The Commissioner Of Income Tax,Chennai v. Late Dr.n.rangabashyamrep. By Wife & L/R Mrs.r.chitralekha

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.08.2017 The Hon'ble Ms.INDIRA BANERJEE, CHIEF JUSTICEAND The Hon'ble MR.JUSTICE M.SUNDAR T.C.A.No.429 of 2017 The Commissioner of Income tax,Chennai... Appellant -vs- Late Dr.N.RangabashyamRep. By wife & L/r Mrs.R.Chitralekha. .. Respondents Appeal filed under Section 260-A of the Income Tax Act,1961, against the order of Income Tax Appellate Tribunal, Madras'B'Bench,Chennai,dated10.11.2016passedinI.T.A.No.1337/Mds/2016, in respect of the Assessment Year 2012-13 against the order dated 23.3.2016 of the Commissioner ofIncome Tax (Appeals) in ITA No.13/CIT(A)-2/2015-16 for theAssessment year 2012-13, against the order dated 30.03.2015 ofthe Deputy Commissioner of Income Tax, Non Corporate Circle-II,Chennaifortheassessmentyear2012-2013inPAN.NO.GIR.NO.AAAPR.6056P.For Appellant:Mr.T.RavikumarJ U D G M E N T (Judgment of the Court was delivered by The Hon'ble ChiefJustice) This appeal is against the judgment and order dated10.11.2016 passed by the Income Tax Appellate Tribunal, 'B'Bench,Chennai,dismissingtheappealbeingI.T.A.No.1337/Mds/2016 filed by the Deputy Commissioner ofIncome-tax, Non-Corporate Circle 2, Chennai, in relation to theAssessment Year 2012-13 and affirming the order dated 23.03.2016passed by the Commissioner of Income-Tax (Appeals)-2. https://hcservices.ecourts.gov.in/hcservices/ 2.The assessee, a Gastroenterologist, since deceased, nowrepresented by his wife and legal heir, Smt.R.Chitralekha, hadfiled a return of income for the Assessment Year 2012-13electronically on 28.09.2012 declaring a total income ofRs.2,13,43,800/-. 3.The assessee had sold property measuring 4.91 acres ofvacant land at Krishnankaranai Village, Chengalpet Taluk, for aconsideration of Rs.9,76,76,000/-, vide Document No.13202/2011,which was registered in the Office of the Sub Registrar,Tiruporur. It is stated that as per the guidelines of the sub-registration office, the market value of the property wasestimated at Rs.11,05,38,000/-. 4.The assessee claimed that the entire sale considerationwas exempt under Section 2 (14) of the Income Tax Act, 1961, asthe lands sold were agricultural lands. The assessee claimedthat the lands in question not being capital asset, no capitalgains tax was payable on such sale. 5.In the course of assessment proceedings, the AssessingOfficer found that the assessee had acquired the lands inbetween the years 1985 to 1988, but the assessee had notreturned any agricultural income from the Assessment years 2006-07 to 2011-12. The Assessing Officer, thus, presumed that theassessee was not carrying on any agricultural activity in theland and concluded that the lands were not agricultural lands. 6.In arriving at the conclusion that the lands sold were notagricultural lands, the Assessing Officer took note of thephenomenal rise in the value of the lands and also the fact thatthe assessee had sold the lands to a real estate developer. 7.Being aggrieved by the order of assessment, the assesseeappealed to the Commissioner of Income-Tax (Appeals), [in short'CIT(A)'] . The CIT (A) allowed the appeal of the assesseeholding that the lands in question transferred by the assesseewere agricultural lands and that there was sufficient evidenceto prove that the lands were used for agricultural purposes. 8.Being aggrieved by the order of the CIT(A), the Departmentfiled an appeal before the Appellate Tribunal. The appeal ofthe Department has been dismissed by the order sought to beappealed against. 9.The CIT (A) had concluded that it was a fact that thelands in question had been sold for a high price ofRs.9,76,76,000/-. However, the fact remained that agriculturalactivities, i.e., cultivation of trees and vegetables, hadactually been carried out in the lands as evidenced by the https://hcservices.ecourts.gov.in/hcservices/ 8.Being aggrieved by the order of the CIT(A), the Departmentfiled an appeal before the Appellate Tribunal. The appeal ofthe Department has been dismissed by the order sought to beappealed against. 9.The CIT (A) had concluded that it was a fact that thelands in question had been sold for a high price ofRs.9,76,76,000/-. However, the fact remained that agriculturalactivities, i.e., cultivation of trees and vegetables, hadactually been carried out in the lands as evidenced by the https://hcservices.ecourts.gov.in/hcservices/ 'adangal' copies and the fact that positive income/loss from thesaid activities had been reflected in the capital account of theassessee and also reflected in the return of income of theassessee, duly supported by the report of the DepartmentalValuation Officer (DVO) and photographs taken by the DVO duringinspection. Further, the conditions laid down in Section 2 (14)of the Income Tax Act, 1961, in relation to distance from thenearest Municipality/Municipal Corporation/Cantonment Board andin relation to population were also fulfilled. 10.The learned Appellate Tribunal, after hearing the rivalsubmissions and perusing the materials including the copy of thesale deed, copy of the revenue records, the survey report,photographs taken by the DVO during survey, etc., arrived at thefinding that the lands in question were agricultural landswithin the meaning of Section 2 (14) of the Income-Tax Act andaccordingly, dismissed the appeal of the Revenue. 11.Learned counsel appearing on behalf of the Revenue has,in support of the appeal, cited the judgment of the SupremeCourt in State of UP vs. Nand Kumar Aggarwal and Ors.,reported in AIR 1998 SC 473, to argue that the fact that thelands had been entered in the revenue records as agriculturallands or so shown in the Master Plan would not in itself makethe lands agricultural lands. 12.The judgment of the Supreme Court in Nand KumarAggarwal's case (supra) was rendered in the context of thedefinition of 'urban land' in the Urban Land (Ceiling andRegulation) Act, 1976, (hereinafter referred to as 'the ULCARAct'). Under the definition of 'urban land' in the ULCAR Act,urban land included any land situated within the limits of anurban agglomeration as specified, but did not include any suchland which was mainly used for the purpose of agriculture.However, for the purpose of the aforesaid clause, the expression'agriculture' included horticulture, but did not include raisingof crops, dairy farming, poultry farming, breeding of live-stockand such cultivation, or the growing of such plant as might beprescribed. In the context of the ULCAR Act, the Supreme Courtfound that operating of a 'Bhatta' could not be an agriculturalpurpose. Even though the land had been entered in the revenuerecords as agriculture land, such land would vest in the State. 13.Capital Asset has specifically been defined in Section 2(14) of the Income Tax Act, 1961 to exclude agricultural land.The definition is extracted hereinbelow for convenience:"2. In this Act, unless the context otherwiserequires, -..... (14) “capital asset” means - (a)property of any kind held by an assessee,whether or not connected with his business orprofession;(b)anysecuritiesheldbyaForeignInstitutional Investor which has invested insuch securities in accordance with theregulations made under the Securities andExchange Board of India Act, 1992 (15 of1992), 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, orby any other name) or a cantonment board and whichhas a population of not less than ten thousand ;or(b) in any area within the distance, measuredaerially, - (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, orby any other name) or a cantonment board and whichhas a population of not less than ten thousand ;or(b) in any area within the distance, measuredaerially, - (I)not being more than two kilometres, fromthe local limits of any municipality orcantonment board referred to in item (a)and which has a population of more thanten thousand but not exceeding one lakh;or(II)not being more than six kilometres, fromthe local limits of any municipality orcantonment board referred to in item (a)and which has a population of more thanone lakh but not exceeding ten lakh; or(III)not being more than eight kilometres,from the local limits of any municipalityor cantonment board referred to in item(a) and which has a population of morethan ten lakh. Explanation. - For the purposes of this sub-clause, “population” means the populationaccording to the last preceding census of whichthe relevant figures have been published beforethe first day of the previous year; ...... " 14.The CIT (A) as also the learned Tribunal have dulyconsidered the definition of agricultural land as contained inthe Income Tax Act, 1961, considered the evidence on record and https://hcservices.ecourts.gov.in/hcservices/ arrived at the factual finding that the lands sold by theassessee were agricultural lands. 15.Learned counsel appearing on behalf of the Revenue alsocited the judgment of the Supreme Court in Smt.Sarifabibi MohmedIbrahim & Ors. vs. Commissioner of Income Tax, reported in(1993) 204 ITR 0631. As held by the Supreme Court in SarifabibiMohmed Ibrahim (supra), whether a land is an agricultural landor not, is essentially a question of fact. Several tests havebeen evolved in the decisions of the Supreme Court and the HighCourts, but all of them are more in the nature of guidelines.The question has to be answered in each case having regard tothe facts and circumstances of that case. There may be factorsboth for and against a particular point of view. The Court hasto answer the question on a consideration of all of them – aprocess of evaluation where inference has to be drawn on acumulative consideration of all the relevant facts. 16.In the instant case, the Appellate Tribunal has concurredwith the factual finding arrived at by the CIT (A) and affirmedthe decision of the CIT (A). The decision is based on somematerials. It cannot be said that the decision is perverse. Itis not for this Court to re-analyse the evidence or decidewhether the evidence on record was sufficient to justify thefinding. 17.Right of appeal is not automatic. Right of appeal isconferred by Statute. If the right of appeal conferred by theStatute is limited to cases where there is a substantialquestion of law, this Court cannot sit in appeal over factualfindings by re-weighing and re-analysing the evidence andmaterials on record. It would be relevant to refer to Section260-A of the said Act, which provides as hereunder: Appeal to High Court. 17.Right of appeal is not automatic. Right of appeal isconferred by Statute. If the right of appeal conferred by theStatute is limited to cases where there is a substantialquestion of law, this Court cannot sit in appeal over factualfindings by re-weighing and re-analysing the evidence andmaterials on record. It would be relevant to refer to Section260-A of the said Act, which provides as hereunder: Appeal to High Court. 260A. (1) An appeal shall lie to the High Court fromevery order passed in appeal by the Appellate Tribunalbefore the date of establishment of the National TaxTribunal, if the High Court is satisfied that the caseinvolves a substantial question of law.(2)The Principal Chief Commissioner or ChiefCommissioner or the Principal Commissioner ofCommissioner or an assessee aggrieved by any orderpassed by the Appellate Tribunal may file an appeal tothe High Court and such appeal under this sub-sectionshall be—(a) filed within one hundred and twenty days fromthe date on which the order appealed against isreceived by the assessee or the Principal ChiefCommissioner or Chief Commissioner or PrincipalCommissioner or Commissioner; (b) omitted.(c) in the form of a memorandum of appeal preciselystating therein the substantial question of lawinvolved. (2A) The High Court may admit an appeal after theexpiry of the period of one hundred and twenty daysreferred to in clause (a) of sub-section (2), if it issatisfied that there was sufficient cause for notfiling the same within that period. (3) Where the High Court is satisfied that asubstantial question of law is involved in any case, itshall formulate that question. (4) The appeal shall be heard only on the question soformulated, and the respondents shall, at the hearingof the appeal, be allowed to argue that the case doesnot involve such question :Provided that nothing in this sub-section shall bedeemed to take away or abridge the power of the courtto hear, for reasons to be recorded, the appeal on anyother substantial question of law not formulated by it,if it is satisfied that the case involves suchquestion. (5) The High Court shall decide the question of law soformulated and deliver such judgment thereon containingthe grounds on which such decision is founded and mayaward such cost as it deems fit. (6) The High Court may determine any issue which— (a) has not been determined by the AppellateTribunal; or (b)has been wrongly determined by the AppellateTribunal, by reason of a decision on such questionof law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, theprovisions of the Code of Civil Procedure, 1908 (5 of1908), relating to appeals to the High Court shall, asfar as may be, apply in the case of appeals under thissection. 18.What constitutes a substantial question of law hasextensively been discussed and explained by the Supreme Court inSir Chunilal V. Mehta & Sons Ltd. vs Century Spg. & Mfg. Co.Ltd. , where the Supreme Court approved thedecision of the Full Bench of this Court in Rimmalapudi SubbaRao vs Noony Veeraju And Ors reported in AIR 1951 Mad 969. 19.It is now well settled that the principles fordetermination of existence of substantial question of law aslaid down in Sir Chunilal V.Mehta's case (supra) in the contextof second appeals under the Civil Procedure Code would apply to https://hcservices.ecourts.gov.in/hcservices/ appeals under Section 260 A of the Income-Tax Act. Referencemay, in this context, be made to the judgment of the SupremeCourt in M.Janardhana Rao Vs. Joint Commissioner of Income Taxreported in (2005) 273 ITR 50 (SC). 19.It is now well settled that the principles fordetermination of existence of substantial question of law aslaid down in Sir Chunilal V.Mehta's case (supra) in the contextof second appeals under the Civil Procedure Code would apply to https://hcservices.ecourts.gov.in/hcservices/ appeals under Section 260 A of the Income-Tax Act. Referencemay, in this context, be made to the judgment of the SupremeCourt in M.Janardhana Rao Vs. Joint Commissioner of Income Taxreported in (2005) 273 ITR 50 (SC). 20.The judgment of the Supreme Court inter alia in SirChunilal V.Mehta's case (supra) was followed by the SupremeCourt in its subsequent decision in Hero Vinoth Vs. Seshammal[(2006) 5 SCC 545] (para 24), where the Supreme Court summarizedthe principles and tests for deciding whether the questionsinvolved in the appeal were substantial questions of law. TheSupreme Court held : “21. The phrase “substantial question of law”,as occurring in the amended Section 100 CPC isnot defined in the Code. The word substantial,as qualifying “question of law”, means—of havingsubstance, essential, real, of sound worth,important or considerable. It is to beunderstood as something in contradistinctionwith—technical, of no substance or consequence,or academic merely. However, it is clear thatthe legislature has chosen not to qualify thescope of “substantial question of law” bysuffixing the words “of general importance” ashas been done in many other provisions such asSection 109 of the Code or Article 133(1)(a) ofthe Constitution. The substantial question oflaw on which a second appeal shall be heard neednot necessarily be a substantial question of lawof general importance. In Guran Ditta v. RamDitta [(1927-28) 55 IA 235 : AIR 1928 PC 172]the phrase “substantial question of law” as itwas employed in the last clause of the thenexisting Section 100 CPC (since omitted by theAmendment Act, 1973) came up for considerationand their Lordships held that it did not mean asubstantial question of general importance but asubstantial question of law which was involvedin the case. In Sir Chunilal case [1962 Supp (3)SCR 549 : AIR 1962 SC 1314] the ConstitutionBench expressed agreement with the followingview taken by a Full Bench of the Madras HighCourt in Rimmalapudi Subba Rao v. Noony Veeraju[AIR 1951 Mad 969 : (1951) 2 MLJ 222 (FB)] :(Sir Chunilal case [1962 Supp (3) SCR 549 : AIR1962 SC 1314] , SCR p. 557)“When a question of law is fairlyarguable, where there is room for difference of opinion on it or where theCourt thought it necessary to deal withthat question at some length and discussalternative views, then the question wouldbe a substantial question of law. On theother hand if the question was practicallycovered by the decision of the highestcourt or if the general principles to beapplied in determining the question arewell settled and the only question was ofapplyingthoseprinciplestotheparticular fact of the case it would notbe a substantial question of law.” difference of opinion on it or where theCourt thought it necessary to deal withthat question at some length and discussalternative views, then the question wouldbe a substantial question of law. On theother hand if the question was practicallycovered by the decision of the highestcourt or if the general principles to beapplied in determining the question arewell settled and the only question was ofapplyingthoseprinciplestotheparticular fact of the case it would notbe a substantial question of law.” This Court laid down the following test asproper test, for determining whether a questionof law raised in the case is substantial: (SirChunilal case [1962 Supp (3) SCR 549 : AIR 1962SC 1314] , SCR pp. 557-58)“The proper test for determining whether aquestion of law raised in the case issubstantial would, in our opinion, bewhether it is of general public importanceor whether it directly and substantiallyaffects the rights of the parties and if sowhether it is either an open question inthe sense that it is not finally settled bythis Court or by the Privy Council or bythe Federal Court or is not free fromdifficulty or calls for discussion ofalternative views. If the question issettled by the highest court or the generalprinciples to be applied in determining thequestion are well settled and there is amere question of applying those principlesor that the plea raised is palpably absurdthe question would not be a substantialquestion of law.” 22. In Dy. Commr. v. Rama Krishna Narain [1954SCR 506 : AIR 1953 SC 521] also it was held thata question of law of importance to the partieswas a substantial question of law entitling theappellant to a certificate under (the then)Section 100 CPC. 23. To be “substantial” a question of law mustbe debatable, not previously settled by law ofthe land or a binding precedent, and must have amaterial bearing on the decision of the case, ifanswered either way, insofar as the rights ofthe parties before it are concerned. To be a 22. In Dy. Commr. v. Rama Krishna Narain [1954SCR 506 : AIR 1953 SC 521] also it was held thata question of law of importance to the partieswas a substantial question of law entitling theappellant to a certificate under (the then)Section 100 CPC. 23. To be “substantial” a question of law mustbe debatable, not previously settled by law ofthe land or a binding precedent, and must have amaterial bearing on the decision of the case, ifanswered either way, insofar as the rights ofthe parties before it are concerned. To be a question of law “involving in the case” theremust be first a foundation for it laid in thepleadings and the question should emerge fromthe sustainable findings of fact arrived at bycourt of facts and it must be necessary todecide that question of law for a just andproper decision of the case. An entirely newpoint raised for the first time before the HighCourt is not a question involved in the caseunless it goes to the root of the matter. Itwill, therefore, depend on the facts andcircumstance of each case whether a question oflaw is a substantial one and involved in thecase or not, the paramount overall considerationbeing the need for striking a judicious balancebetween the indispensable obligation to dojustice at all stages and impelling necessity ofavoiding prolongation in the life of any lis.(See Santosh Hazari v. Purushottam Tiwari[(2001) 3 SCC 179] .)24.The principles relating to Section 100 CPCrelevant for this case may be summarised thus :(i) An inference of fact from the recitals orcontents of a document is a question of fact.But the legal effect of the terms of a documentis a question of law. Construction of a documentinvolving the application of any principle oflaw, is also a question of law. Therefore, whenthere is misconstruction of a document or wrongapplication of a principle of law in construinga document, it gives rise to a question of law.(ii) The High Court should be satisfied that thecase involves a substantial question of law, andnot a mere question of law. A question of lawhaving a material bearing on the decision of thecase (that is, a question, answer to whichaffects the rights of parties to the suit) willbe a substantial question of law, if it is notcovered by any specific provisions of law orsettled legal principle emerging from bindingprecedents, and, involves a debatable legalissue. A substantial question of law will alsoarise in a contrary situation, where the legalposition is clear, either on account of expressprovisions of law or binding precedents, but thecourt below has decided the matter, eitherignoring or acting contrary to such legalprinciple. In the second type of cases, thesubstantial question of law arises not because the law is still debatable, but because thedecision rendered on a material question,violates the settled position of law .(iii) The general rule is that High Court willnot interfere with the concurrent findings ofthe courts below. But it is not an absoluterule. Some of the well-recognised exceptions arewhere (i) the courts below have ignored materialevidence or acted on no evidence; (ii) thecourts have drawn wrong inferences from provedfacts by applying the law erroneously; or (iii)the courts have wrongly cast the burden ofproof. When we refer to “decision based on noevidence”, it not only refers to cases wherethere is a total dearth of evidence, but alsorefers to any case, where the evidence, taken asa whole, is not reasonably capable of supportingthe finding.” 21.The questions raised in this appeal do not meet the testslaid down by the Supreme Court for holding that the questionsare substantial questions of law. We are constrained to holdthat there is no question of law, let alone any substantialquestion of law, involved in this appeal. 21.The questions raised in this appeal do not meet the testslaid down by the Supreme Court for holding that the questionsare substantial questions of law. We are constrained to holdthat there is no question of law, let alone any substantialquestion of law, involved in this appeal. 1.The Registrar, Income-Tax Appellate Tribunal 'B' Bench, Chennai.2.The Commissioner of Income Tax (Appeals)-2, 121, M.G.Road, Nungambakkam, Chennai-34.3.The Deputy Commissioner of Income-Tax, Non Corporate Circle-II, Chennai.+ 1 cc to Mr.T. Ravikumar, Advocate SR.55394T.C.(A).429 of 2017SVI(CO)EU 30.08.17 https://hcservices.ecourts.gov.in/hcservices/