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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
The captioned appeal by the assessee is against the order dated 29th March 2019, passed by the learned Commissioner of Income Tax (Appeals)–39, Mumbai, for the assessment year 2013–14.
Basically, two issues arise out of the grounds raised by the assessee. The first issue relates to assessee’s claim that capital assets
2 Shri Ashok C. Thakkar sold being in the nature agricultural land is not subject to capital gain tax. The second issue is with regard to applicability of provisions of section 50C of the Income Tax Act, 1961 (for short "the Act"), in case the income received from sale of land is assessed under the head “Capital Gain”. Of course, the assessee has raised the issue of levy of interest under sections 234A, 234B, 234C and 234D of the Act.
Brief facts are, the assessee is an individual. For the assessment year under dispute, the assessee filed his return of income on 22nd April 2014, declaring income of ` 6,91,540. While examining the return of income as well as other material on record in the course of assessment proceedings, the Assessing Officer noticed that in the relevant previous year the assessee had sold capital asset in the nature of land and received certain consideration in relation to such sale. Further, the assessee had also received compensation from National Highway Authority of India towards acquisition of land. However, the assessee had not offered the gain derived from sale/acquisition of such land to tax under the head “Capital Gain”. When called upon to explain why the income from sale of land has not been offered to tax as capital gain, it was submitted by the assessee that the land sold being a rural agricultural land, cannot be treated as capital asset as per section 2(14)(iii) of the Act. In this context, the 3 Shri Ashok C. Thakkar assessee also referred to Circular no.F.M. 24011/2009–LRD. dated 13th April 2011, issued by the Government of India, Ministry of Rural Department, New Delhi. Further, in support of his claim that the land being in the nature of agricultural land is not subject to capital gain tax irrespective of the fact whether agricultural activity was carried on at the time of sale, the assessee relied upon certain judicial precedents. The Assessing Officer, however, was not convinced with the submissions of the assessee. He observed, the land sold by the assessee was held by him for a period of less than two years. Thus, according to him, the period of land holding clearly indicates that the intention of the assessee was not to carry out any agricultural activity. Referring to 7/12 extracts, he observed, no agricultural activity was carried on by the assessee at the time of sale of land. Thus, he ultimately concluded that the assessee failed to prove that the land sold is in the nature of agricultural land. Accordingly, he held that the sale consideration received by the assessee is assessable under the head “Capital Gain”. Having held so, he found that as per registered sale deed, the stamp valuation authority has determined the value of land at a rate higher than the sale consideration mentioned in the deed. Thus, invoking the provisions of section 50C of the Act, the Assessing Officer adopted the value determined by the stamp duty valuation authority as deemed sale consideration and computed capital
4 Shri Ashok C. Thakkar gain. This resulted in addition of ` 4,96,00,149, as short term capital gain and ` 15,59,029, as long term capital gain. The assessee challenged the aforesaid additions before the first appellate authority without any success.
Shri Dharmesh Shah, the learned Authorised Representative appearing on behalf of the assessee submitted, during the year under consideration, the assessee had sold agricultural lands located at villages Aase and Ardhe in the District of Raigarh. He submitted, the lands sold being in the nature of rural agricultural lands do not come within the purview of “Capital Asset” as per section 2(14)(iii) of the Act. Therefore, the gain derived from sale of such asset is not subject to tax. The learned Authorised Representative submitted, non-carrying out of agricultural activity does not change the character of land as a agricultural land. He submitted, learned Commissioner (Appeals) has accepted this fact against which the Revenue is not in appeal. He submitted, the only issue which remains to be decided is, whether the land sold by the assessee were in the nature of agricultural land or not. He submitted, to justify his claim, the assessee apart from submitting the sale deeds wherein the description of property has been mentioned as agricultural land as well as the 7/12 extracts, the assessee has also furnished certificates from the local Talati certifying
5 Shri Ashok C. Thakkar that the land sold by the assessee was agricultural land. He submitted, letters from Gramsewak of the local Gram Panchayat were also furnished certifying the land sold as agricultural land. He submitted, the clauses in the sale deed also clearly mention that the assessee is an agriculturist. He submitted, 7/12 extracts enclosed with the deed of conveyance also reveal that in some of the plots crops were cultivated during the year. Thus, he submitted, all these evidences clearly demonstrate that the lands sold were in the nature of agricultural land, hence, cannot be considered as capital asset, as defined u/s 2(14) of the Act, so as to attract capital gain tax. In support of his contention, the learned Authorised Representative relied upon the following decisions:- i) Sercon Pvt. Ltd. v/s CIT, 136 ITR 881 (Guj.); ii) Mr.s Shakuntala Vedachalam & Ors., v/s ACIT, 369 ITR 558 (Mad.); iii) CIT v/s Debbie Alemao & Co., 331 ITR 59 (Bom.); iv) Chalsami Nagaratna Kumari v/s ITO, 79 taxmann.com 104 (Vizag.); v) CWT v/s H.V. Mungale, 145 ITR 208 (Bom.).
Shri Udaya B. Jakke, the learned Departmental Representative submitted, the very fact that the assessee was not carrying out any agricultural activity on the lands sold and held them for a period of 6 Shri Ashok C. Thakkar less than two years indicates that the assessee was holding the lands as investment. Therefore, the activities carried on by the assessee are akin to adventure in the nature of trade. Thus, he submitted, to qualify as agricultural land some agricultural activity must be carried on such land which is absent in the case of land sold by the assessee. Therefore, it cannot be treated as agricultural land. In support of his contention, the learned Departmental Representative relied upon the following decisions:–
i) P. Chellaiah Pillai v/s CIT, 16 ITR 350 (Mad.); and ii) CIT v/s R. Venkataswamy Naidu, 29 ITR 529 (SC);
We have considered rival submissions and perused the material on record. It is evident, the Assessing Officer has brought the income derived from sale of lands to tax under the head “Capital Gain” after rejecting assessee’s claim that they are in the nature of agricultural land, hence, do not come within the definition of “Capital Asset” as per section 2(14) of the Act. While rejecting assessee’s claim, the Assessing Officer has observed that no evidence has been brought on record by the assessee to demonstrate that agricultural activity was carried out on the land during the period the assessee was holding such land. Whereas, learned Commissioner (Appeals), though, has accepted assessee’s contention that actual carrying on of agricultural
7 Shri Ashok C. Thakkar operation is not a necessary condition for deciding the nature of a particular land as agricultural land, however, he has rejected assessee’s claim on the solitary ground that the assessee has failed to furnish any evidence to show that the lands sold by the assessee have been referred to as agricultural land in Government record. Qua the aforesaid observation of learned Commissioner (Appeals), it must be observed that in the course of proceedings before the learned Commissioner (Appeals), the assessee has furnished certain document by way of additional evidences which are as under:-
(a) Confirmation letter from Talati dated 06.05.2016 stating that all the plots at Village “Aase” sold by the appellant were agricultural land; (b) Confirmation letter from Talati dated 06.05.2016 stating that all the plots at Village “Ardhe” sold by the appellant were agricultural land; (c) Letter from Gramsewak, Group Grampanchayat of the census of the villages.”
In fact, learned Commissioner (Appeals) has not only acknowledged filing of documentary evidences before him, but has also called for a report from the Assessing Officer on the additional evidences filed by the assessee. As observed by the learned Commissioner (Appeals), the Assessing Officer chose not to offer any comment on the additional evidences filed by the assessee. Be that as it may, the facts on record clearly reveal that the assessee produced
8 Shri Ashok C. Thakkar certain documentary evidences from the Village level officers to demonstrate that the lands sold were in the nature of agricultural land. Further, the sale deed also describes the lands sold as agricultural land. Unfortunately, learned Commissioner (Appeals) has not whispered even a single word on the veracity of additional evidences furnished by the assessee. If the additional evidences furnished by the assessee mentioning the lands sold as agricultural land did not inspire confidence or required further verification, learned Commissioner (Appeals) should have conducted proper enquiry to ascertain the authenticity of the certificates issued by Talati and Gramsewak. Without disproving the correctness of the confirmation/certificates issued by the Talaties and Gramsewak, learned Commissioner (Appeals) was not justified in rejecting assessee’s claim of agricultural land, that too, on the premise that the assessee failed to furnish any evidence to show that the lands are recorded as agricultural land in the Government record. Moreover, the details of land sold are very much available with the Departmental Authorities. Therefore, it would not have been difficult on their part to ascertain/verify the exact nature of land sold as mentioned in Government records by conducting necessary enquiry with the concerned Government authorities. Without doing so, the Revenue authorities cannot presume that the lands sold are not in the nature of agricultural land. When the 9 Shri Ashok C. Thakkar assessee has brought some evidence on record to establish its claim that the land sold is in the nature of agricultural land, the Revenue authorities are duty bound to verify the authenticity of such evidence and if they want to reject assessee’s claim, they must bring contrary material on record to disprove assessee’s claim. It is evident, the Revenue authorities have not conducted any enquiry to verify the nature of land sold by the assessee, whether agricultural or otherwise. In fact, the evidences furnished by the assessee have not at all been examined in proper perspective. In view of the aforesaid, we are inclined to set aside the impugned order of learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer for de novo adjudication after examining the evidences filed by the assessee and conducting enquiry, if necessary, with the concerned authorities of the Government to find out the true nature and character of the land sold. Only after the Assessing Officer comes to a conclusion on the basis of material brought on record that the lands sold by the assessee are not in the nature of agricultural land, hence, come within the purview of “Capital Asset” as defined u/s 2(14) of the Act, then the question of applicability of section 50C of the Act would arise. In such event, the Assessing Officer has to compute the capital gain by applying provisions of section 50C of the Act after following the procedure laid down in sub-sections (2) and (3) of the said
10 Shri Ashok C. Thakkar provision. Needless to mention, the Assessing Officer must allow reasonable opportunity of being heard to the assessee before deciding the issue. Accordingly, grounds no.1 to 5, are allowed for statistical purposes.
In ground no.6, the assessee has challenged levy of interest under various provisions.
This ground being consequential in nature does not require adjudication.