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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
2 ITAs No. 3981/Mum/2018 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-2, Thane [in short CIT(A)], vide order dated 28.03.2018. The Assessment was framed by the Income Tax Officer-Ward 3(3), Mumbai (in short ‘ ITO / AO’) for the A.Y. 2014-15 vide order dated 30.12.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. At the outset, the learned Counsel for the assessee took us through the grounds of appeal
and stated that the various grounds were raised but he is only arguing the ground No. 4 and the Relevant Ground No. 4 read as under: -
4. The Ld. CIT(A) erred in issuing the erroneous notice u/s 251(2) for enhancement of income and thereafter making the addition of ₹ 5,39,75,247/- though Ld. AO, on due verification and application of mind, had allowed the deduction u/s 54B of the Act;.”
Brief facts are that the assessee is engaged in the business of engineering and fabrication. During the year under consideration, the assessee sold rural agricultural land for a total consideration of ₹ 7.50 crores. The AO during the course of assessment proceedings noticed from AIR data that the total value of transactions reported in the AIR are includes sale and purchase of immovable properties at ₹ 7,73,83,500/-.
ITAs No. 3981/Mum/2018 But the assessee had disclosed total consideration of land sold amount to ₹ 7.50 crores, while the cost of land purchase is ₹ 1,23,83,500/-. The assessee has filed the details of capital gain on sale of agricultural lands and the same read as under: - Survey No. 29/1A1, 29/1B/2 105/1 & Total (₹) 29/03, 29/2, 106/1 29/4 & 30/4, 139/3C, 39/5A Net sale consideration 62,934,167 6,455,833 4,900,000 74,190,000 Less: Cost of acquisition (8,858,920) (1,003,140) (3,675,540) (13,537,600) Capital gain 53,975,247 5,452,693 1,224,460 60,652,400 Less : Deduction allowed (53,975,247) - - (53,975,247) u/s 54B by Ld. AO Taxable capital gain Nil 5,452,693, 1,224,460 6,677,153 4. The AO noted from the charts giving details of sale and purchase of land and held that the assessee is eligible for deduction under section 54B of the Act to the extent of ₹ 5,39,75,347/- but the AO held that the assessee’s claim of balance amount is short term capital gains and not long term capital gains. Accordingly, he treated the gain arising out of the sale and purchase of land as short term at ₹ 66,77,153/-. For this AO observed as under: - “……………….the chart giving details of sale and purchase and the lands which are eligible for deduction u/s 54B of the Act are also stated therein based on the date of purchase and duration of holding (more than 2years) and name on the 7/12 extract for the purpose of carrying out Agriculture is enclosed as Annexure A to this order. Accordingly, the Short Term Capital; Gain is worked out to ₹ 66,77,153/- ITAs No. 3981/Mum/2018 after allowing benefit of deduction under section 54B of the Act to the assessee. Penalty u/s 271(1)(c) is being initiated for furnishing inaccurate particulars pertaining to holding of land and treating it as a Rural Agricultural land being a non-capital asset as per the provisions of section 54B of the Act.
………….”
5. Aggrieved, assessee came in appeal before CIT(A). The CIT(A) apart from dismissing the claim of assessee’s claim of long term capital gain, also made enhancement of income by disallowing deduction under section 54B of the Act, by not considering the land as agricultural land by observing in Para 9.9 & 9.10 as under: - “9.9 Considering these facts, vide order sheet noting dated 22.01.2018, the Ld. AR was requested to justify the claim of agricultural land by furnishing proof of cultivation, purchase of seeds, pesticides, harrowing, irrigation, harvesting, thrashing, marketing along with name and addresses of persons who have cultivated these lands during the period. In compliance to above, vide order sheet noting dated 31.01.2018, it is stated that matter being quite old, therefore, details as called for are not available, hence cannot be produced for verification. It is further contended that the agricultural produces were not sold in the ITAs No. 3981/Mum/2018 market as the same were consumed for household use, hence proof of sales are also not available. Keeping in mind the various factors such as holding periods, selling these lands / plots to builders I developers, at very high value, not declaring any agricultural income, in the returns of income filed with the department, number of plots purchased and sold coupled with the intention to harvest maximum profit, etc., in my considered opinion the appellant is not eligible for claim of exemption of Rs. 5,39,75,247/- uls 54B of the Act and accordingly the income to this extent is hereby enhanced & the penalty proceeding u/s 271(1)(e) r.w.s. 274 of the Act, is issued separately for filing inaccurate particulars of income.
9.10 It is further held that the balance amount of Rs. 66,77,153/-, as taxed by the AO as STCG, is also sustained, for the reasons discussed herein above. Ground No. 2, raised as above is dismissed.”
Aggrieved assessee came in appeal before Tribunal on this issue.
6. Before us, the learned Counsel for the assessee stated the fact that the assessee had purchase 5 pieces of agricultural land in the month of April, 2011 to February, 2012 for a total consideration of ₹ 1,15,87,600/-. The assessee sold these lands to Mr. Jitendra Aggarwal, ITAs No. 3981/Mum/2018 Lodha Developers and Kishore Gaikwad, all non-agriculturists, in the month of July and September, 2013 for a total consideration of 7.50 crores. He argued that only premises of the CIT(A) for disallowing the deduction under section 54B of the Act was that assessee has not cultivated the said land. The learned Counsel for the assessee produced certificate from Revenue authorities and he particularly referred to page 3 of the assessee’s paper book, wherein translated copies of Revenue authority certificates were attached and the same are reproduced as under: - “certificate This is to certify that Shri. Saifullah Abdullah Khan having his permanent residential address at Jalgaon, village jalgaon (jamod, Taluka= Jalgaon (Jamod), Dist-Buldhana (Maharashtra) and he is having land at Mauje-Khelkhasa Bu, Shivarat Gat No 18. He is an agriculturist.
For this purpose, certificated is issued.
Date : 15/12/2006 Place: Jalgaon, Jamod Tahsildar, Jalgaon (Ja.).”
7. The learned Counsel for the assessee produced copies of 7 /12 certificates issued by villate-Talathi, Kalyan, Dist- Thane, wherein land was demarcated as cultivated land and he filed these details in assessee’s paper book at pages 4 to 18 pertaining to the relevant AY 2012-13, 2011-12. The 7/12 extracts clearly show that the crop grown in this land is rice and cultivators name is that of Mr. Saifullah Abdullah ITAs No. 3981/Mum/2018 Khan, the assessee. It was contended by the learned Counsel for the assessee that the assessee has employed one Ravindra Ramdas Gondhle as supervisor for taking care of assessee’s agricultural fields and therefore he was looking after the entire agricultural operations in various fields bearing survey No. 139/3C, 39/5A, 29/1A/1, 29/2, 29/3, 29/4, 30/4 and 29/1B/2 of village Khoni, Taluka Kalyan, Dist. Thane. It was claimed by the assessee that agricultural land holding is there but there is no agricultural income. The learned Counsel for the assessee filed the following documents before CIT(A) and even now before us in assessee’s paper book.
“1. Copy of Index-2 of village Khoni which shows that on 06.04.2011, the rural agricultural land survey Nos. 139/3C and 39/5A was purchased by Saifullah Abdullah Khan.
Copy of Index-2 of village khoni which shows that on 22.07.2013 the rural agricultural land Survey Number 139/3C sold to Jitender Nilmani Agarwal.
3. Copy of proof of advanced amount which was received from Jitender Nilmani Agarwal before registered sale deed dated 22.07.2013.
Copy of Index-2 of village khoni which shows that on 22.07.2013 the rural agricultural land Survey Number 39/5A was sold to Lodha ITAs No. 3981/Mum/2018
5. Copies of certificates dated 15.12.2006 and 31.03.2010 issued by Tehsildar of Jalgaon Jamod, dist- Buidhana which shows that the appellant Saifullah Abduflah Khan is an agriculturist by profession.
Copy of 7/12 extract which shows that Jitender Nilmani Agarwal was agriculturist when he had purchased the rural agricultural lands bearing survey numbers 139/3C, 29/1A/1, 29/2, 29/3, 29/4, 30/4, 29/113/2 of village khoni.
Copy of 7/12 extract which shows that MIS Lodha dwellers Pvt. Ltd was agriculturist when he had purchased the rural agricultural lands bearing Survey No. 39/5A of village Khoni.
Copy of 7/12 extract of rural agricultural land bearing survey number 139/3C of village khoni which shows growing of crop during 2011- 2012.
9. Copy of 7/12 extract of rural agricultural land bearing survey number 139/3C of village khoni which shows growing of crop during 2012- 2013. 10. Copy of Gaon Namuna-g extract of rural agricultural land bearing survey number 139/3C of village khoni which shows that the Land- Revenue-Tax was paid for the year 2011-12. ITAs No. 3981/Mum/2018
Copy of Gagn Namuna-9 extract of rural agricultural land bearing survey number 139/3C of village khoni which shows that the Land- Revenue-Tax was paid for the year 2012-13.
Copy of Gaon Namuna-SA extract of rural agricultural land bearing survey number 139/3C of village khoni for the year 2011-12. 13. copy of Gaon Nmuna-8A extract of rural agricultural land bearing survey number 139/3C of village khoni for the year 2012-13. 14. copy of 7/12 extract of rural agricultural land bearing survey number 39/5A of village khoni which shows growing of crop during 2011- 12. 15. copy of 7/12 extract of rural agricultural land bearing survey number 39/5A of village khoni which shows growing of crop during 2012- 13. 16. copy of Gaon Namuna-9 extract of rural agricultural land bearing survey number 39/5A of village khoni which shows that the land revenue tax was paid for the year 2011-12. 17. copy of Gaon Namuna -9 extract of rural agricultural land bearing survey number 39/5A of village khoni which shows that the land revenue tax was paid for the year 2012-13. ITAs No. 3981/Mum/2018
copy of Gaon Namuna -8A extract of rural agricultural land bearing survey number 39/5A of village khoni for the year 2011-12.
Copy Gaon Namuna-8A extract of rural agricultural land bearing survey 39/5A of village khoni for the year 2012-13.”
8. In view of the above, the learned Counsel for the assessee stated that the disclosure of land is sufficient to claim the land as agricultural land and it is sufficient in compliance to claim deduction under section 54B of the Act. We find from the facts of the case and documentary evidences filed before us regarding cultivation of the above land, which is used for agricultural purposes. It is also a fact that the assessee is reinvested the sale proceed within two years in purchase of agricultural land, which is not in dispute. The assessee has invested a sum of ₹ 5,82,14,780/- in purchase of this agricultural land. The assessee before AO and CIT(A) categorically stated that proceeds of above sale of land was received by cheques and this transaction is already recorded in the registered sale deed dated 22.07.2013 and sale made to Jitendra Agarwal. The assessee admitted that vide sale deed registered dated 22.07.2013, the assessee has sold total agricultural land of 15,670 of village Khoni, out of this land only 4,000 sq. mtr. of land i.e. survey no. 139/3C is capital asset but remaining 11,670 sq. mtr. vide survey no. 29 and 30 is agricultural land which is located beyond 8 kilometers from Kalyan Dombivali Municipal Corporation Ltd. and hence, agricultural land. Similarly, the agricultural land survey No. 39/5A of Khoni village was purchased by assessee on 06.04.2011 and sold the same after two years on 22.07.2013 to Lodha Developers for 1 crores. The assessee purchased agricultural land in Raigarh District and reinvested this ITAs No. 3981/Mum/2018 proceeds. Even the land sold to Kishore Gaikwad on 11.09.2013 the rural agricultural land bearing survey no. 105/1 and 106/1 belongs to village Narhen, Taluka Ambarnath and sold for a sum of ₹ 50 lacs and this land is beyond 16 kms from Municipal Limits of Ambarnath. These facts are already verified by the CIT(A) and only premise of the CIT(A) for enhancing the income by disallowing the claim of deduction under section 54B of the Act is that these lands are not agricultural land. But the entire facts states otherwise. But assessee admitted before the CIT(A) and even now before us, that there is no surplus left which can be declared as agricultural income because the entire agricultural income is consumed by assessee or the cultivator.
The learned Counsel for the relied on the decision of Hon’ble Bombay High Court in the case of CIT vs. Smt. Debbie Alemao (2011) 331 ITR 59 (Bom.) and the same read as under: - “4. The learned Counsel for the appellant submitted that the said land had non-agricultural potential when it was purchased by the respondents. She submitted the very fact that the respondents sold the said land within two years of its purchase to a purchaser for construction of a beach resort showed that the respondents had purchased the property with an intention of selling it for a non-agricultural use. The huge difference in the price nearly 10 times the purchase price would indicate that the land was purchased with an eye on the non- agricultural potential. The learned Counsel for the appellant, therefore, submitted that the said ITAs No. 3981/Mum/2018 land was not an agricultural land. The learned Counsel for the appellant also invited our attention to the fact that the Respondents had not shown any agricultural income during the period of two years from the date of the purchase till the date of the sale, arising out of the said land. This also showed that the land was not an agricultural land. The Counsel for the appellant submitted that the Commissioner of Income-tax (Appeals) as well as the ITAT committed a gross error, bordering on perversity, in holding that the said land was an agricultural land. Ordinarily, the question whether a land is an agricultural land and a non- agricultural land is a question of fact and the finding on the question of fact recorded by the ITAT is final.
Under section 260A of the Income-tax Act, it is not open to the High Court to interfere in the finding of the fact. The finding of fact that could be interfered only if it was arrived at by application of wrong principles of law or was perverse, i.e., to say that no prudent man versed in law would come to the said finding. In our view, the finding is neither perverse nor is it arrived at by wrong application of any principle of law and it is not open for us to interfere in the possible finding of fact in an appeal under ITAs No. 3981/Mum/2018 section 260A of the Income-tax Act. The Assessing Officer has noted that the said land was entered in the revenue record as an agricultural land, i.e., garden or orchard. The ITAT also held that the land was recorded in the revenue records as an agricultural land. This is not disputed by the revenue. It is however contended that the land was not actually used for agriculture inasmuch as no agricultural income was derived from this land and was not shown by the respondents in their Income-tax return. This was explained by the respondents by saying that there were coconut trees in the land but the agricultural income derived by sale of the coconuts was just enough to maintain the land and there was no actual surplus. Hence, no agricultural income was shown from this land. In our opinion, if an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not used for the agricultural purpose. It is not disputed that the land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for non-agricultural use by the respondents. Section 30 of the Goa, Daman and Diu Land Revenue Code, 1968 provides that no land used for agriculture shall be used for any non-agricultural purpose and no land assessed for one non-agricultural purpose shall ITAs No. 3981/Mum/2018 be used for any other non-agricultural purpose except with the permission of the Collector. Section 32 of the Goa, Daman and Diu Land Revenue Code prescribes the procedure for conversion of use of land from one purpose to another including conversion from agricultural purpose to non-agricultural purpose. The permission for non-agricultural use was obtained for the first time by the Varca Holiday Beach Resort Private Limited the purchaser after it purchased the land. Thus, the finding recorded by the two authorities below that the land was used for the purpose of agriculture is based on appreciation of evidence and by application of correct principles of law. The Tribunal has relied upon two unreported decisions of this Court in CIT v. Minguel Chandra Pais/Smt. Maria Leila Tovar Furtado [2006] 282 ITR 6181 which involved identical issue. In those appeals, this Court has upheld the order of the Tribunal holding that the land was agricultural land and its sale did not invite the payment of capital gain. It is not disputed before us that the facts of the said cases were similar to the facts of the present case. We are bound by the decision in those cases.”