2018 (12) TMI 216 - HC - Income Tax

Gain on Sale of land - nature of land sold - agricultural land u/s 2(14)(iii) OR Capital asset - HELD THAT - 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. It is an undisputed fact that no genuine agriculturist would purchase a land ₹ 2,50,00,000/- per acre. In our considered opinion, the factors 2, 7, 8 and 13 evolved by the Gujarat High Court in SIDDHARTH J. DESAI 1981 (9) TMI 48 - GUJARAT HIGH COURT are relevant factors to be taken into consideration for deciding the nature of the land. However, the appellate Tribunal overlooking the above material factors and on the basis of Chitta and Adangal,granted exemption of payment of capital gain. Hence, this is the case of finding on no evidence and it is perverse. As contended by the assessee that the entire extent of 301 cents does not belong to him. It is evident from the records produced by the assessee that the entire sale consideration was ₹ 15,30,00,000/- and the share of the assessee was ₹ 8,61,41,416/-. - Decided in favour of the Revenue

Summary

Issues Involved:

1. Whether the land sold by the assessee qualifies as "agricultural land" under section 2(14)(iii) of the Income Tax Act, thus exempting it from capital gains tax.
2. Whether the High Court can interfere with the findings of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Qualification of Land as Agricultural Land:

The primary issue was whether the land sold by the assessee was agricultural land, which would exempt it from capital gains tax under section 2(14)(iii) of the Income Tax Act. The assessee claimed exemption based on documents such as Chitta and Adangal, which indicated agricultural activity. However, the Revenue argued that these documents were insufficient as they did not show any agricultural income in the assessee's tax returns, nor did they specify the crops or extent of cultivation. The Assessing Officer and the Commissioner of Income Tax concluded that the land was not agricultural, as no agricultural activities were conducted, and the documents provided were not credible. The court noted that the burden of proof lies with the assessee to establish the land's agricultural nature. The court referenced the Supreme Court's decision in Sarifabibi Mohmed Ibrahim & Others Vs. Commissioner of Income Tax, which outlined factors to consider in determining the nature of land, emphasizing that mere classification as agricultural in revenue records is not conclusive. The court found that the assessee failed to provide evidence of agricultural activity from 1998 to 2006, and the high sale price suggested non-agricultural intent. Consequently, the court held that the land did not qualify as agricultural land, and the exemption was unjustified.

2. High Court's Jurisdiction under Section 260A:

The second issue was whether the High Court could interfere with the factual findings of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act. The court clarified that it could intervene if the Tribunal's findings were based on "no evidence" or if there was a misreading or non-consideration of material evidence, rendering the findings perverse. The court found that the Tribunal had overlooked significant factors, such as the absence of evidence of agricultural activity and the high sale price, which were crucial in determining the nature of the land. The Tribunal's decision was deemed perverse as it was based on insufficient evidence. The court concluded that it was within its jurisdiction to set aside the Tribunal's order due to these errors in judgment.

Conclusion:

The High Court set aside the order of the Income Tax Appellate Tribunal, ruling in favor of the Revenue. The court determined that the land did not qualify as agricultural land under section 2(14)(iii) of the Income Tax Act, and thus, the capital gains tax exemption claimed by the assessee was not applicable. The court emphasized the importance of substantial evidence in establishing the agricultural nature of land and clarified the scope of its jurisdiction under section 260A to correct perverse findings by the Tribunal.