The test for determining whether the impugned land is agriculture bear mainly on the nature or character of the land, and not merely on the actual user or non-user at a particular point of time. If the land is not actually appropriated for agricultural purposes, the minimal requirement is that it should be set apart for being used for agricultural purposes and should be such as could reasonably be so used without alteration of its character, entries in the revenue records being prima facie, but not conclusive evidence. In order to qualify for exemption, it is not enough that the land was once agricultural land, it must be agricultural land at the time of sale. As per Revenue records no agricultural activities were carried out by the assessee in the land and the same was also situated within 8 km. of local municipal limits. Therefore, nature and character of the land would not show that the land was to be an agricultural land. Further that, the assessee did not file any explanation before the AO that the property in question was agricultural land. Assessee failed to controvert findings recorded by the AO. Hence, the addition made by the AO under head long-term capital gain by invoking provisions of section 50C was justified.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by assessee has been directed against the order of the learned Commissioner (Appeals), Ghaziabad, dated 31-8-2017, for the assessment year 2007-08.
2. Briefly, the facts of the case are that assessee filed return of income declaring income of Rs. 1,45,142. The assessee declared long-term capital gains at Rs. 1,33,769 from sale of land Khata No. 573, Khasara No. 1234, measuring 2970 sq. mtr situated in Village Ruza Yakubpur, Pargana & Tehsil Dadri, District Gautam Budh Nagar and income from other sources at Rs. 11,373. The case was selected for scrutiny. Finlay, the assessment was completed by assessing long-term capital gains at Rs. 33,81,514 by taking sale value adopted at Rs. 44,60,000 under section 50C as against taken by assessee at Rs. 11 lakhs.
2.1 Aggrieved from the assessment order, the assessee filed an appeal before the learned Commissioner (Appeals) and thereafter, ITAT. The case was adjudicated by ITAT, Delhi, C-Bench and the operative portion of the order is reproduced in the assessment order in which the matter in issue was restored to the file of assessing officer to consider the evidence brought on record and take a view, “Whether land sold was agriculture or not. If the land sold was agricultural land within the meaning of provisions of section 2(14)(iii) of the Act, then, question of invoking provisions of section does not arise.” In view of these directions of the Tribunal the assessing officer has taken-up the matter again for passing the assessment order. In order to provide the opportunity to the assessee of being heard, the assessing officer asked the assessee to submit the following documents/explanation/reply :–
‘(a) Document(s) evidencing conclusively that the land Khata No. 573, Khasara No. 1234 measuring 2970 sq. mtr. situated in Village Roza Yakubpur, Pargana Tehsil Dadri, Distt. Gautam Budh Nagar was not a capital asset at the time of sale effected by you during assessment year 2007-08.
(b) Also, furnish distance of the impugned land from the local limits of any nearest municipality etc. whether the municipality etc. falls in UP., Delhi or Haryana.
(c) Please explain why the impugned land may not be treated a capital asset as vide page No. 2 of the sale deed the nature of the land is mentioned as “residential land”.’
2.2 In response to the notice, assessee filed written reply asserting that the impugned land was agricultural land on the basis of a certificate from Tehsildar and copy of khasra for the relevant period. It was further stated that if assessing officer has any doubt about the evidences then the velocity of the same may be confirmed from the office of the revenue authorities/tehsildar of Dadri Tehsil. The assessee further filed written reply explaining therein that in terms of section 2(14) of the Act, it is to be measured from the Municipality in which land in question situated and not from any foreign municipality. In order to examine the authenticity of the evidences furnished by the assessee, notice under section 133(6) dated 15-12-2015, the Tehsildar, Dadri, Gautam Budh Nagar, was asked to furnish the crops grown during the period 1-4-2005 to 31-3-2007 on the impugned land. He was further required to furnish the distance of the impugned land from local limits of Noida Authority and Greater Noida Authority during F.Y. 2006-07. Similar notice under section 133(6) was issued to Assistant Engineer, PWD, G.B. Nagar to furnish the distance of impugned land from local limits of Ghaziabad/Noida Authority and Greater Noida Authority during F.Y. 2006-07. Further, the Income Tax Inspector was also deputed to ascertain the distance between the impugned land and the local limit of Ghaziabad Nagar Nigam.
2.3 The written reply received from Tahsildar, Dadri, G.B. Nagar and Ex. Engineer, PWD, G.B. Nagar and the report of Income Tax Inspector was confronted to the assessee vide notice under section 142(1) of the Act as reproduced in the assessment order in which it was brought to the notice of the assessee that no crops were grown during the years 2005 to 2007 and the impugned land is situated within the distance of 10 K.M. from the Headquarters of Noida Authority and Greater Noida Authority as reported by Tehsildar, Dadri. It was also brought to the notice of assessee that as per report of PWD, G.B. Nagar, Village Roza Yakubpur, which falls within the limits of Greater Noida Authority and the same is situated within the distance of 5.2 KM from the municipal limits of Ghaziabad Nagar Nigam. The report of the Income Tax Inspector reveal that the distance between the impugned land and the Income Tax Office, Ghaziabad via motorable road is 9.0 KM, which strengthen the above two reports. Meaning thereby, the land in question falls in the area not being more than 8.0 KM from the local limits of Ghaziabad. Nagar Nigam. It was also brought to the notice of the assessee that since no crop was grown during the years 2005 to 2007, therefore, the character of the impugned land was not agricultural land but residential, which is further corroborated from the sale deed, in which, nature of land is mentioned as ‘residential land’. It is also mentioned in the sale deed that same is having covered area having six rooms, one guard room, one generator room built-up on the impugned property, therefore, no agriculture activity could be conducted on the same. It was, therefore, brought to the notice of the assessee that land in question is not agricultural land. Since, there was an inadvertent error in the notice, assessing officer issued corrigendum to the notice issued under section 142(1) pointing-out to the assessee that the land in question is a capital asset due to the reasons mentioned above. Assessee, however, did not attend on the date of hearing fixed for the same purpose. The assessing officer further issued show cause notice asking the explanation of the assessee. The assessee however, did not make any compliance before assessing officer. The assessing officer, therefore, noted that assessee has no explanation whatsoever to the evidence gathered by him during the course of assessment proceedings and it is clearly proved on the basis of the evidence and material on record that no crops grown during F.Ys. 2005-06 to 2006-07 in the impugned land. Meaning thereby, prior to its sale, no agricultural activities were carried out in the impugned land. This fact is further corroborated by sale deed, in which, property is mentioned as “Residential Land”. The impugned land not only falls within the local limits of Greater Noida Authority but at the same time falls within 8.0 KM of local limits of Noida Authority and Ghaziabad Nagar Nigam during financial year under reference. The assessing officer, therefore, held that the impugned land is capital asset and full value of the sale consideration was adopted as per provisions of section 50C of the Income Tax Act at Rs. 44,60,000 and after giving benefit of cost of acquisition of long-term capital gains was computed.
3. The assessee challenged the findings of the assessing officer before learned Commissioner (Appeals). The earlier order of the learned Commissioner (Appeals) and the order of the ITAT on first round are reproduced in the impugned order. The written submissions of the assessee is also reproduced in which the assessee highlighted that copy of the Khatauni showing nature of land as “Bhoomi Jo Sankarmaniya Bhoomidhar Key Adhikar Mein Ho”. The report of the Tehsildar dated 17-4-2009 shows area and distance from the Municipal Corporation to the location of the land. The assessee filed affidavit and return for assessment year 2005-06 and 2006-07 showing agricultural income. It is pointed-out that the land sold originally to the assessee was for agricultural purposes. The assessee also moved petition under rule 46A of the Income Tax Rules for admission of the affidavit of the assessee and copies of the returns for assessment years 2005-06 and 2006-07. The learned Commissioner (Appeals), however, rejected the application of assessee for admission of additional evidences and did not admit these additional evidences. The learned Commissioner (Appeals) considering the explanation of assessee and material on record noted in his findings that the ITAT, Delhi Bench, restored the matter back to the assessing officer with a direction to examine whether the land sold during the year under consideration by assessee was agricultural land, within the meaning of section 2(14)(iii) or not. The assessing officer gave an opportunity to the assessee to prove that the land in question is agricultural land and confronted all the material collected by him during the course of assessment proceedings. However, the assessee did not explain the same. The matter was examined by various authorities and land in question was found within Municipal limits. The learned Commissioner (Appeals) also referred to copy of the sale deed in question which shows that land sold was not agricultural land which is residential property having six residential rooms along with generator room etc., and is a constructed property. It was also noted that evidences reveal that no cultivation was held in this land in assessment years 2005 to 2007. The assessee himself described the said land to be non-agricultural when he has declared long-term capital gains on the same. The learned Commissioner (Appeals), accordingly held that the land in question situated within the municipal limits and is not agricultural land. The appeal of the assessee was accordingly dismissed.
4. Learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB-3 which is Certificate obtained by assessee to show the distance of the impugned land from Municipality, Dadri beyond 8 KM. He has submitted that in preceding years agricultural operations have been done on the same land. It is not necessary to do agricultural operations in assessment year also. Affidavit and returns of income of assessee for earlier year are filed to show assessee earned agricultural income. He has submitted that intention of the assessee to be seen at the time of transferring the land in question. PB-5 is Notification of the Government to show that the land is beyond the municipal limit. The authorities below have ignored report of the Tehsildar. He has relied upon the following decisions :–
(i) CIT v. Smt. Debbie Alemao (2011) 331 ITR 59 (Bom.)
(ii) ITO v. Ashok Shukla (2012) 139 ITD 666 (Indore)
(iii) M.S. Srinivasa Naicker v. ITO (2007) 292 ITR 481 (Mad.).
(iv) CIT v. Lal Singh (2010) 325 ITR 588 (Punj. & Har.).
(v) CIT v. Borhat Tea Co. Ltd. (1982) 138 ITR 783 (Calcutta)
5. On the other hand, learned D.R. relied upon the orders of the authorities below and submitted that assessee himself declared long-term capital gains. Therefore, land in question is capital asset and not agricultural land, on which, section 50C is correctly applied. The land falls in municipal limit aerially. Additional evidences were not admitted by the learned Commissioner (Appeals), on which, no further appeal have been filed by the assessee.
6. I have considered the rival submissions. It is not in dispute that assessee declared long-term capital gains on sale of the impugned land situated at Dadri District, Gautam Budh Nagar. The assessee claimed it to be agricultural land. In the first round of proceedings, the Tribunal has restored the matter to the file of the assessing officer to consider the evidence produced on record and take a view whether the land sold is agricultural or not. It is well settled law that in set aside proceedings, the assessing officer shall have to confine himself to the issue remanded to him i.e., whether the impugned land is agricultural land or not. The Hon’ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT (1993) 204 ITR 631 (SC) held as under :–
“The appellants were co-owners of a plot of land inherited from an ancestor through their father. On 15-3-1967, they agreed to sell the land to a housing co-operative society and, to enable them to complete the transaction, they applied in June, 1968, and March, 1969, for permission to transfer the land for a non-agricultural purpose and the permission was granted in April, 1969. A number of sale deeds were executed in May, 1969, and the purchasing society applied for conversion of the land to non-agricultural purposes, viz., construction of buildings. The question was whether the profit from the sale of the land was assessable to capital gains tax. The facts in favour of the appellants were : the land was registered as agricultural land in the revenue records and land revenue had been paid in respect thereof till the year 1968-69; there was no evidence that the land was put to non-agricultural use and the land was actually cultivated till and including the agricultural year 1964-65; there were agricultural lands abutting the land ; and the appellants had no other source of income except the income from those lands. The facts against the appellant were : the land was situated within the municipal limits of the Surat Municipality and at a distance of one kilometre from the Surat railway station; the land was not cultivated from 1965-66 until it was sold in 1969 : the appellants had entered into an agreement with a housing co-operative society to sell the land for construction of houses, they had applied in June, 1968, and March, 1969, for permission to sell the land for non-agricultural purposes and soon after obtaining permission they executed the sale deeds in May, 1969 ; and the land was sold at a rate of Rs. 23 per sq. yard and the purchasing society commenced construction operations within three days of purchase. On a consideration of the contending factors the High Court held that the land was non-agricultural land and tax was leviable on the capital gains arising from the transfer. On appeal to the Supreme Court:
Held, affirming the decision of the High Court, that the entering into the agreement to sell the land for housing purposes, the applying for and obtaining permission to sell the land for non-agricultural purposes, and 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 and the price at which it was sold outweighed the circumstances appearing in favour of the appellants’ case and established that the land was not agricultural land when it was sold. The appellants had no intention to bring it under cultivation at any time after 1965-66 and certainly not after they entered into the agreement to sell the land to the housing co-operative society. The High Court was right in holding that the land was not agricultural land at the time of its sale and the profit arising from its sate was liable to capital gains tax.”
6.1 In my view, the test for determining whether the impugned land is agriculture bear mainly on the nature or character of the land, and not merely on the actual user or non-user at a particular point of time. If the land is not actually appropriated for agricultural purposes, the minimal requirement is that it should be set apart for being used for agricultural purposes and should be such as could reasonably be so used without alteration of its character, entries in the revenue records being prima facie, but not conclusive evidence. In order to qualify for exemption, it is not enough that the land was once agricultural land, it must be agricultural land at the time of sale. The assessing officer collected several evidences at assessment stage and confronted the same to the assessee seeking explanation as to how assessee claimed the impugned land as agricultural land. However, assessee did not file any explanation before assessing officer and whatever documents were confronted to the assessee have not been rebutted by the assessee. Therefore, the material evidence collected by the assessing officer at assessment stage clearly prove that no crops grown during F.Ys. 2005-06 to 2006-07 in the impugned land. Meaning thereby, prior to the sale on 15-4-2006 and at the time of sale, no agricultural activities were carried out on the said land. This fact is corroborated by the sale deed in question, copy of which is filed in the paper book to show that circle rate of the property in question was Rs. 44,60,000 which could not be of agricultural land and property under sale was residential property, on which, six residential rooms have been constructed along with guard room and generator room. Further construction was also going on in the impugned land. The sale deed is produced by the assessee on record. Therefore, it amounts to admission on the part of the assessee that the impugned land was being used for residential purposes on which massive construction have been raised prior to the sale. According to the reports of the PWD and Income Tax Inspector, the impugned land not only falls within the local limits of Greater Noida Authority but at the same time falls within the 8 KM of local limits of Noida Authority and Ghaziabad Nagar Nigam. PB-3 is letter of the assessee to Tehsildar, Gautam Budh Nagar, in which, assessee seeks information regarding distance of the land from Municipal limit of Dadri. The assessee in this letter did not mention anything to the Tehsildar whether the land is agricultural land or not. The assessee did not seek any information from the Tehsildar whether land is agricultural land or not. It, therefore, appears that assessee did it deliberately to withhold the relevant evidence on record. PB-4 is the Report of Tehsildar which is called by the assessing officer in which Tehsildar has reported that there were no agricultural operations conducted in the impugned land during the years 2005 to 2007. The sale deed confirmed that it is a constructed property, when it was sold. The assessee declared long-term capital gains, meaning thereby, assessee himself admitted that the said land to be non-agricultural land when he has filed the return of income. Even as per Revenue Records, no agricultural activity were carried-out by the assessee in the impugned land. As per evidence collected on record, the land falls within the Municipal limits. Whatever additional evidence were submitted by assessee were not admitted by the learned Commissioner (Appeals), on which, no further appeal have been filed by the assessee. The nature and character of impugned land would not show it to be agricultural land. The assessee has no intention to do any agricultural operation in impugned land. It, therefore, appears that assessee did not file any explanation before assessing officer that property in question is agricultural land. Therefore, the directions of the Tribunal at the time of remanding back the matter to the file of assessing officer have not been complied by the assessee. The decision of the Hon’ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (supra), squarely apply to the facts of the case. The decision relied upon by the learned Counsel for the assessee are clearly distinguishable on facts. In view of the above discussion, I do not find any merit in the appeal of the assessee and the same is accordingly dismissed.
7. In the result, appeal of the Department is dismissed.
Disclaimer- Please note we were not able to verify the above contents from official ITAT Judgments. Please check at your end before relying on the above.