TMI Blog1988 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 13, Nondh No. 126, has sold the said land on Maha Vad 9, S.Y. 2021 corresponding to 24th Feb., 1965 to Sarangpur 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 assesses 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 Amaratlal Chhotalal Khandwala also got separated from the said firm of M/s Shivlal Khandwala Sons, Surat in asst. yr. 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 the surplus of his 1 /3rd share which has been resulted on the sale of the land, profit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee did produce some evidence for purchase of grass, seeds, etc. The fact of planting trees had also not been disputed by the ITO, (ii) the assessee 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(A) and highlighted the factual aspects brought on record by the ITO. 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 (A) stated that in fact, on 20th Feb., 1966, the ITO 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 firm of M/s Shivlal Khandwala and Sons, the firm from which the assessee purchased the land and on 24th Feb., 1966, the ITO had made a report in writing and ultima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spects were not at all considered by the Commissioner(A). The most important aspect was with regard to the cultivation. He relied upon various judicial pronouncements, viz., CIT vs. Sarifibibi Mohamed Ibrahim and Ors. (1981) 24 CTR (Guj) 171: (1982) 36 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 vs. Siddharth J. Desai (1983) 28 CTR (Guj) 148: (1983) 139 ITR 628 (Guj). Further, reliance was also placed in the case of CED vs. V. Venugopala Varma Rajah (1976) CTR (SC) 423: (1976) 105 ITR 593 (SC): 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 vs. Sutton and Sons Ltd. (1981) 127 ITR 57 (Cal) where the term 'cultivation' was defined, in the case of Kalpaka Oil Mills vs. ClT (1985) 44 CTR (Ker) 68: (1985) Taxation 76 (1)-34(Ker) where it was held that (sic) further submitted that the land was agricultural land had to be proved by the assessee. 6. The learned representative of the assessee strongly supporting the order passed by the Commissioner(A) reiterated the factual aspect that according to the opinion of the then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the land continued to be agricultural land and that is why great important was attached by the Supreme Court in the case of CWT vs. Officer-in-charge (Court of Wards) (1976) CTR (SC) 404: (1976) 105 ITR 133 (SC) 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 ITO has taken one view while another ITO who personally inspected the site soon after the previous year ended and who is now promoted as AAC as also the Commissioner(A) who decided the issue in favour of the assesses took the view different from that taken by the ITO. 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 there can only be one conclusion in favour of the Revenue. Suffice it to say that the case of the Revenue is not so strong to enable us to take a view only in favour of the Revenue so as to reverse the decision taken by the Commissioner (A). On going through the order passed by the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 for use it for agricultural purposes, there is no clear evidence giving a clue either (ix) The land is not situated in developed area but nearby area is in the process of development as stated by the ITO. (x) The land itself was not developed by plotting and providing roads and other facilities. (xi) There is no evidence regarding previous sales of portions of the land for non-agricultural use. (xii) Permission under s. 63 of the Bombay Tenancy and Agricultural Lands Act, 1948 is not obtained probably because the same is not applicable. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 initial onus of dislodging the presumption by bringing some positive evidence to the contrary to rebut the existing presumption. Such positive evidence to the contrary may, of course, be found by the Taxing Officer in the facts attending on the land under consideration, treatment given by the owner to the land, previous and/or subsequent conduct of the owner in relation thereto, etc. The question is whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red." 12.3 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 records: (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 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. 13. In order to examine the justification and to appreciate the probative value of the above positive evidence, a brief reference to the back ground of the case and the treatment given by the respondents and/or their ancestors to the land in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 some what relevant having a bearing, howsoever small it may be, upon the determination of such question. 15.2 What is available on record on the point of cultivation of the land is that it was (not necessarily for the first time) let out to Koli Prabhu Uka of village Athva, Taluka Chaurasi, Distt Surat by Seth Shivlal Khandwala Sons on 31st May, 1935 for S.Y. 1992 season (fasal) against a rent consideration of Rs. 175 only(83). Fresh lease deeds for following three years, i.e. S.Y.s. 1993, 1994 1995 appear to nave been executed on 13th May, 1936, 3rd May, 1937 and 11th May, 1938, respectively, (84,85,86). The entry of Prabhu Uka into cultivatory possession of the land in question not only has a bearing upon the main question of the user of the land but also upon the rebuttab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "Tillers Day", i.e. on 1st April, 1957 and, therefore, he was deemed to have purchased the said land as per provisions of s. 32 of Bombay Tenancy Agricultural Lands Act, 1948(48). By his order dt. 9th Sept., 1959 in R.T.S. 1-58 the Mamlatdar Saheb appears to have taken note of the entry of the name of Prabhu Uka over S.No. 57/3 in Reverue Record and deleted his name vide order dt. 9th July, 1960(47). The Talati appears to have notified the change vide notice dt. 12th July, 1960(47). 18. The matter had come up before the Tribunal for Agricultural Land Marnlatdar, Chorasi whereupon a notice under s. 32(g)(1) of the Bombay Act, 1948, aforesaid, was directed to be issued on 10th Dec., 1962 to the respondent Kanchan Lal Mancha Ram Khadwala (48). And by its order dt. 19th Dec., 1962, the Mamlatdar had felt satisfied that the possession of the land in question was with the owner on 'Tillers Day" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) 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 and Sons, Surat for S.Y. 2018 and 2019 only contain 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 ACCCUNT' which has been debited by an amount of Rs. 1,179 which includes the cost of certain plants of Chiku, Lemon and Guava for Rs. 929. This account has been capitalized by the cost of the aforesaid capital expenditure of Rs. 1,179 and has been squared up by debiting the account of the assessee and his other co-sharer Shri Vasantlal C. Khandwala. During this year in S.Y. 2020, the assessee has shown to have received the amount of Rs. 575 in Agricultural Account from the sale proceeds of grass from Shri Jivabhai Pitamber for the entire said land. This account has been debited by an amount of Rs. 150 in Agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponding expenses as have been shown in subsequent years. 21.1 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 stated to have been received from sale of 'Green' grass and 'Sundhiya' to Soma Daya Abir was shown on Cr. side and expenditure of Rs. 150 on Majori 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 years. In S.Y. 2018(113), following entries were made on Cr. Dr. sides of the Ganot A/c: Credit Debit 551.00 Asho Vad Amas Sunday. By proceeds of current year rainy season grass of Umra S.No. 57(3) sold to Somabhai Ahir debited to his a/c 150.00 Kartik Vad Amas Thursday to labour and expense for grass and weeding the land in Umra S.No. 57(3) paid to Bharwad Soma Dahya on S.Y. 2017 Jeth Vad 13 Monday and was in suspense (a/c) 21.2 In S.Y. 2019(113) some more details were given as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass had been sold to the very person who had cut it for himself. For obvious reasons, payment of Rs. 15 on 25th July, 1961 and of Rs. 12 on 7th July, 1962 to Soma Dahayabhai and of Rs. 18 on 27th June, 1963 to Jeevabhai Pitambar(116) inspires no confidence in me. When these so called expenses and the expenses incurred on plantation of Cheeku, Lemon and Guava plants and digging a well in S.Y. 2020 2021 are lead in the light of of other circumstances attending on the transaction of transfer of land on 24th Feb., 1965, it remains no longer a secret that all that exercise was done to give a colour of agricultural land to the land in question which had all along, after the departure of Prabhu Uka in 1957 or prior to that, remained fallow land bringing only insignificant income to the respondents from sale of spontaneously grown grass without necessitating any agricultural operation and incurring of any expenditure of its growth. The reasons for such a planned exercise are not hidden in any mystery. 23. It was as back as in February, 1963 that the limits of Surat Municipality were extended and the Municipality had declared its intention to make a Development Plan under the Town Plann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat, had inspected the respondents' land situated in five different villages including the land in question, on 24th Feb., 1966 in connection with similar question of capital gains tax levy for asst. yr. 1957-58. My learned brother has dealt with this report of Sri Mandlik at sufficient length and has accepted his opinion with regard to the agricultural character of the land in question. I regret my inability of giving that value to the report or opinion of Mr. Mandlik for more than one reasons. 24.2 As is gathered from the affidavit of respondent Kanchantal Manchha Ram Khandwala at page 177, Sri Mandlik, ITO had visited the land in question as also four other lands on 20th Feb., 1966, that is just after one year of its transfer by the respondents to the Housing Society. Now what Mr. Mandlik had found on spot was this that the lands at villages Athva, Vanta and Kapadara were in possession of the tillertenants and were having Kapas, Bananas, Jowar, etc., over them. The land at village Athwa was partly occupied by the assessees' bungalow and partly by fruit-trees. With regard to the factual position of the land under consideration, Mr. Mandlik reported on 24th Feb., 1966 as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that: (1) the land in question was no doubt recorded as Agricultural land in Revenue Record and was subject to payment of land revenue but the presumption arising in favour of correctness of entries in revenue record stood sufficiently rebutted by positive proof of the recorded entry of holding of the land by Kohli Prabhu Uka (sic) proof of its user as agricultural land after 1938; (2) the land was cultivated by the tenant Kohli Prabhu Uka for the period from 1935 to l938 and thereafter there is no proof of its cultivation either by the said Prabhu Uka or by the firm M/s Seth Shivlal Khandwala Sons upto 1957; (3) from the year 1957 to 1963-64 (S.Y.2012 to S.Y. 2019)., no agricultural operations were carried on at all in the land and during this period, the land had given 'agricultural income from sale of spontaneously grown grass in rainy season; (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 5th Dec., 1963. The land under consideration fell within the To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re has been a difference of opinion between the two Members and the following point of difference has been referred to me as a Third Member under s. 255(4) of the IT Act: "Whether the land sold by the co-owner assessees was agricultural land and ther before, gain on sale of land is not to be regarded as capital gain within the meaning of s. 45 of the IT Act, 1961?" 2. The two assessees in the two appeals were co-owners of a land bearing Survey No. 57-3 of 4 acres and 35 gunthas situated in village Umra, District Surat. This land was sold on 24th Feb., 1965 to Sarangpur Co-op. Housing Society for Rs. 2,15,163. A question arose regarding the charge of capital gains on the same. It was claimed by the assessees that capital gain was not chargeable as the land in question was agricultural land at the relevant time. 3. The ITO had noted that the 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 ITO, reliance had been placed on 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 wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd revenue paid in respect of land is all along on the basis that the land was agricultural land. (b) The land had various fruit trees planted probably by the appellant about two years before the sale of the land. (c) The appellant had shown sale of grass from the land though the amounts received on sale of grass were very small (d) No application was made by the appellant at any time to get the land converted, into non-agricultural land (e) There is no evidence to come to the conclusion that the land at any time was used for non-agricultural purposes. The following points put forward by the ITO in support of the land being non-agricultural land, have been disputed by the appellant and as such 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 purposes (e) The appellant could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question belonged to the firm, agricultural income was being shown and even after the land was purchased by the assessee, agricultural income from this land was being disclosed. As the report of Shri Mandlik was not on record, the Mandlik had been remanded and Shri Mandlik had been examined in the remand proceedings. He had stated that he did visit certain villages and had given a report that there were agricultural operations on the land. As Shri Mandlik had been examined several years after his first report, he had stated that he did not remember the details of the villages visited at that time but he did remember to have made a report. The Accountant Member referred to the various case laws and applying those principles which were enumerated by the Gujarat High Court in the case of CIT vs. Siddhart J. Desai (1983) 28 CTR (Guj) 148: (1983) 139 ITR 628 (Guj) held that most of 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 ITO had shifted the initial on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the rainy season and therefore, it could not be considered to be agricultural operation. According to him, the expenses incurred on the plants, digging of wells, etc. was done to give a colour of agricultural land to the land in question and the land in question remained fallow. He also referred to the fact that the Surat Municipality extended its limits and a development plan for the area was also being worked out. According to him, considering the potential of the land, the assessees wanted to create evidence that it was agricultural land and put fruit plantations so that it may appear to be an agricultural land. It was also observed by him that the assessees had shown the sale of grass grown and had tried to show that there was cultivation of grass and it was not of spontaneous growth. It was also observed that there was a well dug in the land but the expenditure incurred was only Rs. 121 which could not be considered to be sufficient for watering the plants which themselves had cost about Rs. 1000 or more. He also referred to the fact that the land was to be sold to a housing society for Rs. 2,15,164 which shows that the land had become a developed land for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66, 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. 2,15163 on 24th Feb., 1965 to a Housing Society called Srinagar Co-operative Housing Society, Surat for residential purposes. 9. On the above facts, he came to the conclusion that the land in question was not agricultural land on the date of transfer and had lost that character long ago and the evidence created was only 11/2 years prior to the sale. He, therefore, proposed to set aside the order of the CIT(A) and restored the order of the ITO. 10. It is on these facts that the difference has arisen between the two Members. The learned Departmental Representative, after referring to the facts pointed out that Shri Mandlik who had been re-examined in the remand proceedings, had accepted that he had visited some villages but he was not sure whether 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he municipal area in 1963, there was no development for almost 10 years and he placed before me Notification dt. 15th March, 1986 showing that several parts of village Umra were brought in the city limits for the purpose of development only at the time of this Notification. He submitted that there was no development of this area at the time of the sale. Regarding the grass grown on the land, he submitted that there was evidence that grass seeds were purchased from year to year and grass was being cultivated for the purposes of sale. He contended that a small income from this source and the small expenditure should not give the basis for completely ignoring the case of the assessee. He pointed out that all these years the assessee was mainly dependent on monsoon even for growing grass and, there fore, the grass seeds never purchased immediately before the monsoon. 12. Regarding the history of the case, he submitted that when the land was with the firm it had been given to a tenant and he was carrying on agricultural operation on the land. He also submitted that on the Tiller's day the tiller had died and hence the assessees were able to get the land in their name. It was also cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. 14. The learned counsel further submitted that no res judicata was applicable. There should be uniformity in the findings, otherwise there would be great confusion. He further relied on an order of the Jaipur Bench in (1988) 25 ITD 2 (sic) should be ITO vs. Ajit Kumar Arya (1988) 25 ITD 37 (Jp) and strongly relied on the decision of the Gujarat High Court in (1981) 127 ITR 671 (Guj) 15. I have considered the facts and have perused the orders of both the Members. Determination of the nature of land on the point of view of its being agricultural land depends on large number of circumstances and it is the totality of the circumstances which has to be considered. I am inclined to agree with the learned Accountant Member having regard to all the materials which have been brought on record and are indicated in the paper book filed before the Tribunal. As stated above, the land had been given to a Ganotia on rent and from the agreement with the Ganotia which appears on page l45 ot the paper book it appears that the land had been taken for actual consideration and at that time besides Juwar and Kapas, grass was being grown in a regular manner. As far as the owners were concerned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fact that development of this area as part of Surat has taken several years and it was only recently that the municipal area was fully extended to various areas including the village Umra. 16. As regards the use of the land in a few years prior to the sale, the assessee had brought on record the material to show that the grass was being grown as a result of cultivation and the assessees were incurring expenses on the labour for cultivation as well. It is true that the assessees were mainly dependent on rains and, therefore, the grass seeds are sown in three years continuously being purchased prior to the monsoon season. The fact that the income from such sale of grass was small did not mean that it was not being put in the earth by human effort. In those years any such income upto Rs. 500 was also not very low. 17. It cannot be denied that the assessees, as the owner of the land. must have been aware of the potential of the land due to its vicinity to the city or being a part of the city and might have gradually confined to cultivation of grass or planting of fruit trees and not to regular cultivation of agricultural produce. There is also no dispute that the potential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of CIT vs. Siddharth J. Deasi had held that though it was a relevant consideration, it was not conclusive and it may be that the agricultural activity was giving a low income to the owner. The courts have laid down various factors which are relevant to be looked into for determining the nature of the land. All the factors cannot be present in all cases and ultimate decision will have to be reached on a balanced consideration on a totality of the circumstances. In this connection, the report of Shri Mandlik has some importance. He has admitted that he has given his report in which he has stated that at the time when he visited in 1966 after the sale had taken place one year back, signs of cultivation were still there. If the ITO had any doubt about this statement he could have questioned it. This was a contemporaneous report and the Officer having given the report and having accepted after several years should be given its due importance. The main difficulty in this case has arisen because of the rise in the price of land due to various factors. It has given an impression to the Revenue authorities that the nature of the land had changed. If the value of agric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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