TMI Blog2014 (10) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... essment. The material which is available with the AO even along with 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 - Sec. 147 cannot be read in a manner that it can be applied only in a case where the assessment has already been made – following the decision in Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] - the AO had not made any assessment and had not formed any opinion - the AO in view of explanation 2(b) can take action u/s 147 in a case where the return has been processed u/s 143(1) – thus, the reopening is invalid. Computation of capital gains for brokerage incurred – Held that:- 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 and we had to go through one small rocky way - No agricultural activities or operations being carried out on the land were foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 6-6-2014 - P.K. BANSAL, AND D. T. GARASIA, JJ. Nishant K. for the Appellant. Jitendra Jain for the Respondent. ORDER P.K. Bansal, Accountant Member - These appeals have been filed by the Department and the Cross Objections by the Assessee against the orders of CIT(A), all dt. 8.4.2013 for A.Y 2007-08. The following effective grounds of appeal have been taken by the Revenue and the Assessee in their respective Appeals and Cross Objections. ITA NOS. 129 130/PNJ/2013 1. The Ld. CIT(A) erred on fact treating the sale of land at Loliem Canacona Goa was not a capital asset as per section 2(14) of the IT Act. 2. The Ld. CIT(A) has not considered in computing capital gain of ₹ 81,46,760/- in respect of sale of land at Lolim, Canacona, Goa. 3. The Ld. CIT(A) erred on fact and in law has directed to delete the addition on the grounds that sale of land is treated as agricultural land and not a capital asset. 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 ₹ 81,46,760/- from sale of land at Lolim, Canacona Goa, which is situated in the village pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on Land, Land not agricultural - Liable to capital gains in view of case law in the case of Fazalbhoy Investment Co. Ltd. vs. CIT (Bom) 176 ITR 523. 6. The Ld. CIT(A) failed to appreciate the fact that the land is sold or transferred to a non agriculturist for a non agricultural purpose or whether or not is likely to be used for agricultural purpose soon after its transfer is also a relevant factor germane to the determination of the issue in view of case law in the case of Gopal C Sharma Vs. CIT (Bom) 209 ITR 946. CO NO. 59/PNJ/2013 (ITA NO. 178/PNJ/2013) 1. The learned CIT(A) erred in law in not adjudicating the ground that the Assessing Officer erred in law and on facts in assuming assessment jurisdiction. 2. The learned CIT(A) erred in law in not adjudicating the ground that the Assessing Officer further erred in law and on facts in assuming jurisdiction u/s 148 and consequently the assessment order passed u/s 147 r.w.s. 144 in bad in law. ITA NOS. 156 to 161/PNJ/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 judgemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 1. On the facts and circumstances, the ld. CIT(A) grossly erred by not considering the fact that it is not mentioned in the sale deed that property sold is an agricultural land. 2. On the facts and circumstances, the ld. CIT(A) erred by not appreciating the fact seen from the extract of Form No. 1 XIV furnished by the Sub-registrar that the details of cropped area is mentioned as 'NIL'. 3. On the facts and circumstances, the ld. CIT(A) erred by not appreciating the fact that assessee has not shown any agricultural receipts in the returns of income filed for the previous three years preceding to the A.Y. 2007-08 evidencing that the assessee is in receipt of agricultural income. 4. On the facts and circumstances, the ld. CIT(A) grossly erred by not considering the fact that assessee has sold the property to a non-agriculturist for non-agricultural purpose. CO NOS. 36 37/PNJ/2013 (ITA NOS. 174 175/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 havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in adopting the fair market value of agricultural land sold during the year as at 1st April, 1981 @ ₹ 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. 2. All these appeals and cross objections, since involve common issue, both the parties agreed that all these appeals and cross objections be disposed off on the basis of the facts in the case of Pundalik Krishna Khaunte (ITA No. 129/PNJ/2013 and CO No. 25/PNJ/2013). It was also stated that the facts involved in all these cases are common and whatever view this Tribunal may take in the case of Pundalik Krishna Khaunte (supra), the same view will be acceptable in case of other Assessees. Since the facts involved, and the issues involved, in all these cases are common, we, therefore, agreed that all these appeals shall be disposed off on the basis of the facts involved in the case of Pundalik Krishna Khaunte (supra). 3. The brief facts involved in the case of Pundalik Krishna Khaunte (supra) are that the Assessee filed his income tax return for A.Y 2007-08 on 30.7.2007 at an incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in of ₹ 81,46,764/- as computed by him in respect of the sale of the aforesaid agricultural land at Loliem, Canacona, Goa, which according to him was Capital asset u/s 2(14) of the Income Tax Act. Similarly, the capital gain was assessed in the hands of all other assessees as they were also co-owners. The Assessee and all other co-owners went in appeal before the CIT(A). 5. The first issue involved in the appeal before the CIT(A), relates to the validity of the action initiated u/s 147 and also the validity of the assessment made in consequence of notice issued u/s 148. The second issue relates to whether the agricultural land sold by the Assessee is a Capital asset as defined u/s 2(14) of the Income Tax Act or not. The third issue relates to the computation of Capital Gains - in case the agricultural land is treated as Capital asset, what will be the fair market value as on 1.4.1981. The Assessee paid brokerage to the broker on the sale of the land. Whether this brokerage is deductible or not? 6. The CIT(A) decided the issue relating to the re-opening of the assessment against the Assessee. The issue relating to chargeability of Capital Gains was decided in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully considered the same alongwith the order of the tax authorities below as well as the material and the relevant provisions of the Income Tax Act. We have gone through the case laws as has been relied on before us from both the sides. Before deciding the issue involved, it is expedient to discuss the relevant provisions. The relevant provisions of Sec. 147 are reproduced as under : 147. Income escaping assessment. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance or any other allowance under this Act has been computed; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4. For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 10.1 From reading of this section, it is apparent that this section empowers the AO to assess or re-assess income chargeable to tax if he has 'reason to believe' that income for any assessment year has escaped assessment. This section authorizes the AO not only to re-assess but also to assess the Assessee in respect of an income wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec. 147 as substituted w.e.f. 1.4.1989. Sub-clause (b) of the explanation is relevant for us. This sub-clause clearly mandates that where income tax return has been filed by the Assessee 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 will be deemed to be a case where income chargeable to tax has escaped assessment. In our opinion, explanation 2(b) is clearly applicable in the case of the Assessee in view of the proposition of law as pronounced by the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) as the assessee has duly furnished the return but no assessment u/s 143(3) has been framed by the assessing officer. In the case of the Assessee, we noted that the return for the impugned assessment has been processed u/s 143(1) and issued the intimation. No decision was brought to our knowledge by the ld. Advocate how the explanation 2(b) will not apply in the case of Assessee. 10.3 No doubt in the case of Orient Craft Ltd. (supra) the Hon'ble Delhi High Court under para 17 while dealing with the specific argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, do not agree with the submission of the ld. Advocate on this issue and reject the plea advanced in this regard. 10.5 Now, coming to the second submission of the ld. Sr. Advocate that in view of the decision of the Hon'ble Delhi High Court in the case of Orient Craft Ltd. (supra) as given in para 18, there must be fresh tangible material which should have come in the possession of the AO subsequent to the issue of the intimation, we noted this observation of the Hon'ble High Court in that case. We also noted that the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) nowhere took the view that some fresh tangible material should come subsequently in the possession of the AO while taking action u/s 147 after the return is processed u/s 143(1). The Hon'ble Supreme Court while comparing the old provisions of Sec. 147 and the provisions as has been substituted w.e.f. 1.4.1989 has clearly laid down under para 17 of its decision that under the substituted Sec. 147 existence of only the first condition is sufficient. If the AO, for whatever reasons, has reason to believe that income has escaped assessment, it confers jurisdiction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) as in that case, the AO had not made any assessment and had not formed any opinion. Therefore, on the basis of the material which is available in the return or alongwith the return with the AO, the AO, in our opinion, in view of explanation 2(b) can take action u/s 147 in a case where the return has been processed u/s 143(1). We are bound to follow the decision of the Hon'ble Supreme Court. Even we noted that the decision of the Hon'ble Delhi High Court is not binding precedents on us in view of the decision of the full bench of Hon'ble Delhi High Court in Usha International Ltd.'s case (supra). 11. Although, we are of the opinion that the issue is duly covered by the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) but still we decided to go through the relevant provisions from which the word 'tangible material or information' has been interpreted by the courts while interpreting the provisions of Sec. 147. 11.1 We noted that initially the provisions for income escaping assessment were brought into the statute by way of Sec. 34 incorporated under the Income Tax Act, 1922. This section reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation in his possession, has reason to believe about the escaped income. U/s 34(1)(b) thus the reason to believe for escapement of the income must have arisen in consequence of the information coming in the possession of the AO. The Hon'ble Supreme Court has analysed the word 'information' as used in Sec. 34(1)(b) in the case of Kalyanji Mavji Co. v. CIT [1976] 102 ITR 287 and has categorically held in the following manner : 'The word information in section 34(1)(b) is of the widest amplitude and comprehends a variety of factors. Nevertheless, the power under section 34(1)(b), however wide it may be, is not plenary because the discretion of the Income-tax Officer is controlled by the words reason to believe . Information may come from external sources or even from the materials already on record or may be derived from the discovery of new and important matter or fresh facts. Section 34(1)(b) would apply to the following categories of cases : (1) where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). 11.4 In this section also, for the purpose of 'reason to believe' it is necessary that the 'reason to believe' must have arisen in consequence of the information in the possession of the AO. The information must precede the reasons to believe if we read the provisions of Sec.147(b). We noted that the Hon'ble Supreme Court had occasion to interpret the word 'information' as used in Sec. 147(b) in the case of CIT v. A. Raman Co. [1968] 67 ITR 11(SC) as reproduced below : 'The expression information in the context in which it occurs [in section 147(b) of the Income-tax Act, 1961 must mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. To commence the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were under the Income Tax Act prior to 1.4.1989 it is apparent that for arriving at 'reason to believe' that income chargeable to tax has escaped assessment it was necessary that the AO must have information in his possession prior to arriving at reasons to believe that income escaped assessment. This information has been interpreted by the courts from time to time in the form of tangible fresh material or facts but when we looked into the provisions of Sec. 147 which has been substituted w.e.f. 1.4.1989, we noted that there are drastic changes in this section. Now, the only condition which requires to be fulfilled is that the AO must have 'reason to believe' that any income chargeable to tax has escaped assessment. This section does not talk that 'reason to believe' must be based or must have been in consequence of information coming into the possession of the AO. Therefore, in our opinion, for taking action u/s 147 the 'reason to believe' can be based on the basis of the material available with the AO on the basis of the return filed by the Assessee. Requirement of new material or fresh tangible material coming in the possession of the AO as a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs u/s 147 of the Act even when intimation u/s 143(1) had been issued. Thus, with the amendment brought to Sec. 147 of the Act on and from 1.4.1989 and the elucidation on the scope of the authority and jurisdiction of the officer u/s 147 of the Act, we are of the firm view that the proceedings initiated by the AO u/s 147 are valid and the AO could have taken the action u/s 147 on the basis of the material available and filed alongwith the return. There is no need of any fresh tangible material for coming to the 'reason to believe' that the income has escaped assessment in view of explanation 2 clause (b) of Sec. 147. 12. We have gone through the various case laws as has been relied on by the ld. AR. In the case of Smt. Varsha Goyal (supra) we noted that even though the return was processed u/s 143(1)(a), proceedings were initiated u/s 147. The Assessee challenged the initiation of the proceedings. When the matter went before the Hon'ble High Court, the Hon'ble High Court noted that the AO has not specified what items of jewellery and which share certificates were not recorded in the books of accounts. Therefore, the Hon'ble High Court took the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy of the reasons. This decision has also been rendered on 14.2.2005, prior to the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra). This decision nowhere talks that fresh material is required for reopening the assessment framed u/s 143(1). In case of Balkrishna Hiralal Wani (supra) we noted that the Hon'ble Bombay High Court took the view that there was no tangible material before the AO to form the conclusion that income had escaped assessment. This decision also does not talk of that fresh material is required before reopening of assessment. We have also gone through the decision of the Hon'ble Bombay High Court in the case of Prashant S. Joshi (supra). In this decision also, we noted that the Hon'ble High Court took the view that only reasons recorded by the AO has to be considered i.e. bona fide of the reasons have to be looked into. This decision also, in our opinion, will not be applicable to the facts before us and this decision also nowhere requires that there must be fresh material to be brought on record by the AO. In the case of Batra Bhatta Co. (supra) we noted that the assessment has been reopened by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age panchayat at Loliem in Canacona, Tal. South Goa out of total sale consideration of ₹ 16,34,24,748/-. The AO also noted that similar sale consideration has been received in 5 other cases, therefore, the AO re-opened the case to bring to tax the escaped income of Capital Gains as the Assessee has not declared the said income either as a Capital Gains or business income. The Assessee mentioned that the sale proceeds received from sale of the agricultural land is not a Capital asset u/s 2(14) as it is situated beyond 8 kms. from the local limits of the municipality. In response to notice issued u/s 148, the Assessee submitted that the original return filed may be taken as return filed in response to notice u/s 148. The Assessee asked for copy of the reasons recorded and thereupon the Assessee submitted the objections. The AO disposed off the objections. The Assessee before the AO submitted that the said land sold is an agricultural property which is neither located in any municipality nor situated within 8 kms. from any notified municipality, therefore, it cannot be considered as per Sec. 2(14) to be a Capital asset. Reference was made to Form I XIV issued by the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ak etc. takes place. The above property is within the limits of Loilem Village Panchayat and around 15 kms. from the Canacona Municipal limits. ' 15.2 On the basis of the report the AO took the view that on the captioned land no agricultural operations are being carried out and he took the view that Assessee has to prove that the land was in a cultivable state. Reliance was placed on the decision of Tea Estates India (P.) Ltd. case (supra) wherein it was held that Agricultural land' should comprise of following characteristics: (i) It must be a land; (ii) It must pertain to or be connected with cultivation; (iii) It must involve expenditure of human labour and skill for the purpose of cultivation or for keeping it in a cultivable state. 15.3 AO took the view that the land sold in question cannot be regarded to be agricultural land. It was also held that in the sale deed it is not mentioned that the property sold is an agricultural land. Referring to the extract of Form I XIV furnished by the Sub-Registrar he noted that in these forms details of cropped area is mentioned as 'Nil' and there is no mention of agricultural activity carried on. Ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for Non-agricultural use by the respondents. 6. Since the facts of this case are identical to that of CIT vs. Smt. Debbie Alemao CIT vs. Minguel Chandra Pias respectfully following the judgement of the jurisdictional Bombay High Court, the AO is directed to delete the addition made as Capital Gains arising on sale of agricultural land and this Ground of Appeal of the Appellant is allowed. 7. In view of the above, other Grounds of Appeal of the appellant become Infructous and therefore, they are not being adjudicated upon. For statistical purposes, the appeal is allowed.' 16. The ld. AR before us vehemently contended that the land sold by the Assessee is an agricultural land and therefore it is not a capital asset within the meaning of Sec. 2(14) of the Act. For this our attention was drawn to Sec. 2(14) and pg. 271-272 of the paper book consisting of copy of Form I XIV issued by the Officer in-charge, Land records and it was submitted that this form certified that the dry crop area is 2,18,250 sq. mtrs. The said certificate further states that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Milani vs. JCIT, 114 ITD 428 (Pune), especially at pg. 447 for the proposition of law that agricult ural produce would have been consumed by the Assessee and therefore no question of returning the agricultural income arises. Referring to the provisions of Sec. 2(14) of Income Tax Act, 1961 it was contended that it is not necessary that the land should generate agricultural income and assessed to tax for being treated as agricultural land. In the Income Tax Act, 1922 and the proposed DTC it is specially made acondition. Under Sec. 2(14) of Income Tax Act, 1961 the only condition provided is in regard to distance of the land and population of the region in which the land is situated. The AO on both these accounts has given a finding in favour of the Assessee. Difference in the language of the 1922 Act and 1961 Act has judicially been recognised by the Hon'ble Calcutta High Court in the case of CIT vs. Sutton Sons Ltd., 127 ITR 57 at pg. 60 where the Hon'ble Court has observed that there is a significant departure in the definition of Capital asset assessed in the 1961 Act as it stood at the relevant time so far as agricultural land is concerned. Capital asset under the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted that there are hardly 3500 trees on land of 2,18,250 sq. mtrs. The land cannot be used for agricultural purpose as there is no source of water. Even there is no arrangement for watering the land. Whatever trees are there, they are old trees which have spontaneously grown. The land cannot be regarded to be an agricultural land. Attention was also drawn to the decision of the Hon'ble Supreme Court in the case of CIT vs. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466. In respect of the decision relied on by the Assessee, it was submitted that those decisions are not applicable. 17.1 In the rejoinder, the ld. AR relied on the following decisions : (i) Chand Prabha Jain vs. ACIT, 34 CCH 125 DelTrib (ii) Gemini Pictures Circuit P. Ltd. vs. CIT, 130 ITR 686 (Mad.) (iii) Lavleen Singhal vs. DCIT, 111 TTJ (Del) 326 (iv) ITO, Indore vs. Ashok Shukla, [2012] 139 ITD 666 (Indore) (v) CIT vs. P.C. Joshi B.C. Joshi, 202 ITR 1017 (Bom) (vi) CIT vs. Smt. Debbie Alemao Joaquim Alemao, 331 ITR 59 (Bom) (vii) CIT vs. Minguel Chandra Pais Anr., 282 ITR 618 (Bom) Our attention was also drawn towards Goa Agricultural Tenancy Act, 1964 which defines lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) any work of art. Explanation. For the purposes of this sub-clause, jewellery includes (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel; (iii) agricultural land in India, not being land situate (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a 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 according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d being used by some possible future owner or possessor for an agricultural purpose. 17.5 Similarly, it was held by the Delhi High Court in Shiv Shankar Lal v. CIT [1974] 94 ITR 433 that where a land has been put to agricultural purpose for a long period and the agricultural operations were temporarily suspended, the land does not cease to be an agricultural land. The Bombay High Court in Smt. Debbie Alemao's case (supra) held that even though agricultural operations on land does not result in generation of surplus, the land would still continue to be treated as agricultural land. 17.6 The Madras High Court in the case of MS Srinivasa Naicker v ITO (2007) 292 ITR 481 (Mad) held that where the lands in question were under agriculture operation on the date of sale, these were not to be treated as capital assets and it mattered very little how subsequent purchasers intended the land in question to be put to use. 17.7 The Hon'ble Supreme Court had the occasion to define the word 'agriculture' in the case of CIT v. Raja Benoy Kumar Sahas Roy (supra). In that case the Hon'ble Supreme Court in respect of agriculture and agricultural purposes held as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding plantations and groves, or grass or pasture for the consumption of beasts or articles of luxury, such as betel, coffee, tea, spices, tobacco, or commercial crops like cotton, flax, jute, hemp, indigo. All these are products raised from the land but the term agriculture cannot be confined merely to the production of grain and food products for human beings and beasts; it must be understood as comprising 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 and sal and piyasal trees, casuarina plantations, tendu leaves and horra nuts. There is no warrant at all for extending the term agriculture to all activities which have some relation to the land or are in any way connected with the land, for the term agriculture cannot be dissociated from the primary significance thereof, which is that of cultivation of the land. The extension of the term agriculture to denote such activities as breeding and rearing livestock, dairy farming, butter and cheese-making, and poultry farming, is an unwarranted distortion of the term.' 17.8 The Hon'ble Supreme Court clearly la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act. While deciding this question, the Hon'ble High Court took the view that irrespective of the nature of the produce or product of the land, whatever is grown on the land aided by human labour and effort, whatever does not grow wild or spontaneously on the soil without human labour or effort would be an agricultural product, and the process of producing it would be 'agriculture' within the meaning of that expression in Sec. 2 of the Income Tax Act and ultimately the Hon'ble High Court took the view that where a mango, coconut, Palmyra, orange, jack, arecanut, tamarind and other trees are planted usually in an enclosed land, these trees require some kind of cultivation or prodding of the soil at the inception when the planting is done and subsequently also at intervals. The Hon'ble High Court nowhere took the view that if the land is uncultivable, it will be regarded that the land is used for agricultural purposes. This decision may help the Assessee only in respect of the portion of the land on which coconut etc. trees are standing but not in respect of the land which is totally uncultivable. 17.10 In the case of Sutton Sons Ltd. (supra) we noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land which is apparent from our personal visit to the site alongwith the counsel of the Assessee and ld. DR, carried out as per the provisions of Sec. 255(6). This decision, therefore, will not assist the Assessee. 17.12 In the case of Deen Mohammad Mian (supra) we noted the observations of the Hon'ble High Court as are made at pg. 347 on which the ld. AR has relied. Even though this case does not deal with the question whether the land is an agricultural land, the relevant observations are laid down as under : 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 pruning and digging of the soil around the roots and it cannot be said that this ceases to be cultivation merely because the whole tree is not replanted every year. 17.13 We may mention that in the case of the Assessee there are only 3850 trees as per the evidence filed by the Assessee on a small portion of the land. This observation can be relevant only for that portion of the land as the rest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riculture mean. 17.16 In the case of Gemini Pictures Circuit (P.) Ltd. (supra) the Hon'ble Madras High Court held as under : 'Held, that the circumstances relied on by the revenue such as the environment and situation of the land, the intention of the assessee at the time of purchase and the high price paid, etc., were not sufficient to dislodge the presumption arising from the user of the land for agricultural purpose. The assessment of the land to urban land tax was compatible with the assessee's contention in view of the wide definition of the term urban land under the Tamil Nadu Act No. 12 of 1966. The fact that from 1953 till the date of sale the land was used as garden and the further fact that the corporation records showed that vegetables were grown on the land showed that the land was garden land retaining its agricultural character. It was not a capital asset within the meaning of s. 2(14) and the surplus arising on its sale was not assessable to capital gains tax.' This decision relates to the provision of Sec. 2(14) before amendment made in 1970. This decision puts the burden on the revenue to prove that the land is not actually used for agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961. If an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not used for agricultural purpose. It was further observed that the land was shown in the revenue records as used for agricultural purposes and no permission was ever obtained for non-agricultural use by the Assessee. Permission for non-agricultural use was obtained for the first time by the purchaser. Therefore, no interference is called for in the order of the Tribunal. This decision, we noted, confirmed the order of the Tribunal as the Tribunal has given a finding of fact. The Hon'ble High Court had no occasion to consider the question whether non-cultivable land can be regarded to be agricultural land. Thus, this decision, in our opinion, will not be applicable to the facts of the case before us. 17.19 In the case of Minguel Chandra Pais (supra) we noted that the Hon'ble High Court held as under : 'The expression agricultural land is not defined in the Act, and whether a piece of land is agricultural land or not has to be determined by using the tests or methods laid down by the Supreme Court in the case of Smt. Sarifabibi Mohmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield. At the same time, the Supreme Court has stated that whether a land is an agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The court has to answer the question on a consideration of all of them by a process of evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. The Supreme Court has further stated that not all these factors or tests would be present or absent in any case and that in each case one or more of those factors may make appearance and that the ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances. A question of fact becomes a question of law, if the finding is either without any evidence or material, or the finding is contrary to evidence or is perverse or there is no direct nexus between the conclusion and the facts upon which that conclusion is based. A perverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The court has to answer the question on a consideration of all of them by a process of evaluation and inference has to be drawn on a cumulative consideration of all the relevant factors. In this case, since the land was not used for agricultural purpose, the Hon'ble Supreme Court took the view that land not agricultural though entered in the revenue record as agricultural. In view of this decision and the decision of the Hon'ble Supreme Court in the case of Officer-in-Charge (Court of Wards) (supra) it can be said that if land is assessed to revenue as agricultural land under the state revenue law, it may be a strong piece of evidence to determine the character of the land but it is not a conclusive evidence. 18. In view of the aforesaid decision, we are of the view that for becoming an agricultural land (i) It is necessary that the land must be cultivable i.e. it must be capable of cultivation. (ii) The revenue record even though ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up. The land appears to be non-cultivable. The ld. DR also submitted her report and the comments of the counsel of the Assessee were also asked for. The Assessee submitted that Income Tax Act does not provide for all season regular watering. There are dry crops which do not require 12 months watering. This region gets heavy rainfall during monsoon further supplemented by river and nalla throughout the year and irrigation is not a condition for agriculture and rainfall and river water is sufficient. It was stated that even after 7 years from the date of sale, the number of dry crop trees visible were more than 3500. Certificate of local authority showing existence of 3500 trees is based on old record prior to previous year 2006-07. From the submission of the Assessee it is not denied that there are more than 3500 trees on total land admeasuring 2,18,250 sq. mtrs. The land does not have any cropped area except dry crop. Certificate has been issued by the officer in-charge, land records on 22.7.2006. These dry crops are only on part of the area. Rest of the area, it is apparent, has not been cultivated for the last several years and the impugned land leaving aside the trees which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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