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TMI Blog1988 (5) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... is included in the Municipal Limits of Surat and bears the number of Surat City Survey Ward No. 13, Nondh No. 126, has sold the said land on Maha Vad 9, S. Y. 2021 corresponding to 24-2-1965 to Srangar Co-operative Housing Society, C/o. Rasiklal Somchand Shah, Taswala Building, Gandhi Chowk, Surat for Rs. 2,15,163. It is stated by the assessee that the aforesaid land originally belonged to his ancestor 1916 and was acquired in 1924 by the firm of M/s. Shivlal Khandwala Sons, Surat. It is further stated by the assessee that in Asst. Yr. 1957-58 (S. Y. 2012) the said land was purchased by the assessee along with other co-owners Shri Kanchanlal M. Khandwala having 2/3rd share in the said land from the firm of M/s. Shivlal Khandwala Sons, Surat in which they were partners, for Rs. 54,000. Thereafter, the other two partners. Shri Shantilal Hiralal Khandwala and Shri Amratlal Chhotalal Khandwala also got separated from the said firm of M/s. Shivlal Khandwala Sons, Surat in A. Y. 1957-58 (S. Y. 2012) by taking their share by effecting Havala entries in the books of accounts of the firm. 4. It is the contention of the assessee that the aforesaid land is an agricultural land and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land did have the character as agricultural land. He observed that (i) it could not be denied that the assessee did produce some evidence for purchase of grass, seeds, etc. The fact of planting trees had also not been disputed by the Income-tax Officer, (ii) the assessed had not applied for conversion of agricultural land before the sale was made. 4. At the time of hearing, the learned Jr. Departmental Representative Mr. Saxena who appeared in early stages strongly attacked the order passed by the Commissioner (Appeals) and highlighted the factual aspects brought on record by the Income-tax Officer. According to him, considering the various judicial pronouncements it could not be said that the land continued to have character of agricultural land. 5. The learned representative of the assessee supporting the order passed by the Commissioner (Appeals) stated that in fact on 20th February, 1966 the Income-tax Officer Mr. Mandlik had personally inspected the land for ascertaining whether the land could be said to be agricultural land and this was done on the basis of instruction by the IAC when an occasion for reopening of the assessment was contemplated in the case of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer who visited the site, the learned Departmental Representative now appearing before us was requested to make further submissions and therefore, he made lengthy submissions again highlighting the findings recorded by the Income-tax Officer and stated that certain aspects were not at all considered by the Commissioner (Appeals). The most important aspect was with regard to the cultivation. He relied upon various judicial pronouncements, viz., in the case of CIT v. Sarifabibi Mohmed Ibrahim [1982] 136 ITR 621 (Guj.) and submitted that the ratio laid down by the court was not at all overruled by the later decision in the case of CIT v. Siddharth J. Desai [1983] 139 ITR 628 (Guj.). Further reliance was also placed on in the cases of CED v. V. Venugopala Varma Rajah [1976] 105 ITR 593 (SC) and Dr. K. A. Dhairyawan v. J. R. Thakur AIR 1958 SC 789 for the proposition that trees, etc., are not to be considered as part of agricultural land, in the case of CIT v. Sutton Sons Ltd. [1981] 127 ITR 57 (Cal.) where the term 'cultivation' was defined in the case of Kalpaka Oil Mills (in liquidation) v. CIT [1985] Tax. 76(1)-34 (Ker.) where it was held that agricultural operations in fact w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the land either by himself or through somebody, therefore, as long as considering the past history, if the land has been accepted as agricultural land and it is so stated in the revenue records it has to be presumed that the land continues to be agricultural land and that is why great importance was attached by Supreme Court in the case of CET v. Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 where the Bench consisted of 5 Judges to entries in the revenue records and held to be good prima facie evidence for the land being of agricultural character. Now, in the facts before us, the assessing Income-tax Officer has taken one view while another Income-tax Officer who personally inspected the site soon after the previous year ended and who is now promoted as Appellate Assistant Commissioner of Income-tax as also the Commissioner (Appeals) who decided the issue in favour of the assessee took the view different from that taken by the Income-tax Officer. Therefore, this is not a case where the picture is so clear even on the basis of evaluation of the various factors on the basis of various tests required to be considered as stated in the case of Siddharth J. Desai so that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sai. Considering those factors the position emerges as under : (i) The land was classified in the revenue records as agricultural and it was subject to payment of land revenue. (ii) The land is ordinarily used for agricultural purposes at or about the relevant time. (iii) Such user of the land was for a long period and there is no evidence to suggest that in past such user was not made. (iv) The income derived from the agricultural operations does not have rational proportion to the investment made in the land. (v) No permission was applied for the non-agricultural use of the land. (vi) On the relevant date the land has not ceased to be put to agricultural use since there is no alternative use also. (vii) Regarding ploughing and tilling there is no clear evidence against the assessee since it was reported in fact that there were signs of cultivation and a well existed and the grass was grown. (viii) Regarding intention of the owner of the land to use it for agricultural purposes there is no clear evidence giving a clue either way. (ix) The land is not situated in developed area but nearby area is in the process of development as stated by the Income-tax Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to the charge of land revenue (if the land is subject to such a charge), payment of irrigation charges (if the land gets State-provided irrigation facility), its possession with the person named in the record of right, the crops sown and grown in it (if it has been subjected to cultivation and growing of any crop) would necessarily find place in other relevant records like Pabani Patrak (From Nos. 7, 7A 12), Record of possession, Record of levy and payment of Government dues, etc. All such entries, existing as they are in public documents, carry a presumption of correctness in their favour. But such a presumption is not conclusive. It is rebuttable. The entries are to be presumed to be correct until the contrary is proved. By leading proof to the contrary not only the correctness of the entries in such records relating to the ownership and possession of the land but also with regard to its very character as agricultural land may be successfully challenged and disproved. It is in this view of the nature of the presumption in favour of the correctness of the entries in Revenue Records that in the administration of Direct Tax Laws the Taxing Officer is burdened with the init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ath the lines it is very much evident that the assessee has planted the aforesaid plants only one and a half year before the sale of land simply to create an evidence that before the sale of land there were certain plants. These plants which were planted would not have even grown reasonably and obviously, there cannot be any question of their bearing fruits. This act of the assessee of putting plants is merely to clock the real nature of the land which only had growth of the spontaneous grass for which no agricultural operations are required." 4.3 From the above extracts from the order of the ITO it is evident that he had sought to shift the initial onus on Revenue to the respondents by bringing the following positive evidence on record : (i) The land in question was situated in the midst of a residential area which was fast developing and almost on all sides of it there existed several old and new bungalows besides the Sardar Vallabhbhai Regional Engineering College; (ii) The land in question situated in Municipal limits and was included in the Notified Town Planning Area; (iii) There were no traces of agricultural activities in the near about areas; (iv) The land in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7.1 Regarding the agricultural operations carried on in the land in question the evidence available on record is like this. The ITO has observed, and rightly so to my mind, that the respondents, and for that matter their ancestors also, are not agriculturists by profession. Share-brokerage appears to be and to have been their business. That the respondents and their families have not cultivated the land in question by themselves is also borne out by good material on record. I agree with my learned brother that the character of a land as being agricultural land does not depend upon the profession of its owner. But, to my mind, in the absence of cultivation of the land by any other person, either on his own behalf or on behalf of the owner of the land, and particularly when the question of carrying on agricultural operations in the land at a particular point of time or for a particular period assumes importance in the determination of the character of the land, the profession of the owner himself, though not at all decisive in itself, becomes somewhat relevant having a bearing, howsoever small it may be, upon the determination of such question. 7.2 What is available on record o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per sq. yd. as compared to Athwa land sold Rs. 6 per sq. yd., in view of its very small frontage and dispute in respect of its possession (74, 75). It is thus evident that at the time of the transfer of the land by the firm to the respondents it was valued in terms of yards and not acres. The version regarding its possession being in dispute is required to be appreciated in its right perspective which has a bearing upon the question of its cultivatory user as well as upon the correctness of the entries in the Revenue Records. 9. It has been seen above that Koli Prabhu Ukabhai had entered into cultivatory possession of the land in question in the year 1935 or may be prior to that. There is no evidence from the side of the respondents on the point as to how long had the said Prabhu Uka remained in possession of the land. What is gathered from the record is that he was holding the said land as tenant on "Tiller's Day", i.e. on 1-4-1957 and, therefore, he was deemed to have purchased the said land as per provisions of sec. 32 of Bombay Tenancy Agricultural Lands Act, 1948 (48). By his order dated 9-9-59 in RTS 1-58 the Mamlatdar Saheb appears to have taken note of the entry of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that after the transfer of the land to them in 1957, they had grown grass and fruit plants therein and the income in their account books and also in their Income-tax Returns fro, A. Y. 1958-59 up to A. Y. 1965-66. 12.1 Before I appreciate the respondents' evidence on the point of actual cultivation of the land on and up to the date of transfer, I consider it worthwhile to refer to the examination thereof by the ITO. The ITO has commented upon that aspect of respondents' evidence in paras 6 7 of his order (13, 14, 15) as follows : "6. The aforesaid copy of the 'UMRA VILLAGE' Agricultural income and expenditure A/c as standing in the account books of M/s. Shivlal Khandwala Sons, Surat for S. Y. 2018 and 2019 only contains on the income side receipts of the sale of grass of Rs. 551 for the entire aforesaid land in S. Y. 2018 and the identical amount of Rs. 551 in S. Y. 2019 from one Shri Soma Dhaya and an identical amount of Rs. 150 paid in both the years to the same person, i.e., Shri Soma Dhaya for miscellaneous Majuri done by him. In S. Y. 2020 there is an account named 'UMRA LAND ACCOUNT' which has been debited by an account of Rs. 1,179 which includes the cost of certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54) pertaining to S. Y. 2021 to 2014, it is gathered that though agricultural income from various lands, including the land under consideration was shown yet no reference to the expenses incurred in respect to cultivating of land and sowing, growing and reaping any crop was made anywhere. In S. Y. 2015 (155, 156, 157) loss of agricultural income was mentioned but it was not explained as to how this loss was occasioned. In S. Y. 2016 (116) Rs. 150 were earned from sale of grass in the land at Umra but without incurring any corresponding expenses as have been shown in subsequent years. 13.1 The method of writing the account books of the respondents seems to have recorded a change from S. Y. 2017 onward. In the account of the respondents Rs. 551.00 stated to have been received from sale of 'Green' grass and 'Sundhiya' to Soma Dahya Ahir was shown on Cr. side and expenditure of Rs. 150 on Majoori of Umra land was shown on Dr. side. What for this 'Majoori' was paid, either for growing the 'green grass' or for cutting the spontaneously grown grass is not gathered from the accounts of this year but that fact is clearly gathered from the details of income and expenditure in subsequent ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joshi credited. 250.00 To Mohanlal Gulabbhai of labour contract (to plant the sprouts) S.Y. 2021 575.00 Aso Vad 30 Wednesday. By proceeds of grass sold to Jivabhai Pitamber of land of Umra village S. No. 57/3 debited to his account S.Y. 2021 1500.00Maha Vad 9 Wednesday. 220.00 Magsar Vad 30 Saturday to By Rasiklal Somchand Shah labour of digging a well Promoter of Shrinagar Co- Magan operative Housing Society of Madhu .... Rs. 151.00 off-hand priced of the Chiku, Buckets, rope, baskets timber Lemon Guava trees planted and pulley .......Rs. 39.00 and of well in land of village Labour of drawing and watering Umra the plantations and watching ......Rs. 30.00 189.00 Magsar Vad 30 Monday, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity were extended and the Municipality had declared its intention to make a Development Plan under the Town Planning Act, 1954 (31). A notification u/s 4(1) of the said Ac regarding old and new limits was also published in Official Gazette on 5-12-1963 (50). The preparation / submission / finalisation of the Development Plan by the Municipality, however, appears to have been delayed due to one reason or the other. But this state of affairs was sufficient to make the respondents aware of the important consequential difference in the charge of capital gains tax in the transfer of agricultural and non-agricultural land. The land in question was not being subjected to any sort of cultivation and/or other agricultural operations. It was, therefore, necessary to give it collate of agricultural land whose income was exempt under the relevant Tax Law. The respondents, therefore, necessary to give it a colour of agricultural land whose income was exempt under the relevant Tax Law. The respondents, therefore, thought it proper to behave and conduct in the way they did. First, the growth of spontaneous grass was tried to be represented as "green grass" as if it was sown or grown. Then several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, etc., over them - the land at village Athwa was partly occupied by the assesses' bungalow and partly by fruit trees. With regard to the factual position of the land under consideration, Mr. Mandlik reported on 24-2-1966 as follows :- "2. Regarding land at Umra, it was seen that there is a well and there was also some sign of cultivation. The assessee has produced the copies of Pabani Patrak and Panchnama saying that the said land was used for agricultural purposes. In my opinion, there fore, no action for taxing capital gains is necessary." (176) 17.1 Taking pointwise, the evidentiary value of this report comes to this : (i) The so-called well was dug, as has been seen above, in S. Y. 2021 only, sometimes before its transfer along with land by the respondents to the Housing Society. (ii) The land had been transferred along with the 317 Chiku, Lemon and Guava plants thereupon. They were not found by Mr. Mandlik. Presumably, they had been removed/uprooted by the Housing Society as that had purchased the land for use for residential purposes and not for carrying on any agricultural operations. (iii) No doubt, Mr. Mandlik declares to have seen 'sign of cultivation' in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) the limits of Surat Municipality were extended in February 1963 and the said Municipality declared its intention to make a Development Plan under the provisions of Town Planning Act, 1954 and the old and new limits were also published in Official Gazette on 5-12-1963. The land under consideration fell within the Town Planning Scheme; (5) the land in question was situated in the midst of residential area which was fast developing; (6) it was only in the year 1964-65 that certain pants of Cheeku, Lemon and Guava were stated to have been planted in the land in question; (7) a well was also dug (not constructed) in the land in the year 1964-65; (8) the Cheeku, Lemon and Guava plants were not found on spot by Mr. Mandlik, ITO on 20-2-1966; and (9) the land was first agreed to be sold in April 1964 to M/s Gandhi Ravals but was later on sold for Rs. 2,15,163 on 24-2-1965 to a Housing Society called Srinagar Co-operative Housing Society, Surat for residential purposes. 19. The above established facts lead me to the irresistible conclusion that as no agricultural operations had been carried on in the land in question from year to year since 1957 and/or even prior to that ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he land was in a village which had come in the municipal limits of Surat and the sale was also to a co-operative housing society. Before the Income-tax Officer, reliance had been placed in the entries in the revenue records where it was shown that agricultural operation was being carried on. In the Panipatrak for the year 1964-65 it was noted that there were certain plants of Chiku, lemon and guava on the said land and the Chief Officer of Surat Municipality had stated in a letter that the tax on the land was on the classification as agricultural land. Some income form the fruit-bearing trees and sale of grass had been shown in the earlier years. The Income-tax Officer, however, observed that he did not find any cultivation having been done on the land and from the year 1958-59 to the year 1963-64 only grass was grown on the land. He held that the grass was of spontaneous growth and only in the year 1964 the fruit trees were planted. According to the Income-tax Officer, the plantation of fruit trees was only to create an evidence before the sale of the land to show that it was agricultural land. 4. The Income-tax Officer has also referred to the small income from agricultural in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are to be adjudicated : (a) The grass grown on the land was of spontaneous growth and no cultivation was made by the appellant. (b) The land was fallow for a number of years before the actual sale. (c) The land was situated in an area which was developing very fast and as such the land was no longer fit for agricultural purposes. (d) The land was sold to a housing society which purchased the land with an idea of using it for non-agricultural purpose. (e) The appellant could have got the permission to get the land converted to non-agricultural category if he had applied for the same." Before the CIT (Appeals) it was pointed out that the grass which was grown was not self-generating but had been cultivated by putting grass seeds and paying wages to labourers for cultivating it and then cutting it. The CIT (Appeals) referred to the decision of the Gujarat High Court in the case of Dr. Motibhai D. Patel v. CIT [1981] 127 ITR 671 and other cases and held that the land was agricultural land. The reasons given by him were as under : "10. In the present case, the entry in the Land Revenue Register shows the land as agricultural. The land revenue has been paid by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factors considered in the case were in favour of the assessee and the land in question should be held to be agricultural land. 7. The Judicial Member was, however, inclined to take a different view and considered the history of the case in detail. According to him, the Income-tax Officer had shifted the initial onus on revenue to the assessee by bringing some positive evidences on record. He referred to the following factors : (i) The land in question was situated in the midst of a residential area which was fast developing and almost on all sides of its there existed several old and new bungalows besides the Sardar Vallabhbhai Regional Engineering College; (ii) The land in question situated in Municipal limits and was included in the Notified Town Planning Area; (iii) There were no traces of agricultural activities in the near about areas; (iv) The land in question was though recorded as agricultural land and as such subject to the payment of land revenue yet no cultivation had been done in it from 1958-59 to 1963-64 and during that period only spontaneous grass had grown over it; (v) The Chiku, Lemon and Guava plants were planted only in the year 1964-65. He re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure incurred was only Rs. 121 which could not be considered to be sufficient for watering the plants which themselves had cost about Rs. 1,000 or more. He also referred to the fact that the land was to be sold to a housing society for Rs. 2,15,163 which shows that the land had become a developed land for the purpose of housing and in order to show that it was an agricultural land some evidence was created. 8. The learned Judicial Member also did not attach much importance to the report of Shri Mandlik as it was not stated in it as to what sort of agricultural operation was going on this land. He referred to the fact that Shri Mandlik had not referred to the fruit-bearing trees in 1966 and it might be that they were removed by the housing society. He also pointed out that in Panipatrak of 1964-65 and in Panchnama there was no mention of cultivation of land and there is only mention of fruit trees. He summed up his findings as under :-" 26. Now to sum up my findings, I hold that : (1) The land in question was no doubt recorded as agricultural land in Revenue Records and was subject to payment of land revenue but the presumption arising in favour of correctness of entries i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther he had seen this particular land when he had given his report. Relying on the analysis of the facts in Judicial Member's order, he submitted that there were no agricultural operations after 1938 and the assessee was not an agriculturist and the land in question was within the municipal limits of Surat. He stated that the totality of circumstances had to be seen and the principles as laid down in various case laws should be applied. He referred to the decisions in the case of Officer-in-Charge (Court of Wards) and the decisions of the Gujarat High Court in the cases of Siddharth J. Desai, Arundhati Balkrishna v. CIT [1982] 138 ITR 245, Sarifabibi Mohmed Ibrahim, Smt. Lilavati Thakorelal Patel and Yaswanti T. Bhatt V. CWT [1978] 114 ITR 318. According to him, considering the totality of the circumstances it could not be held that the land was subjected to any cultivation in several years before the sale. He pointed out that the expenses on grass was meagre and the purchase of grass seeds alone could not prove that there was cultivation of grass on the whole land. Referring to the meagre expenditure, he submitted that it was not sufficient for carrying on any agricultural operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes. It was also contended that when the land was sold to the assessee in 1957 the sale was not in yards as stated by the learned Judicial Member. He pointed out that up to 1957 when the land was with the Ganotia the firm used to pay land revenue and certain interest payment was being received and shown as agricultural income after giving the facts. 13. Referring to the report of Shri Mandlik he submitted that the report of 1966 was very clear and Shri Mandlik on re-examination had accepted that he had visited the land and had given a report. In his report he had stated that signs of cultivation were found on this land and a well was also dug by that time. It was submitted that this being a contemporaneous record only one year after the sale importance should be attached to it and the land should be considered as agricultural land. Regarding the planting of fruit trees he submitted that it was not for creating evidence and it was merely a surmise of the Judicial Member that it was done for creating evidence. He further submitted that the fact that it was purchased by a housing society should not mean that needed it for housing purposes but the thing to be seen is whether at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the owners were concerned, they were getting the rent and the work of cultivation was being done by the Ganotia at that time. This position continued till 1957. When the Ganotia died the tiller could not get the benefit of getting the land in the name of the tiller as on that Tiller's Day and the lands reverted to the firm which in its turn transferred it to the present two assessees. The first assessment of these two persons which is available on record is for the asst. year 1958-59 where the agricultural income had been shown by both the assessees. This was one of the lands in the possession of the assessees and after noting this fact the Income-tax Officer had exempted this income from tax. In the details available on record the income from Umra land is also shown and the shares of the two assessees are shown duly in their accounts. The surplus from the sale of the agricultural land was also duly shown in the accounts. At that point of time there could not have been any intention of showing agricultural income or agricultural land when it was not there. This position continues from year to year and it is seen that the agricultural income from the land at Umra village has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agricultural produce. There is also no dispute that the potential of the land had improved and its value was also going up as it could be used in future when the city was developed. However, in view of the principles laid down by the courts one has to see whether the land which was basically agricultural land in the past has continued to be used as an agricultural land or the user was changed. No material is there on record to show that the user was changed to non-agricultural purposes. The use for cultivating grass and selling the grass and later on putting the fruit trees might have been planned by the assessees in order to sell the land when it is convenient, but that would not take away the basic nature of the land which was agricultural. 18. It is not correct to say that the land was sold on the basis of per yard though while fixing the rate it might have been in the mind of the purchaser which was a co-operative society. It cannot be denied that the purchaser had not purchased it for the purpose of agriculture. That in my opinion, could not be a circumstance against the assessees. The allegation that the planting of fruit trees was meant to create evidence before sale m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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