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TMI Blog2014 (10) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. On the facts and circumstances of the case, the Ld. CIT(A) erred by giving relief to the assessee in respect of computing capital gains of Rs. 81,46,760/- from sale of land at Lolim, Canacona Goa, which is situated in the village panchayat." CO NO. 25 & 26/PNJ/2013 (ITA NO. 129 & 130/PNJ/2013) "1. The cross objector submits that the Assessing Officer erred in assuming jurisdiction u/s. 147 when the jurisdictional conditions were not fulfilled. 2. The Assessing Officer erred in resorting to the provisions of section 147 without having "reason to believe" that income chargeable to tax had escaped assessment. 3. The Assessing Officer erred in attempting to improve upon the reasons recorded at the time of reopening the assessment. 4. Even assuming, though not conceding, that the Assessing Officer's ground is to be allowed, the Assessing Officer erred in adopting the fair market value of agricultural land sold during the year as at 1st April, 1981 @ Rs. 5/- per sq. mtr. The appellant submits that the value of the said land as at 1st April, 1981 is substantially higher and that the Assessing Officer be directed to adopt the said higher value. 5. Even assuming, though not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 "1. The Ld. Commissioner of Income Tax (Appeal), Panaji's order is opposed to law and facts of the case. 2. The Ld. Commissioner of Income Tax (Appeal) has erred in relying on judgement of the jurisdictional Mumbai High Court in the case of CIT vs. Debbie Alemao & CIT vs. Minguel Chandra Pais as the facts of the case are entirely different from present one, as in the referred case agricultural activities were actually carried out. 3. The Ld. CIT(A) failed to appreciate that land not agricultural though entered in the revenue record as agricultural in view of case law in the case of Sarifabibi Mohammed Ibrahim and others Vs. CIT (SC) 204 ITR 631, Chemancherry Estates Co. Vs. ITO (ITAT Chennai) 118 TTJ 691; DTR 478. 4. The CIT(A) failed to appreciate that burden of proof is on assessee to show that it was agricultural land - Forest land acquired with the intention of extending plantation - No agricultural operation carried out - Transfer of land lead to capital gains in view of case law in the case of Kalpetta Estates Limited Vs. CIT (Ker) 185 ITR 318. 5. The Ld. CIT(A) failed to appreciate that evidence showing that no agricultural operations were carried out on Land, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 147 when the jurisdictional conditions were not fulfilled. 2. The Assessing Officer erred in resorting to the provisions of section 147 without having "reason to believe" that income chargeable to tax had escaped assessment 3. The Assessing Officer erred in attempting to improve upon the reasons recorded at the time of reopening the assessment. 4. The Assessing Officer erred in adopting the fair market value of agricultural land sold during the year as at 1st April, 1981 @ Rs. 5/- per sq. mtr. The appellant submits that the value of the said land as at 1st April, 1981 is substantially higher and that the Assessing Officer be directed to adopt the said higher value." ITA NO. 144/PNJ/2013 "1. The order of CIT(A) is opposed to law and facts of the case. 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Capital Gains to the tune of Rs. 2,62,93,527/-. 3. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in treating the sale consideration received from the sale of land as "Agricultural land" instead of Non-Agricultural land. 4. On the facts and circumstances of the case and in law, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rishna Khaunte (supra) are that the Assessee filed his income tax return for A.Y 2007-08 on 30.7.2007 at an income of Rs. 1,76,405/- which was processed u/s 143(1) on 27.2.2008. In the footnote of the return the Assessee had mentioned that he has received sale proceeds from the sale of agricultural land amounting to Rs. 1,38,12,166/- (half share of Rs. 2,76,24,333/-). Subsequently, ITO, Ward-1(3), Panaji issued notice u/s 148 dt. 7.2.2012 to the Assessee for re-opening of assessment for A.Y 2007-08 by recording the following reasons : "SRI. PUNDALIK KRISHNA KAUNTE ASST. YEAR 2007-08 REASON FOR ISSUE OF NOTICE U/S 148: It has come to the notice that Sri. Pundalik Krishna Khaunte has received 1/6th share of Rs. 2,76,24,333/- on sale of property situated within the limit of village of panchayat of Loliem in Canacona Taluka South Goa bearing Sy No. 352/1, out of total sale consideration amount of Rs. 16,34,24,748/-. On perusal of the return of income filed by the Assessee for A.Y.2007-08 on 30th July 2007, it is noticed that the assessee has not declared either capital gains income or business income from the sale of the above said property, instead, the assessee has mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to chargeability of Capital Gains was decided in favour of the Assessee by holding that the land sold by the Assessee represents agricultural land and there is no Capital Gains and in consequence thereof, he deleted the addition made as Capital Gains. The other issues taken by the Assessee were not decided as according to him, the other grounds of appeal of the Assessee became infructuous and therefore did not require adjudication. The revenue came in appeal and cross objection have been filed by the respective assessees. 7. Since the Cross objection filed by the Assessee involves legal issues which goes to the root of the assessment regarding the validity of the initiation of the proceedings u/s 147, we decided to dispose off first the legal ground taken in the Cross objection regarding the validity of the initiation of the proceedings u/s 147 which has been taken by the Assessee in ground nos. 1 to 3. 8. The ld. AR before us contended that the proceeding initiated u/s 147 is not valid. No doubt the original return has been processed u/s 143(1), but there is no reason to believe. Reason to believe cannot be bona fide until and unless the AO has fresh tangible material. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come which escaped assessment. For initiating the proceedings under this section, no doubt there must be 'reason to believe'. 'Reason to believe' would mean cause or justification. If the AO has cause or justification to know or suppose that income has escaped assessment, it can be said that assessing officer has 'reason to believe' that the income has escaped assessment. The Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) has categorically held that processing of the return u/s 143(1) by way of intimation is not an assessment. Initiating action u/s 147 in respect of income escaping assessment where an intimation u/s 143(1) is issued, is covered by the main provision of Sec. 147 as substituted w.e.f. 1.4.1989 and not by the proviso thereto. The only condition to clothe with the jurisdiction u/s 147 in such case is that there must be 'reason to believe' that any income chargeable to tax has escaped assessment. The 'reason to believe' means where there is relevant material on which a reasonable person could have formed the requisite belief. The material need not conclusively prove escapement of income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Revenue that an intimation cannot be equated to an assessment, took the view that the submission of the ld. DR acted to be self-defeating because if an intimation is not an assessment, then, it can never be subjected to Sec. 147 proceedings as the section covers only an assessment and we wonder if the Revenue would be prepared to concede that position. In our opinion, Sec. 147 authorises the AO not only to re-assess but to assess any income chargeable to tax which has escaped assessment for any assessment year. The word 'chargeable to tax has escaped assessment' is defined under explanation 2 under sub-clause (b). Sub-clause (b) clearly states that where return has been filed but no assessment has been made and the AO notices that the Assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, it shall be deemed to be a case where income chargeable to tax has escaped assessment. We do not find that the explanation 2(b) has been considered by the Hon'ble High Court in this decision while the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) has duly reproduced at pg. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment. It is further stated that both the conditions must be fulfilled if the case falls within the ambit of proviso to Sec. 147. No doubt the ingredients of Sec. 147 are to be fulfilled. The ingredients of Sec. 147 nowhere requires that in case a return is processed u/s 143(1), there must be tangible material which should come to the possession of the AO subsequent to the issue of the intimation. In our opinion, the material which is available with the AO even alongwith the return at the time of the processing of the return can be the basis for 'reason to believe' as in view of clause (b) of explanation 2 it can be deemed that income chargeable to tax has escaped assessment. Clause (b) of explanation 2 does not require that the assessment must precede before taking any action u/s 147. 10.6 We noted that there is decision of Full Bench of the Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd, 348 ITR 485 (Delhi) (FB) which has taken a view contrary to the decision of Orient Craft Ltd. (supra), 354 ITR 536 (Del.). Even this decision of full bench has not been referred to in the case of Orient Craft Ltd. (supra). 10.7 We noted that the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaping assessment - (1) If - (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under Section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time and in cases falling under clause (b) at any time within four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the Income-tax Officer; (3) where the information is derived from an external source of any kind: such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment; and (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record or the facts disclosed thereby or from other enquiry or research into facts or law. Where, however, the Income-tax Officer gets no subsequent information, but merely proceeds to reopen the assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, section 34(1)(b) would have no application.' 11.3 From the aforesaid judgement, we noted that the Hon'ble Court has interpreted that the word 'subsequent information' requires fresh facts and material or if there are existing facts, then, there must be enquiry into the materials available. Thus, we noted that requirement of fresh material or facts has been interpreted by the court because Sec. 34(1)(b) states that the AO has in consequence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich came to the notice of the Income-tax Officer, the previous order of assessment was vitiated by some error of fact or law. The High Court exercising jurisdiction under article 226 of the Constitution has power to set aside a notice issued under section 147(b) of the Income-tax Act, 1961, if the condition precedent to the exercise of the jurisdiction does not exist. The court may, in exercise of its powers, ascertain whether the Income-tax Officer had in his possession any information: the court may also determine whether from the information the Income-tax Officer may have reason to believe the income chargeable to tax has escaped assessment. But the jurisdiction of the court extends no further. Whether on the information in his possession, he should commence proceedings for assessment or reassessment, must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act: if he has information from which it may be said, prima facie, that he had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High Court exercising powers under article 226 of the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad made an assessment earlier. This will not be applicable if no assessment was originally made and AO is going to proceed with assessment u/s 147 for the first time. It may also be noted that Sec.147 does not deal only with the cases of re-assessment but also with the assessment for the first time. The courts have from time to time interpreted the word 'reason to believe' to mean that the AO must have cause or justification. At the stage of initiation of the proceedings it is not required that the AO must establish the escapement of the income. The only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. The scope and effect of Sec.147 as substituted w.e.f. 1.4.1989 is substantially different from the provisions as stood prior to such substitution. The court has interpreted from time to time that there must be bona fide reason to believe. Where the AO has applied his mind to the material available with him, he cannot be permitted to review the assessment in the garb of 'reason to believe'. The Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) has categorically tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. The decision of the Hon'ble Supreme Court even though was rendered on 23.5.2007 but the Hon'ble High Court could not look into that decision as the Hon'ble High Court decided the issue on 18.7.2007. This decision, in our opinion does not support the submission of the ld. AR that the AO requires fresh material before initiating proceedings u/s 147 in case the return is processed u/s 143(1). Coming to the decision of the Hon'ble Gujarat High Court in the case of Inductotherm (India) (P.) Ltd. (supra), we noted that in this case also the Hon'ble High Court took the view that if intimation u/s 143(1) was issued and scrutiny assessment u/s 143(3) was not done, assessment could be re-opened if there was 'reason to believe' that income chargeable to tax had escaped assessment. This decision, therefore, will not apply to the facts of the case of the Assessee as it is not a ground in the case of the Assessee that the AO was not having 'reason to believe'. In the case of Indivest Pte Ltd. (supra), we noted that the Hon'ble High Court has held that the AO has power to reopen the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deeper scrutiny. In view of this, the Hon'ble High Court took the view that this cannot be the basis for 'reason to believe'. This decision, therefore, will not assist the Assessee. 12.1 In view of the aforesaid discuss ion, we dismiss the ground taken by the Assessee in all Cross objections that the proceedings initiated u/s 147 are invalid. Thus, ground nos. 1 to 3 stands dismissed. 13. So far as ground no. 4 in the Cross objection is concerned, we noted that this ground was taken by the Assessee before the CIT(A) stating that the AO erred in adopting the fair market value of the agricultural land sold during the year as on 1.4.1981 @ Rs. 5/sq. mtr. After hearing the rival submissions and carefully considering the same, we noted that this ground has not been examined and adjudicated by the CIT(A). We, therefore, restore this issue to the file of the CIT(A) with direction that the CIT(A) should give a finding on this issue after giving proper and sufficient opportunity to the Assessee. Thus, this ground stands allowed for statistical purpose. 14. Ground no. 5 in the Cross objection relates to the claim of deduction by the Assessee while computing Capital Gains for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land. The Assessee also pointed out that the market value as on 1.4.1981 was not less than Rs. 50/sq.mtrs. and the Assessee has paid brokerage of Rs. 56 lacs to one Tapan Acharya who finalised the above sale with the purchaser of the land. It was also stated that the Assessee and his wife invested Rs. 50 lacs each in REC Capital Gains Bonds which are eligible for exemption u/s 54EC of the Income Tax Act but the exemption u/s 54EC and the brokerage paid for the sale of the land was not claimed as deduction as the Assessee was of the view that the land sold was not a capital asset. The Assessee also submitted a copy of the receipt issued by the broker and true copy of the Bond allotment certificate eligible for exemption u/s 54EC. The Assessee also relied on the following case laws : (i) Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 (Guj.) (ii) Tea Estates India (P.) Ltd. v. CWT [1966] 59 ITR 428 (Cal.) (iii) Smt. Manyam Meenakshamma v. CWT [1967] 63 ITR 534 (AP) (iv) Venugopala Varma Rajah v. CED [1967] 64 ITR 358 (Ker) (v) CWT v. Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 (SC) The AO deputed an inspector to verify the land. The Inspector submitted his report dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral land. The Assessee went in appeal before the CIT(A). The CIT(A) called for the remand report of the AO and ultimately took the view that the captioned land is an agricultural land by holding as under and deleting the addition made by the AO as Capital Gains arising on the sale of agricultural land : '5.6 I have gone through the reasoning of the A.O. and submissions of the appellant and have perused details and documents, which are relevant in the facts of the instant case. I have also gone through the judicial pronouncements relied upon by the AO and the learned counsel of the appellant. In my opinion, the instant case is more a case of facts than 'Law '. There is no denying the fact that even after 4 years of sale, several fruits bearing trees existed on the property and no developmental work relating to infrastructure was carried till date. Documents like Form I and Form XIV and the certificate dated 07.12.2010 issued by the Zonal Agricultural Officer. Cancona-Goa proved that the land sold by the appellant was an agricultural land which cannot be considered as a capital asset. It is also proved through verification that the character of the land has not changed e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Officer, Canacona, Goa. It was submitted that the Zonal Agricultural Officer, Canacona, Goa vide certificate dt. 7.12.2010 certified on inspection of the said land that it is registered as agricultural land and dry trees like cashew, mango, jackfruit, cocum and coconuts etc. are existing which are more than 20 years old. The Inspectors of two different assessees who visited the land under consideration in their reports dt. 16.12.2010 and 19.10.2011 stated that there are valuable trees like teak, mangoes, coconut, jack fruits, kokum etc. In this regard, it was further submitted that the aforesaid trees once planted grow on their own and do not require yearly seeding, souring, ploughing etc. like paddy/vegetable crops. Reliance was placed in this regard on the decision of Hon'ble Patna High Court in the case of Deen Mohammad Mian v. Hulas Narain Singh AIR 1942 Pat 296 particularly at pg. 347 in which it was held that - "The case of an orchard is quite different. Orchard trees ordinarily are, and can be presumed to have been, planted by man after preparation of the ground which is cultivation and seasonal crops are gathered. Fruit trees also require seasonal attention such as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital asset but only the lands, the income derived from which was agricultural. So the purpose for which the agriculture was carried out was a relevant factor under the 1922 Act. In the definition under which we have to consider whether the land in question was agricultural land or not, all that was required to be seen was whether the land in question was an agricultural land in India. Under the Income Tax Act, 1922 Sec. 2(4)(a)(iii) defines agricultural land as ―any land from which income derived is agricultural income‖. In the case of CIT vs. Borhat Tea Co. Ltd., 138 ITR 783 (Cal.) it was pointed out that the Hon'ble High Court has categorically taken the view that for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not necessary. Referring to pg. 282 of the paper book it was submitted that the Sarpanch of the Village Panchayat has certified that the said land is notified as CRZ-I and no development can be done. It was also submitted that in the valuation report submitted by the Government Approved Valuer, the said authority has inspected and certified existence of aforesaid trees and also the cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft fallow and includes farm building appurtenant to such land.' During the course of the hearing, the Bench observed how the land can be stated to be agricultural land when there are only 3500 trees standing on the land measuring 2,12,850 sq. mtrs. If part of the land is barren, how it can be regarded to be an agricultural land. The Bench also observed during the course of the hearing by referring to the decision as relied by the ld. AR in the case of Borhat Tea Co. Ltd. (supra) in which at pg. 789 the Hon'ble High Court had clearly stated that it is to be seen whether such land is capable of agricultural operations being carried on. On this, the ld. AR requested the Bench that it can by exercising the power u/s 255(6) have a personal inspection so that the true nature of the land can be ascertained. The ld. DR also agreed to this proposition. 17.2 The Bench, in view of the request of both the parties issued summons u/s 255(6) for conducting site visit on 1.4.2014. On that day, the Bench conducted site inspection alongwith the ld. DR, Smt. Sonal Sonkavde and the counsel of the Assessee, Shri Jitendra Jain. 17.3 We have carefully considered the rival submissions alongwith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section, it is apparent that the property of any kind held by the Assessee whether or not connected with his business or profession are capital asset but the assets which are given under sub-clause (i), (ii) and (iii) are excluded from the capital asset. Sub-clause (iii) excludes agricultural land in India but this exclusion has certain exceptions in which case even though the land is agricultural land, it will not fall within the exception and will be regarded to be a capital asset. The exceptions are provided on the basis of the location of the agricultural land. Clause (a) of sub-clause (iii) of Sec. 2(14) talks of agricultural land which is situated in any area within the jurisdiction of municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name or a cantonment board and which has a population of not less than ten thousand. Clause (b) of the said sub-clause talks of agricultural land which is situated within 8 kms. from the local limits of municipality or cantonment board referred to in clause (a) as may be notified by the Central Government having regard to the extent of, and scope for, urbanisation of that area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the seeds, planting and similar operations on the land. These are basic operations and require the expenditure of human skill and labour upon the land itself. Those operations which the agriculturist has to resort to and which are absolutely necessary for the purpose of effectively raising produce from the land, operations which are to be performed after the produce sprouts from the land, e.g., weeding, digging the soil around the growth, removal of undesirable undergrowth, and all operations which foster the growth and preservation of the same not only from insects and pests but also from depradation from outside, tending, pruning, cutting, harvesting and rendering the produce fit for the market, would all be agricultural operations when taken in conjunction with the basic operations. The human labour and skill spent in the performance of these subsequent operations cannot be said to have been spent on the land itself. The mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations, would not be enough to characterise them as agricultural operations; in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the land means tilling of the land, sowing of the seeds, planting, and similar operations on the land. In this case, the Hon'ble Supreme Court further took the view that the term 'agriculture' cannot be confined merely to the production of grain and food products for human consumption but it must be understood to include all the products of the land which have some utility either for consumption or for trade and commerce and would also include forest products such as timber, sal and Piyasal trees, Casuarina plantations, tendu leaves and horranuts. Thus, if the land, in our opinion, is cultivable, it can be regarded to be agricultural land. If the land is not cultivable, it cannot be regarded to be agricultural land. Our aforesaid view is duly supported by the decision of the Hon'ble Calcutta High Court in the case of Borhat Tea Co. Ltd. (supra) on which the ld. AR has relied, wherein at pg. 789 the Hon'ble High Court has clearly taken the view that the land must be capable of agricultural operations by observing as under : "Thus, for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re carried on, on the land. In this case, the Hon'ble High Court also took the view that if the land is actually used for cultivation and agricultural operations are carried out, though on a limited experimental scale, the land will be an agricultural land and will come out of definition of capital asset. The Hon'ble High Court in this case, no doubt had made a comparative study for the definition of capital assets given under the Income Tax Act, 1922 and Income Tax Act, 1961 and took the view that 'capital assets' under 1961 Act excluded agricultural land in India but under the 1922 Act, it was not all agricultural lands which were excluded from the definition of capital assets but only the land, the income derived from which was agricultural and therefore ultimately observed that under the 1961 Act, all that was required to see was whether the land in question was an agricultural land in India. This denotes, in our opinion, that it is not necessary that land must be actually used for agricultural purposes but it must be capable of carrying on agricultural operations. This decision nowhere deals with the proposition of law that if the land is a barren land and cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r provisions of Income-tax Act. Where character of land sold was agricultural as on date of sale, intention of purchaser is irrelevant consideration for determining whether or not land in question was capital asset u/s. 2(14)(iii) of the Act." We do agree that the characteristics of the land has to be decided as per the provisions of Income Tax Act only at the date of the sale. If the land can be regarded to be an agricultural land on the date of the sale, the Assessee will have a case. If the land cannot be regarded to be an agricultural land, then, it will be a capital asset as per provisions of Sec. 2(14). 17.15 In the case of Lavleen Singhal (supra), the Tribunal took the view that - "Land being recorded as agricultural land in Revenue records at the time of purchase by assessee and nothing having been done by assessee for putting it to non-agricultural use, same could not be treated as non-agricultural only because assessee did not cultivate it for fourteen years and as per certificate issued by Tehsildar, land falling beyond 8 kms. from Committee Area, was out of the purview of capital asset, hence no capital gains arose on its sale." This decision, in our opinion, will n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltivation. 17.17 In the case of Ashok Shukla (supra) the Hon'ble ITAT Indore bench took the view that there is no requirement in the Act that only self-cultivated land would be treated as agricultural land. The question involved in this decision is entirely different and there is no dispute in the case of the Assessee for determining the agricultural land there should be cultivation by the Assessee or by third party. 9.6.12 In the case of P.C. Joshi & B.C. Joshi (supra) the Hon'ble High Court took the view that the test laid down by the Hon'ble Supreme Court in the case of Officer-in-Charge (Court of Wards) (supra) must be considered for determining whether the land is an agricultural land. The Hon'ble Supreme Court in that case has categorically laid down that entries in the revenue record are good prima facie evidences though they may not be conclusive. Therefore, in view of this decision, the revenue records are not conclusive. The character of the land will depend on what is the actual nature of the land. 17.18 We have perused the decision of the Hon'ble Bombay High Court in the case of Smt. Debbie Alemao (supra). We noted that in this case the Assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural purposes at or about the relevant time; (3) whether such user of the land was for a long period or whether it was of a temporary character or by any stopgap arrangement; (4) whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land; (5) whether the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land and if so, when and by whom (the vendor or the vendee) ; whether such permission was in respect of the whole or a portion of the land; if the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date; (6) whether the land, on the relevant date, had ceased to be put to agricultural use; if so, whether it was put to an alternative use; whether such cesser and/or alternative user was of a permanent or temporary nature ; (7) whether the land, though entered in the revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled ; whether the owner meant or intended to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d unreasonable that no person acting judicially and properly instructed in law would have arrived at it. The assessees sold their ancestral property to S in May 1995. The assessees did not include the gains derived from the sale on the ground that the land was agricultural. The Assessing Officer held that they were liable to pay long term capital gains tax. The Tribunal held that the land was agricultural because the assessees had produced receipts for payment of land revenue which could not be ignored. Admittedly, the subject land was situated in a village and at a distance of about 15 kms. from the municipal limits. The assessees had produced an award of the Land Acquisition Officer and all documents produced by the assessees showed that the acquired land was agricultural. The witnesses whose affidavits were produced had clearly stated that labourers were seen working in the subject land until it was sold to S; the land was classified as agricultural land in the revenue records, and it was subjected to the payment of land revenue. It held that the gains could not be taxed as capital gains. On appeal to the High Court: Held, dismissing the appeal, that the Tribunal was right upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry stoppage of the agricultural operation in the land will not make it to be a non-agricultural land. (v) Character of the land is not determined by the nature of the products raised. So long as the land is used or can be used for raising valuable plants or crops or trees or any other purpose of husbandry, the land will be regarded to be an agricultural land. (vi) The situation of the land in a village or in an urban area is not by itself determinative of its character. Whether the land has been developed by plotting and providing roads and other facilities. 18.1 To determine the correct character of the land, on the request of both the parties we decided to visit the land personally by exercising the power u/s 255(6) and accordingly this Bench visited on 1.4.2014 alongwith Shri Jitendra Jain, Adv. CAs on behalf of the Assessee as well as Smt. Sonal Sonkavde, ld. DR on behalf of the Department. We noted that the impugned property is bounded by a small riverlet from south side which joins the Arabian sea. Arabian sea also demarks its limit from west side. Almost all the area of the land is hilly and rocky, even so much so that there is no easy access to the whole of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has held that a barren and uncultivable land can be regarded to be an agricultural land. Opportunities were given from time to time but the ld. AR expressed his inability to bring any decision on this issue which supports his case. It is not denied even by the Revenue that part of the land consists of dry crop i.e. trees of cashew, mango, jack, kokum and coconut. To the extent these trees are standing on the land, this portion of the land, in our opinion, has to be regarded to be agricultural land as this portion of the land is being used for the purpose of agriculture. Neither the Assessee nor the Revenue produced before us the exact measurement of the land on which the trees are standing and out of which dry crop is grown. To the extent the land is actually used for dry crop, the land has to be regarded to be an agricultural land. Since there are approximately 3500 trees standing on the land, which is not denied even by the Revenue and has been accepted by the ld. AR, we, therefore, to the best of our knowledge we estimate that atleast 10 mtrs area is required for one fruit tree and therefore, there are approximately 35000 sq.mtrs area of the land which can be regarded to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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