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TMI Blog2014 (4) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... Act in purchase of agricultural land from the sale proceeds of the agricultural land. A.O. disallowed the claim on the reason that the land which was sold by the assessee was not land used for agricultural purposes so as to grant deduction under section 54B of the Act. The A.O. took similar stand in other group of cases also of Mr. N. Raghu Varma, Mr. S. Mani Raju and Smt. A. Padmavathi for the same assessment year who also similarly sold the lands to M/s. Aparna Infra Housing Pvt. Ltd. like the assessees in the case of Smt. G. Bhagyavathi and Smt. Alluri Tirumala. Mr. S. Kodanda Rama Raju however, seems to have sold the land to another individual. A.O. was of the view that the intention to sell the land to an Infrastructure Company itself indicates that there are no agricultural operations and the land is not agricultural land. Further, he was of the view that the area has become notified area of Cyberabad Development Authority. Therefore, the land cannot be considered as agricultural land. Moreover, the A.O. also doubted that the assessee has carried on any agricultural operations in the lands. The assessees submitted the relevant details of income tax returns filed earlier and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, ground of appeal No.1 is not maintainable." 5. Before us, Ld. Counsel reiterated the submissions made before the CIT(A) to state that the reasons recorded are not correct for initiating the proceedings and relied on the Coordinate Bench decision in the case of Prudential Cooperative vs. ACIT in ITA.No.508/Hyd/2010 to submit that even for reopening of assessment under section 143(1) there should be tangible material. 6. After considering the rival submissions, we agree with the findings given by the Ld. CIT(A) that A.O. has tangible material before initiating proceedings under section 147. It is admitted that A.O. obtained information under section 133(6) and thereafter, he has initiated proceedings for reopening the assessment. Moreover, since the assessments are reopened within 4 years from the end of the assessment year. and further as there was no scrutiny in earlier proceedings and returns were accepted under section 143(1), the principles laid down by the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 as well as the decision of the Apex Court in the case of Reymond Woollen Mills Ltd. vs. ITO 236 ITR 34 would apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... babul plantation in the said land and has been carrying on agricultural activities by growing Jowar from 1995 and the same was stopped since three years by shifting to subabul cultivation due to water scarcity and produced the photograph of such cultivation. The assessee also produced the details of expenditure for raising the subabul plantation in its computation of income and before sale of property the plantation was cut and so that it was mentioned in the sale deed that there were no trees on that land. The assessee also produced a copy of Pattadar Passbook in proof of that the land was agricultural land and also sale deed where it is mentioned as agricultural land. The only dispute of the Department is that no agricultural activity is carried on by the assessee on that land. In our opinion, whatever agricultural use, he made of it, prior to sale of the said land has to be considered as carrying on the agricultural operations in the said land and the Department cannot deny deduction u/s. 54B on mere technicalities. The object of section is to encourage cultivation. The Hon'ble Supreme Court in the case of CWT vs. Officer-in-charge (Court of Wards) 105 ITR 133 (SC) held that : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initial presumption that the property, classified as agricultural land in revenue records and accepted as agricultural land in the wealthtax assessments, ceased to be such agricultural land before the transfer of such lands. 9. Section 2(14), which defines capital asset, was amended by the Finance Act, 1970 to include agricultural land situated within the limits of any municipality. It is not in dispute that these lands were situated within Municipal Corporation and, therefore, the capital gains arising from the transfer of these lands would become assessable because the lands in question must be regarded as capital asset within the meaning of Section 2(14). However, the Finance Act, 1970 also introduced Section 54B granting exemption in case the proceeds of sale of agricultural lands are reinvested in the purchase of other agricultural lands. The Finance Bill did not contain this section and, therefore, we do not have any Notes on Clauses in respect of this section. However, after the Finance Act introduced this section, the CBDT has explained its meaning by Circular No. 45, dated 2-9-1970. It states: "The effect of the amendments to Section 2(14) and Section 47, as stated above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not a condition precedent for granting the relief Under Section 54B. Even if we take it to be so, on the facts of the present case, we find that the assessee had in fact cultivated a part of its lands according to the Adangal Register and no further cultivation was possible because of lack of water. The use referred to in the section can only be regarded as such use as the lands are capable of with the aid of facilities available and the assessee cannot be denied the relief because he was actually unable to put the land to use due to vagaries of nature and non-availability of resources. It can hardly be the fault of the assessee if rained lands are not actually put to use during the drought. We are, therefore, convinced that the assessee was entitled to relief Under Section 54B of the Act." 8. Learned D.R. however, submitted that though the land was classified in the revenue records as agricultural lands, there is no proof on record regarding payment of land revenue and further assessees have not furnished any evidence with regard to agricultural operations and D.R. also distinguished that the evidence filed in the case of Smt. A. Padmavathi are not furnished in these cases an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute about the fact that assessees herein have purchased agricultural lands on which claim of section 54B was made. Therefore, the only issue to be examined is, whether the agricultural lands are used for agricultural purposes or not. 11. A.O. as well as Ld. CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of Sarifabibi Mohmed Ibrahim and others vs. CIT (1993) 204 ITR 631 (S.C.) to deny the benefit to the assessee on the reason that intention of the party at the time of sale is also necessary for determining the nature of the agricultural land. We are of the opinion that the principles laid down in the above judgment is wrongly applied to the present set of facts. In that case, the land was situated near to railway station. It was sold on sq. yard basis to a housing society after applying for transfer of land usage for non-agricultural purposes. Even though the land was not agricultural, though entered into revenue records as agricultural, the profits on sale of land was held assessable to capital gains and the Hon'ble Supreme Court in that context has considered that there may be factors both for or against a particular point of view and intention of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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