2020 (11) TMI 177 - AT - Income Tax

Rectification of mistake u/s 254 - whether the profit from sale of agricultural land was to be treated as business income or income from capital gain? - HELD THAT - While the assessee claimed that the income derived from sale of agricultural land is exempt from being taxed under the head capital gain, the Assessing Officer held that it is to be treated as income from business or profession. Tribunal while deciding the issue in appeal has taken note of the factual matrix as well as the submissions made and has concluded that the nature of land sold being agricultural land, the income derived from the sale of such land cannot be treated as income from business or profession as the land sold is not a business asset. In the present misc. application, the Revenue is basically challenging the aforesaid reasoning of the Tribunal. Revenue in the guise of rectification, in reality, wants review of the appeal order. This, in our view, is not within the ambit of section 254(2) of the Act which is meant only for rectifying mistakes which are apparent on the face of record. Since, the appeal order, prima facie, does not reveal any mistake apparent on the face of record, we are unable to entertain the present application filed by the Revenue - MA dismissed.

Summary

Issues:
1. Recall/rectification of order under section 254(2) of the Income Tax Act, 1961.
2. Treatment of profit from sale of agricultural land as business income or income from capital gain.

Analysis:
The judgment concerns an application filed by the Revenue seeking recall/rectification of an order dated 2nd January 2019, passed in an appeal regarding the treatment of profit from the sale of agricultural land. The Departmental Representative argued that the Tribunal overlooked the fact that no agricultural activity was conducted on the land in question. However, the Counsel for the assessee contended that the Revenue was attempting to review the order, which is not permissible under section 254(2) of the Act.

Upon considering the submissions and the material on record, the Tribunal identified the key issue in the appeal as determining whether the income from the sale of agricultural land should be treated as business income or income from capital gain. The assessee claimed the income was exempt from taxation under capital gains, while the Assessing Officer treated it as income from business or profession. The Tribunal, after examining the facts and submissions, concluded that since the land sold was agricultural and not a business asset, the income derived could not be classified as business income. The Revenue's application was seen as an attempt to challenge the Tribunal's reasoning, which the Tribunal deemed as seeking a review of the appeal order rather than rectification of a mistake apparent on the face of the record.

The Tribunal held that the application did not reveal any such mistake and, therefore, could not be entertained under section 254(2) of the Act. Consequently, the application for recall/rectification was dismissed. The judgment was pronounced in open court on 4th November 2020.