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TMI Blog2022 (5) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... eady been reproduced in our order vide para 4.1. Therefore, keeping in view these documents and evidences the Assessing Officer took a plausible view and held such land to be agricultural land. The order passed by learned Pr. CIT is not justified. The order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue nor the Assessing Officer has assumed wrong facts while arriving at the conclusion. In view of the above, the order passed by learned Pr. CIT u/s 263 is quashed. - Decided in favour of assessee. - ITA No. 44/Lkw/2021 - - - Dated:- 17-5-2022 - SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER Appellant by : Ms. Shweta Mittal, C. A. Respondent by : Smt. Sheela Chopra, CIT, D.R. ORDER PER T. S. KAPOOR, A. M. This is an appeal filed by the assessee against the order of learned Pr. CIT, Kanpur dated 30/03/2021 passed u/s 263 of the Act. In this appeal, the assessee has taken following grounds: 1. On the facts and in the circumstances of the case and in law, the order made by the Ld. CIT under section 263 of the Income-tax Act, 1961 ('IT Act') is illegal, invalid and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s position with regard to exempt capital gain. It was submitted that the Assessing Officer, after due application of mind and after verifying the documentary evidences, rightly allowed the claim of the assessee of exempt capital gain being earned on agricultural land. Learned counsel for the assessee further submitted that after completion of the assessment, the Assessing Officer vide notice u/s 154 of the Act dated 02/05/2018, proposed rectification of the order passed u/s 143(3) of the Act by including profit on sale of agricultural land in the computation of book profits u/s 115JB of the Act. In view of the rectification notice the assessee again explained its case before the Assessing Officer and after considering the explanation offered and documents submitted by the assessee, the Assessing Officer dropped proceedings initiated u/s 154 of the Act vide order dated 14/06/2018. In view of the above, it was argued that the Assessing Officer twice verified the facts that the land sold by the assessee was not a capital asset and only after being satisfied with the submissions made before him drew the conclusion that the land was rural agricultural land which was not a capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. The buyer of land is a construction company and hence, the nature of land should have been verified by the Ld. Assessing Officer. Mere classification of land in revenue records as agricultural land is not conclusive evidence to prove the nature of land. iv. That there was failure on the part of Assessing Officer to make necessary inquiries with respect to usage of land for agricultural purpose in the past. 2.1 Learned counsel for the assessee submitted that it is wrong on the part of learned Pr. CIT to hold that agricultural land was not being used for agricultural purposes whereas the meaning of such line, mentioned in sale deed, was that said land had not been given on oral agreement for cultivation to any person. Regarding the observation of learned Pr. CIT that assessee was not able to demonstrate that the land was being used for agricultural purpose, Learned counsel for the assessee submitted that the crop inspection report by Lekhpal was also filed which shows that the land was being used for agricultural purposes. In view of the above facts and circumstances, it was argued that since the Assessing Officer had twice carried out the verification and had h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter. We further submit as under: 1. Original/certified copies of Khasra, Jamabandi, Khatauni in Form No. 10 and the Certificate of Tehsildar of NUH District. Certifying the distance of the agricultural land more than eight kms. from the municipal corporation are enclosed . 2. We further enclose details of population in villages and towns in NUH Tehsil of Mewat, District-Haryana. This is down loaded from the web site of Census 2011 of India. It may be observed that the population of NUH Municipal Committee was only 16,260 as per last Census. 3. We also enclose the location details of Hiranthla village as down loaded from the web site of Mewat, District-Haryana. It is mentioned that the NUH is the Sub-district head quarter of Hiranthla village and it is situated Ten kilometers away from the village. 4. Since the population of NUH Municipal Committee as per last Census is less than One lac and the Village Hiranthla is situated more than Two kilometers from the Municipal Committee, the land sold by us is an agricultural land as defined in Sec- 2(14)(iii)(b) of Income Tax Act, 1961. A copy of such reply is placed in paper book page 73. 4.2 From the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile computing income under normal provisions of Act claimed the gain not chargeable to tax treating the agricultural land as non-capital Asset. A certificate from Tehsitdar, NUH was also obtained by the assessee and was furnished during assessment proceedings. 2. From the assessment record, it is observed that the agricultural land sold by the assessee was a capital asset in terms of provisions of section 2(14) of the Income Tax Act, 1961 which says: (i) In any area within the distances, measured aerially (ii) Not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh. 3. The certificate issued by Tehsildar, NUH does not specify the aerial distance of the assessee's land from the municipal limits hence the Assessing Officer should have questioned the veracity of the certificate given by the Tehsildar and included the profit on sale of agricultural land in Book Profit u/s 115JB of the Income Tax Act, 1961. 4. On going through the case record and assessment proceedings it is found that no inquiry regarding the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany was not able to demonstrate that after purchase on 17.02.2011 any agricultural activities were carried on by the assessee company itself. 2. In preceding assessment year 2014-15, the assessee company had declared agricultural income of Rs.26,600/- but was not able to justify the same therefore, the income of Rs.26,600/- was held and assessed as other income of the assessee. 3. Mere classification of land in revenue records, as agricultural land, will not conclusively prove that nature of land was an agricultural land. Hence, where no evidence was produced by the assessee to establish character of land sold by it as agricultural land, land cannot be treated as agricultural land for the purpose of computing capital gain. 4. Though, in the assessment order, the Assessing Officer has mentioned that as per provisions of section 2(14)(iii)(b)(1) of the Act, the land sold is not capital asset not chargeable to tax under the head capita gain, yet he completely ignored to verify and examine the nature and character of the land which was purchased by the assessee on 17.02.2011 with the motive of developing the land. 4.6 Regarding first observation of learned Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not conclusively prove that nature of land was an agricultural land is not correct as the character of land is ascertained from the classification in the Revenue records which undoubtedly in the Revenue record is agricultural land. The Hon'ble Supreme Court in the case of CWT vs. Officer-in-Charge (court of wards) 105 ITR 138 has held that entries in the Revenue records are considered as good prima facie evidence for classifying the land as agricultural land. 4.9 The fourth observation of learned Pr. CIT that the future land use is for economic utilization also has no force as held by the Chennai Bench of the Tribunal in a bunch of appeals in an order dated 05/04/2017 where the Tribunal has held that the future scope of the area to use the land for non agricultural purposes do not reflect that the land is not an agricultural land. The Tribunal in a consolidated order dated 05/04/2017 in a bunch of appeals has relied on different decisions of Hon'ble High Courts to arrive at such conclusion. For the sake of completeness, few of the decisions relied on by the Tribunal, as contained in para 6.2 onwards, are reproduced below: 6.2. A reference could be made to the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he land for agricultural purpose and also the presumption arising from the entries of the Revenue records are rebutted. 6.4. The Hon'ble Bombay High Court in the case of CWT vs. H. V. Mungale (1983) 32 CTR (Bom) 301 : (1984) 145 ITR 208 (Bom) held that the Hon'ble Supreme Court had pointed out that the entries raised only a rebuttable presumption and some evidence would, therefore, have to be led before taxing authorities on the question of intended user of the land under consideration before the presumption could be rebutted. The Court further held that the Supreme Court had clearly pointed out that the burden to rebut the presumption would be on the Revenue. The Hon'ble Bombay High Court held that the ratio of the decision of the Supreme Court was that what is to be determined is the character of the land according to the purpose for which it was meant or set apart and can be used. It is, therefore, obvious that the assessee had abundantly proved that the subject land sold by them was agricultural land not only as classified in the Revenue records, but also it was subjected to the payment of land revenue and that it was actually and ordinarily used for agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the land sold by the assessee was not agricultural land and this was upheld by the CIT(A). On further appeal, the Tribunal accepted the claim of the assessee holding that the transaction in question duly fulfilled the conditions specified for relief. On further appeal to the High Court, the Punjab Haryana High Court found that the finding that the land had been used for agricultural purposes was based on cogent and relevant material. The Revenue record supported the claim. Even the records of the IT Department showed that the assessee had declared agricultural income from this land in her returns for the preceding two years. The land being located in commercial area or the land having been partially utilised for non-agricultural purposes or that the vendees had also purchased it for nonagricultural purposes, were totally irrelevant consideration for the purposes of application of s.54B. 5. In the present case there is no denying of the fact that in the Revenue records the land has been classified as agricultural land. The evidence of agricultural activities being carried out on such land was filed with the Assessing Officer. The copy of Jamabandi and Khasra Khatau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee filed reply to section 154 proceedings and the proceedings were dropped vide order dated 17/06/2018. The contents of order u/s 154, as placed in paper book pages 10 11, are reproduced below: In this case, assessment u/s 143(3) of the Act was completed on 21.09.2017 at a total income of Rs.21,80,970/-. Subsequently, it was noticed that the assessee has not included profit on sale of agricultural land while computing tax in accordance with the provisions of Section 115JB of the I.T. Act, 1961. Accordingly, notice u/s 154 of the Act was issued on 02.05.2018 proposing the said rectification. In response to the notice u/s 154, the assessee submitted reply vide letter dated 14.05.2018. The reply of the assessee has been considered. In view of the legal position, the amount of gain arising from sale of agricultural land has rightly been deducted from net profit while calculating the tax liability in accordance with the provisions of section 115JB of the Act. Further, Section 2(1A) of the Act defines the term 'agricultural income1. Explanation 1 to section 2(1A) reads as under:- Explanatran 1.- for the removal of doubts, it is hereby declared that revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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