Burden of proof on assessee to adduce evidence that land sold is agricultural

Burden of proof is on assessee to adduce cogent evidence that land sold was an agricultural land – Supreme Court dismisses SLP.

In a recent judgment, Hon’ble Supreme Court dismissed SLP of the assessee against the judgment of Hon’ble Kerala High Court holding the land sold by the Petitioner as non-agricultural in the absence of any cogent evidence adduced except certificate issued by the Village Officer.

ABCAUS Case Law Citation:
4987 (2026) (01) abcaus.in SC

In The instant case, the Petitioner assessee had claimed sale of land by him as an agricultural land being not a ‘capital asset’ in terms of Section 2(14)(iii) of the Income Tax Act 1961 (the Act) and therefore not liable to tax under the Act.

The said explanation of the assessee was not accepted by the AO who proceeded to assess the appellant in the said amount under the head of capital gains.

The CIT(A) allowed the appeal in favour of the Petitioner based solely on the certificates issued by the Village Officer, which suggested that the land sold by the assessee was shown as agricultural land in the revenue records.

Aggrieved by the said finding of the First Appellate Authority, the revenue preferred an appeal before the Income Tax Appellate Tribunal which set aside the order of the First Appellate Authority and remitted the matter to the assessing authority to reconsider the factual question as to whether the land in question was within 8 Kms limits of the Municipality.

Against the said order of the tribunal, the revenue approached Division Bench of High Court. The High Court found that inasmuch as the appellate tribunal had itself found that the land in question was situated beyond 8 Kms, they did not have to remit the case for examining issues on which parties were not at variance and ought to have considered the evidence on record to determine the question as to whether the land was agricultural land or otherwise. The impugned order of the appellate tribunal was therefore set aside and the matter was remitted to the appellate tribunal for fresh consideration based on the evidence on record.

Pursuant to the remand, the tribunal passed a fresh order holding that the land sold was not agricultural land.

Aggrieved, the assessee challenged the order of the Tribunal before the Hon’ble High Court.

The Hon’ble High Court observed that claim of the appellant/assessee, being for exemption from the levy of income tax as applicable to capital gains, the burden of proof was on the assessee to show that he was entitled to exemption by virtue of the land sold by him being in the nature of agricultural land.

The Hon’ble High Court further observed that assessee did not produce any evidence other than a certificate from the Village Officer that the land in question was agricultural land, which certificate went against the revenue records itself that pointed to the land being in the nature of ‘Purayidam’ which translates as dry land suitable for construction of houses.

The Hon’ble High Court also noted that in addition to above, the assessee also produced copies of some returns that showed that he had returned an amount slightly over Rs.1 lakh as agricultural income obtained from the property over many years prior to the sale of the land. The appellant, however, did not produce any other cogent evidence such as wages paid to agricultural labourers, purchase invoices in respect of manure, fertilizers etc., purchase invoices pertaining to agricultural implements, if any, used in connection with the agricultural operations, the details regarding the source of water for irrigation purposes, etc. all of which would have been available with the assessee, if in fact he was engaged in agricultural operations on the land in question.

The Hon’ble High Court noted that it was on account of the absence of any cogent evidence adduced by the appellant that the appellate tribunal proceeded to hold, based on the evidence on record, that the appellant/assessee had not established that the land sold by him was agricultural in nature.

The Hon’ble High Court opined that the findings of the appellate tribunal being entirely factual and, in the absence of any evidence adduced by the assessee, could not be said to be arbitrary or perverse.

Accordingly, the Hon’ble High Court held that no substantial question of law arose and the appeal was dismissed.

Not satisfied with the judgment of the High Court, the Department challenged it before the Hon’ble Supreme Court by way of filing a Special Leave Petition. However, the Apex Court dismissed the SLP with the following observations,

“we do not find that any case is made out for interference with the impugned order passed by the High Court. The Special Leave Petition is, accordingly dismissed.”

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