2015 (3) TMI 565 - AT - Income Tax

Revision u/s 263 - unaccounted income from agricultural land - Held that - In this case the AO issued notice to the assessee under section 143(3) on 6.8.2009 and notice under section 142(1) notice on 27/7/2010. The assessee participated in the assessment proceedings. To various enquiries of the AO the assessee furnished information to the satisfaction of the AO specifically vide assessee s counsel dated 27/7/2010. The assessee furnished full details of income derived at ₹ 53,23,339/- from agricultural land located at Mondvane Village and it was stated to the AO that the said amount of ₹ 53,23,339/- received as compensation on acquisition of rights of use from the owner of the land was exempt in view of agricultural land under section 10(1) read with section 2(1A) and section 2(14) of the I.T. Act. After considering the reply of the assessee and material brought on record the AO came to the conclusion that the impugned receipt is not taxable and treated as exempt from tax. For this view of the AO, CIT cannot find fault and he cannot impose his view on AO when the AO has taken one possible view. More so, when a transfer of land in similar area was considered, by Co-ordinate Bench of this Tribunal in the case of ITO vs. Amrutilal B. Shah 2013 (12) TMI 1102 - ITAT MUMBAI wherein held that the definition of capital asset provided in section 2(14)(iii) is not met. There is no notification issued by the Central Government in this regard calling the same being a capital asset. Under these circumstances, the land in question is rightly held by the assessee as agricultural land. It is borne out from the records of the Revenue Department that the lands in question are described by the District Collector, Jamnagar as agricultural lands as evident from the extraction given above. As such, there is no incriminating material in the possession of the Assessing Officer to hold that the land in question is capital asset within the meaning of section 2(14) of the Act. Regarding the onus related issues, we find that the same keep changing depending on the information furnished by the assessee and also gathered by the Revenue from time to time. Thus we annul the order passed by ld. CIT u/s. 263 - Decided in favor of assessee.

Issues Involved:
1. Validity of invoking Section 263 of the Income Tax Act, 1961.
2. Classification of compensation received as agricultural income.
3. Determination of the nature of land and its use.
4. Examination of the authenticity of documents submitted by the assessee.
5. Assessment of capital gains tax liability.

Detailed Analysis:

1. Validity of Invoking Section 263 of the Income Tax Act, 1961:
The appeal questions the jurisdiction of the Commissioner of Income Tax (CIT) in invoking Section 263, which allows revision of orders prejudicial to the interests of the revenue. The CIT observed that the assessment order dated 19.11.2010 was erroneous and prejudicial to the interests of the revenue because the Assessing Officer (AO) accepted the compensation received by the assessee as agricultural income without proper verification. The CIT cited the Supreme Court's decision in Malabar Industries Co. Ltd. Vs. CIT, emphasizing that an order can be revised if it is erroneous and prejudicial to the interests of the revenue. The Tribunal held that the AO's order was not erroneous as it was based on one possible view, supported by the Tribunal's decision in ITO vs. Amrutilal B. Shah, and thus annulled the CIT's order under Section 263.

2. Classification of Compensation Received as Agricultural Income:
The assessee claimed compensation of Rs. 53,00,000 received from Reliance Gas Transportation Infrastructure Ltd. (RGTIL) as agricultural income, which was accepted by the AO. The CIT argued that the compensation was for the acquisition of the right of user in land for laying a pipeline, a non-agricultural purpose, and thus could not be classified as agricultural income. The Tribunal noted that the AO had considered the assessee's submissions and concluded that the receipt was not taxable, treating it as exempt from tax.

3. Determination of the Nature of Land and Its Use:
The CIT observed that the land described in the 7/12 extracts was not used for cultivation/agricultural purposes, as it was classified as 'Gairan' (land for cattle rearing) and 'Ranshet' (open land with weeds). The CIT also noted that the panchnamas provided by the assessee did not bear any official seal or stamp and were prepared after the pipeline work was completed, raising doubts about their authenticity. The Tribunal, however, found that the AO had considered these factors and accepted the assessee's claim based on the evidence provided.

4. Examination of the Authenticity of Documents Submitted by the Assessee:
The CIT questioned the authenticity of the panchnamas and receipts submitted by the assessee, noting the absence of official seals and the timing of their preparation. The CIT also pointed out that the assessee did not produce the order determining the compensation for land and trees. The Tribunal held that the AO had made sufficient inquiries and accepted the assessee's documents, and the CIT could not impose his view when the AO had taken one possible view.

5. Assessment of Capital Gains Tax Liability:
The CIT argued that the compensation received by the assessee was liable for tax on capital gains, as the acquisition of the right of user in land amounted to a transfer under Section 2(47)(ii) and (iii) of the Act. The CIT directed the AO to verify the situation of the land, the distance from municipal limits, and the authenticity of the documents, and to bifurcate the compensation amount towards agricultural produce and land. The Tribunal, however, found that the AO had already considered these factors and concluded that the receipt was not taxable.

Conclusion:
The Tribunal annulled the CIT's order under Section 263, holding that the AO's order was not erroneous or prejudicial to the interests of the revenue, as it was based on one possible view supported by evidence. The appeal of the assessee was allowed.

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