TMI Blog1981 (9) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Government with effect from 27-10-1964. The assessee was awarded a final compensation of Rs. 2,10,361 on 7-7-1967. The land in question is not agricultural land and has not been subjected to agricultural operations. The capital gains are chargeable to income-tax. The value as on 1-1-1954 is estimated at Rs. 1,000 per acre and the total value of the entire land as on 1-1-1954 would be about Rs. 16,500. Thus the assessee made a net capital gain of Rs. 1,93,860. Besides the amount of interest that accrued year to year will have to be included as a protective basis. The assessee has filed a return disclosing an income of Rs. 3,599, being interest on belated compensation on 17-2-1972. As this has been filed beyond the period prescribed under section 139(4) the return has been treated as invalid and filed. I have, therefore, reason to believe that income chargeable to tax has escaped for the assessment year 1965-66 and that such escapement was by reason of the omission or failure on the part of the assessee to make a valid return under section 139 for the assessment year 1965-66. I request the Commissioner to accord sanction for reopening the assessment under section 147(1)." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adesh High Court relied on by the Commissioner (Appeals) was actually reversed by the Supreme Court, it cannot be said that the decision of the Andhra Pradesh High Court was not binding on the ITO. He also pointed out that as a matter of fact the Supreme Court has not actually reversed the Andhra Pradesh High Court judgment in Officer-in-Charge's case. He urged that the law on material point of time alone should be taken into consideration for deciding whether the ITO would have formed a reasonable belief that income had escaped assessment and that in this case at the point of time when proceedings were initiated, section 147(a), as per the law then prevailing, the ITO could not be said to have had reasonable belief that income chargeable to tax had escaped assessment. 4. We have considered the rival submissions. It is common ground that at the time when the ITO initiated proceedings under section 147(a) the Full Bench decision of the Andhra Pradesh High Court in the case of Officer-in-Charge, which was rendered on 26-11-1968 was holding the field. The entire facts of the case relating to the land in question were available before the ITO at that time. As rightly held by the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not operate as retrospective legislation and that it cannot render invalid the action of the ITO in initiating reassessment proceedings which were valid when they were started. In the instant case the reassessment proceedings were not valid when they were started and the subsequent decision of the Supreme Court in Officer-in-Charge's case on which much reliance was placed by the learned departmental representative cannot render the action of the ITO valid retrospectively. We, therefore, uphold the order of the Commissioner (Appeals) on this issue. Though this finding is enough to dispose of this appeal, yet we proceed to dispose of the other contention raised on behalf of the revenue before us for the sake of completeness and also because the Commissioner (Appeals) had also dealt with the same. 5. Let us now take up the second contention raised by the revenue, viz., that the Commissioner (Appeals) erred in holding that the lands in question were agricultural lands even though no agricultural operations were conducted thereon. The Commissioner (Appeals) had referred to the following circumstances relied on by the assessee in support of her stand that the lands under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference raised on the data produced by the assessee that the lands in question were agricultural lands. The Commissioner (Appeals) further found that the inference drawn by the ITO on some circumstances referred to in the assessment order was not justified. The Commissioner (Appeals) then referred to the ruling of the Supreme Court in the case of CWT v. Officer-in-Charge. The Commissioner (Appeals) thereafter referred to the tests laid down by the Supreme Court in the above decision. Applying the said tests laid down by the Supreme Court to the facts of the instant case, the Commissioner (Appeals) observed that there was great force in the arguments of the assessee that the various facts relating to the purchase of land and its later holding by the assessee showed that the preponderance of probability of the case was in favour of treating the lands as agricultural and the ITO had not brought any evidence on record to displace this probability. He therefore, accepted the assessee's claim that the lands were agricultural. The revenue has come on appeal before us against this finding of the Commissioner (Appeals). 6. The learned departmental representative, Shri C. Satyanarayana s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the judgment of the Andhra Pradesh High Court in CCC Appeal No. 13 of 1968 dated 6-10-1970 in the appeal filed by the Special Deputy Collector Land Acquisition against the father of the assessee Shri Panduranga Rao. He submitted that in that judgment the Hon'ble Andhra Pradesh High Court had held that the mere fact that there were no sales of land adjacent to the father's land cannot be a ground to hold that the above lands were useful only for agricultural purposes and that their value had not correspondingly increased. Later in the same judgment the High Court had proceeded to observe that the acquisition of these lands for industrial development would necessarily show that though these lands were used as agricultural lands they were potential industrial sites even from the year 1958. The above passage in the judgment of the Andhra Pradesh High Court in respect of the lands belonging to the father which were contiguous to the assessee's lands indicated that the assessee's lands were also agricultural lands. Referring to the Pahani Patrikas the learned counsel pointed out that they constituted prima facie evidence to show that the lands were agricultural in nature. He submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desh. The Supreme Court referred to its earlier ruling in CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 in which it was held that the wider meaning given to agricultural operations, such as breeding and rearing of live-stock, poultry farming or dairy farming would not be applicable, and the correct test would be to find our whether human labour had been applied to the land itself in order to extract from its natural powers, added to or aided by other natural or artificial sources of strength to the soil, a product which can yield an income. The Supreme Court observed that in the case before it which was under the wealth-tax there was no definition of agricultural land yet it did not mean that the land to be considered could be divorced from its actual or natural or ordinary user. The Supreme Court observed that if all land, which was capable of being used for agriculture, could be intended to be excluded from 'assets', practically every type of land, including that covered by buildings, would fall within that class and, therefore, it would be impossible to adopt such a wide test. The Supreme Court observed that it could not give a wide meaning as sought to be given by the Ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. The Supreme Court has held that the determination of the character of land is a matter which should be determined on the facts of each particular case, and that the actual condition and intended user of the land has to be seen. The Calcutta High Court in the case of Sutton Sons had held that the question whether a land is agricultural land or not is a question of fact to be determined by the cumulative effect of all the relevant factors but the basic factor to be taken into consideration is whether the land is such where agricultural operations were carried on, on the land or capable of being carried on. The Gujarat High Court reiterated the above position in the case of Smt. Chandravati Atmaram Patel v. CIT [1978] 114 ITR 302. The Gujarat High Court in the case of Motibhai had referred to the ruling of the Supreme Court in Officer-in-Charge's case referred to above and had laid down four tests to find out whether the lands are agricultural in character. The Patna High Court in the case of Tarachand had again referred to the above ruling of the Supreme Court in the case of Officer-in-Charge and referred to certain criteria which should be applied to find out if the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at that time. There is no material brought on record to show that the lands were converted into non-agricultural lands or put to any non-agricultural user. The assessee had produced land revenue receipts for all the years before the income-tax authorities. In this connection the ruling of the Andhra Pradesh High Court in Suri Mukundgirji relied on before us on behalf of the revenue would not support the stand of the revenue that the lands in question should be treated as non-agricultural lands. In that case the Hon'ble Andhra Pradesh High Court was referring to its earlier Full Bench decision in the case of Officer-in-Charge which was set aside by the Supreme Court, in the case of CWT v. Officer-in-Charge. In that connection the Andhra Pradesh High Court observed that it never said that where there were no agricultural operations on land and where buildings were put upon the land merely for the reason that the revenue records described the land as agricultural land, it should be treated agricultural land. The ratio of that decision was that the Tribunal should not be guided solely by the fact that land revenue was being paid on the property. In the instant case, we are not deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of treating the land as agricultural and the ITO had not brought any evidence on record to displace the same. We, therefore, uphold the order of the Commissioner (Appeals). 9. In the result, the appeal of the revenue fails and stands dismissed. Per Shri George Cheriyan, Accountant Member --I agree with the conclusions on all issues as arrived at by my learned brother. 2. On the point as to whether proceedings were validly initiated under section 147(a) of the Income-tax Act, 1961 ('the Act'), I would like to add a few words to highlight certain facets. In the present case, the assessee had filed a return on 17-2-1972 showing income of Rs. 3,599 being interest received on belated payment of compensation for the lands of the assessee which had been acquired by the Government. As the return filed was beyond the period prescribed under section 139(4) of the Act, the ITO treated the same as invalid. 3. The ITO thereafter recorded reasons for initiating proceedings under section 147(a) which have been set out in paragraph 2 of the order of my learned brother and which would bear repetition as under : "In this case the assessee owned 16 acres 33 guntas in Nacharam Vil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent (in the present case) to return not having been filed earlier. The legal position in this regard, which was explained by the Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219, was reiterated in Kantamani Venkata Narayana Sons v. First Addl. ITO [1967] 63 ITR 638 at pages 641 and 642 as under : "In a recent judgment of this court in S. Narayanappa v. CIT [1967] 63 ITR 219 Ramaswami J., speaking for the court, observed : '...the legal position is that if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under section 34. Whether these grounds are adequate or not is not a matter for the court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. It is of course open for the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this acquisition has not been awarded and that the trees have not been correctly counted and reasonably awarded as prayed for. In the judgment, the Second Addl. Chief Judge, City Civil Court, Hyderabad, noticed that the Land Acquisition Collector had stated that the land was dry morum chelka uneven to a large extent and unsuitable for agriculture. Then he referred to the value of Rs. 500 per acre being fixed and thereafter observed as follows : "The L.A. Collector could have explained these lands and the basis on which he fixed the market value at Rs. 500 by examining himself or by examining the village officers or other persons acquainted with the land acquired and other lands which he has referred to. No such attempt is made in spite of taking adjournments. I have, therefore, no hesitation in coming to the conclusion that the fixation of the market value of land at Rs. 500 an acre not being based on any date, cannot be sustained." Had the award by the Land Acquisition Officer remained without any further action being taken thereon, the ITO would have been justified in drawing the inference that the land to a large extent was unsuitable for agriculture. However, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, even if the land was barren, looking to the large area, in the absence of any material to the contrary, it has to be considered that the land is one which is capable of being cultivated because there is no material to show that the land was actually put to any other non-agricultural use. Regarding item (5), there is no material on record before the ITO at the material item, nor regarding item (6). As far as item (7) is concerned, again, the nature of the products is not relevant as long as the land is used and can be used for raising plants, crops or trees which in the absence of any other material, it has to be considered, is possible in the present case. The situation of course, is not determinative of the character. There was, therefore, in our view, no material on the record before the ITO by which, applying the aforesaid tests, he could have formed the belief that the land was not agricultural land and unless there was reason for such belief, the assessment could not have been reopened, if the binding decision of the Andhra Pradesh High Court which was holding the field at that time was to be followed. 8. Subsequently, the decision of the Supreme Court in Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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