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TMI Blog2017 (11) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... med the benefit of exemption under section 54B of the Income-tax Act, 1961 (hereinafter referred to as "the Act") in his return of income for the impugned assessment year. During the course of scrutiny assessment proceedings, the Assessing Officer made enquiries to verify the genuineness of the transactions qua the sale of agricultural land and the assessee's claim of exemption under section 54B of the Act. The Assessing Officer concluded that the agricultural land on which the assessee had claimed the exemption under section 54B was not utilised for cultivation for the last 2 to 3 years. The Assessing Officer further held that since the land in question is the urban land, therefore, the provisions of section 54B would not apply on the capital gains arising from sale of such land. The Assessing Officer denied the benefit of exemption claimed by the assessee and made addition of the entire capital gain amount i.e., Rs. 72,88,087. Aggrieved by the assessment order dated February 5, 2015 the assessee filed appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) rejected the contentions of the assessee and upheld the additions made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were made by spreading murrum. 4.1 The learned authorised representative of the assessee submitted that though the land of the assessee was acquired only up to November 15, 2008 yet it took almost one year for the assessee to restore the land to its original shape and making it fit for cultivation. Consequently, no crops could be grown during the financial years 2008-09 and 2009-10. The assessee again cultivated the land in the financial years 2010-11 and 2011-12. The assessee cultivated Jowar and Soyabean crops on the said land during the respective financial years. The learned authorised representative referred to 7/12 extracts at pages 6 and 7 of the paper book. The learned authorised representative further submitted that since the land of the assessee is "Jirayat" i.e., only source of irrigation is rain, the land of the assessee is cultivable only during Kharif season. No crop is sown during Rabi season. 4.2 The learned authorised representative of the assessee submitted that the assessee sold his share of land to M/s. Rajlaxmi Projects Pvt. Ltd. on January 3, 2012 and earned capital gain of Rs. 72,88,087. The assessee invested the entire amount in the specified capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Therefore, the observations of the Assessing Officer are purely based on surmises and conjectures. 4.4 The learned authorised representative submitted that the Assessing Officer has erred in not allowing the benefit of exemption under section 54B of the Act on the ground that since the agricultural land of the assessee falls within 3 kms. from the municipal limit, therefore, it is an urban land and does not fall within the ambit of the provisions of section 54B of the Act. A perusal of the provisions of section 54B would show that for availing of the benefit of exemption under the said section, the land should be a capital asset and is used for agricultural purposes in two years immediately preceding the date of transfer of such land. The land in question of the assessee satisfy all the conditions. The assessee sold the land on January 3, 2012. During the financial years 2010-11 and 2011-12 the land was used for agricultural purposes. Since the land of the assessee falls within 8 kms. from the Municipal limits it is a capital asset. Therefore, the reasons given by the Assessing Officer for rejecting the benefit of section 54B to the assessee are against the provisions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the farmers to be always present near the agricultural land for carrying out agricultural activity. The authorities below have brushed aside the evidence furnished by the assessee in the form of revenue records. The fact that 24 lemon trees are planted on the land itself shows that the land was being used by the assessee for agricultural purposes. The Commissioner of Income-tax (Appeals) has wrongly held that as per 7/12 extract dated January 21, 2015 there is no agricultural produce since the last 6 years. The 7/12 extracts dated January 21, 2015 is annexed to the assessment order. A perusal of the same would show that the land was very much in cultivation and the assessee had sown Jowar and Soyabean crops on the land in the financial years 2010-11 and 2011-12. 4.7 The learned authorised representative of the assessee submitted that during the remand proceedings, the Assessing Officer had confronted Shri Shivaji Wamanrao Mirase who is having agricultural land in Gat No. 125 at Village-Nerli. Shri Shivaji Wamanrao Mirase in his statement admitted that agricultural activities were carried out by him during the financial years 2008-09, 2009-10, 2010-11, 2012-13, 2013-14, 2014-15 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned authorised representative contended that the assessee has sold the agricultural produce during the financial year 2011-12 to M/s. Rakonde Trading Company. The authorities below have cast aspersions on the said sale of agricultural produce. M/s. Rakonde Trading Company has confirmed the sale of Soyabean by the assessee vide Sale Bill No. 29 dated October 30, 2011. The confirmation by M/s. Rakonde Trading Company vindicates the stand of the assessee. Mere fact that Shri Manik Rakonde proprietor of M/s. Rakonde Trading Company was not able to explain the date of sale of the said Soyabean by him to APMC and that no books of account were maintained by M/s. Rakonde Trading Company or no return of income was filed by the said trader, cannot be a ground for rejecting the claim of the assessee. 4.10 The learned authorised representative further submitted that the assessee is not a very big farmer. The assessee in his return of income has been showing income from agricultural ranging between Rs. 40,500 to Rs. 87,440, during the assessment years 2004-05 to 2012-13. The Department has been accepting the same without raising any question. Admittedly, the assessee is not maintaining bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly defended the impugned order. The learned Departmental representative submitted that the assessee has himself admitted that there was no cultivation of crop on the land in question during the financial years 2008-09 and 2009-10. The assessee sold the land on January 3, 2012 i.e., during the financial year 2011-12. To comply with the conditions set out in section 54B the assessee should have cultivated the land immediately two preceding years i.e. 2009-10 and 2010-11. Since the assessee has himself admitted that there was no cultivation in the financial year 2009-10 the benefit of exemption under section 54B cannot be allowed to the assessee. The learned Departmental representative in support of his submissions placed reliance on the decision of the hon'ble Andhra Pradesh High Court in the case of CIT v. Bolla Ramaiah [1988] 174 ITR 154 (AP). 6. We have heard the submissions made by the representatives of the rival sides and have perused the orders of the authorities below. We have also considered various documents furnished by the assessee in the form of paper book and referred during the course of making submissions, as well as the decisions on which the rival sides have pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guru Granth Saheb from March 1, 2008 to November 15, 2008. Therefore, no agricultural operations could be carried out by the assessee during that period. It has been further contended by the assessee that since a temporary township was created on the land acquired which included the land of the assessee in Gat No. 126, the land was not ready for cultivation even in the next financial year. The electricity poles were erected and temporary roads were made by spreading murrum. The land had become unfit for cultivation. Electricity poles were removed by the authorities concerned much after the Tri-centenary celebrations were over. It took almost one year for the assessee to make the land fit for cultivation. 8. Before proceeding to decide the issue, it would be relevant to see whether the assessee has satisfied all the conditions set out in section 54B have claiming exemption. The conditions necessary for claiming exemption under section 54B are : (i) The agricultural land is transferred by any individual or Hindu undivided family. (ii) The agricultural land has been used by the individual or his parents for agricultural purpose during two years immediately preceding the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been disclosing income from agriculture and the Department has been accepting the same without any query. The land revenue records clearly indicate that land is under cultivation and Jowar and Soyabean crops were grown. The land revenue records are maintained by the Government Department. There is an element of credibility in the records maintained by the Government agencies. 10. The Commissioner of Income-tax (Appeals) has given several peripheral reasons for rejecting the claim of the assessee. The objections raised by the Commissioner of Income-tax (Appeals) in rejecting the claim of the assessee are of trivial nature and would not impact adjudication of care issue. In our opinion the same are not warranted when the entries made in the revenue records clearly show that there was cultivation on the land. In so far as determination of two years period is concerned, the period of two is to be determined from date of sale and not the immediately two preceding financial years. The date of sale of land is January 3, 2012. Thus, the period of two years have to be reckoned from January, 2010 onwards. As has been pointed earlier that the land of the assessee is Jirayat land. The asses ..... 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