NIHAL SURESH HARCHANDRAI,MUMBAI vs. ASST CIT CIR 14(1)(3), MUMBAI

Before us, the Ld. Counsel for the assessee submitted that the Ld. CIT(A) has wrongly upheld the erroneous order passed by the A.O. The Ld. Counsel further submitted that the assessee along with his co-owners sold his share in the land situated in Taluka Alibaug, Distt. Raigarh bearing GAT No. 929 of village Dhokawade admeasuring 1-96-4 hectares equivalent to 169.4 gunthas equivalent to 16,940 sq. meters on 09th August, 2009 for a total consideration of Rs. 4,21,00,000/-. The assessee did not offer any capital gain on the sale of the land because at the time of sale the land was an ‘agricultural land’ within meaning of section 2(14)(iii) of the Act. That as per certificate issued by Sarpanch Gram Panchayat Dhokawade the land in question is at the distance of 16 KM from Alibaug Nagarpalika and the population of the said village in the year 2009 was 3,086 persons. The land was recorded as agricultural land in the records of rights maintained by the department of revenue and was subject to payment of land revenue. The said land was never put to any non- agricultural use by the assessee and that the assessee carried on agricultural activities on said land viz. planting of saplings of Mango, Supari, Coconut, rice and vegetables. The Ld. counsel further submitted that since the findings of the AO are based on wrong assumptions and not based on the evidence on record, the Ld. CIT(A) ought to have set aside the same. Since, the Ld. CIT(A) has passed the impugned order without taking into consideration the documentary as well as circumstantial evidence placed on record, the same is liable to be set aside.

On the other hand the Ld. Departmental Representative (DR) relying on the concurrent findings of the authorities below submitted that enquiry conducted during assessment proceedings revealed that the land sold by the assessee and his co-owners was not an agricultural land but was a capital asset within the meaning of section 2(14) of the Act. Enquiry conducted by the ward inspector further established that purchaser of land Shri. Abhijit Bhandari has developed a Bangalow making substantial investment after getting the land converted into non-agricultural land with the approval of the land revenue. As per the latest 7/12 extract furnished by the office of the Talathi, Alibaug the land in question was never used for the agricultural purposes till the date of sale by the assessee and others. The Ld. DR further submitted that the Ld. CIT(A) has upheld the assessment order keeping in view the law laid down by the Hon’ble Supreme Court in Smt. Sarifabibi Mohmed Ibrahim vs. CIT (1993) 204 ITR 631 (SC), Hon’ble jurisdictional High court in Fazalbhoy Investment Co P Ltd. vs. CIT (1989) 176 ITR 523 (Bom) The Ld. DR further submitted that in the present case the purchaser has not purchased the said land for genuine agricultural operation as the sale price works out at Rs. 2.34 lacs per guntha i.e. 1000 sq. ft. and that Rs. 2.34 lacs per guntha cannot be the purchase price for an agricultural land. Since the land was never cultivated by the assessee and remained barren for more than twelve years the same had lost of its agricultural character. Hence, the Ld. CIT(A) has rightly upheld the findings of the A.O. and there is no further scope for interfere with the impugned order.

We have heard the rival submissions and also perused the material placed on record before us including the decisions relied upon by the parties in support of their contentions. The common issue involved in these case are at the time sale of the land in question whether the land was an agricultural land or the capital asset within the meaning of section 2(14) of the Act. The Ld. CIT(A) has upheld the findings of the A.O relying on the various judicial pronouncements in which it was held that a piece of land cannot be characterized as agricultural land merely because of entries in the revenue records to that effect. However, in the present case the assessee has claimed that agricultural activities such as planting of Mango trees, Supari trees, Coconut trees, cultivation of rice and vegetables etc. was carried on by the assessee as co-owner in possession of the land. The assessee has submitted the copies of 7/12 extracts to prove the classification of land as agricultural land, copies of receipts issued against the land revenue paid to prove that land in question was agricultural land and land revenue was paid accordingly from time to time, copies of affidavits sworn by Mr. Kesarinath Patil and Mr. Vijay Wakde, to establish that the land was used for agricultural purposes since it was acquired by the assessee and others and they used to carry out the agricultural activities in the said land and they were paid in cash or kind by the assessee. The assessee has placed on record the Bills and Vouchers to prove that seeds fertilizers pesticides and other materials required for carrying on agricultural activities to substantiate its claim. The assessee has also submitted the site plan to show the location of Ground Well, Bore Well, mango trees, coconut trees, supari trees, rice and vegetable cultivation etc. to establish that agricultural land was sold by the assessee.

On the other hand the Ld. CIT(A) has confirmed the findings of the AO mainly on the ground that the land was not used for agricultural purposes and was lying barren from the year 1996-97. The assessee has not shown any agricultural income in the income tax return. The purchaser agreed to pay hefty price of Rs. 421.00 lacs as against the stamp valuation for agricultural land of just Rs. 85.20 lacs and soon thereafter converted the land to non- agricultural purposes and developed a Bungalow making substantial investment of approx Rs. 1.50 crores, such prove the intentions of the purchaser to use the land for other purposes other than agricultural.

In Smt. Sarifabibi Mohmed Ibrahim vs. CIT (supra) the Hon’ble Supreme Court has upheld the decision of Hon’ble Gujarat High Court and held the land in question was not an agricultural land at the time of its sale and that the income arising from its sale was not exempt from the capital gain tax irrespective of the fact that the land was registered as agricultural land in the revenue record; the appellant made payment of land revenue till it was sold in the year 1969; that the land was actually cultivated till 1964-65. The Hon’ble Supreme court in the aforesaid case has further held that whether a land is an agricultural land or not is essentially a question of fact. The several tests evolved by the courts are more in the nature of guidelines. Therefore, the question has to be answered on consideration of all of them.

We find that the AO has decided the issue involved in this case without rebutting the direct and circumstantial evidence on record which is in favour of the assessee. No verification was conducted by the AO to falsify the documentary and circumstantial evidence placed on record by the assessee. Even the persons who carried out the agricultural activities at the instance of the assessee were not examined to controvert the contents of the affidavits sworn by them. Before us, the counsel for the assessee placed on the record the copy of application dated 23/03/2010 under sub-section (1) of section 44

Since, we have decided the first ground of appeal in favour of the assessee, ground no 2 has become academic. Hence, we do not consider it necessary to adjudicate the said ground.