Extracts of Land Revenue Records, Not Sufficient Evidence To Prove Agricultural Activity: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has upheld that the assessee is against the addition made on account of short-term capital gains by treating the land as a capital asset.

The two-member bench headed by Pramod Kumar (Vice President) and Sandeep Singh Karhail (Judicial Member) has observed that apart from the purchase and sale deeds of conveyance and 7/12 extracts from land revenue records, no other evidence has been brought on record by the assessee of having cultivated the land or carrying any agricultural activity during the period when the land was held by the assessee or period prior or subsequent to its sale.

The assessee is an individual and derived income under the head house property, business income, capital gains and other sources. For the year under consideration, the assessee e-filed his return of income, declaring total income. In the return of income, the assessee claimed a profit of Rs. 47,58,980, arising on the sale of land claimed to be agricultural land, as exempt under section 45 read with section 2(14).

During the course of assessment proceedings, the assessee was asked to submit the details of gains as well as documentary evidence to substantiate the claim that the land was agricultural land and that the assessee had carried out agricultural activities on the land.

In reply, the assessee, by referring to the purchase and sale deeds of conveyance, submitted that the land is agricultural land. The copy of the land revenue record, i.e., 7/12 extract, was also furnished, wherein the land in question was stated to be fit for cultivation.

The assessee also submitted that its case does not fall under the other conditions provided in section 2(14), i.e., pertaining to distance from the local limits of any municipality or cantonment board as well as population.

The assessee submitted that there is nothing in law to suggest that when no agricultural activity is carried out by the assessee on the land, the land ceases to be agricultural land.

The AO did not agree with the submissions of the assessee and held that no agricultural activity has been carried out on the land since the 7/12 extract itself shows the land as barren.

The AO further held that nothing has been brought on record to prove that the agricultural activity was carried out on the land in question and that merely because land is recorded as agricultural in revenue records would not mean that the land is agricultural land.

The AO treated the land as a "capital asset" and the profit of Rs. 47,58,980 on the sale of land as a "short-term capital gain" and added the same to the total income of the assessee.

The CIT(A) dismissed the appeal filed by the assessee. The CIT(A) held that in order to come within the category of agricultural land, it must not only be capable of being used for agricultural purposes but should have been actually used as such at some point of time. The CIT(A) also held that a temporary non-user for agricultural purposes may not affect the character of the land, but the permanent abandonment of a user for agricultural purposes will certainly affect the character of the land as agricultural land.

The assessee submitted that the term "Jirayat land" used in the land revenue record means land where cultivation depends upon annual rainfall and, therefore, the land cannot be called barren as it was cultivable land.

The department submitted that no evidence has been brought on record to prove that land was ever used for agricultural purposes.

The tribunal did not find any infirmity in the order passed by the CIT(A).

Case Title: Noshir Darabshaw Talati Versus Asst. Commissioner of Income Tax Central Circle–7(1), Mumbai

Citation: ITA no.1516/Mum./2021

Date: 03.10.2022

Counsel For Appellant: Advocate B.V. Jhaveri

Counsel For Respondent: Sr. A.R. Hoshang B. Irani

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