2019 (11) TMI 1043 - AT - Income Tax

Revision u/s 263 - as per CIT AO while granting exemption u/s 10(37) failed to notice that the land acquired compulsorily was not situated in an area referred to in Item (a) or item (b) of sub clause (iii) of clause (14) of section 2 but situated within the limits of Trivandrum Municipal Corporation, and hence, capital gain could not be exempted u/s 10(37) - HELD THAT - The land in question is classified as Purayidam in Thandeperu Register of the Revenue records. It doesn't mean that agricultural operation could not be carried out in the said land. The Agriculture Officer and the Spl. Tahsildar (L.A) had certified the presence of agricultural plantation in the land. AO, in the course of assessment proceedings, had conducted enquiries which is possible at that point of time in order to find out the utilisation of the land for agriculture purpose for two years immediately preceding the date of transfer and found that the land was used for agriculture purpose till it was acquired in 2007. Moreover the land acquired was a small piece of land. It formed part of 15.35 ares (about42 cents) of land owned by the assessee in sy.no. 186/7. Jurisdiction for setting aside the order of the AO by invoking revisionary power u/s 263 of the Act could not be assumed by the Commissioner of Income-tax (CIT) in this case. This is because the issues considered by the CIT for directing to conduct further inquiries in this respect were subject matter of inquiry by the AO and the AO had accepted the assessee s contentions and formed a possible view in light of the facts of the case. The Tribunal in the case of K Rajendran Vs ITO Ward 2017 (7) TMI 1337 - ITAT COCHIN had held on the basis of certificate of Agriculture Officer that 4.4 ares of land acquired for Trivandrum air port was agriculture land in which agriculture operation was carried out till the date of acquisition and, therefore, the capital gains arising from the transfer was exempt u/s 10(37) of the Act. Further, in the case of ITO, Ward 2(1) Tvm v. G.S.Lekha 2019 (4) TMI 1783 - ITAT COCHIN Cochin Bench of the Tribunal (order dated 29.03.2019), on identical facts, held that assessee was entitled to deduction u/s 10(37) of the I.T.Act. Order of the CIT passed u/s 263 of the I.T.Act is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the revision order under Section 263 of the Income Tax Act.
3. Assessment of the agricultural nature of the land and eligibility for exemption under Section 10(37) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Delay in filing the appeal:
The assessee filed an appeal with a delay of 1351 days. The delay was attributed to a misunderstanding by the assessee and his Chartered Accountant (CA) regarding the necessity to file an appeal against the revision order under Section 263, rather than the assessment order giving effect to it. The Tribunal referred to a similar case (Dr. Damodar Rout v. CIT) where the High Court of Kerala condoned the delay under similar circumstances. Given the affidavits from the assessee and his CA, and the precedent, the Tribunal condoned the delay and proceeded to hear the appeal on merits.

2. Validity of the revision order under Section 263 of the Income Tax Act:
The CIT issued a notice under Section 263, stating that the AO failed to notice that the land was not situated in an area referred to in Item (a) or (b) of sub-clause (iii) of clause (14) of Section 2 of the Act. The CIT also noted that the land was within the Trivandrum Municipal Corporation limits and questioned the agricultural status of the land. The Tribunal found that the AO had conducted local inquiries and relied on a certificate from the Agricultural Officer, which confirmed the agricultural nature of the land. The Tribunal held that the CIT’s order under Section 263 was not justified as the AO had already investigated the matter and formed a possible view. The Tribunal set aside the CIT’s revision order.

3. Assessment of the agricultural nature of the land and eligibility for exemption under Section 10(37) of the Income Tax Act:
The assessee claimed that the land, compulsorily acquired by the government, was agricultural and thus exempt under Section 10(37). The AO had accepted this claim based on local inquiries and a certificate from the Agricultural Officer. The CIT, however, questioned this conclusion, citing discrepancies in the land classification on the official website and the absence of detailed agricultural activity records. The Tribunal found that the presence of agricultural produce like coconut and areca nut trees, as certified by the Agricultural Officer and the Special Tahsildar, substantiated the agricultural use of the land. The Tribunal emphasized that the AO’s inquiries and findings were sufficient and that the CIT’s revisionary jurisdiction under Section 263 was not warranted. The Tribunal upheld the AO’s original assessment granting the exemption under Section 10(37).

Separate Judgment for ITA No.464/Coch/2019:
This appeal was filed with a delay of 215 days, which the Tribunal condoned, finding sufficient cause for the delay. The appeal arose from a consequential assessment order following the Section 263 revision order. Since the Tribunal had already set aside the Section 263 order, the consequential assessment order lost its basis and was dismissed as infructuous.

Conclusion:
The appeal in ITA No.116/Coch/2019 was allowed, setting aside the CIT’s revision order under Section 263. The appeal in ITA No.464/Coch/2019 was dismissed as infructuous following the decision on ITA No.116/Coch/2019.