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2021 (10) TMI 695 - AT - Income TaxNature/character of lad sold - gain earned on transfer of agriculture land - whether said land did not fall within the definition of capital assets as defined u/s. 2(14)? - as per AO land was part of notification which was issued by the Forest authorities wherein the plantation etc. were prohibited - HELD THAT - As per Section 2(14) of the Act the land should not be situated in the area as mentioned therein. Admittedly, the land does not fall within any of the area as mentioned in Section 2(14). In the opinion of the Authorities below the basic agricultural operations were not carried out and no such activity was permissible. It was stated by the Assessing Officer that the land being Gair Mumkin Pahar i.e. banjar land, no agricultural operations could be carried out and permitted by law. Notification No. S.O.46/P.A.-2/1900/S.5/70 dated 11.02.1970 reveals that it was in force for 25 years w.e.f. 11.12.1970 hence, the period of its operation came to an end way back in the year 1995. No. other notification is brought to our notice by the Revenue. Hence, reliance made by the AO on this notification is not justified, coupled with the fact that land notified in that Circular did not include the land under dispute. AO observed that the sale receipts for the sale of agricultural produce were nothing but an arrangement to make a false claim that land was an agricultural land - no evidence is placed on record to substantiate this observation. Undisputedly, no material is placed before us except the statement of one Shri Hemant Chauhan stating that no agricultural activity was carried out by him. It is pointed by the Ld. Senior Counsel for the assessee that statement of Shri Hemant Chauhan pertains to earlier assessment year which is not relevant for the present proceedings. We at this juncture cannot set the clock back and find out by making on spot inspection whether agricultural activity is being carried out or not. We have no option but to adjudicate the issue purely on the basis of material placed before us by the parties. It is observed from the record that the Assessing Officer has grossly failed to verify the veracity of claim of the assessee by making on the spot inquiry. In the case in hand, admittedly it has been recorded by the Revenue official that certain crop was grown by the assessee. The assessee has also placed on record, certain evidences proving the sale of agricultural produces. These two evidences proved that prior to transfer of the land in question was being used for the agricultural purposes. Revenue could not rebut the evidences filed by the assessee. The only basis of non-acceptance of the assessee's plea was that the land was part of notification which was issued by the Forest authorities wherein the plantation etc. were prohibited. As discussed above that the said notification remained in force till the year 1995 - assessee pointed out that the land in question was not part of 1970 notification. This contention is not rebutted by the Revenue. Revenue has not brought any other notification to our notice which has superseded the 1920 notification by further extending the period. AO did not make any enquiry from the Village as well as from other land owners of the surrounding areas. Nothing is placed on record to prove the fact that entry recorded in the Revenue records related to the land was cancelled by the Competent Authority. Further, the Assessing Officer has not brought any material on record suggesting that no agricultural operation was possible on the land in dispute. Assessee has furnished documents in the form of photographs, electricity connection and proof of sale of agricultural produces. There is another aspect of the matter that the and Revenue Authorities had recorded a finding that physical possession was not handed over as the consolidation proceedings were not completed. The ordinary corollary of such findings would be that no transfer of land took place which is self-contradictory for the stand of the Assessing Officer for charging capital gain tax on transfer of land. Therefore, in the absence of any cogent evidences to rebut the claim of the assessee that the land in question was being used for agricultural purposes, and the evidences as supplied by the assessee not being found to be false and fabricated, we are unable to sustain the findings of the Assessing Officer - Respectfully following the judgment in the case of Smt. Sarifabibi Mohmed Ibrahim 1993 (9) TMI 10 - SUPREME COURT and SIDDHARTH J. DESAI 1981 (9) TMI 48 - GUJARAT HIGH COURT held character of land being agriculture did not change by mentioning in revenue records as 'Ghair Mumkin'. We therefore hereby, direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
Issues Involved:
1. Classification of land as agricultural or non-agricultural. 2. Validity of the assessment order under section 153A of the Income Tax Act. 3. Levy of interest and initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act. Detailed Analysis: 1. Classification of Land as Agricultural or Non-Agricultural: - Dispute: The primary issue was whether the land sold by the assessee was agricultural land, thereby exempt from capital gains tax under section 2(14) of the Income Tax Act. The Assessing Officer (AO) contended that the land was "Gair Mumkin Pahar" (barren land) and not used for agricultural purposes, thus classifying it as a capital asset subject to capital gains tax. - Findings by CIT(A): The CIT(A) upheld the AO's decision, relying on documents such as the consolidation orders of the Commissioner and Divisional Commissioner, Gurgaon, which stated the land was barren and uncultivable. The CIT(A) also noted that the land was under a notification by the Forest Department prohibiting agricultural activities. - Submissions by Assessee: The assessee argued that the land was used for agricultural purposes, supported by Khasra Girdawari records, electricity bills, sale receipts of agricultural produce, and photographs of the land. The assessee contended that the consolidation process was completed for their land, and physical possession was with them. - Tribunal's Decision: The Tribunal found that the AO and CIT(A) failed to provide concrete evidence that no agricultural activities were possible on the land. The Tribunal noted that the notification prohibiting agricultural activities had expired in 1995 and did not cover the land in question. The Tribunal accepted the assessee's evidence of agricultural use and directed the AO to delete the addition of capital gains tax. 2. Validity of the Assessment Order under Section 153A: - Additional Ground by Assessee: The assessee raised an additional ground challenging the jurisdiction of the AO under section 153A, arguing that the proceedings were initiated without satisfying the statutory conditions. - Tribunal's Decision: The Tribunal did not adjudicate this ground as it became academic after deleting the addition on merit. The Tribunal kept this ground open for future consideration. 3. Levy of Interest and Initiation of Penalty Proceedings under Section 271(1)(c): - Grounds by Assessee: The assessee challenged the levy of interest and initiation of penalty proceedings, arguing that the conditions for imposing penalty were not met. - Tribunal's Decision: The Tribunal held that since the addition of capital gains was deleted, the penalty levied on the same amount deserved to be deleted. The Tribunal directed the AO to delete the penalty. Conclusion: The Tribunal allowed the appeals partly, deleting the additions of capital gains tax and penalties, and held that the land in question was agricultural land exempt from capital gains tax. The Tribunal's decision was based on the assessee's evidence of agricultural use and the expiration of the notification prohibiting agricultural activities. The additional ground on the validity of the assessment order under section 153A was kept open for future consideration.
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