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Facts
The appellant, a non-resident Indian, filed a return declaring long-term capital gains from the sale of a property in Maharashtra. The Assessing Officer (AO) treated the sale consideration based on the stamp duty value, which was higher than the actual sale price. The appellant claimed the property was agricultural land and thus not a capital asset, but failed to provide sufficient evidence to substantiate this claim.
Held
The Tribunal held that the appellant failed to prove that the land sold was agricultural land by providing adequate evidence. Reliance was placed on a Kerala High Court judgment stating that the burden of proof lies with the assessee claiming exemption. The Tribunal also dismissed the ground challenging the DVO's valuation, as a separate remedy exists for that.
Key Issues
Whether the property sold by the assessee was agricultural land to be exempt from capital gains tax, and whether the valuation adopted by the DVO was correct.
Sections Cited
143(3), 144C(13), 50C, 2(14)(iii)(a), 2(14)(iii)(b)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against final assessment order dated 08.09.2023 passed u/s. 143(3) r.w.s. 144C(13) of Income Tax Act, 1961 (hereinafter "the Act") for Assessment Year (AY) 2021-22.
Brief facts of the case are that the appellant is a non-resident Indian. The return of income for AY 2021-22 was filed on 03.09.2021 declaring long term capital gains of Rs. 2,36,26,891/- Thomas Cherian and income from other sources of Rs. 66,066/-. Against the said return of income, the assessment was completed by the draft assessment order was passed u/s. 147 r.w.s. 144C was passed on 26.12.2022 at a total income of Rs. 4,88,76,382/-. While doing so, the AO made addition under the head “long term capital gains”.
The factual background leading to the above addition is that during the previous year relevant to the assessment year under consideration the appellant sold property situated in Kolechafesar Village, Mawal Taluka, Maharashtra for a total consideration of Rs. 2,78,75,000/-. The property is situated in rural area but without any agricultural activity. However, the value of the property for the purpose of stamp duty was Rs. 5,30,68,425/-. The AO adopted the same as sale consideration invoking provisions of section 50C of the Act. However, during the course of assessment proceedings, the appellant sought exemption from capital gains by stating that the capital gains were wrongly offered to tax by submitting that the property sold was agricultural property situated in rural area and, therefore, it cannot be termed as “capital asset” within the meaning of section 2(14)(iii)(a) & (b) of the Act. Without prejudice to the above, the appellant also objected to adoption of the value for stamp duty purposes u/s. 50C as the stamp duty value does not represent the fair market value and requested for reference to valuation report. The AO made a reference to the valuation report. However, since the valuation report was not received till the date of completion of Thomas Cherian the assessment, the AO proceeded with framing draft assessment order by adopting stamp duty value as sale consideration under the provisions of section 50C of the Act rejecting the contention of the appellant that it is agricultural land for want of proof of agricultural activities by the appellant. On receipt of the draft assessment order, objections were filed before the DRP contending that the property sold is agricultural land which is situated in rural area and earmarked as Jirayt land since 2006 as evident from 7/12 Extracts. It is further submitted that actual agricultural activities need not be carried on to come within the purview of agricultural land placing reliance on the following decisions: - i) CIT v. Venkateswara Hospital. 264 Taxman 90 (Mad) ii) SLP dismissed by Hon SC in the above case 264 taxman 89 iii) CIT v. Debbie Alemao (Smt.) 331 ITR 59 (Bom) iv) CIT v. Ashok Kumar Rathi, 404 ITR 173 (Mad) v) PCIT v. Anthony John Pereira 425 ITR 134(Bom) vi) PCIT V K. P. R. Developers 311 CTR 832 (Mad) vii) WTO V H. V. Mungale 32 CTR 301 (Bom) viii) ACIT V Ashok W. Wesavkar (Mum) (TM)
dated 25.01.2023 4. It was further contended that the mere fact that the appellant erroneously offered the gains arising out of sale of agricultural land to tax should not be a reason to assess the same, as it is the duty of the AO o assess the correct income in accordance with law placing reliance on the CBDT Circular No. 14 (XL-35) and decision of the Thomas Cherian Hon'ble Kerala High Court in the case of Raghavan Nair v. ACIT [2018] 402 ITR 400. The appellant also filed objection to the value adopted by the DVO. On due consideration of the objections filed by the appellant the DRP issued instructions on 24.08.2023 directing the AO to adopt the value of property as per valuation done by the DVO, i.e., Rs. 3,17,78,000/-. However, rejected the contention of the appellant that the property sold was agricultural land.
On receipt of the directions from the DRP the AO passed assessment order u/s. 143(3) r.w.s. 144C(13) of the Act on 08.09.2023 adopting the value as per DVO report as deemed sale consideration u/s. 53C o Rs. 3,17,78,000/-. Accordingly, computed the long term capital gains at Rs. 2,75,29,891/-.
Being aggrieved by the final assessment order, the appellant is in appeal before this Tribunal in the present appeal. The learned counsel for the assessee submitted before us that the DRP ought not have held that the property sold is capital asset, inasmuch as, the property is situated in rural area. Without prejudice to the above it is contended that the valuation made by the DVO is wrong and, therefore, submitted that the assessment order may be quashed.
On the other hand, the CIT-DR submitted that since the order passed by the learned lower authorities are speaking orders and based on proper appreciation of the evidence, no interference is called for.
Thomas Cherian 8. We have heard the rival contentions and perused the material available on record. Ground of appeal Nos. 1, 2 & 5 are general in nature. Ground No. 3 challenges the findings of the DRP confirming the assessment of gains arising on sale of agricultural land. On a mere perusal of the assessment order, it would suggest that the AO had treated the property sold by the appellant as non-agricultural land in view of the fact that the appellant had not carried on any agricultural activity. Undisputedly, the appellant had failed to adduce any evidence to show that the appellant had actually carried on agricultural activities. In the absence of this evidence, the learned lower authorities proceeded to hold that the property sold was not agricultural land. The contention of the appellant that it is not a necessary requirement under law that the land should be actually used for agricultural purposes, it is enough if the property is capable of being used for agricultural activities. The contention of the appellant cannot be acceded in view of the recent judgement of the Hon'ble Kerala High Court in the case of M.J. George (Died) v. DCIT in of 2024 dated 04.03.2025 wherein it was held as under: -
“8. On a consideration of the rival submissions, we find that the appellate tribunal has gone into the factual issues at length and determined the issue as to whether or not the land sold by the appellant was agricultural land or not, based on the facts and evidence available before it, examined in the backdrop of the legal position that obtains from the precedents on the point. It is significant in this regard to Thomas Cherian observe that the claim of the appellant/assessee, being for exemption from the levy of income tax as applicable to capital gains, the burden of proof was on the assessee to show that he was entitled to exemption by virtue of the land sold by him being in the nature of agricultural land. We find that, towards that end, the assessee did not produce any evidence other than a certificate from the Village Officer that the land in question was agricultural land, which certificate went against the revenue records itself that pointed to the land being in the nature of 'Purayidam' which translates as dry land suitable for construction of houses. In addition to that, the assessee also produced copies of some returns that showed that he had returned an amount slightly over Rs.1 lakh as agricultural income obtained from the property over many years prior to the sale of the land. The appellant, however, did not produce any other cogent evidence such as wages paid to agricultural labourers, purchase invoices in respect of manure, fertilizers etc., purchase invoices pertaining to agricultural implements, if any, used in connection with the agricultural operations, the details regarding the source of water for irrigation purposes, etc, all of which would have been available with the assessee, if in fact he was engaged in agricultural operations on the land in question.”
In view of the binding precedent of the Hon'ble Jurisdictional High Court the other decisions relied upon by the appellant have not application as the appellant is situated within the jurisdiction of the Hon'ble Kerala High Court. Accordingly, this ground of appeal stands dismissed.
Ground No. 4 challenges the adoption of value of Rs. 3,17,78,000/- by the DVO. This Tribunal, at this stage cannot enter into whether the DVO had adopted the due process to arrive at the Thomas Cherian fair market value of the property or not as a separate appeal lies against the DVO report. We are told at Bar that the appellant is pursuing remedy against the DVO report. Therefore, this ground of appeal stand dismissed.
In the result, the appeal filed by the assessee stands dismissed.
Order pronounced in the open court on 31st July, 2025.