ARCHITA FARMS PVT. LTD.,AHMEDABAD vs. THE PCIT, AHMEDABAD-1, AHMEDABAD

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ITA 1393/AHD/2024Status: DisposedITAT Ahmedabad28 April 2025AY 2017-18Bench: Shri Sanjay Garg (Judicial Member), Ms. Annapurna Gupta (Accountant Member)4 pages

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Facts

The assessee sold land and claimed exemption from capital gains tax, asserting it was agricultural land. The PCIT initiated revision proceedings under Section 263, finding that the land was within municipal limits and no agricultural activity was carried out, thus holding that the Assessing Officer erred in granting the exemption. The PCIT set aside the assessment, remanding the matter for fresh adjudication, leading the assessee to appeal against this order.

Held

The Tribunal ruled that the nature of land as agricultural cannot be determined solely by the absence of agricultural activity in the year of sale if land revenue records indicate otherwise and past activities existed. The Tribunal found the PCIT's exercise of revisionary powers under Section 263 unjustified, as the PCIT did not adequately address the assessee's contention regarding the land's location outside municipal limits. Therefore, the PCIT's order was quashed, and the appeal of the assessee was allowed.

Key Issues

Whether the PCIT was justified in exercising revisionary jurisdiction under Section 263 in a case where the AO allowed an exemption for the sale of land, and whether the land qualifies as agricultural land under Section 2(14) of the Income Tax Act, 1961.

Sections Cited

263, 147, 2(14)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH

Before: Shri Sanjay Garg & Ms. Annapurna Gupta

For Appellant: Ms. Nupur Shah, A.R

For Respondent: Shri A.P. Singh, CIT-D.R

आदेश/ORDER Per Sanjay Garg, Judicial Member:

The present appeal has been filed by the Assessee against the order passed under section 263 by the Principal Commissioner of Income Tax, Ahmedabad-1 [hereinafter referred to as “PCIT”] dated 04.03.2024 arising from the order passed u/s. 147 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2017-18.

Archita Farms Pvt. Ltd., A.Y. 2017-18 2. The assessee in this appeal has contested the exercise of revision jurisdiction by the ld. PCIT in exercise of his powers u/s. 263 of the Income Tax Act (in short, “the Act”).

The appeal is time barred by 77 days. A separate application for condonation of delay has been filed. Considering the averments made in the application, the delay in filing the appeal is hereby condoned.

The sole issue involved in this appeal is as to whether income earned by the assessee on sale of land is to be taxed under the head “capital gains” or the same was exempt from taxation, being consideration received from sale of agricultural land, which does not fall under the definition of “capital gain” as defined u/s. 2(14) of the Act. The ld. PCIT observed from the assessment records that the land in question was falling within the municipality limits of Ahmedabad and further the same was not an agricultural land. On being show-caused in this respect, the assessee explained that land was situated about 14.5 kilometers from the municipality limits. The ld. PCIT did not dispute or deliberate upon the issue as to whether the land was situated outside municipality limits, however he held that no agricultural activity was being carried on the land in question. He, referring provisions of section 2(14) of the Act, held that such exemption was applicable to agricultural land only. That since no agricultural activity was carried out on the land, therefore, he held that Assessing Officer had erred in allowing the claim of exemption from taxation on the sale of land in question. He, 2 Archita Farms Pvt. Ltd., A.Y. 2017-18 therefore, set aside the assessment order and referred the matter back to the file of Assessing Officer with a direction to decide the matter afresh.