1981 (9) TMI 185 - AT - Income Tax

Agricultural Land, Assessment Proceedings, Capital Asset, Capital Gains, Compulsory Acquisition, Failure To Disclose, Full Bench, High Court, Reassessment Proceedings, Supreme Court

Issues Involved:

1. Validity of proceedings initiated under section 147(a) of the Income-tax Act, 1961.
2. Determination of whether the land in question was agricultural land.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Under Section 147(a):

The department contended that the Commissioner (Appeals) erred in holding that the Income Tax Officer (ITO) had no reasonable belief that income had escaped assessment when initiating proceedings under section 147(a) for the assessment year 1965-66. The ITO initiated these proceedings based on the belief that the land in question was not agricultural and thus capital gains from its acquisition by the government were chargeable to income-tax. The ITO's reasons for this belief were recorded on 17-3-1973, including the fact that the assessee had filed a return disclosing interest income on belated compensation, which was treated as invalid due to late filing.

The assessee argued that the ITO's belief was not based on good faith but was merely a pretence based on suspicion, citing the Full Bench decision of the Andhra Pradesh High Court in the case of Officer-in-Charge (Court of Wards) v. CWT, which was binding at the time. The Commissioner (Appeals) agreed, stating that the ITO could not have reasonably believed that income had escaped assessment under the prevailing legal interpretation.

The departmental representative argued that the decision of the Andhra Pradesh High Court was not accepted by the department and was pending appeal before the Supreme Court, which later set aside the High Court's decision. However, the Commissioner (Appeals) and the Tribunal held that the ITO's belief must be judged based on the law at the time of initiating proceedings. The Tribunal upheld the Commissioner (Appeals)'s finding, stating that the subsequent Supreme Court decision could not retrospectively validate the ITO's action if it was invalid at the time of initiation.

2. Determination of Agricultural Land:

The second contention was whether the land in question was agricultural, despite no agricultural operations being conducted thereon. The Commissioner (Appeals) considered several factors supporting the assessee's claim that the land was agricultural:

- The land was acquired by purchase from an individual who obtained permission from the Collector under the Prevention of Agricultural Land Alienation Act.
- The vendor paid land revenue for the land, and the land was used for raising grass and other products.
- Receipts for land revenue and Pahani Patrikas (land records) indicated that the land was agricultural.
- The burden of proof was on the revenue to show that the land was non-agricultural, which it failed to do.

The Commissioner (Appeals) applied the tests laid down by the Supreme Court in CWT v. Officer-in-Charge, concluding that the land was agricultural based on its use, the nature of the products grown, and the surrounding circumstances. The Tribunal agreed, noting that the revenue had not provided sufficient evidence to rebut the assessee's claim. The Tribunal emphasized that the cumulative effect of all circumstances should be considered, and in this case, the preponderance of probability favored treating the land as agricultural.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the Commissioner (Appeals)'s findings on both issues. The proceedings under section 147(a) were deemed invalid, and the land in question was determined to be agricultural.

← Previous Next →