Principal Commissioner Of Income Tax 6 v. >

Principal Commissioner of Income Tax 6No.121, Mahatma Gandhi Road,Chennai...Appellant / RespondentVs. Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 against the order of the Income Tax AppellateTribunal, Madras 'B' Bench, Chennai, dated 05.12.2017 made inITA No.1878/Mds/2016, against the order dated 18/03/2016 made inin ITA No.155/CIT(A)-15/14-15 passed by the Commissioner ofIncome Tax (Appeals)-15, Chennai and against the order dated26/03/2014 passed by the Income Tax Officer, Busines Ward IV(1),Chennai for the Assessment Year 2007-08. For Respondent : Mr.Muthumani Doraisami, Senior Counsel For Mr.M.P.Senthilkumar HULUVADI G. RAMESH, J. & K.KALYANASUNDARAM, J. This Tax Case Appeal has been filed by the Revenue callingin question the correctness of the order passed by the IncomeTax Appellate Tribunal, Madras 'B' Bench, Chennai, dated05.12.2017 made in ITA No.1878/Mds/2016, by raising thefollowing substantial questions of law:- https://hcservices.ecourts.gov.in/hcservices/ "(i) Whether the Appellate Tribunal is perverseby holding that the said land was an agricultural landunder Section 2(14)(iii) of the Income Tax Act? (ii) Whether mere payments of kisti will sufficeto consider a land as agricultural, when no incomefrom agriculture was offered in the return of incomeand no other evidence being available with theassessee?" 2. Brief facts necessary for disposal of the appeal wouldrun thus:- Lands measuring an extent of 301 cents at Kelambakkam waspurchased through sale deeds dated 04.05.1998 for Rs.7,76,788/-inclusive of stamp duty. The assessee along with his brotherviz., M.A.Antony and one Thilagan had entered into an agreementof sale on 21.08.2006 agreeing to sell the property for a saleconsideration of Rs.2,50,00,000/- per acre and the assesseereceived a sum of Rs.8,61,41,416/-. On 17.07.2007, assesseefiled Return of Income Tax for the assessment year 2007-08,admitting income of Rs.3,87,342/- and claimed exemption forpayment of tax of sale of the land under Section 2(14)(iii) ofthe Income Tax Act. However, on 05.06.2012, an action underSection 133A of Income Tax Act (hereinafter referred to as "theAct") was taken and the Officials of the appellant conductedsurvey. After the proceedings under Section 133A of the Act, anotice under Section 148 of the Act was issued on 05.02.2013 toreopen the assessment for the assessment year 2007-08 on theground Long Term capital gains chargeable to tax is escaped fromassessment. Thereupon, on 04.04.2013, the assessee filed aReturn declaring business loss of a sum of Rs.14.62 Lakhs. TheAssessing Officer passed reassessment order dated 26.03.2014,charging Long Term Capital Gains of Rs.8,61,41,416/- anddemanded tax of Rs.3,56,36,380/-. On appeal, the Commissioner ofIncome Tax, confirmed the reassessment order. 3. The Assessing Officer and the Commissioner of Income Taxhave held that no agricultural activity was undertaken by theassessee in the land in question and hence, the nature of landcannot be considered as agriculture. The assessee had producedChitta and Adangal to show that for the relevant period hecultivated the land. On the basis of the Chitta, Adangal andpayment of kist, the Appellate Tribunal came to the conclusionthat the assessee had proved the factum of agricultural activitybeing carried on during the relevant time and set aside theorders of imposing capital gain tax. Assailing the order, theRevenue is before this Court. 3. The Assessing Officer and the Commissioner of Income Taxhave held that no agricultural activity was undertaken by theassessee in the land in question and hence, the nature of landcannot be considered as agriculture. The assessee had producedChitta and Adangal to show that for the relevant period hecultivated the land. On the basis of the Chitta, Adangal andpayment of kist, the Appellate Tribunal came to the conclusionthat the assessee had proved the factum of agricultural activitybeing carried on during the relevant time and set aside theorders of imposing capital gain tax. Assailing the order, theRevenue is before this Court. 4. Mr.T.R.Senthilkumar, learned Senior Standing Counsel forthe Revenue vehemently contended that the assessee had purchasedthe land in the year 1998 for a total sale consideration ofRs.7,76,788/, but sold the property by way of sale agreement toVijay Shanthi Builders Ltd., for development of property ashouse sites and thereby he received Rs.8,61,41,416/- towardssale consideration. Though the assessee had produced Chitta,Adangal and Kist for the year 2005, the assessee has not shownany agricultural income during the earlier years and also forthe assessment year 2007-08 under the Income Tax Act or WealthTax Act. Moreover, the details of crops said to have beencultivated by the assessee has not been mentioned in the Adangaland the portion relating to the crops and extent have been leftblank and therefore, those documents cannot be relied upon todetermine the character of the land. 5. It is the further submission of the learned SeniorStanding Counsel that though the land in dispute has beenassessed to the land revenue as agricultural land under theState Revenue Law is certainly a relevant fact, but it is notconclusive. It is further argued that the Hon'ble Supreme Courtin the case of Sarifabibi Mohmed Ibrahim & Others Vs.Commissioner of Income Tax reported in 1993 (204) ITR 0631, hasaffirmed the decision of Gujarat High Court in CIT Vs.Siddharth, wherein, the Gujarat High Court has evolved 13factors / indicators applying to come to the conclusion thatwhether the land is an agricultural land under Section 2(14) ofof the Act. According to the learned counsel, non-considerationof the relevant facts and findings of the Income Tax AppellateTribunal on irrelevant and inadmissible documents are perverse,warrants interference of this Court. 6. Per contra Sri.K.Doraisami, learned Senior Counsel forthe respondent-assessee by placing reliance upon the decisionsof this Court reported in (2006) 284 ITR 511 [CWT v.E.Udayakumar], (2007) 292 ITR 481 [M.S.Srinivasa Naicker v.ITO], (2016) 388 ITR 514 [PCIT v. Mansi Finance Chennai Ltd.],(2014) 369 ITR 558 [Sakunthala Vedachalam v. ACIT], (2017) 99CCH 185 [CIT v. Dr.N.Rangabashyam] and (2018) 404 ITR 173 [CITv. Ashok Kumar Rathi] would argue that no substantial questionof law arises for consideration in this appeal as, the IncomeTax Appellate Tribunal, accepting the materials produced by theassessee viz., Chitta, Adangal and Kist arrived at the factualfinding that the lands sold were agricultural lands. LearnedSenior Counsel would urge that the assessee had establishedbefore the Authorities that the land in question was agriculturetill it was sold and the factum that the purchaser would beusing for different purpose cannot be a ground to interfere inthe appeal filed under Section 260-A of the Act. Hence, thefactum findings based on evidence have to be confirmed. 7. The sum and substance of the argument of the learnedSenior Counsel for the respondent is that the issue whether theland is an agriculture or not was already decided by theAppellate Tribunal and the factual finding cannot be reopened orre-appreciated by this Court by exercising the power underSection 260A of the Income Tax Act. For convenience, Section 2(14) of the Act is extracted below:- 7. The sum and substance of the argument of the learnedSenior Counsel for the respondent is that the issue whether theland is an agriculture or not was already decided by theAppellate Tribunal and the factual finding cannot be reopened orre-appreciated by this Court by exercising the power underSection 260A of the Income Tax Act. For convenience, Section 2(14) of the Act is extracted below:- "2 (14) "capital asset" means (a) property of any kind held by an assessee,whether or not connected with his business orprofession,(b) any securities held by a Foreign InstitutionalInvestor which has invested in such securities inaccordance with the regulations made under theSecurities and Exchange Board of India Act, 1992 (15of 1992) but does not include- (i) .... (ii) ... (iii) agricultural land in India, not being landsituate- (a) in any area which is comprised within thejurisdiction of a municipality (whether known as amunicipality, municipal corporation, notified areacommittee, town area committee, town committee, or byany other name) or a cantonment board and which has apopulation of not less than ten thousand; or (b) in any area within the distance, measuresaerially,- (I) not being more than two kilometres, from thelocal limits of any municipality or cantonment boardreferred to in item (a) and which has a population ofmore than ten thousand but not exceeding one lakh; or (ii) not being more than six kilometres, from thelocal limits of any municipality or cantonment boardreferred to in item (a) and which has a population ofmore than one lakh but not exceeding ten lakh; or (iii) not being more than eight kilometres, fromthe local limits of any municipality or cantonmentboard referred to in item (a) and which has apopulation of more than ten lakh" 8. In the appeal, the issues that arise for consideration iswhether the assessee had proved that the land sold was anagricultural land and it would not attract payment of capitalgain tax and whether this Court can interfere with the findingsof the Appellate Tribunal while exercising jurisdiction underSection 260A of the Act. 9. In the matter on hand , in the sale deed produced by theassessee, the land has been mentioned as agricultural land,however, in the agreement of sale dated 21.08.2006, wherein, theassessee had agreed to sell the property to Vijay ShanthiBuilders Limited, the land was not mentioned as an agriculturalland. Though the agreement of sale was entered into on21.08.2006, the entire reading of the agreement would show thatthe purchaser, viz., Vijay Shanthi Builders Limited had almostpaid the entire sale consideration to the vendors. The vendorshave also executed a Power of Attorney in favour of the personnamed by the purchaser to enable them to sell the property. Therelevant clauses are extracted below:- "13. The vendors through may execute a Power ofAttorney in the name of the nominee of the purchaserto deal with the schedule mentioned property, theVendor agrees, if necessary, in order to facilitatethe process of obtaining necessary sanctions andapprovals from the authorities, to extend allnecessary co-operation to the purchaser as may berequired by signing relevant papers / applicationswhich are to be submitted to the authorities concernedincluding Director of Town and Country Planning andLocal Planning Authority Chennai Development Authorityfor obtaining the plan sanction in respect of thedevelopment contemplated on the schedule mentionedproperty. The purchaser shall bear all the costsincidental to such survey, measurement, preparation ofplan, sketches and drawings, etc., and also the feeinvolved for making necessary applications or forobtaining sanctions and approvals from the authorisesconcerned. 14. The vendors have agreed to permit thepurchaser upon execution of this agreement for sale toundertake marketing operations in respect of theproposed development on the schedule mentionedproperty at the sole risk and cost of the purchaser.The marketing operations will specifically include thepurchaser's right to put up a display board at theschedule mentioned property about the proposeddevelopment and also their right to negotiate, enterinto agreement for sale and conclude transactions withthe prospective buyers without any recourse to thevendors. 15. The parties hereto confirm and agree that thisAgreement for sale is irrevocable and the vendorshereby agree that they will not revoke the Power ofAttorney executed in respect of the properties in anycircumstances and that the same is irrevocable sinceconsideration as per the Agreement would have alreadybeen received by the Vendors. In spite of the above,in the event of that the vendors unilaterally orvoluntarily revoke the Power of Attorney then theVendors shall be liable to pay to the purchaser thenprevailing market value of the schedule mentionedproperty together with compensation for improvementseffected together with interest at the rate of 15% perannum on such amounts against surrender /re-conveyanceof the schedule mentioned properties to the vendorswith all improvements." 10. As stated above that the Assessing Officer and theCommissioner of Income Tax had come to the conclusion the landin question was not agricultural land and rejected Chitta andAdangal produced by the assessee. A perusal of the Chitta andAdangal annexed in the typed-set of paper furnished by therespondent would reveal that for the Fasali No.1415(Corresponding year 2005) in the adangal, except mentioning thename of the asessee, survey number and extent, the otherrelevant columns i.e., crop and extent said to have beencultivated by the assessee are left blank. As rightly contendedby the learned Senior Standing Counsel for the appellant, theAdangal produced by the assessee creates a serious doubtwhether the assesee was in fact was cultivating the land at therelevant point of time. 11. The Hon'ble Supreme Court in the case of SarifabibiMohmed Ibrahim & Others Vs. Commissioner of Income Tax (referredsupra), has held that the fact that the land is assessed to theLand Revenue as agricultural land under the State Revenue Law iscertainly a relevant fact but it is not conclusive. It isfurther observed that the Madras High Court in Sarojini Devi v.T. Sri Krishna [AIR 1944 Mad 401] held that the exception"agricultural land" should be given the widest meaning and theland is assessed to land revenue as agricultural land under theState Revenue Law is a strong piece of evidence of its characteras an agricultural land, but on appeal, the Constitution Benchof the Hon'ble Supreme Court held that inasmuch as, theagricultural land is exempted from the purview of the definitionof the expression “assets”, it is “impossible to adopt so wide atest as would obviously defeat the purpose of the exemptiongiven”. It is also observed that the idea behind exempting theagricultural land is to encourage cultivation of land and theagricultural operations. 12. The Gujarat High Court in CIT Vs. Siddharth, hasevolved the following 13 facts to determine the character of theland, which would run thus:- “(1) Whether the land was classified in therevenue records as agricultural and whether it wassubject to the payment of land revenue? (2) Whether the land was actually or ordinarilyused for agricultural purposes at or about therelevant time? (3) Whether such user of the land was for a longperiod or whether it was of a temporary character orby way of a stopgap arrangement? 12. The Gujarat High Court in CIT Vs. Siddharth, hasevolved the following 13 facts to determine the character of theland, which would run thus:- “(1) Whether the land was classified in therevenue records as agricultural and whether it wassubject to the payment of land revenue? (2) Whether the land was actually or ordinarilyused for agricultural purposes at or about therelevant time? (3) Whether such user of the land was for a longperiod or whether it was of a temporary character orby way of a stopgap arrangement? (4) Whether the income derived from theagricultural operations carried on in the land boreany rational proportion to the investment made inpurchasing the land? (5) Whether, the permission under Section 65 ofthe Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom(the vendor or the vendee)? Whether such permissionwas in respect of the whole or a portion of the land?If the permission was in respect of a portion of theland and if it was obtained in the past, what was thenature of the user of the said portion of the land onthe material date? (6) Whether the land, on the relevant date, hadceased to be put to agricultural use? If so, whetherit was put to an alternative use? Whether such cesserand/or alternative user was of a permanent ortemporary nature? (7) Whether the land, though entered in revenuerecords, had never been actually used for agriculture,that is, it had never been ploughed or tilled? Whetherthe owner meant or intended to use it for agriculturalpurposes? (8) Whether the land was situate in a developedarea?Whetheritsphysicalcharacteristics,surrounding situation and use of the lands in theadjoining area were such as would indicate that theland was agricultural? (9) Whether the land itself was developed byplotting and providing roads and other facilities? (10) Whether there were any previous sales ofportions of the land for non-agricultural use? (11) Whether permission under Section 63 of theBombay Tenancy and Agricultural Lands Act, 1948, wasobtained because the sale or intended sale was infavour of a non-agriculturist? If so, whether the saleor intended sale to such non-agriculturist was fornon-agricultural or agricultural user? (12) Whether the land was sold on yardage or onacreage basis? (13) Whether an agriculturist would purchase theland for agricultural purposes at the price at whichthe land was sold and whether the owner would haveever sold the land valuing it as a property yieldingagricultural produce on the basis of its yield?" The Hon'ble Supreme Court in the case of Sarifabibi held thatnot of all these factors would be present or absent in any caseand that in each case one or more of those factors may makeappearance and that the ultimate decision will have to bereached on an balanced consideration of the totality of thecircumstances. (12) Whether the land was sold on yardage or onacreage basis? (13) Whether an agriculturist would purchase theland for agricultural purposes at the price at whichthe land was sold and whether the owner would haveever sold the land valuing it as a property yieldingagricultural produce on the basis of its yield?" The Hon'ble Supreme Court in the case of Sarifabibi held thatnot of all these factors would be present or absent in any caseand that in each case one or more of those factors may makeappearance and that the ultimate decision will have to bereached on an balanced consideration of the totality of thecircumstances. 13. Further, we would like to make it clear that the burdenof proof that the land is an agricultural land is always on theassessee, who seeks exemption under Section 2(14)(iii) of theIncome Tax Act, because, the Revenue cannot be expected toproduce negative evidence. The Constitution Bench of Hon'bleSupreme Court in (1976) 105 ITR 133 (SC) [Commissioner of WealthTax vs. Officer-in-Charge (Court of Wards) while consideringthe issue of granting exemption to the agricultural land underthe provisions of the Wealth Tax Act, has held as follows:-"We also think that the Full Bench was not correctin adopting view expressed in Sarojini Devi's case(supra) by the Madras High Court where it was heldthat it was enough to show that the land underconsideration was capable of being used foragricultural purpose. This erroneous view also seemsto us to have affected the conclusion of the FullBench on what was essentially a question of fact. Ithas led the Full Bench into giving excessive weight toconsiderations which had a bearing only onpotentialities of the land for use for agriculturepurposes. For the reasons already given, we do not thinkthat the term "agricultural land" had such a widescope as the Full Bench appears have given it for thepurposes of the Act we have before us. We agree that the determination of the character of land, accordingto the purpose for which it is meant or set apart andcan be used, is a matter which ought to be determinedon the facts of each particular case What is reallyrequired to be shown is the connection with anagricultural rural purpose and user and not the merepossibility of user of land by some possible futureowner or possessor, for an agricultural purpose. It isnot the mere potentiality, which will only affect itsvaluation as part of "assets", but its actualcondition and intended use which has to be seen forpurposes of exemption from wealth tax. On the objectsof the exemption seemed to be to encourage cultivationactual utilisation of land for agricultural purposes.If there is neither anything in its condition, noranything in evidence to indicate the intention of itsowners or possessors, so as to connect it with anagricultural purpose, the land could not be"agricultural land" for the purses of earning anexemption under the Act. Entries in revenue recordsare, however, good prima facie evidence. We do notthink that all these considerations were kept in viewby the taxing authorities deciding the question offact which was really for the assessing authorities todetermine having regard to all the relevant evidenceand law laid down by this Court." 14. In the decisions relied on by the learned Senior Counselfor the respondent, this Court, on facts, came to the conclusionthat the assessee had in fact established their case that theywere carrying agriculture activities. Some of the assesseeshave shown their agricultural income in the Returns submitted bythem under the Income Tax Act and the Wealth Tax Act. Hence,the decisions have no application to the case on hand. Further,we are not able to agree with the proposition stated therein forthe reason that the guidelines / factors framed by the GujaratHigh Court and got approval of the Apex Court in SarifabibiMohmed Ibrahim & Others Vs. Commissioner of Income Tax (referredsupra), were not taken note of. 15. In the present case, no materials have been produced bythe assessee for the period between 1998 and 2006 to show thathe was carrying on agricultural activities in the land at anypoint of time except producing Chitta and Adangal for the year2005. Since relevant columns in the Adangal with regard to cropand extent are left blank, it would not be proper to record afinding on those documents and they have to be discarded. Itis an undisputed fact that no genuine agriculturist wouldpurchase a land Rs.2,50,00,000/- per acre. In our consideredopinion, the factors 2, 7, 8 and 13 evolved by the Gujarat High Court (supra) are relevant factors to be taken intoconsideration for deciding the nature of the land. However, theappellate Tribunal overlooking the above material factors and onthe basis of Chitta and Adangal, granted exemption of payment ofcapital gain. Hence, this is the case of finding on no evidenceand it is perverse. 16. The Hon'ble Supreme Court in the following decisionshave held that if the finding is based on no evidence ormisreading of evidence and non consideration of materialevidence would be perverse and they are liable to be set aside. (i) Ramlal v. Phagua [2005 (5) CTC 282]:- "22. The case of Indira Kaur v. Sheo Lal Kapoor[(1988) 2 SCC 488] was cited by the learned SeniorCounsel appearing for Respondent 1 in regard to thescope of Article 136. In the above judgment, thisCourt in para 7 held that Article 136 does notexpressly forge any fetters on the power of this Courtto interfere with the concurrent findings of fact.Though, this power has to be exercised sparingly butif and when the Court is satisfied that graveinjustice has been done it is not only the right butalso the duty of the Court to reverse the error andthe injustice and to upset the finding notwithstandingthe fact that it has been affirmed earlier. This Courtalso held that it is not the number of times that afinding has been reiterated that matters. What reallymatters is whether the finding is a manifestlyunreasonable and unjust one in the context of theevidence on record. This judgment squarely applies tothe case on hand. In the instant case, the High Courthas rightly exercised its right and discharged itsduty to reverse the error and removed the injusticedone by the courts below. The High Court is right inexercising its duty, rightly so in interfering withunreasonable and unjust findings by both the courtsbelow. 23. On a careful perusal of the materials onrecord, it will be clear that both the courts belowdid not appreciate the evidence on record both oraland documentary and, therefore, the findings arrivedat by the High Court, in our opinion, do not call forany interference under Article 136 of the Constitutionand the civil appeal deserves to be dismissed." (ii) Bharatha Matha v. R. Vijaya Renganathan [2010 (3) CTC654]"11. In Rajappa Hanamantha Ranoji v. MahadevChannabasappa [(2000) 6 SCC 120] this Court held that 23. On a careful perusal of the materials onrecord, it will be clear that both the courts belowdid not appreciate the evidence on record both oraland documentary and, therefore, the findings arrivedat by the High Court, in our opinion, do not call forany interference under Article 136 of the Constitutionand the civil appeal deserves to be dismissed." (ii) Bharatha Matha v. R. Vijaya Renganathan [2010 (3) CTC654]"11. In Rajappa Hanamantha Ranoji v. MahadevChannabasappa [(2000) 6 SCC 120] this Court held that it is not permissible for the High Court to decide thesecond appeal by re-appreciating the evidence as if itwas deciding the first appeal unless it comes to theconclusion that the findings recorded by the courtbelow were perverse." 17. It is to be noted that before the appellate Tribunal, itwas contended by the assessee that the entire extent of 301cents does not belong to him. It is evident from the recordsproduced by the assessee that the entire sale consideration wasRs.15,30,00,000/- and the share of the assessee wasRs.8,61,41,416/-. 18. Keeping in view the principles laid down in the abovedecisions and for the foregoing reasons, the order of IncomeTax Appellate Tribunal, Madras 'B' Bench, Chennai, dated05.12.2017 is liable to be set aside and accordingly, set aside.The questions of law are answered in favour of the Revenue andthe Tax Case Appeal is allowed. There is no order as to costs. Sd/- Assistant Registrar(CO) //True Copy// Sub Assistant Registrar r n sTo 1.The Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai. Madras 'B' Bench, Chennai. 2.The Commissioner of Income Tax (Apeals-15), Chennai. Chennai. 3.The Income Tax Officer, Business Ward IV (1), Chennai. Business Ward IV (1), Chennai. 4.The Principal Commissioner of Income Tax-6, No.121, Mahatma Gandhi Road, Chennai. No.121, Mahatma Gandhi Road, Chennai. sai[co]srg 20/11/2018 Tax Case Appeal No.504 of 2018