2022 (1) TMI 144 - AT - Income Tax

Exemption claimed u/s 54B - decision of the A.O. to treat the Agriculture Land as Non Agriculture - Capital Gain on sale of agriculture land - HELD THAT - We find that the assessee in the sale deed of said land mentioned the nature of land as agricultural land. The assessee also placed on record the copy of Form-8, wherein the user of land is clearly written in Gujarati language as Kethi LayakUpagyog i.e. agricultural purpose . In the valuation report, the property is shown as agricultural land. Though, in specification of property, the surrounding factors are mentioned. We find that before the AO as well as CIT(A), the assessee categorically stated that land is situated on the bank of river Mindhola, which area is affected by very high salinity and regular crop of sugarcane or other trees are not possible. The assessee used the land for cultivatation and growing of Grass which is not affected by floods. We find that in the documentary evidences furnished by the assessee the nature of land is clearly mentioned as agriculture use. AO has not made any investigation on the assertion of assessee. AO presumed that growing of grass is not agriculture activities. We noted that the AO arrived on conclusion on the basis of his presumption that Grass is not agriculture product. AO has not brought any adverse evidence to counter the evidence furnished by the assessee. The best evidence available before the AO was Form- 7 8 extract, wherein the nature of land is mentioned as agriculture land. Mere fact that the assessee has not shown agriculture income from the piece of land would not change its character. In our view, in absence of any adverse material, the presumption of AO that no income is shown from the sale of Ghass is not justified. Hence, the ground of appeal raised by the assessee is allowed.

Summary

Issues:
1. Whether the land sold by the assessee qualifies for exemption under section 54B of the Income Tax Act.
2. Whether the lower authorities were justified in denying the exemption claimed by the assessee on the grounds of the land not being used for agricultural activities.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) upholding the decision of the Assessing Officer (AO) to treat the agricultural land as non-agricultural, thus denying the exemption claimed under section 54B of the Act. The AO observed that the land was not utilized for agricultural activities based on the crop shown in the 7/12 extract as "Ghass." The AO issued a show cause notice to the assessee regarding the exemption claimed. The assessee provided evidence to support the agricultural nature of the land, including Form-8 and 7/12 extracts, but the AO denied the exemption.

2. The CIT(A) upheld the AO's decision, emphasizing that the primary evidence for determining agricultural use is the land revenue record extract or Form 7/12. The CIT(A) agreed with the AO's presumption that the growth of "Ghass" could be spontaneous, as the assessee failed to rebut this presumption. The assessee then appealed, arguing that the land was situated in a remote area affected by high salinity, making it unsuitable for traditional crops like sugarcane or fruits. The assessee cultivated grass for cattle feed, supported by documentary evidence and the sale deed mentioning the land as agricultural.

3. The Tribunal considered the documentary evidence provided by the assessee, including the Form-8, sale deed, and valuation report, all indicating agricultural use. The Tribunal noted the unique circumstances of the land, affected by salinity, where traditional crops were not viable. The AO's presumption that growing grass did not constitute agricultural activity was unfounded, as no adverse evidence was presented. The Tribunal found that the land qualified as agricultural, and the assessee's appeal was allowed, overturning the lower authorities' decision to deny the exemption.

In conclusion, the Tribunal allowed the appeal, emphasizing that the evidence presented by the assessee established the agricultural nature of the land, despite the absence of agricultural income in the preceding years. The Tribunal found the AO's presumption unfounded and ruled in favor of the assessee, granting the exemption under section 54B of the Income Tax Act.