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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 ..... CIT has erred in law and on facts by ignoring the relevant evidence and material on record, e.g. certificate from the Tehsildar and copy of Jamabandi of land in question which clearly showed that the land is "Khudkasht" i.e. the owner of land was doing agricultural activities itself on the land and "Girdavari" i.e. copy of crop inspection report maintained by Lekhpal of the village which clearly showed the name of crops grown on the land in last four years. c. Because the learned CIT has erred in law and on facts in wrong appreciation of few words in the sale deed and the assessment order of earlier year to hold that the land sold was not agricultural land at the time of sale of land and no agricultural activities were ever carried on by the appellant upon said land since its purchase. d. Because the order passed by the Ld. CIT is based on the irrelevant and biased considerations and without appreciating the facts and evidences on record." 2. Learned counsel for the assessee, at the outset, submitted that during the year under consideration the assessee had sold an agricultural land on which it had earned capital gain which was exempt as having been earned on an agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the Pr.CIT treated the assessment order as erroneous and prejudicial to the interest of the Revenue by holding that the Assessing Officer did not carry any inquiry regarding actual distance of the land under consideration from the limits of the Municipal Corporation and also he had not done any verification to ascertain that the land in question was agricultural land and whether any agricultural activities were being carried out on such land. Learned counsel for the assessee submitted that another reason for holding the assessment order erroneous and prejudicial to the interest of Revenue is that the claim of the assessee for agriculture income of Rs.26,600/- for assessment year 2014-15 was denied as being from non-agricultural income. Learned counsel for the assessee submitted that in view of the detailed show cause notice by the Pr.CIT, the assessee filed detailed submissions and filed the documents filed during assessment proceedings and in addition also filed Google Map showing the arial distance of land which was more than six Kms. from the Village Hiranthla where the said land was situated. Learned counsel for the assessee submitted that a certified copy of Khas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the land to be agricultural land. 3. Learned CIT, (D. R.), on the other hand, submitted that the purchaser of the land and seller of the land, both are private limited companies and the land in question cannot be classified as agricultural land as it was to be used for economic purposes and therefore, the Assessing Officer had wrongly allowed the claim of the assessee and learned Pr. CIT has rightly invoked the provisions of section 263 of the Act. learned CIT, D.R. in this respect heavily placed reliance on the order of the learned Pr. CIT. 4. We have heard the rival parties and have gone through the material placed on record. We find that during the year under consideration the assessee declared a profit on sale of agricultural land which the Assessing Officer verified after calling information from the assessee u/s 142(1). The Assessing Officer vide notice dated 20/06/2017 wanted the assessee to furnish details of exempt income claimed along with all the necessary documents. In this respect the assessee filed reply vide letter dated 16/08/2017 wherein vide para 5, the assessee submitted as under: During the year, the assessee company has earned profit on sale of agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The assessee, in response to notice u/s 154, filed the reply and Assessing Officer, after going through the submissions of the assessee, dropped the proceedings u/s 154 , copy of order u/s 154 dated 14/06/2018 is placed at pages 10 and 11 of the paper book. From the above facts and circumstances, it is evident that the Assessing Officer twice carried out investigation regarding the character of land and held the same to be an agricultural land and took a plausible view. Therefore, the order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. 4.3 The Pr. CIT, vide show cause notice dated 15/03/2021 u/s 263, show caused the assessee as to why order u/s 263 be not passed by making following observations, in the show cause notice: (a) The examination of records for A.Y. 2015-16 revealed that Assessee company had e-filed the return of income on 18.09.2015 vide acknowledgement number 803610891180915 admitting a total income of Rs.21,80,970/-. Subsequently the return was selected for Compulsory Limited Scrutiny on the reason "Large interest expenses relatable to exempt income u/s 14A" & "Purchase of property reported in Form 26QB". The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied being treated as non-agricultural income. In the present case, the assessee company failed to prove that the agricultural activities were being carried out by it on the land under question. In view of the facts that the agricultural income in the earlier year has been held to be not genuine, the case of the assessee fails the test of agricultural operation carried out in the said land. Therefore, the assessee company does not qualify for exemption u/s 10 of the I.T. Act, 1961. 5. In view of above, you are given an opportunity to explain as to why the assessment order passed on 21,09.2017 u/s 143(3) of the Income Tax Act, 1961 may not be held to be erroneous and prejudicial to the interest of the revenue and cancelled or modified by invoking the provisions of section 263 of the Income Tax Act, 1961. You can file your written submission along with supporting documents through online e-filng portal or send the same on official email id [email protected] on or before 22.03.2021 failing which the case would be decided on the material available on record." 4.4 In response to the notice issued by the Pr. CIT, the assessee filed detailed reply, a copy of which is pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltivation on this land to any other person. The purpose of this line in sale deed is only to ensure that the land has not been given to any person for cultivation through an oral contract. Therefore, the first observation of learned Pr. CIT has no force which could be used to initiate proceedings u/s 263 of the Act. 4.7 As regards the second observation of having not accepted agricultural income declared by the assessee in assessment year 2014-15, we find that non acceptance of agricultural income from agricultural land by the Revenue authorities cannot be a reason to classify the said land as not being used for agricultural purposes. The fact of the matter is that the assessee filed necessary evidences regarding cultivation of said land which is apparent from the copy of Khasra Girdwari placed at pages 40 to 42 of the paper book wherein it has been mentioned that the assessee is Khudcast. The detail of agricultural produce on such land from the years 2012-13 to 2017- 18 is mentioned on copy of Khasra, a copy of which is placed in paper book pages 68 & 69. The said copy was filed with AO vide covering letter No. NIL dated NIL, placed in paper book page 73. This Khasra Girdwari cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term 'agriculture' receives a wider interpretation both in regard to its operation as well as the result of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of its cultivation of the land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself and this basic conception is essential sine qua non of any operation performed on the land constituting agricultural operation and if the basic operations are there, the rest of the operations found themselves upon the same, but if the basic operations are wanting, the subsequent operations do not acquire the characteristics of agricultural operations. The Constitution Bench of the Hon'ble Supreme Court in the aforesaid case observed that the entries in Revenue records were considered good prima facie evidence. 6.3. The Hon'ble Gujarat High Court in the case of Dr. Motibhai D. Patel vs. CIT (1982) 27 CTR (Guj) 238 : (1981) 127 ITR 671 (Guj) refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which, the case of Smt. Sarifabibi Mohamed Ibrahim & Ors. vs. CIT (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the Bombay High Court has stated that the profit motive of the assessee selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the price paid is not decisive to say whether the land is agricultural or not. 6.7 We may refer to a judgment of the Hon'ble Madras High Court in the case of CWT vs. E. Udayakumar (2006) 284 ITR 511 (Mad) where the Hon'ble Madras High Court has referred to the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Smt. Savita Rani (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H) and has observed and held as under: "8. It is well settled in the case of CIT vs. Smt Savita Rani (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H), wherein it is held that the land being located in a commercial area or the land having been partially utilised for non-agricultural purposes or that the vendees had also purchased it for non-agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... location, details of land as downloaded from web along with details of population as per census 2011 was submitted. The contents of such letter has already 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. 6. We further find that 154 proceedings were initiated against assessee for rectification of a mistake apparent from record. The proposed rectification, as mentioned in the notice u/s 154 proceedings, is as below: "The following discrepancies have been noticed from the perusal of Balance Sheet, Profit & Loss Account, Auditors report, Computation of Income and other relevant documents submitted by you for the A.Y. 2015-16. during the assessment proceeding. Therefore, the same is proposed to be rectified. On perusal of records it was observed that the assessee had sold a property situated at NUH municipal committee at village Hiranthaila for a consideration of Rs.6,32,90,000/- which was purchased in the year 2010-11 for a consideration of Rs.1,75,18,500/- The profit on sale of this agricultural land amounting to Rs.4,57,71,500/- was credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t situated in the areas mentioned in aforesaid item (a) or item (b) and accordingly the gain on sale of land is treated as non-taxable being a capital receipt. Therefore, to sum up, it is submitted that there is no dispute that the profit arising on sale of agricultural land, which does not fall in the category of 'capital asset1 as defined under section 2(14), does not come under the purview of the Income-tax Act at all. For example, the profit arising on sale of personal effects is not exigible to Income tax Act. In the similar manner, the profit arising on sale of agricultural land, which is not a capital asset, is also not exigible to income tax. Hence, an item of income which does come under the purview of income tax cannot be subjected to tax under any of the provisions of the Act. Accordingly, the profit from sale of agricultural land, which is not a 'capital asset', cannot be included for the purpose of computing book profit under section 115JB of the I.T. Act, 1961. In view of the above, proceedings initiated vide notice u/s 154 of the Act dated 01.05.2018 are hereby dropped." 7. In view of the above facts and circumstances, the order passed by learned Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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