Agricultural land-revenue records can not be rejected without any basis or material evidence-ITAT

Agricultural land-revenue records can not be rejected without any basis or material evidence holding it to be an mechanical entry – ITAT

ABCAUS Case Law Citation:
ABCAUS 2461 (2018) 08 ITAT

The instant appeal had been filed by the assessee against the order passed by CIT(A) in sustaining the reopening u/s 147 and holding that the land sold was not agricultural land within the meaning of section 2(14) of Income Tax Act, 1961 (the Act)

The return of the assessee was initially processed under section 143(1) of the Act. In case of co-owner of an agricultural land the claim of exemption of capital gains tax was denied by the assessing officer holding that the land sold was not agricultural one.

Consequently, being the co-owner, notice under section 148 of the Act was issued to the assessee. The AO observed that assessee also had sold his share of alleged agricultural land and claimed that it was not a capital asset under section 2 (14) of the Act and hence not chargeable to tax as capital gain. It was also submitted that the land is situated outside municipal area.

The AO placed reliance upon report of Inspector which obtained in case of co-owner where it had been reported that the entire area was an industrial hub and therefore was not used for agricultural purposes on the date when it was sold by assessee prior to 3 to 4 years.

The AO passed assessment order under section 143(3) read with section 147 of the Act, taxing the capital gain on sale of land as short term capital gain, following assessment order passed in case of co-owner.

.CIT(A) upheld action of reopening of assessment and dismissed grounds of assessee by holding that no agricultural income has been shown during the period of holding and therefore no agricultural activities were carried out by assessee as per enquiry report submitted by Inspector and sale of land was in a developed industrial hub and therefore could not be considered to be an agricultural land

The Tribunal opined that merely because addition had been made in hands of co-owner, no presumption could be drawn that income has escaped assessment in the hands of assessee, without there being independent ‘reasons to believe’ , based upon cogent materials. Secondly, Inspector’s report based upon which assessment was completed in the hands of co-owner, specifically stated that alleged agricultural land was situated 11 km away from Thasil Palwal, and therefore the reason for reopening of assessment was based upon a contrary view.

In the context of statement recorded by the spouse of the co-owner regarding no cultivation had taken place on alleged agricultural land during holding period and subsequently having being sold in a short span of 10 months, the Tribunal observed that intention to use a particular piece of land for non agricultural purposes could not by itself alter character of the land in question. What is to be seen is nature of land as on the date it was acquired. As per the letter of the Thesildar alleged agricultural land was situated 12 km away from the city and this fact had not been disputed by AO.

Further the Tribunal observed that authorities below had not been able to dispute that during financial year relevant to assessment year under consideration, as per revenue records land in question had been shown as “KHUD KHAST” and without any basis or material evidence had rejected these Government records by holding it to be an mechanical entry. The Tribunal opined that there was no materials, based upon which assessing officer had ‘reason to believe’, that income had escaped assessment.

The Tribunal quashed and set-aside the reopening of assessment on legal ground.

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