2021 (9) TMI 1564 - SCH - Income Tax

Gain on Sale of land - nature of land - agricultural land u/s 2(14)(iii) or Capital asset - As decided by HC 2018 (12) TMI 216 - MADRAS HIGH COURT no materials have been produced by the assessee for the period between 1998 and 2006 to show that he was carrying on agricultural activities in the land at any point of time except producing Chitta and Adangal for the year 2005. Since relevant columns in the Adangal with regard to crop and extent are left blank, it would not be proper to record a finding on those documents and they have to be discarded HELD THAT - There is justification in the submission which has been urged on behalf of the Union of India that by its very nature, it would not be appropriate for this Court to look into the documents which have been produced in the application for permission to file additional documents, particularly in the absence of the High Court having carried out the exercise. It would be unsafe for this court to rely on material which has been produced for the first time in the present proceedings, without the genuineness and authenticity of the documents being tested earlier. This aspect of the submissions of the ASG has weighed with this court. At the same time, the manner in which the case appears to have proceeded before the High Court creates a sense of disquiet. Was the appeal by the Revenue initially dismissed ? If so why was the appeal listed again before the Division Bench ? Was the original order recalled by the High Court after apprising parties and their counsel ? Were any reasons for recall recorded ? While we have flagged these issues, we are not venturing into the exercise of finding answers, on the state of the record as it stands the better course being to remand the proceedings for hearing before another Bench of the High Court. In the above conspectus of facts, and particularly having regard to the checkered history of the appeal which we have referred to above, we are of the view that the appropriate course of action would be to set aside the judgment of the High Court and to remand the proceedings for disposal afresh. We are inclined to pass an order of remand since it appears that the High Court while exercising its jurisdiction in an appeal under Section 260A reversed the view of the Tribunal on the basis of an evidently cursory view which appears in paragraph 15 of the impugned order extracted above. Thus, without this Court expressing any opinion on the merits of the appeal filed by the revenue against the order of the Income Tax Appellate Tribunal, we allow the appeal and, in consequence, restore Tax Case (Appeal) to the file of the High Court of Judicature at Madras for disposal afresh. All the rights and contentions of the parties are specifically kept open to be addressed before and decided by the High Court.

Summary

Issues:
- Assessment of capital gains tax on land sale
- Interpretation of definition of agricultural land under Income Tax Act
- Judicial review of High Court's decision on tax appeal

Analysis:

Issue 1: Assessment of capital gains tax on land sale
The appellant filed a return of income for Assessment Year 2007-2008, declaring a total income. The assessing officer reopened the assessment due to undisclosed capital gains from the sale of land, treating it as non-agricultural. The Commissioner of Income Tax (Appeals) upheld this assessment. The Tribunal, however, allowed the appeal, emphasizing that the land sold was agricultural based on specific evidence provided by the assessee. The High Court, in its initial judgment, set aside the Tribunal's decision, questioning the lack of evidence of agricultural activities on the land between 1998 and 2006. The High Court found discrepancies in the Adangal entries and concluded that no genuine agriculturist would purchase the land at the price indicated.

Issue 2: Interpretation of definition of agricultural land under Income Tax Act
The key contention revolved around whether the land sold qualified as agricultural land under Section 2(14)(iii) of the Income Tax Act. The Tribunal considered various factors and substantial evidence provided by the assessee to support the agricultural nature of the land, ultimately ruling in favor of exemption from capital gains tax. However, the High Court disagreed, focusing on the blank entries in the Adangal and the absence of evidence of agricultural activities during the relevant period. The appellant sought to introduce additional documents to prove agricultural use, but the authenticity and genuineness of these documents were questioned.

Issue 3: Judicial review of High Court's decision on tax appeal
The Supreme Court, after considering the arguments presented, expressed concerns about the High Court's handling of the case. Questions were raised about the dismissal and subsequent listing of the appeal, as well as the reasoning behind reversing the Tribunal's decision. The Supreme Court decided to remand the case back to the High Court for fresh disposal, highlighting the need for a more thorough examination of the evidence and a proper adjudication of the matter. The Supreme Court refrained from expressing any opinion on the merits of the appeal, emphasizing the importance of a fair and comprehensive review by the High Court.

This detailed analysis encapsulates the intricate legal proceedings and the critical issues addressed in the judgment, providing a comprehensive overview of the case.