D.Sivagama Sundari, CHENNAI V. ITO, CHENNAI

ITA 451/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4451 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARICIT
• Assessee Lawyers: V JAGADISAN
• Keywords: Capital asset
• Section: 2(14)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. 451/MDS/2017 / ASSESSMENT YEAR : 2007-08 SMT. D. SIVAGAMA SUNDARI, 32, BOAG ROAD, T. NAGAR, CHENNAI 600 017. PAN: AACPS4247H V. THE INCOME TAX OFFICER, NON-CORPORATE WARD 2(1), CHENNAI 600 034. ( ! /APPELLANT) ( '# ! /RESPONDENT) ! $ /APPELLANT BY : SHRI V. JAGADISAN, CA '# ! $ /RESPONDENT BY : SHRI M.M. BHUSARI,CI T $ /DATE OF HEARING : 19.04.2017 $ /DATE OF PRONOUNCEMENT : 31.05.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI DATED 19.12.2016 AND PERTAINS TO THE ASSESSMENT YEAR 2007 -08. 2. SHRI V. JAGADISAN, THE LD. REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE SOLD AGRICULTURAL LAND DURING THE YEAR 2 I.T.A. NO. 451/MDS/2017 UNDER CONSIDERATION AND CLAIMED THE SAME AS EXEMPTE D FROM TAXATION. ACCORDING TO THE LD. REPRESENTATIVE ORIGINALLY THE LAND IN QUESTION WAS PURCHASED BY SMT. CE SARASWATHY AMMAL ON 27.05.1982 . ACCORDING TO THE LD. REPRESENTATIVE, SMT. CE SARASWATHY AMMAL IS THE MOTHER OF THE ASSESSEE. AFTER THE DEATH OF SMT. CE SARASWAT HY AMMAL, THE ASSESSEE SUCCEEDED TO THE PROPERTY AND SHE WAS IN P HYSICAL POSSESSION AND ENJOYMENT OF THE SAME FOR THE LONG P ERIOD. THE ASSESSEE HAS ALSO CULTIVATED THE SAME. REFERRING T O THE PATTA ISSUED BY THE TAHSILDAR, THE LD. REPRESENTATIVE SUBMITTED T HAT THE LAND WAS CLASSIFIED AS WET LAND. REFERRING TO THE ADANGAL E XTRACT, THE COPY OF WHICH IS AVAILABLE AT PAGE 37 IN THE PAPER BOOK, TH E LD. REPRESENTATIVE SUBMITTED THAT THE LAND WAS SUBJECT TO CULTIVATION OF PADDY. DUE TO FAILURE OF MONSOON, THE ASSESSEE COULD NOT CULTIVAT E PADDY IN SOME OF THE YEARS. HOWEVER, SEASONAL CROPS WERE CULTIVATED . THE LAND CONTINUES TO BE AGRICULTURAL LAND. THE CHARACTERIST ICS OF LAND WAS NOT CHANGED AT ANY POINT OF TIME. ADMITTEDLY THE LAND IN QUESTION IS SITUATED BEYOND 8KM RADIUS OF THE NEAREST MUNICIPAL ITY. THEREFORE THE PROFIT ON SALE OF SUCH LAND HAS TO BE TREATED AS IN COME FROM AGRICULTURE AND CANNOT BE SUBJECTED TO TAXATION UNDER THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT). REFERRING TO THE ASSESSMENT ORDER, THE LD.REPRESENTATIVE SUBMITTED THAT THE LD.AO CLAIMS T HAT IN THE ADANGAL, IT IS REFERRED AS PUNCTURE LAND. WHEN THE LAND I S CLASSIFICED AS WET 3 I.T.A. NO. 451/MDS/2017 LAND BY THE STATE REVENUE DEPARTMENT, THE LD. ASSES SING OFFICER IS NOT JUSTIFIED IN SAYING IT IS A PUNCTURE LAND. AT ANY STRETCH OF IMAGINATION, THE LAND CLASSIFIED AS WET LAND BY THE STATE REVENUE DEPARTMENT CANNOT BE CONSTRUED TO BE AN UN-CULTIVAT ABLE LAND. WHEN THE LAND WAS CLASSIFIED AS WET LAND AND THE SAID LA ND COULD NOT BE CULTIVATED FOR FAILURE OF MONSOON, THE REVENUE AUTH ORITIES CANNOT TAKE ADVANTAGE OF THAT SITUATION AND CLAIM THAT THE LAND IN QUESTION IS NOT AN AGRICULTURE LAND AT ALL. UNLESS AND UNTIL THE STAT E REVENUE DEPARTMENT RECLASSIFIES THE LAND AS RESIDENTIAL OR OTHERWISE, THE INCOME TAX AUTHORITIES CANNOT IGNORE THE CLASSIFICATION MADE B Y THE STATE GOVERNMENT. THE LAND WAS PURCHASED AS AGRICULTURE L AND BY THE ASSESSEES MOTHER WHICH CONTINUES TO BE AGRICULTURE LAND TILL THE ASSESSEE SOLD THE SAME. IN FACT, THE LAND WAS SOLD AS AGRICULTURE LAND. THEREFORE THE LD. AO IS NOT JUSTIFIED IN REJECTING T HE CLAIM OF THE ASSESSEE. THE LD. REPRESENTATIVE PLACED HIS RELIANC E ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN PRINCIPAL COMMI SSIONER OF INCOME TAX VS. MANSI FINANCE CHENNAI LTD. (2016) 97 CCH 0005 AND ALSO JUDGMENT OF HONBLE MADRAS HIGH COURT IN MRS. SAKUNTHALA VEDACHALAM VS. ACIT, (2014) 369 ITR 558. THE LD. REP RESENTATIVE HAS ALSO PLACED RELIANCE ON THE UNREPORTED JUDGMENT OF THIS BENCH OF THE TRIBUNAL IN ITO VS.G. RAJALAKSHMI, ITA NO.2807/MD S/2014 DATED 28.08.2015. THE LD. REPRESENTATIVE ALSO PLACED REL IANCE ON VARIOUS 4 I.T.A. NO. 451/MDS/2017 JUDGMENTS OF THE VARIOUS HIGH COURTS INCLUDING THE JUDGMENT OF THE HONBLE APEX COURT IN CWT VS. OFFICER IN CHARGE, (19 76) 105 ITR 133. 3. SHRI M.M. BHUSARI, THE LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT NO DOUBT, THE LAND IN QUESTION WAS C LASSIFIED AS WET LAND BY THE STATE GOVERNMENT. THE TAHSILDAR CLARIFI ED THAT NO CROP WAS CULTIVATED FROM 01.04.2004 TO 31.03.2007. THE L D.AO ALSO FOUND THAT THE LAND WAS REFERRED AS PUNCTURE LAND WHICH M EANS, THE LAND IS UN-CULTIVATABLE. THE LD.DR FURTHER SUBMITTED THAT T HE ASSESSEE HAS NOT RETURN ANY INCOME FROM AGRICULTURE AT ANY POINT OF TIME. IN THE ABSENCE OF ANY AGRICULTURAL OPERATIONS, INCOME AND EXPENDITURE FOR CULTIVATION, THE LD.AO FOUND THAT THE LAND IN QUEST ION IS NOT AN AGRICULTURE LAND. THEREFORE THE PROFIT ON SALE OF S UCH LAND IS LIABLE FOR TAXATION. THE LD.CIT(APPEALS) AFTER CONSIDERING THE FACTS OF THE CASE, FOUND THAT THE LAND CANNOT BE CONSTRUED AS AGRICULT URE LAND AT ALL. THEREFORE THE PROFIT ON SALE OF SUCH LAND IS LIABLE FOR TAXATION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEES MOTHER SMT. CE SARASWATHY AMMAL PURCHASE D THE LAND ON 27.05.1982 AND SHE CULTIVATED THE LAND TILL HER LIFE TIME. ON THE DEMISE OF SMT. CE SARASWATHY AMMAL, THE ASSESSEE SU CCEEDED TO 5 I.T.A. NO. 451/MDS/2017 THE PROPERTY. THE ASSESSEE ADMITTEDLY SOLD THE LAND DURING THE YEAR UNDER CONSIDERATION. THE PATTA ISSUED BY THE TAHSIL DAR WHICH IS OTHERWISE KNOWN AS VILLAGE-10(1) ACCOUNT CLEARLY IN DICATES THAT THE LAND IN QUESTION IS A WET LAND. 10(1) VILLAGE ACCO UNT IS FOR THE PURPOSE OF COLLECTION OF TAXES/LAND REVENUE BASED UPON THE CLASSIFICATION OF THE LAND. THE STATE GOVERNMENT TAKING IN TO CONSIDERAT ION OF THE QUALITY OF THE SAND CLASSIFIED THE SUBJECT LAND AS WET LAND. DURING THE FASLI YEAR 1408, THE ASSESSEE CULTIVATED PADDY WHICH IS OBVIOU S FROM THE ADANGAL REGISTER, OTHERWISE KNOWN AS VILLAGE ACCOUN T NO.2, THE COPY OF WHICH IS AVAILABLE AT PAGE 37 OF THE PAPER BOOK. THERE IS NO MATERIAL AVAILABLE ON RECORD TO SUGGEST THAT THE CL ASSIFICATION OF THE LAND WAS CHANGED AT ANY POINT OF TIME. THE CLASSIF ICATION OF LAND AS WET LAND CONTINUES TO BE THE SAME TILL THE ASSESSEE EXECUTED THE SALE DEED FOR SALE OF THE PROPERTY. FOR SOME YEARS THE A SSESSEE COULD NOT CULTIVATE THE LAND IN QUESTION FOR FAILURE OF THE M ONSOON. IT IS A COMMON KNOWLEDGE THAT FOR CULTIVATION OF PADDY SUFF ICIENT WATER IS NECESSARY. WHEN THE LAND IS CLASSIFIED AS WET LAND BY THE STATE GOVERNMENT, THERE SHOULD BE A NATURAL SOURCE LIKE T ANK OR LAKE FOR IRRIGATION OF LAND IN QUESTION. DUE TO FAILURE OF M ONSOON, THERE MAY NOT BE ANY WATER SUPPLY FROM THE EARMARKED TANK OR LAKE . IT DO NOT MEAN, THE LAND IS UN-CULTIVATABLE. WHEN THE LAND IS CLAS SIFIED AS WET LAND, THIS TRIBUNAL IS UNABLE TO UNDERSTAND HOW THE AO OR CIT(APPEALS) 6 I.T.A. NO. 451/MDS/2017 OBSERVED THAT THE SUBJECT LAND UN-CULTIVATABLE. TH IS TRIBUNAL IS OF THE CONSIDERED VIEW THAT THE CLASSIFICATION OF LAND WAS MADE BY THE STATE GOVERNMENT BY TAKING IN TO CONSIDERATION OF THE SOU RCE OF IRRIGATION, QUALITY OF SOIL, ETC. THE SUBJECT LAND CONTINUES TO BE WET LAND, THEREFORE, THE ASSESSING OFFICER IS NOT CORRECT IN OBSERVING AS THE LAND IS UN-CULTIVATABLE. THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT WET LAND CANNOT BE CONSTRUED TO BE AN UN-CULTIVATABLE L AND BY ANY AUTHORITIES IN THE STATE. THE MATTER WOULD STAND A T DIFFERENT FOOTING, IN CASE THE CLASSIFICATION WAS CHANGED BY THE STATE GO VERNMENT. AN IDENTICAL SITUATION WAS EXAMINED BY THIS TRIBUNAL IN SMT. G. RAJALAKSHMI (SUPRA) AND THIS TRIBUNAL FOUND WHEN THE LAND WAS CLASSIFIED AS WET LAND AND IT WAS SUBJECT MATTER OF CULTIVATION OF PADDY, THE VAO CANNOT GO BEYOND THE OFFICIAL DOCUMENT MAIN TAINED WHILE PERFORMING HIS OFFICIAL DUTY. IN FACT THIS TRIBUNA L HAS OBSERVED AS FOLLOWS AT PARA 5 & 6 :- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY DISPUTE IS WITH REGARD TO WHETHER THE LAND IS AGRICULTURAL LAN D OR NOT. THE COPY OF PATTA, WHICH IS OTHERWISE KNOWN AS VILLAGE ACC OUNT NO.10 SHOWS THAT THE LAND IN QUESTION IS A WET LAND, THER EFORE, THE STATE GOVERNMENT CLASSIFIED THE LAND AS WET LAND. WHEN T HE PATTA AND OTHER DOCUMENTS ARE AVAILABLE BEFORE THE ASSESSING O FFICER, IT IS NOT KNOWN HOW THE ASSESSING OFFICER CAME TO THE CONCLUSI ON THAT THE SUBJECT LAND IS A DRY LAND. THIS TRIBUNAL IS OF TH E CONSIDERED OPINION THAT THE MATERIALS AVAILABLE ON RECORD CLE ARLY SUGGEST THAT THE LAND WAS CLASSIFIED AS AGRICULTURAL LAND. 7 I.T.A. NO. 451/MDS/2017 6. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WHETH ER THE LAND WAS CULTIVATED OR NOT. THE STATE REVENUE DEPARTMENT IS TAKING THE CULTIVATION ACCOUNT IN EVERY SIX MONTHS. THE VILLAGE ADMINISTRATIVE OFFICER HAS TO TAKE THE CULTIVATION AC COUNT AND RECORD IN VILLAGE ACCOUNT NO.2. THIS VILLAGE ACCOUNT NO.2 IS OTHERWISE KNOWN AS ADANGAL/CULTIVATION ACCOUNT. SUB SEQUENTLY, A GAZETTED OFFICER FROM THE TALUK OFFICE WILL RE-VERI FY THE ACCOUNTS TAKEN BY THE VILLAGE ADMINISTRATIVE OFFICER AND THIS ACCOUNT WOULD BE USED FOR ESTIMATING THE FOOD PRODUCTION OF THE D ISTRICT. THEREFORE, IT IS OBVIOUS THAT THE CULTIVATION ACCOUN T (ADANGAL) PREPARED BY THE VILLAGE ADMINISTRATIVE OFFICER IS TH E BASIC DOCUMENT WHICH WAS MAINTAINED BY THE STATE REVENUE D EPARTMENT IN THE REGULAR COURSE OF OFFICIAL FUNCTIONING. IN THIS DOCUMENT, THE SUBJECT LAND WAS SHOWN AS IF IT WAS CULTIVATED WITH PADDY. ONCE THE VILLAGE ADMINISTRATIVE OFFICER, IN EXERCISE OF HIS O FFICIAL FUNCTIONING, FOUND THAT THE LAND WAS SUBJECTED TO C ULTIVATION WITH PADDY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME CANNOT BE DOUBTED BY THE INCOME TAX AUTHORITIES. EV EN DURING EXAMINATION, THE VILLAGE ADMINISTRATIVE OFFICER CLAR IFIED THAT THE SUBJECT LAND WAS UNDER CULTIVATION. IN THOSE CIRCU MSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LAND IN QUESTION IS AGRICULTURAL LAND AND IT WAS SUBJECTED TO CULTIVATI ON. THE ONLY CONTENTION OF THE REVENUE NOW BEFORE THIS TRIBUNAL I S THAT THE ADANGAL REGISTER WAS NOT EXAMINED BY THE ASSESSING OFF ICER. WHEN THE ASSESSEE FILED THE DOCUMENTS BEFORE THE AS SESSING OFFICER INCLUDING THE ADANGAL REGISTER, IT IS FOR THE ASSESSI NG OFFICER TO EXAMINE THE SAME. INSTEAD OF EXAMINING THE ADANGAL REGISTER, THE ASSESSING OFFICER PROCEEDED AS IF THE LAND WAS CLASS IFIED AS DRY LAND AND THE VILLAGE ADMINISTRATIVE OFFICER ADMITTED THAT THE LAND WAS NOT CULTIVATED AFTER TSUNAMI. THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE STATEMENT OF THE VILLAGE ADMINISTRATIVE OFFICER CANNOT GO BEYOND THE OFFICIAL DOCUMENT MAIN TAINED WHILE PERFORMING THE OFFICIAL DUTY. SINCE THE ADANGAL REG ISTER WHICH IS ONE OF THE DOCUMENT MAINTAINED BY THE STATE GOVERNM ENT SHOWS THAT THE SAID LAND WAS CULTIVATED WITH PADDY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAID LAND IS AN AGRICUL TURAL LAND, THEREFORE, IT CANNOT BE TREATED AS A CAPITAL ASSET U/S 2(14) OF THE INCOME-TAX ACT. THE CIT(A) HAS ALSO FOUND THAT THE S UBJECT LAND 8 I.T.A. NO. 451/MDS/2017 WAS SITUATED BEYOND 8KMS RADIUS OF THE MUNICIPAL LI MIT AND THE POPULATION WAS LESS THAN 10,000. IN THOSE CIRCUMST ANCE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). MOREOVER, IT IS NOT THE CASE OF THE REVENUE THAT THE CIT(A) HAS ADMITTED ANY FRESH MATERIAL DURING THE COURSE OF AP PELLATE PROCEEDINGS. IN SUCH CIRCUMSTANCES, THIS TRIBUNAL IS UNABLE TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE MATT ER NEEDS TO BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER F OR RE-EXAMINATION. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF MADR AS HIGH COURT IN MANSI FINANCE CORPORATION CHENNAI LTD., (SUPRA). ON AN IDENTICAL SITUATION, THE MADRAS HIGH COURT AFTER CONSIDERING VARIOUS JUDICIAL PRECEDENCE ON THE SUBJECT FOUND THAT ON SIMILAR SIT UATION THE LAND IN QUESTION IS AN AGRICULTURAL LAND. SIMILARLY, IN M/ S. SAKUNTHALA VEDACHALAM (SUPRA) THE HIGH COURT FOUND THAT WHEN T HE LAND WAS CLASSIFIED AS AGRICULTURE LAND, MERELY BECAUSE ADJA CENT LAND WAS PUT TO USE FOR COMMERCIAL PURPOSE, THAT CANNOT BE A REASON TO TREAT THE LAND IN QUESTION AS NOT AGRICULTURAL LAND. THE HIGH COUR T OBSERVED THAT THE MANNER IN WHICH THE ADJACENT LAND IS USED BY THE OW NER THEREIN WAS NOT A GROUND TO COME TO A CONCLUSION THAT THE ASSES SEES LAND WERE NOT AGRICULTURE IN NATURE. IN VIEW OF THE ABOVE JU DGMENT OF THE MADRAS HIGH COURT, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE LAND IN QUESTION IS VERY MUCH AGRICULTURE LAND AND CONTINUE S TO BE A WET LAND. 9 I.T.A. NO. 451/MDS/2017 5. NOW COMING TO THE CONTENTION OF THE LD.DR THAT T HE ASSESSEE HAS NOT RETURN ANY AGRICULTURAL INCOME, RETURNING O F AGRICULTURAL INCOME WOULD DEPEND UPON THE PROFIT EARNED IN AGRICULTURE. WHEN THE ASSESSEE CULTIVATED THE LAND BY INCURRING EXPENDITU RE AND NO PROFIT WAS EARNED, IT IS NOT NECESSARY FOR THE ASSESSEE TO DISCLOSE IN THE RETURN OF INCOME. ONLY WHEN THE ASSESSEE EARNED PR OFIT IN THE CULTIVATION, THE SAME HAS TO BE DISCLOSED IN THE RE TURN OF INCOME FOR THE PURPOSE OF COMPUTATION OF TOTAL TAXABLE INCOME. IT IS A FACT THAT AGRICULTURAL INCOME IS NOT TAXABLE UNDER THE PROVIS IONS OF INCOME TAX ACT. AGRICULTURAL INCOME IS TAXABLE BY THE RESPECT IVE STATE GOVERNMENT ONLY. FOR THE PURPOSE OF COMPUTATION, I T IS NECESSARY TO DISCLOSE THE AGRICULTURAL INCOME. WHEN THE ASSESSE E HAS NO AGRICULTURAL INCOME, IT IS NOT NECESSARY TO DISCLOS E THE SAME. MERELY BECAUSE THE ASSESSEE HAS NOT DISCLOSED THE AGRICULT URAL INCOME IN THE RETURN FILED THAT CANNOT BE A REASON FOR TREATING T HE LAND IN QUESTION AS NON-AGRICULTURAL LAND. MERELY BECAUSE THE ADJACENT LANDS WERE USED FOR COMMERCIAL PURPOSE AS OBSERVED BY THE MADRAS HI GH COURT THAT CANNOT BE A REASON FOR TREATING THE LAND IN QUESTIO N AS NON-AGRICULTURAL LAND. SINCE THE LAND IN QUESTION CONTINUES TO BE C LASSIFIED AS WET LAND IN THE STATE REVENUE RECORD, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED I N TREATING THE LAND IN QUESTION AS NON-AGRICULTURAL LAND. ACCORDINGLY THE ORDERS OF THE LOWER 10 I.T.A. NO. 451/MDS/2017 AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE LD.AO IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 31 ST MAY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESA N) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 31 ST MAY, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. !'# /DR 6. $% /GF