench of the Hon'ble Gujarat High Court in the case of CIT vs. Siddharth J. Desai [1982] 10 Taxman 1 [1983] 139 ITR 628 (Guj.) and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the land is an agricultural land or not has got to be decided or answered. 5.2 A reference could be made to the case of CWT v. Officer-in-charge (Court of Wards) [1976] 105 ITR 133 (SC) wherein the Constitution Bench of the Hon'ble Supreme Court stated that the term 'agriculture' and 'agricultural purpose' was not defined in the Indian IT Act and that we must necessarily fall back upon the general sense in which they have been understood in common parlance. The Hon'ble Supreme Court has observed that the term 'agriculture' is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term 'agriculture' receives a wider interpretation both in regard to its operation as well as the result of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of its cultivation of the land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself and this basic conception is essential sine qua non of any operation performed on the land constituting agricultural operation and if the basic operations are there, the rest of the operations found themselves upon the same, but if the basic operations are wanting, the subsequent operations do not acquire the characteristics of agricultural operations. 5.5 We may also refer to the case of Gopal C. Sharma vs. CIT [1994] 72 Taxman 353/209 ITR 946 (Bom), in which, the P a g e 32 | 47 Assessment Year : 2017-18 case of Smt. Sarifabibi Mohmed Ibrahim (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the Bombay High Court has stated that the price paid is not decisive to say whether the land is agricultural or not. The argument advanced by the assessee is that the lands sold by the assessee is an agriculture land in revenue records, as such the impugned land is not a capital asset. For this purpose, the learned Authorised Representative produced copy of record of rights which is placed on record. It was also submitted by the learned Authorised Representative that the assessee has declared agriculture income from this property Bearing No. 54/2, Akkupet Village, Devanahalli Taluk at Rs.50,000 in the Assessment Year 2007-08. According to learned Authorised Representative this would be a circumstance in favour of conclusion that it is an agriculture land. However, in our opinion this would raise only a prima facie presumption and that said presumption can be destroyed by other circumstances to the contrary conclusion. This legal proposition highlighted by the Hon'ble Gujarat High Court and upheld by the Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (supra). It is also to be seen that the question whether a particular land is agriculture land or not is basically a question of fact. As laid down by various High Courts in different judgements, a series of tests are applied to decide whether a land is agriculture land or not. It is also to be understood that all the tests are in the nature of guidelines and have to apply depending upon the facts and circumstances of each case. In the present case, the RTC produced by the assessee does not show the crop grown by the assessee. There was no details of crops cultivated by the assessee. The column relating to mentioning the crop cultivated by the assessee were kept blank. Being so, the RTC cannot be considered as conclusive evidence to prove that the assessee's land is agriculture land is collapsed. At initial stages, the property might have been agriculture land. That is why the land is classified in the revenue records as agriculture land. That position continued in a religious manner without any further verification of the nature of the property. It is to be noted that because of urbanization, the properties being in the peripheral of the Bangalore Metropolity, real estate development has started in and around Akkupet Village, Devanahalli Taluk and a lot of commercial and private buildings are constructed. Because of the book in the real estate development, the entire adjoin land was become subject matter of transaction intend for the purpose of real estate development. In that background, we have to see whether actual cultivation has been carried out by the assessee in the said land. As we noted in earlier RTC produced by the assessee does not have any entry of crop P a g e 33 | 47 Assessment Year : 2017-18 cultivated by the assessee. Past history alone is not the deciding factor but whether the assessee has sold agriculture land. Once upon a time, the land might have been used for agriculture land. All the parts of Devanahalli might be agriculture land in good old days. Therefore history is not the only test to be applied to decide the nature of land at the time of sale. A temporary stoppage in the agriculture activity carried out by the assessee also not go against the assessee. For one or the other reason, the assessee may not be carrying on agriculture operations for one or two years. He might be carrying agriculture operations. In such case, it is not possible of non-carrying of agriculture activity for one or two years permanently change the character of the land. In the present case, the assessee has not placed any evidence of carrying out the agriculture operations and the assessee's counsel only relied on the RTC of the revenue department. There is no evidence that the assessee has carried out agriculture activity over the property. The assessee has not claimed any expenses incurred in carrying out the agriculture operations. There is no evidence of agriculture produce having been sold. The Hon'ble Kerala High Court in the case of Kalpetta Estates Ltd. v. CIT [1992] 61 Taxman 54/[1990] 185 ITR 318 wherein it has been held that the burden of proof that the land in question was agriculture land at the time of transfer to claim exemption was on the assessee. The facts and circumstances are to be considered as a whole and an overall view is to be taken in deciding whether the land was agriculture land. In given case, large number of circumstances may be indicative of agriculture character but one circumstance made out where all of this are on basis, the land would be held to be non- agriculture land. In the present case, the assessee has not produced any evidence of having spent human labour in the sense of preparing the land for cultivation, tilling, sowing seeds, planting on a regular basis. The property is situated in fast developing area and access to all modern facilities. There was a real estate activity in the area where the property is situated. The assessee sold the property of 1.35 acres of agriculture land for a consideration of Rs.2,50,05,000. The sale consideration received by the assessee show that no bona fide agriculturist would pay such huge price for 1.35 Acres of land. Another fact is that the land is situated in Devanahalli Taluk in Bangalore North where there is rapid development activities and it has become a bustling suburban. The area is upcoming residential area with many private residential flats are coming up. The property sold by the assessee is in the middle of development activity being carried out by builders in and around Devanahalli Taluk P a g e 34 | 47 Assessment Year : 2017-18 on the reason of coming up of Kempe Gowda Airport in immediate vicinity. In view of the same, the sale price received by the assessee is very high which a normal agriculture land will not fetch. The price is in accordance with the development activities and changes happening in and around the land. If we consider the above fact as a whole and overall view is to be taken in deciding whether the land is agriculture land, we come to a conclusion that the land cannot be considered as agriculture land on only the said land is not Notified under section 2(14) (iii) (a) & (b) of the Income-tax Act. Though the circumstances that land is classified as agriculture in revenue record and Akkupet village, Devanahalli Taluk that is not notified under the provisions of section 2(14)(iii)(a) & (b) of the Act still it is considered as agriculture land on the reason that no agriculture operations has been carried out by the assessee in the said land. In our opinion, the land situated on the presumption of urban area and in the municipal limit cannot be considered as agriculture land unless there was actual agriculture operations carried out by the assessee. Further it is to be seen that the income returned in her Return of Income was an agriculture income was just for name sake and does not have any proportion. At the time of sale of land, no agriculture activity was carried out by the assessee. Accordingly we hold that the property sold by the assessee is not an agricultural land and to be treated as a capital asset liable to be taxed.
With regard to the claim of payment of compensation to unauthorized occupants and payment of commission to Brokers, the assessee has not produced any evidence in support of the same. Similarly, the assessee has not produced supporting evidence in relation to claim of deduction under section 54F of the Act. Accordingly, these grounds of appeal
are also dismissed."
13. The Hon'ble Mumbai ITAT in the case of Greenboom Developers & Resorts Ltd. vs. ITO (140 taxmann.com 13) held that where the assessee claimed capital gain arose on sale of a land as exempt claiming that it was an agricultural land but failed to provide any substantial evidence in support to justify such claim that land in question was an agricultural land, matter was to be remanded back to Assessing Officer for assessee to establish same. Further, it was held in para-7 that since the assessee had also not satisfied 13 tests laid down in case of Smt. Sarifabibi Mohmed Ibrahim vs. CIT [1993] 70 taxmann.com 301/204 ITR 631 (SC) for a land to be considered as agricultural which went to root of question that whether land of assessee was an agricultural land or not, matter was to be remanded back to Assessing Officer for assessee to establish same.
14. Reliance is placed on the judgement of Hon'ble Mumbai High Court in the case of Jeevan Investment & Finance Ltd. P a g e 35 | 47 Assessment Year : 2017-18 (88 taxmann.com 552). In this case, the A.O. had raised a query regarding method of valuation of stock. In response, it was submitted that the shares were valued at cost but the method of valuation was not submitted. The A.O. allowed the loss in the shares without conducting further inquiries. It was held by the Hon'ble Mumbai High Court in para-10 that it was a case of no enquiry. The observations of the Hon'ble High Court in para-10 are reproduced as under: "10. We have examined the rival submissions made before us. We find that during the course of assessment proceedings, the Assessing Officer had by a letter dated 12th January, 2000 for the subject Assessment Year sought various details along with documentary evidence, if any, to enable the Assessing Officer to complete the Assessment. One enquiry in the letter dated 12th January, 2000 mentioned at Serial No.8 thereof was the method of valuation in case of unquoted shares (i.e. listed shares) namely M/s. Mayo India Ltd. The Appellant responded to the above letter dated 12th January, 2000 by its letter dated 31st January, 2000. However, the letter dated 31st January, 2000 did not address the enquiry at Sr. No.8 in the letter dated 12th January, 2000 namely method of valuation of unlisted shares. The Appellant's response was only that the unquoted shares are valued at costs. This is begging the question. No method of valuation of the shares was submitted to the Assessing Officer during the proceedings, leading to the Assessment Order dated 24th February, 2000. It is, therefore, to be noted that the Assessing Officer after having asked a pertinent question of the method of valuing unlisted shares in his letter dated 12th January, 2000 did not pursue that line of enquiry. The required information was not furnished by the Appellant nor any explanation offered for not furnishing the same. It is also not a case where the Assessing Officer was satisfied with regard to his query by some other explanation offered by the Appellant. In fact, merely asking a question which goes to the root of the matter and not carrying it further is a case of non- enquiry, if the query is not otherwise satisfied while responding to another query. In the present facts, the question raised has not been responded to by some explanation which would render the enquiry commenced, futile. In fact, the CIT in his order dated 20th March, 2002 specifically exercised powers under Section 263 of the Act on the basis that the necessary information was not furnished by the Appellant in support of its claim nor the Assessing Officer enquired into the same. Thus, this is a case of non-enquiry and not inadequate enquiry. Therefore, the order of the Assessing Officer is certainly erroneous. There is no dispute that the order of the Assessing Officer is prejudicial to the Revenue". P a g e 36 | 47
15. In the case of Virbhadra Singh (HUF) vs. Pr. CIT (86 taxmann.com 113), the assessee had initially filed return of income showing agricultural income of Rs.15 lakhs. During the course of scrutiny proceedings, the assessee filed revised return of income wherein the claim of agricultural income was enhanced to Rs.2.81crores (which was 1872% higher). The A.O. did not apply his mind to this aspect. The Hon'ble Himachal Pradesh High Court held in para-119 & 120 held that any enquiry by the A.O. without application of mind is non-est. The view taken by the A.O. was not plausible in law. It was further held that the A.O. in the given facts, should have done complete and proper enquiry.
16. The Hon'ble Delhi High Court in the case of Gee Vee Enterprises (99 ITR 375) held as under: "The reason is that it is not the Income-tax Officer but a superior officer like the Commissioner who is exercising a revisional jurisdiction suo motu there under. The superior officer could be trusted with a larger power. The only requirement for the exercise of this power is that the Commissioner should consider that the order passed by the Income-tax Officer is " erroneous in so far as it is prejudicial to the interests of the revenue ". What is the meaning of " erroneous " in this context ? It was argued for the assessees by Shri G. C. Sharma that the word " erroneous " means that the order must appear to be wrong on the face of it. In other words, he equated the " error " with " error of law apparent on the face of record " which is a well-known ground for the review of a quasi-judicial order by this court under article 226. We are unable to agree with this interpretation. The intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income-tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word " erroneous " in section 263 emerges \out P a g e 37 | 47 Assessment Year : 2017-18 of this context. It is because it is incumbent on the Income- tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct".
17. In the case of NIIT vs. Commissioner of Income-tax (Central-II) (60 taxmann.com 313), the Hon'ble Delhi ITAT analyzed plethora of judgments on the issue and through order dated 27.03.2015, gave a ratio that the AO is required to conduct the inquiry in a manner whereby he places on record the material enough to reach the satisfaction, which a rational person, being informed of the nuances of tax laws would reach after due appreciation of such material. If this component is missing, it will always be a case of lack of inquiry and not inadequate inquiry. The relevant portion of the order of Hon'ble ITAT is reproduced below:— "28.1 Ld. Special counsel has rightly pointed out that the expression, 'inquiry1, 'lack of inquiry' and 'inadequate inquiry', have not been defined and, therefore, when the action of the AO would be suggestive of lack of inquiry or inadequate inquiry, will depend upon the facts obtaining in a particular case. What emerges as a broad principle from the various decisions is that where the AO has reached a rational conclusion, based on his inquiries and material on record, the Commissioner should not start the matter afresh in a way as to question the manner of his conducting inquiries. It is not the province of the Commissioner to enter into the merits of evidence; it has only to see whether the requirements of essential inquires and of law have been duly and properly complied with by AO or not. 28.2 It is well settled that before the Commissioner can invoke his powers u/s 263, he has to arrive at a conclusion that the assessment order is erroneous in so far as it was prejudicial to the interests of the revenue. Then only the powers u/s 263 can be invoked. Therefore, if AO accepts or rejects any claim of the assessee without due application of mind and if such failure causes prejudice to revenue, the Commissioner would be well within his powers u/s 263 to intervene in the matter. An inquiry which is just farce or mere pretence of inquiry, cannot be said to be an inquiry at all, much less an inquiry needed to reach the level of satisfaction of the AO on the given issue. The level of satisfaction would obviously mean that he has conducted the inquiry in a manner whereby he places on record the material enough to reach the satisfaction, which a rational person, being informed of the nuances of tax laws would reach after due appreciation of such material. If this component is missing, it will always be a case of lack of inquiry and not inadequate inquiry." P a g e 38 | 47 Assessment Year : 2017-18 18. Reliance is placed on the decision of Hon’ble Delhi High Court in the case of CIT vs. Nagesh Knitwers P. Ltd & others (345 ITR 135) wherein it was held that when the A.O. has allowed claim of the assessee in a slipshod manner without conducting any inquiry, then in the case of no inquiry, the assessment order is not only erroneous but also prejudicial to the interest of revenue. The order of assessment has to be a speaking order and when the fact of others’ view has not been mentioned and the claim pressed by the assessee has been allowed without making any inquiry, then the order must be held as erroneous and prejudicial to the interest of revenue.
19. The decision of Hon'ble Supreme Court in the case of Malabar Industries Ltd. vs. CIT (243 ITR 83) is in the favour of the Deptt. It was held therein that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase ‘‘prejudicial to the interests of the Revenue’’ is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. In view of above facts, the appeal filed by the appellant is required to be dismissed.
Ld. CIT-DR further placed reliance on the decision of the ITAT Bangalore Bench of the Tribunal in the case of Jairam G. Kimmane Vs. DCIT, reported in 119 taxmann.com 99, to submit that no evidence on agricultural operations carried out had been placed on record and no evidence of agricultural operations having been carried out nor the assessee having declared any income from agriculture on the said property, the property cannot be treated as an agricultural land. He placed reliance on the decision of Hon’ble Madras High Court in the case of GRK Reddy & Sons (HUF), reported in 123 taxmann.com 291/430 ITR 283 (Mad), wherein it has been held that nothing was brought on record by the assessee to P a g e 39 | 47 Assessment Year : 2017-18 establish that the agricultural operations were carried on prior to his purchase and after his purchase. Further the conduct of the assessee in selling the property within a short period of one year to non-agriculturists and the property being used to develop SEZ was also not taken into consideration by the Tribunal while deciding the character of the land. It was the submission that the Hon’ble High Court held that the impugned land to be non-agriculture in nature.
The ld. CIT-DR further relied on the decision of the Hon’ble Bombay High Court in the case of Fazalbhoy Investment Co. (P.) Ltd., reported in 42 Taxman 22/176 ITR 523 (Bom), wherein it has been held that where the assessee incurred no expenses in relation to the agricultural operation on the land in question and only petty sale proceeds from the sale of mangoes and grass, the land under consideration could not be said agricultural land for the purpose of capital gain.
The ld. CIT-DR further relied on the decision of Hon’ble Kerala High Court in the case of Sreedhar Asok Kumar Vs. CIT, 89 taxmann.com 145 (Kerala), wherein the Hon’ble High Court has held that mere categorization of the land as “Nilam” in the revenue record, would not suffice to raise a valid claim of exemption. It was submitted that in the said decision, it was categorically claimed that the assessee is not an owner of the land and the land has not been put to agricultural use.
The ld. CIT-DR further placed reliance on the decision of the ITAT Mumbai Bench of the Tribunal in the case of Greenboom Developers & Resorts Ltd., reported in 140 taxmann.com 13, to submit that the 13 tests P a g e 40 | 47 Assessment Year : 2017-18 specified by the Hon’ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim, reported in [1993] 70 taxmann.com 301/204 ITR 631 (SC) had not been considered by the Tribunal and the matter was remanded back to the AO. He also placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of G.Vijay Padma, reported in 119 taxmann.com 441 to the same effect. It was the submission that the order of the ld. Pr.CIT is liable to be upheld.
In reply, ld. AR, in respect of the assessment order being cryptic, placed reliance on the decision of the Hon’ble Delhi High Court in the case of Vikas Polymers, reported in [2010] 194 Taxman 57 (Delhi)/[2012] 341 ITR 537(Delhi), wherein it has been held that if an enquiry has been raised during the course of scrutiny by the AO which was answered to satisfaction of AO, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision. He also relied upon the decision of Hon’ble Delhi High Court in the case of Anil Kumar Sharma, reported in [2011] 335 ITR 83 (Delhi), wherein it has been held that where it was discernible from record that Assessing Officer had applied his mind to issue in question, the Commissioner could not invoke section 263 of the Act merely because he had different opinion. Ld. AR also relied upon the decision of coordinate bench of the Tribunal in the case of M/s Earth Minerals Co. Ltd., passed in order dated 29.08.2022 to submit that the ld. Pr.CIT having not done any further enquiry after receiving response from the assessee, order u/s.263 of the Act is liable to be quashed. In this P a g e 41 | 47 Assessment Year : 2017-18 proposition he also relied on the decision of Hon’ble Jurisdictional High Court in the case of Orissa State Police Housing & Welfare Corporation Ltd., reported in [2022] 139 taxmann.com 207 (Orissa). He further relied on the decision of the Hon’ble Madras High Court in the case of K.P.R. Developers Ltd., reported in [2020] 117 taxmann.com 822 (Madras), wherein it has been held that merely because an agriculture activity could not be done on said land for various reasons including natural causes, it did not cease to be an agricultural land, thus, same could not be considered as capital asset as per Section 2(14) of the Act and capital gain arising from same was exempt from tax. He further placed reliance on the decision of the Hon’ble Madras High Court in the case of M.S.Srinivasa Naicker, reported in [2008] 169 Taxman 255 (Madras) , wherein it has been held that where the land in question was under agricultural operations till date of sale, it would not shed its character as agricultural land merely because purchaser intended to use same for non-agricultural purposes and profit on sale of such land could not be assessed as capital gain treating said land as non-agricultural land. He further placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Heenaben Bhadresh Mehta, reported in [2018] 96 taxmann.com 164 (Gujarat)/[2018] 409 ITR 196 (Gujarat), wherein it has been held that the intention of purchaser could not be a determinative factor to treat profit earned by assessee on sale of agriculture land as business income. He also relied on the decision of Hon’ble Gujarat High Court in the case of Gordhanbhai Kahandas Dalwadi, reported in [1981] 127 ITR 664 (Gujarat), wherein it has been held that entries in record of rights
P a g e 42 | 47 Assessment Year : 2017-18 are prima facie, good evidence, regarding land being agricultural and if presumption raised either from actual user of land or from entries in revenue records is to be rebutted, there must be material on record to rebut presumption.
Ld. AR further relied on the decision of Hon’ble Bombay High Court in the case of Smt. Debbie Alemao, reported in [2011] 196 Taxman 230 (Bombay), wherein it has been held that where it was apparent from records that land in question was entered in revenue records as an agricultural land and no permission was ever obtained for non-agricultural use by assessee, the sale of the said land is liable to be treated as sale of an agricultural land.
Ld.AR further relied on the decision of Hon’ble Gujarat High Court in the case of Rajshibhai Meramanbhai Odedra, reported in [2014] 42 taxmann.com 497 (Gujarat), wherein it has been held that where the land was sold to non-agriculturist which was in breach of law prevailing in State, character of land would not be changed into a capital assets and land would continue as agricultural land.
It was submitted that the AO had called for the record from the Tehsildar, who is the government officer to decide on the land and he has categorically verified the details and character of the land and the RI has categorically mentioned that the lands were used for cultivation. It was the submission that the case laws relied on by the ld. CIT-DR have no application as they were on different facts of each case and the lands are agricultural land which are situated beyond the limits prescribed from the P a g e 43 | 47 Assessment Year : 2017-18 municipality u/s.2(14) of the Act. The AO has conducted the enquiry and has drawn a conclusion. It was further submitted that the explanation 2(a) to Section 263 of the Act was for “no enquiry”. It was submitted that in the assessee’s case there was complete enquiry. It was thus submitted that the order passed by the ld. Pr.CIT u/s.263 of the Act is liable to be quashed.
We have considered rival submissions. Both the ld. AR and the ld.CIT-DR have vehemently argued as to whether the lands sold by the assessee is liable to be considered as agricultural lands or not. It is but unfortunate that both sides have failed to understand that the issue in the appeal before this Tribunal is as to whether the order passed u/s.263 of the Act is sustainable on the facts or not. This Tribunal is not in the present appeal competent to decide as to whether the land sold is an agricultural land or not. All that is before the Tribunal under the present appeal is that the assessee has filed its return and assessment has been completed under scrutiny, whether that scrutiny assessment has encompassed in itself, the verification of the details produced by the assessee and as to whether the assessment order and the views and the opinion taken by the AO is an opinion that a reasonably informed person would draw on the basis of evidence placed before him and as to whether the Pr.CIT is right in invoking his powers of revision to disturb those findings as made by the AO.
The facts in the present case clearly show that the AO had issued a questionnaire in the form of a notice issued u/s.142(1) of the Act. Both the issues proposed in the revision have been raised in the notice issued u/s.142(1) of the Act. The assessee has responded to the AO’s notice and P a g e 44 | 47 Assessment Year : 2017-18 has produced certain evidences before him. The AO in his wisdom has done further enquiry on the evidence produced by the assessee and has drawn a conclusion. True, the assessment order passed by the AO is cryptic and does not talk of the enquiry as done by him. A perusal of the order passed u/s.263 of the Act, says that the AO has done enquiry and he has issued notices to other Government authorities and after obtaining the responses from them has arrived at a view. The ld. Pr.CIT after issuing the show cause notice to the assessee and after receiving the reply of the assessee, however, unfortunately, has done nothing further other than alleging that the AO has not done any enquiry. The reply of the assessee has been given to the ld. Pr.CIT is as early as on 24.08.2021 and the order u/s.263 of the Act has been passed on 12.03.2022 after nearly seven months. Absolutely no enquiry has been done by the ld. Pr.CIT in respect of the reply filed by the assessee. A perusal of the explanation 2(a) to Section 263 of the Act, says that the revision is permissible when the order is passed without making enquires or verification as should have been made. Here admittedly, the AO has made enquiries and verifications. If the Pr.CIT is to take a stand that the AO has not done enquiries or verifications which should have been made, it was incumbent on the ld. Pr.CIT to satisfy as to what is the enquiry or verification that has not been done by the AO. It is easy to point out faults on acts done by a subordinate officer. As a superior officer it is a duty, nay, a responsibility cast on such superior officer to do the necessary enquiry or verification as is expected to be done if he wishes to show the subordinate officer’s order as having been done without making the enquiry
P a g e 45 | 47 Assessment Year : 2017-18 or verifications. This is conspicuous by its absence in the order of the ld. Pr.CIT. The various courts have held that the AO is not a tax collector but he is a tax adjudicator. The AO in his wisdom and on the basis of his enquiry has adjudicated on both the issues. He has formed an opinion. He has accepted that the gains from the sale of lands is exempt and that the capital gains on the sale of the flat by the assessee generated a capital loss. This view as arrived at by the ld. AO has not been shown to be erroneous. An error can be in the form of a non-enquiry or wrong appreciation or application of law. The AO having done enquiry and having come to a conclusion, just because it does not meet the opinion of the ld. Pr.CIT will not make the order of the AO erroneous. Our view finds support from the decision of the Hon’ble Delhi High Court in the case of Anil Kumar Sharma, referred to supra, wherein it has been categorically held that where it was discernible from the record that the AO has applied his mind to the issue in question, the Commissioner could not invoke his powers u/s.263 of the Act merely because he had a different opinion. This being so, as it is noticed that the AO has done examination, verification and enquiry of both the issues which have been raised by the ld. Pr.CIT and as it is noticed that in the order u/s.263 of the Act, the ld. Pr.CIT is attempting to impose his opinion over that of the AO, the same being impermissible under the provisions of Section 263 of the Act. Thus, the order passed by the ld. Pr.CIT u/s.263 of the Act is unsustainable and consequently, the same is hereby quashed.
P a g e 46 | 47 Assessment Year : 2017-18 26. In the result, appeal of the assessee is allowed.
Order dictated and pronounced in the open court on 16/02/2023.
Sd/- Sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 16/02/2023 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : Smt. Purnima Das, C/O. Biswajit Das, At-9, Budha Nagar, Budheswari, Bhubaneswar 2. The Respondent: Pr. CIT Bhubaneswar-1 3. The CIT(A)-1, Bhubaneswar 4. DR, ITAT, Cuttack 5. Guard file. //True Copy// By order
Sr.Pvt.secretary ITAT, Cuttack
P a g e 47 | 47