Namdeo Janku Thorat Vs ITO (ITAT Pune)
Summary: The Pune Bench of the Income Tax Appellate Tribunal considered the assessee’s appeal for AY 2012-13 against the order of the CIT(A), NFAC, Delhi, arising from an assessment framed under section 143(3) read with section 263 of the Income-tax Act, 1961. The principal dispute concerned the character of agricultural land at Village Vaki Khurd, Tal. Khed, whether its sale gave rise to taxable capital gains, and whether the assessee could claim deduction under section 54B for purchase of another parcel of land.
The assessee had sold land situated at Village-Vaki for Rs.1,40,00,000/- and had itself disclosed capital gains in the return of income while claiming deduction under section 54B. The original assessment under section 143(3) was completed on 18.12.2014 at an assessed income of Rs.6,20,750/-. Subsequently, the Pr. CIT passed an order under section 263 on 30.03.2017 with specific directions, pursuant to which the AO passed an order under section 143(3) read with section 263 on 20.12.2017 assessing income at Rs.80,00,750/-. The CIT(A) confirmed that assessment order.
The assessee argued that the land sold was agricultural land and therefore did not constitute a capital asset under section 2(14). It was submitted that the description of the land as industrial land in the registered sale deed was a typing mistake and that the description resulted from the fact that the purchasers were non-agriculturists. The assessee also contended that the land purchased at Village Ambethan remained agricultural land despite being described as industrial land, and therefore the investment of Rs.73,80,000/- should qualify for section 54B relief. The assessee further sought refund of Rs.2,15,973/- allegedly offered as long-term capital gains.
The Tribunal examined the registered sale deed dated 15.12.2011 relating to Gut No.187/1/A/1/6 at Village Vaki. It noted that the document specifically described the land as industrial land. The Tribunal also considered the 7/12 extract, in which the land was shown as “पड़”, indicating, according to the Tribunal, that no agricultural activity was carried out on the land. The land had been sold to non-agriculturists, while the assessee itself was carrying on engineering job work and water supply business.
A significant factor was that the assessee had itself offered the transaction to tax as capital gains in its return. The Tribunal held that the assessee had thereby admitted that the land was a capital asset and that its sale resulted in capital gains. It therefore rejected the attempt at the appellate stage to contend that the same land was agricultural land and outside the definition of capital asset.
The Tribunal relied upon the Supreme Court decision in Smt. Sarifabibi Mohmed Ibrahim Vs. Commissioner Of Income-Tax, (1993) 204 ITR 631 (SC), which considers the true character and nature of land by examining relevant circumstances, including actual agricultural use, revenue records, intention concerning future use, permission for non-agricultural use, the purpose of sale and surrounding circumstances. Applying that approach, the Tribunal considered the industrial-use description in the registered sale deed, the assessee’s own disclosure of capital gains, the “पड़” entry in the 7/12 record, the non-agricultural purpose of the purchaser, the sale price and the period between acquisition and sale. The Tribunal noted that the assessee had purchased the land on 22.01.2007 and sold it on 15.12.2011.
On the basis of the cumulative circumstances, the Tribunal held that the impugned land was a capital asset under section 2(14) and was not agricultural land. Grounds Nos. 1, 2 and 3 were accordingly dismissed. The Tribunal found the decisions relied upon by the assessee distinguishable on facts.
As regards section 54B, the Tribunal examined the registered purchase deed dated 29.05.2012 for the replacement land. That document also classified the acquired land as industrial-purpose land. The Tribunal therefore concluded that the assessee had sold industrial-purpose land and purchased industrial-purpose land. Since deduction under section 54B requires the transferred land to have been used for agricultural purposes in the prescribed preceding period and the purchased land to satisfy the statutory requirement, the assessee was held ineligible for the deduction. Grounds Nos. 5 and 6 were dismissed.
The assessee also challenged the validity of the order under section 263. The Tribunal held that the present appeal arose from the CIT(A)’s order under section 250 and that the assessee had never challenged the original section 263 order dated 30.03.2017. It therefore held that the assessee was precluded from challenging the validity of the section 263 proceedings in the present appellate proceedings. Grounds Nos. 7 and 8 were dismissed.
Ground No. 9, being general in nature, was held not to require adjudication. The appeal was ultimately partly allowed.
Cases Discussed
- Smt. Sarifabibi Mohmed Ibrahim Vs. Commissioner Of Income-Tax, (1993) 204 ITR 631 (SC)
- CIT Vs M/s. Pruthvi Brokers & Shareholders Pvt. Ltd., (2012) 23 taxmann.com 23 (Bom.)
- Bhadrabala Dhimantrai Joshi Vs. ACIT, ITA No.126/SRT/2025, dated 26.09.2025
- Mr. Popatrao Dashrathrao Suryawanshi Vs. ITO, ITA No.234/PUN/2024, dated 21.01.2026
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT PUNE
1. This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 („the Act‟) for AY 2012-13 on 11.04.2025.
2. The assessee has raised the following grounds of appeal :
“1) The Ld. CIT(A) erred in considering Agricultural land at Village Vaki Khurd, Tal. Khed as Capital Asset u/s 2(14)(iii) even though it was brought to his notice that it was wrongly offered for capital gains tax during assessment proceedings.
2) The Ld. CIT(A) erred in law as Agricultural land at Village Vaki Khurd, Tal. Khed is not a Capital Assets u/s 2(14)(iii) falling within the definition of transfer u/s 2(47) of the Income Tax Act, 1961.
3) In the registered sale document Agricultural land at Village Vaki Khurd, Tal. Khed was mentioned as Industrial Land as it was sold to non-agriculturist u/s 63IA of Maharashtra Tenancy & Agricultural land Act, 1948, which doesn’t change the original character and use of land until converted as per provisions of law.
4) Without prejudice to above grounds in the registered purchase document the Agricultural land purchased at village Ambethan was mentioned as Industrial Land as it was acquired with future intention to convert the land from agricultural to industrial u/s 63IA of Maharashtra Tenancy & Agricultural land Act, 1948 until then the original character and use of land remains same as agricultural.
5) The agricultural land purchased at village Ambethan is still an agricultural land as no conversion has been done to the character and use of the land and hence exemption u/s 54B on acquisition cost land at Rs. 73,80,000/- be allowed against the agricultural land sold and treated as capital asset if any.
6) The Appellant has wrongly offered Rs. 2,15,973/- as long-term capital gains on sale of agricultural land at village Vaki Khurd, Tal. Khed & discharged the tax liability to that extent, the same shall be refunded along with interest as per provisions of law.
7. The Ld. PCIT erred in assuming revisionary jurisdiction u/s 263 as the original assessment order dated 18/12/2014 is not erroneous in so far as prejudicial to the interests of revenue.
8) The capital gains calculation including exemptions claim u/s 54B was verified during original assessment proceedings and were allowed under the head income from capital gains hence Ld. PCIT assuming revisionary jurisdiction u/s 263 on same issue is unwarranted and will amount to change of opinion.
9) The appellant prays to be allowed to raise, add, amend, delete, modify, and rectify any grounds of appeal at the time of hearing.”
Submissions of Ld. AR :
3. Ld. AR filed paper book. Ld. AR submitted that the land sold by the assessee was agricultural land hence no capital gain tax is liable to be paid by assessee. Ld. AR submitted that assessee had shown agricultural income during the year. Ld. AR took us through the copy of Registered Sale Deed dated 05.12.2011 between M/s Harishchandra Agrawal, Sumit Agrawal and Namdev Janku Thorat for sale of land at Gut No. 187/1/A/1/6 Village Vaki. Copy of the said Registered Sale Deed is at page No. 17 to 47 of the paper book.
3.1 On reading the Registered Sale Deed we noted that it is specifically mentioned that land is for industrial use in the Registered Sale deed. Hence, we asked Ld. AR how land which is specifically for industrial use be claimed as agricultural land. Ld. AR submitted that it was typing mistake. Ld. AR further submitted that assessee had sold land to individuals who were not agriculturist and hence it was mentioned in the Sale Deed that land was industrial purpose land.
3.2 Ld. AR further pleaded that assessee had purchased a land hence assessee is eligible for deduction u/s 54B of the Act.
3.3 Ld. AR pleaded that the order u/s 263 is bad in law. Ld. AR further pleaded that assesses has not challenged the order u/s 263 of the Act. The Ld. AR relied on the decision of Hon‟ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers & Shareholders, (2012) 23 taxmann.com 23 (Bom.).
3.4 The Ld. AR also relied on the following decisions :
i. Bhadrabala Dhimantrai Joshi Vs. ACIT in ITA No. 126/SRT/2025, dated 26.09.2025.
ii. Mr. Popatrao Dashrathrao Suryawanshi Vs. ITO in ITA No. 234/PUN/2024, dated 21.1.2026.
Submission of Ld. DR
4. Ld. DR took us through the Registered Sale Deed and invited our attention to the fact that as per registered sale deed the impugned land was specifically for industrial use. The Ld. DR also invited our attention to copy of 7/12 attached with the Agreement wherein land is mentioned as “पड़”. Ld. DR submitted that the land sold was not agricultural land as defined in section 2(14) of the Act. Ld. DR further submitted that the land which has been purchased by the assessee also classified as industrial land.
4.1 Therefore, the Ld. DR submitted that the assessment order may be sustained.
4.2 Ld. DR submitted that assessee has filed appeal against the order of Ld. CIT(A) passed u/s 250 of the Act emanating from assessment order dated 20.12.2017 passed u/s 143(3) r.w.s. 263 of the Act. Assessee has not filed any appeal against the order u/s 263 of the Act. Therefore, assessee cannot plead at this stage that order u/s 263 is bad in law.
Findings and analysis:
5. We have heard both the parties and perused the records. In this case, assessment order u/s 143(3) of the Act was passed by ITO, Ward-8(4), Pune on 18.12.2014 for AY 2012-13 assessing the income at Rs.6,20,750/-. Ld. Pr. CIT passed an order u/s 263 of the Act for AY 2012-13 on 30.03.2017 with specific directions. Accordingly, AO passed an order u/s 143(3) r.w.s. 263 of the Act on 20.12.2017 for AY 2012-13, after providing opportunity to the assessee. AO assessed the income at Rs.80,00,750/-. Aggrieved by the assessment order passed u/s 143(3) r.w.s. 263 assessee filed appeal before Ld. CIT(A). Ld. CIT(A) vide order u/s 250 dated 11.04.2025 confirmed the assessment order. Aggrieved by the order u/s 250 assessee filed appeal before this Tribunal.
6. In this case, assessee in the return of income had shown sale of land situated at Village-Vaki for Rs.1,40,00,000/-. Assessee had shown capital gain in the return of income from the sale of impugned land. However, assessee claimed deduction u/s 54B in the return of income.
6.1 Thus, admittedly, in the return of income assessee had shown sale of land and offered capital gain for taxation. In the return of income assessee has shown as under :
It means assessee had admitted in the return of income that the impugned land is a capital asset and its sale results into capital gain. Therefore, assessee at this stage cannot claim that the impugned land was agricultural land and hence it was not capital asset.
7. We have read the Registered Sale Deed dated 15.12.2011 vide which assessee has sold land at Village Vaki having S. No. 187/1/A/1/6. Copy of the said Registered Sale Deed at Page No. 17 to 47 of the paper book. In the said Registered Sale Deed, the impugned land has been shown as industrial land. The relevant part of the agreement is scanned and reproduced here as under :
8. Thus, it can be observed that in the Registered Sale Deed the land is mentioned as industrial land. The impugned land as per 7/12 is “पड़”, it means no agricultural activity were carried out in the impugned land as per 7/12 extract, which is a revenue record. The land was sold to non-agriculturist. The Assessee himself is a businessman and shown Income from Engineering Job work and water supply in the Return of Income.
9. The Hon‟ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim Vs. Commissioner Of Income-Tax, (1993) 204 ITR 631 (SC) has held as under :
Quote, “17. In Commissioner of Income-Tax v. V.A. Trivedi 172 I.T.R. 95 a Division Bench of the Bombay High Court, of which one of us (S.P. Bharucha, J.) was a member, considered this question again. In this case the assessee had purchased the land of an extent of seven acres in February 1966. The land was covered by the Nagpur Improvement Trust Scheme. In August 1966 he obtained permission to convert the said land to non-agricultural use. In June 1968 he entered into an agreement with a Housing Cooperative Society to sell three acres out of it. The sale-deed was executed in October 1968. In this assessment proceedings the assessee claimed that the surplus income arising from the sale of land was exempt from tax inasmuch as it was agricultural land at the time of its sale. The matter reached the High Court. The Division Bench referred to several facts established from the record. Some of them supported the assessee’s stand while some others militated against his contention. The facts found in favour of the assessee were: (1) at the time of its purchase by the assessee, the Ajni land was agricultural land; (2) it had been under cultivation by the assessee till the date of its sale, (3) it continued to be assessed to land revenue as agricultural land until it was sold, (4) the intention of the assessee, when he purchased it, was to acquire agricultural land for agricultural purposes, (5) the assessee’s use of it was the normal use by an agriculturist, (6) it was nor within any Town Planning Scheme, and (7) no materials has been produced to show any development or building activity surrounding it. The facts which militated against the assessee’s stand were three in number – namely: (1) the location or the Ajni land within the Corporation and the improvement trust limits; (2) the action of the assessee in obtaining on August 8, 1966, permission to convert the user of the Ajni land to non-agricultural purposes, and (3) the agreement to sell and the sale of the Ajni land for non-agricultural, i.e., building purposes.
18. The Bench observed that to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date and further whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span of time the future. Examining the facts of the case from the said point of view, the Bench held that the agreement entered into by the assessee with the Housing Society is the crucial circumstance since it showed that the asses-see agreed to sell the land to Housing Society admittedly for utilisation for non-agricultural purposes. The sale-deeds were executed four months after the agreement of sale and even if any agricultural operations were carried on within the said span of four months, – the Bench held – it was evidently in the nature of a stop-gap arrangement. On the date the land was sold, the Bench held, the land was no longer agricultural land which is evident from the fact that the assessee had obtained permission even in August 1966 to convert the said land to non-agricultural purposes.
19. Now let us examine the facts of the case before us in the light of the principles flowing from the above decision. But before we do that, it would be appropriate to clear the ground regarding the user of of the land till the date of sale. The land was undoubtedly under cultivation upto and inclusive of the agricultural year 1964-65. For the years 1965-66,1966-67 and 1967-68 the land was admittedly not cultivated. Certain grass naturally growing thereon appears to have been utilised. So far as the year 1968-69 is concerned, there exists a good amount of doubt whether it was or was not cultivated. The appellant’s case was that they raised ‘loni’ grass said to be used as fodder for horses. They relied upon the entry in Pahani Patrak in this behalf. The third member of the Tribunal (to whom the matter was referred on a difference of opinion arising between two members who first heard the appeal) found the following facts which are mutually inconsistent: (a) there were unprecedented floods in the Tapti river in the Year 1968 which rendered the said land useless for cultivation for a couple of months because of heavy accumulated layers of mud and slush; (b) the next monsoon sowing soon would have started in June, 1969 but even before that the land was sold in May, 1969; (c) there is evidence of agricultural cultivation and raising of ‘loni’ grass during the year 1968-69; (d) for a period of seven months from October 1968 to April 1969, the land remained uncultivated. In our opinion the above findings considered together do negative the theory of actual cultivation of the said land during any part of the year 1968-69. If there were floods in the Tapti river in the year 1968 – this must be during the months June to September – and there was no cultivation during the period October, 1968 to April, 1969, it is difficult to see when was the grass raised in the said land. We conclude, on the basis the facts found by the learned third Member, that there was no cultivation even during the year 1968-69.
20. Now, we may consider the various circumstances appearing for and against the appellant’s case. The facts in their favour are: land being registered as agricultural land in the Revenue records; payment of land revenue in respect thereof till the year 1968-69; absence of any evidence that it was put to any non-agricultural use by the appellants; that the land was actually cultivated till and including the agricultural year 1964-65; that there were agricultural lands abutting the said land and that the appellants had no other source of income except the income from the said land. As against the above facts, the fact appearing against their case: the land was situated within the municipal limits – it was situated at a distance of one kilometer from the Surat railway station; the land was not being cultivated from the year 1965-66 until it was sold in 1969; the appellants had entered into an agreement sale with a Housing Cooperative Society to sell the said land for an avowed non-agricultural purposes namely construction of houses; they had applied in June, 1968 and March, 1969 for permission to sell the said land for non-agricultural purposes under Section 63 of the Bombay Tenancy and Agricultural Lands Act and obtained the same on 22nd April; soon after obtaining the said permission they executed sale-deeds in the following month i.e., in May 1969; the land was sold at the rate of Rs. 23 per sq. yd. and the purchaser-society commenced construction operations within three days of purchase. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts? This question has to be answered keeping the criteria evolved in Bequmpet Palace case set out hereinbefore. In our opinion, the entering into the agreement to sell the land for housing purposes, the applying and obtaining the permission to sell the land for non-agricultural purposes under Section 63 of the Bombay Tenancy and Agricultural Lands Act an its sale soon thereafter and the fact that the land was not cultivated for a period of four years prior to its sale coupled with its location, the price at which it was sold do outweigh the circumstances appearing in favour of the appellants’ case. The aforesaid facts do establish that the land was not an agricultural land when it was sold. The appellants had no intention to bring it under cultivation at any time after 1965-66 – certainly not after they entered into the agreement to sell the same to a Housing Cooperative Society. Though a formal permission under Section 65 of the Land Revenue Court was not obtained by the appellants, yet their intention is clear from the fact of their application for permission to sell it for a non-agricultural purpose under Section 63 of the Bombay Tenancy and Agricultural Land Act.
21. We are, therefore, of the opinion that the High Court was right in holding that the said land was not an agricultural land at the lime of its sale and that the income arising from its sale was not exempt from the Capital Gains Tax. The appeals accordingly fail and are dismissed. No costs.” Unquote.
10. Thus, applying the proposition of law explained by the Hon‟ble Supreme Court (supra) to the present case, it can be seen that :
- As per Registered Sale Deed the land was for industrial purpose as per section 63IA of Maharashtra Tenancy & Agricultural Land Act, 1948.
- Assessee himself offered capital gain in the return of income.
- As per 7/12, land is “पड़”.
- The purchaser of the land had purchased the impugned land for non-agricultural purpose.
- The rate at which land was sold by assessee explains that such rate is not available to agricultural land.
- The assessee had purchased impugned land on 22.01.2007 and within four years on 15.12.2011, assessee sold it. This explains the intention of the assessee.
11. For all the reasons discussed above, respectfully following Hon‟ble Supreme Court (supra) it is held that the impugned land sold by the assessee was capital asset for the purpose of Income Tax Act as per section 2(14) of the Income Tax Act, and it was not agricultural land. The decision relied by the Ld. AR are distinguishable on fact. Therefore, for all the reasons discussed above, Ground Nos. 1, 2 and 3 raised by the assessee are dismissed.
12. Assessee had purchased the land vide purchased deed dated 29.05.2012. Copy of the said Registered Purchase Deed is at page No. 71 to 92 of the paper book. Assessee claimed that the said land was agricultural land. However, on perusal of the Registered Purchase Deed, it is observed that the said land has been classified as industrial purpose land. The relevant page of the Registered Purchase Deed is scanned as under :
13. Thus, as per Registered Sale Deed assessee purchased land which was classified as industrial purpose land. It means assessee had not purchased agricultural land. We have already observed that assessee had sold industrial purpose land and then purchased industrial purpose land. The assessee is not eligible for deduction u/s 54B of the Act. Deduction u/s 54B of the Act is available only if assessee had sold the land which was used for agricultural purpose in preceding two years. We have already noted that as per 7/12 of the land sold, the land was “पड़”. It means land which was sold was not used for agricultural purpose in preceding years, rather it was Industrial Purpose Land.
14. Therefore, for all the reasons discussed above, assessee is not eligible for deduction u/s 54B of the Act. Accordingly, ground Nos. 5 and 6 are dismissed.
15. Assessee has challenged validity of order u/s 263 of the Act. The present appeal filed by the assessee is against order u/s 250 of the Act passed by Ld. CIT(A). The assessee had never challenged order u/s 263 dated 30.03.2017. The assessee is precluded from challenging validity of order u/s 263 in the present proceedings which are arising from order u/s 250 of the Act. Therefore, ground Nos. 7 and 8 raised by the assessee are dismissed.
16. Ground No. 9 is general in nature, hence, do not require any adjudication.
17. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on 24th August, 2026
