Gajarsingh Mangusingh Rathod Vs ITO (ITAT Nagpur)
The ITAT Nagpur in Gajarsingh Mangusingh Rathod Vs ITO upheld the denial of exemption under Section 54B of the Income Tax Act on the ground that the assessee failed to establish actual agricultural use of the land during the prescribed period preceding its transfer. The Tribunal held that mere classification of land as agricultural in revenue records is insufficient for claiming exemption unless supported by evidence showing active agricultural operations.
The assessee, an individual, filed return of income for AY 2016-17 declaring total income of Rs.8.42 lakh and claimed exemption under Section 54B amounting to Rs.1.43 crore in respect of capital gains arising from sale of agricultural land. During scrutiny assessment, the Assessing Officer examined whether agricultural activities were actually carried out on the lands sold. Notices under Section 133(6) were issued to the Tehsildar, Patur seeking copies of 7/12 extracts for the relevant years. The Tehsildar reported that no agricultural activities had been conducted on the lands during FYs 2011-12, 2012-13, and 2013-14. Based on this report, the Assessing Officer disallowed the exemption claimed under Section 54B and added Rs.1.43 crore to the assessee’s income.
Before the CIT(A), the assessee produced revised 7/12 extracts issued pursuant to an order of the Tehsildar dated 26.03.2019, wherein the earlier entries were corrected and the lands were shown as agricultural lands under cultivation. Since these documents constituted additional evidence, the CIT(A) sought a remand report from the Assessing Officer. In the remand report, the Assessing Officer questioned the reliability of the revised records, observing that the corrections appeared to be based mainly on the assessee’s affidavit and that contradictory reports had been issued by the Tehsildar’s office within a short period. The Assessing Officer also pointed out that apart from revised revenue entries, the assessee had not produced independent evidence such as sale bills of agricultural produce, proof of cultivation expenses, or supporting material showing actual farming operations.
