The ITO, Calicut V. Sri. Kalathingal Faizal, Calicut

ITA 456/COCH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7644 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 15-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-09-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: IYPE MATHEW
• Keywords: Capital asset; Principle of natural justice; Assessment record
• Section: 54B; 54F; 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO.456/COCH/ 2015 ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, WARD- 2(3), KOZHIKODE VS. SHRI KALATHINGAL FAIZAL RAHIMAN, 14/90, ROSE VILLA, FEROKE, KOZHIKODE. [PAN:ACZPR 4683H] (REVENUE -APPELLANT) (REVENUE-RESPONDENT) REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR ASSESSEE BY SHRI IYPE MATHEW, CA DATE OF HEARING 15/12/2015 DATE OF PRONOUNCEMENT 06/01/2016 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE REVENUE ARISES FROM THE ORDE R OF THE LD. CIT(A), KOZHIKODE DATED 10.06.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 DECLARING AN INCOME RS. 4,41,496/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS BY ISSUANCE OF NOTICE U/S. 143(2) OF THE ACT. THE ASSESSMENT RECORDS REVEALED THAT THE ASSESSEE SOLD PROPERTY MEASURING 2 ACRES AND 42.801 CENTS FOR A CONSIDERATION OF RS.3,38,63,200/-. THE ASSESSEE HAD NOT SHOWN THE S ALE CONSIDERATION IN THE I.T.A. NO.456/COCH/2015 2 RETURN OF INCOME , CLAIMING THE SAME TO BE AN AGRICULTURAL PROPERTY A ND NOT BEING A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT SINCE THE ASSESSEE HAD NOT RETURNED ANY AGRICULTURAL INCOME DURING THE LAST 4 YEARS, PRIOR TO THE SALE OF PROPERTY AND ALSO THE FACT THAT IN THE SPOT ENQUIRY REPORT OF THE INS PECTOR OF INCOME TAX, IT WAS STATED THAT THE LAND IN QUESTION WAS VERY CLOSE TO THE INDUSTRIAL PARK. THE PROPERTY SOLD BY THE ASSESSEE CANNOT BE CONSIDERED AS AGRICULTURAL PROPERTY AND WAS, THEREFORE, LIABLE FOR CAPITAL GAINS ARISING ON ITS SALE. TAKING THE COST IN 1981 TO BE RS.35,000, THE ASSESSING OFFICER CALCULATED T HE LONG TERM CAPITAL GAIN AT RS.3,36,40,950/-. 3. AGGRIEVED BY THE ASSESSMENT ORDER DATED 26.03.2 013, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHEREIN THE APPEAL OF THE ASSESSEE WAS ALLOWED BY HOLDING THAT THE LAND SOLD BY THE ASSESSEE CANNO T BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. TH EREFORE, THE SALE WAS NOT LIABLE FOR CAPITAL GAINS UNDER THE ACT. 4. AGGRIEVED BY THE ORDER OF THE LD CIT(A) ALLOWI NG THE APPEAL OF THE ASSESSEE, THE REVENUE HAS PREFERRED THIS APPEAL BY RAISING TH E FOLLOWING GROUNDS OF APPEAL: I.T.A. NO.456/COCH/2015 3 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX(APPEALS) IS RIGHT IN LAW IN HOLDING THAT THE LAND SOLD BY THE ASSESSEE CANNOT BE TREATED AS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE INCOME TAX ACT? 3. THE DECISION OF THE HONBLE ITAT, COCHIN BENCH IN THE CASE OF M.J. THOMAS VS. DY. CIT, CIRCLE-2(2), ERNAKULAM IN I.T.A. NO. 224/COCH/2011 DATED 06-06-2014, RELIED ON BY THE CIT(A) IS DISTIN GUISHABLE FROM THE FACTS OF THE PRESENT CASE AS IN THAT CASE THE ASSESSEE HAD R ETURNED AGRICULTURAL INCOME FROM THE TRANSFERRED PROPERTY IN THE EARLIER ASSESSMENT YEARS AND IN THE PRESENT CASE THE ASSESSEE HAD NOT RETURNED AGRI CULTURAL INCOME FROM THE TRANSFERRED PROPERTY IN THE EARLIER ASSESSMENT YEAR S. 4. THE CONCLUSION REACHED BY THE ASSESSING OFFICER REGARDING THE NATURE OF TRANSFERRED PROPERTY WAS NOT SOLELY BASED ON THE RE PORT OF THE INCOME TAX INSPECTOR BUT MANY OTHER FACTORS LIKE THE LETTER OF THE SECRETARY, CHELAMBARA GRAMA PANCHAYATH, DATED 20-01-2011 ADDRESSED TO THE INCOME TAX OFFICER (INV.), KOZHIKODE IN WHICH IT WAS STATED THAT AS PE R THE BUILDING ASSESSMENT REGISTER AND COPIES OF THE BUILDING TAX RECEIPT THE RE WERE FOUR BUILDINGS IN THE OWNERSHIP OF SRI K FAISAL RAHIMAN BEARING BUILDING NUMBERS CPV/438,439,440,441 IN THE TRANSFERRED PROPERTY WHI CH WERE USED AS RESIDENTIAL QUARTERS AND ALSO THE FAILURE OF THE AS SESSEE TO FURNISH ANY EVIDENCE REGARDING THE AGRICULTURAL ACTIVITIES CARR IED OUT HAVE BEEN CONSIDERED. IN VIEW OF THIS, IS NOT THE DECISION O F THE COMMISSIONER OF INCOME TAX(APPEALS) ARRIVED AT WITHOUT APPRECIATING THE COMPLETE FACTS OF THE CASE? 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) MAY BE SE T ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. WE SHALL TAKE UP GROUND NOS. 2 TO 4 AT THIS ST AGE. AS THE PRINCIPAL ISSUE IS THAT WHETHER THE LAND SOLD BY THE ASSESSEE CAN BE T REATED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. I.T.A. NO.456/COCH/2015 4 6. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT DECLARED THE AGRICULTURAL INCOME FROM THE LAND SOLD DURING THE LAST FOUR YEAR S PRECEDING THE RELEVANT ASSESSMENT YEAR. IT IS THE CASE OF THE REVENUE THA T THE INTENTION TO SELL THE LAND WAS COMMERCIAL IN NATURE AS THE TRANSFEREE HAD BUIL T THE BUILDINGS ON THE SAID LAND. THE LD. DR HAS RELIED UPON THE JUDGMENT IN TH E CASE OF KALPETTA ESTATE LTD. VS. CIT 185 ITR 318 (KER.) TO SUPPORT HIS SUBM ISSION THAT THE BURDEN IS ON THE ASSESSEE TO SHOW THAT THE LAND WAS AN AGRICULTU RAL LAND ON THE DATE OF SALE AND IF NO AGRICULTURAL OPERATIONS WERE CARRIED ON, THE LAND CANNOT BE CLAIMED TO BE AGRICULTURAL. HE HAS FURTHER RELIED UPON THE JUD GMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CWT VS. OFFICER-IN-CHARGE (COU RT OF WARDS), PAIGAH, 105 ITR 133 (SC) WHEREIN IT WAS HELD THAT AGRICULTURAL LAND MUST BE A LAND WHICH COULD BE SAID TO BE EITHER ACTUALLY USED OR ORDINARILY US ED OR MEANT TO BE USED FOR AGRICULTURAL PURPOSES 7 THE LD. DR HAS FURTHER BASED HIS SUBMISSIONS U PON THE REPORT OF THE INSPECTOR OF THE INCOME TAX STATING THAT THE LAND I N QUESTION WAS VERY NEAR TO THE INDUSTRIAL PARK. HE HAS ALSO RELIED UPON THE LE TTER DATED 20-01-2011 OF THE SECRETARY, GRAMA PANCHAYAT. HE ALSO RELIED UPON THE ORDER OF THE ASSESSING OFFICER TO CANVASS HIS SUBMISSIONS. 8. THE LD. AR ON THE OTHER HAND HAS REBUTTED TH E AFORESAID ARGUMENTS RAISED BY THE LD. DR AND HAS ARGUED THAT THE LAND IN QUEST ION IS AGRICULTURAL LAND. HE I.T.A. NO.456/COCH/2015 5 HAS PLACED HEAVY RELIANCE ON THE CERTIFICATE OF THE VILLAGE OFFICER CERTIFYING THAT THE PROPERTY WAS USED FOR COCONUT PLANTATION AND FO R GROWING OTHER AGRICULTURAL CROPS FROM 1981 ONWARDS AND THE ASSESSEE WAS EARNIN G AGRICULTURAL INCOME OUT OF THE SAME. HE HAS SUBMITTED THAT THE ASSESSING OF FICER ERRED IN DISREGARDING THE CERTIFICATE FROM THE VILLAGE OFFICER BY TREATIN G THAT IT WAS OBTAINED YEARS AFTER THE DATE OF TRANSACTION. AS REGARDS THE REPORT OF THE INSPECTOR OF INCOME TAX WAS CONCERNED, IT WAS SUBMITTED BY THE LD. AR THAT ONLY BECAUSE THE AGRICULTURAL LAND WAS NEAR TO THE HIGHWAY AS WELL AS THE INDUSTR IAL PARK, IT WOULD NOT MEAN THAT THE SAME CAN BE CALLED AS AGRICULTURAL LAND. REBUTTING THE SUBMISSIONS OF THE LD. DR THAT NO AGRICULTURAL INCOME WAS EARNED, IT WAS SUBMITTED BY THE LD. AR THAT THE NET AGRICULTURAL INCOME WAS MEAGRE AND WAS THEREFORE. NOT DECLARED, AS UNDER THE INCOME TAX ACT, THE SAME WAS NOT REQU IRED TO BE DECLARED IF THE AGRICULTURAL INCOME WAS BELOW RS.5000. THE LD. AR H AS FURTHER SUBMITTED THAT THE ONLY BECAUSE THE BUYER HAS USED THE LAND FOR CO MMERCIAL PURPOSES, CANNOT MEAN THAT THE LAND IN QUESTION WAS NOT AGRICULTURAL IN NATURE. 9. THE LD. AR HAS STRENUOUSLY ARGUED THAT THE CASE OF THE ASSESSEE WAS SQUARELY COVERED BY THE ITAT, COCHIN BENCH IN THE C ASE OF M.J. JOSEPH VS. DY. CIT, CIRCLE-2(2), ERNAKULAM IN I.T.A. NO. 224/COCH/2 011 DATED 06-06-2014. HE FURTHER RELIED UPON THE ORDER OF THE LD. CIT(A) TO SUPPORT HIS SUBMISSIONS. I.T.A. NO.456/COCH/2015 6 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE FACTS ON RECORD. THE TERM CAPITAL ASSET IS DEFINED U/S 2(14) OF THE INCOME-T AX ACT AN D THE SAME IS EXTRACTED BELOW: (14) CAPITAL ASSET MEANS (A) PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHE THER OR NOT CONNECTED WITH HIS BUSINESS OF PROFESSION; (B) ANY SECURITIES HELD BY A FOREIGN INSTITUTIONAL INVESTOR WHICH HAS INVESTED IN SUCH SECURITIES IN ACCORDANCE WITH THE REGULATIONS MADE UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) , BUT DOES NOT INCLUDE (I) ANY STOCK-IN-TRADE (OTHER THAN THE SECURITIES REFERRED TO IN SUB-CLAUSE (B), CONSUMABLE STORES OR RAW MATERIALS HELD FOR THE PUR POSES OF HIS BUSINESS OR PROFESSION (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PRO PERTY (INCLUDING WEARING APPAREL AND FURNITURE) HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM, BUT EXCLUDES (A) JEWELLERY; (B) ARCHAEOLOGICAL COLLECTIONS; (C) DRAWINGS; (D) PAINTINGS; (E) SCULPTURES; OR (F) ANY WORK OF ART. (EXPLANATION 1) FOR THE PURPOSES OF THIS SUB-CLAUS E, JEWELLERY INCLUDES (A) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTHER PRECIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH PRECIOUS M ETALS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONE, AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL; (B) PRECIOUS OR SEMI-PRECIOUS STONES, WHETHER OR NO T SET IN ANY FURNITURE, UTENSIL OR OTHER ARTICLE OR WORKED OR SEWN INTO ANY WEARING APPAREL. (EXPLANTION 2 FOR THE PURPOSES OF THIS CLAUSE- (A) THE EXPRESSION FOREIGN INSTITUTIONAL INVESTOR SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (A) OF THE EXPLANATION TO S ECTION 115AD; I.T.A. NO.456/COCH/2015 7 (B) THE EXPRESSION SECURITIES SHALL HAVE THE MEAN ING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGUL ATION ACT, 1956 (42 OF 1956). (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SI TUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORA TION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND; OR (B) IN ANY AREA WITHIN THE DISTANCE, MEASURED AERI ALLY, - (I) NOT BEING MORE THAN TWO KILOMETRES, FROM THE LO CAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN TEN THOUSAND BUT NOT EXCEED ING ONE LAKH; OR (II) NOT BEING MORE THAN SIX KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN ONE LAKH BUT NOT EXCEEDING TEN LAKH; OR (III) NOT BEING MORE THAN EIGHT KILOMETRES, FROM TH E LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN 10 LAKH. EXPLANATION, - FOR THE PURPOSES OF THIS SUB-CLAUSE, POPULATION MEANS THE POPULATION ACCORDING TO THE LAND PRECEDING CENSUS O F WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PRE VIOUS YEAR. (IV) 61/2 PER CENT GOLD BONDS, 1977, OR 7 PER CENT GOLD BONDS, 1980, OR NATIONAL DEFENCE GOLD BONDS, 1980, ISSUED BY THE CE NTRAL GOVERNMENT. (V) SPECIAL BEARER BONDS, 1991, ISSUED BY THE CENTR AL GOVERNMENT; (VI) GOLD DEPOSIT BONDS ISSUED UNDER THE GOLD DEPOS IT SCHEME, 1999 NOTIFIED BY THE CENTRAL GOVERNMENT. (EXPLANATION, - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT PROPERTY INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDE D ANY RIGHTS IN OR IN RELATION TO AN INDIAN COMPANY, INCLUDING RIGHTS OF MANAGEMENT OR CONTROL OR ANY OTHER RIGHTS WHATSOEVER; I.T.A. NO.456/COCH/2015 8 11. UNDER SECTION 45 OF THE ACT, THERE CANNOT BE ANY LEVY OF CAPITAL GAINS UNLESS THE ASSET TRANSFERRED IS A CAPITAL ASSET. TH E ONLY QUESTION TO BE CONSIDERED IN THE PRESENT APPEAL IS WHETHER THE LAN D IN QUESTION IS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE A CT. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE FALLS WITHIN THE EXCE PTIONS CONTAINED U/S. 2(14) (III) OF THE ACT. THEREFORE, WHAT IS TO BE DE CIDED IS WHETHER THE LAND IN QUESTION IS AN AGRICULTURAL LAND OR NOT. IT IS P ERTINENT TO MENTION HERE THAT THE TERM AGRICULTURAL LAND OR AGRICULTURAL PURPO SE ARE NOT EXPRESSLY DEFINED UNDER THE ACT. IN THE CASE OF CWT VS. OFFIC ER-IN-CHARGE (COURT OF WARDS), PAIGAH, 105 ITR 133, THE HONBLE SUPREME CO URT HELD THAT THE AGRICULTURAL LAND MUST BE A LAND WHICH COULD BE SAI D TO BE EITHER ACTUALLY USED OR ORDINARILY USED OR MEANT TO BE USED FOR AGR ICULTURAL PURPOSE, THAT IS TO SAY, IT MUST HAVE A CONNECTION WITH AN AGRICULTU RAL USER OR PURPOSE AND MERE POTENTIALITY OF AGRICULTURAL USE IS NOT ENOUGH . IN VIEW OF THE AFORESAID JUDGMENT IT IS TO BE SEEN WHETHER THE LAND IN QUEST ION WAS USED FOR AGRICULTURAL PURPOSES OR HAD ANY CONNECTION WITH TH E AGRICULTURAL PURPOSE. 12. IT IS THE ADMITTED CASE OF BOTH THE PARTIES THAT THE STATE GOVERNMENT HAD NOT MAINTAINED ANY RECORDS FOR CULTIVATION OF T HE LAND. THE ASSESSEE HAS SUBMITTED THAT THE LAND WAS USED FOR THE COCONU T PLANTATION AND FOR THE SAME HE HAS RELIED UPON THE CERTIFICATE OF THE VILL AGE OFFICER CERTIFYING THAT THE SUBJECT LAND WAS USED FOR COCONUT PLANTATION AN D FOR GROWING OTHER I.T.A. NO.456/COCH/2015 9 AGRICULTURAL CROPS FROM 1981 ONWARDS AND THE ASSESS EE WAS EARNING AGRICULTURAL INCOME OUT OF IT. IN THE ABSENCE OF AN Y RECORD MAINTAINED BY THE STATE GOVERNMENT, WE SEE NO REASON TO DISBELIEV E THE CERTIFICATE OF THE VILLAGE OFFICER AND THE SAME CANNOT BE REJECTED SOL ELY ON THE BASIS THAT IT WAS ISSUED POST THE SALE OF LAND BY THE ASSESSEE. T HE CERTIFICATE IS CLEAR AND UNAMBIGUOUSLY STATES THAT THE SAID LAND WAS USED FO R COCONUT PLANTATION , WHICH LEAVES NO MANNER OF DOUBT THAT THE LAND WAS U SED FOR AGRICULTURAL PURPOSES. 13. THE COCHIN BENCH OF THE ITAT IN THE CASE OF M.J. JOSEPH VS. DY. CIT. CIR.2(2), ERNAKULAM IN I.T.A. NO. 224/COCH/2011 DATED 06/06/2014 HELD IN FAVOUR OF THE ASSESSEE BY RELYING UPON THE CERTIFICATE OF THE VILLAGE OFFICER CERTIFYING THAT THE LAND WAS USED FOR AGRIC ULTURE ONLY THE ITAT, COCHIN BENCH HAS CONSIDERED THE FACT THAT THE STATE GOVERNMENT DID NOT MAINTAIN ANY RECORD FOR CULTIVATION IN THE STATE AN D ALSO THE FACT THAT AGRICULTURE AS AN ENTITY WAS LARGELY UNORGANISED AND HELD AS UNDER : 26. NOW THE QUESTION ARISES FOR CONSIDERATION IS IN THE ABSENCE OF RECORDS MAINTAINED BY THE STATE GOVERNMENT FOR CULT IVATION WHETHER THE MATERIAL FILED BY THE ASSESSEES WOULD BE SUFFICIENT TO PROVE TO SHOW THAT THE ASSESSEES WERE USING THE LAND FOR AGRICULTURAL PURPOSE / AND THE LAND IN QUESTION HAS ANY CONNECTION WITH AGRICULTURAL PU RPOSE. ALL THE ASSESSEES ARE INDIVIDUAL ASSESSEES. AGRICULTURE IN THIS COUNTRY IS UNORGANISED. NORMALLY ILLITERATE CITIZENS OF THIS C OUNTRY ARE ENGAGED IN AGRICULTURAL ACTIVITIES. THOUGH THE RESPECTIVE STAT E GOVERNMENTS ARE TAKING STEPS TO SELL THE AGRICULTURAL PRODUCE IN THE MARKE TS, STILL, THE SALE OF AGRICULTURAL PRODUCE IS NOT REGULATED PROPERLY. THE AGRICULTURAL LABOURERS, WHO ARE ENGAGED FOR CULTIVATION, ARE ALSO ILLITERAT E. IN THOSE CIRCUMSTANCES, EXPECTING MATERIAL EVIDENCES FROM THE AGRICULTURIST S FOR I.T.A. NO.456/COCH/2015 10 CULTIVATION MAY BE FAR-FETCHED. IN RESPECT OF CORPORATE COMPANIES THAT ARE ENGAGED IN CULTIVATION, MAY MAINTAIN EVIDENCE FOR PURCHASE OF FERTILIZERS, PAYMENT OF WAGES TO LABOURERS AND IN RESPECT OF SALE OF AGRICU LTURAL PRODUCES. HOWEVER, SUCH KIND OF EVIDENCE MAY NOT BE EXPECTED FROM INDIVIDUAL FARMERS SO LONG AS THE GOVERNMENT DOES NOT REGULATE THE CULTIVATION OF LAND AND SALE OF AGRICULTURAL PRODUCE IN THIS COUNTRY. T HIS GROUND REALITY CANNOT BE IGNORED BY JUDICIAL AUTHORITIES WHILE ADJUDICATI NG THE DISPUTE WITH REGARD TO CULTIVATION. THEREFORE, THIS TRIBUNAL CANNOT BLAME THE ASSESSEES FOR NOT MAINTAINING RECORDS FOR CULTIVATION. 27. THE STATE GOVERNMENT IS EXPECTED TO MAINTAIN CU LTIVATION ACCOUNT FOR THE PURPOSE OF ESTIMATION OF FOOD PRODUCTION OF THE STATE AND POSSIBLE EXCESS OR DEFICIT IN THE FOOD PRODUCTION SO AS TO M AKE NECESSARY ARRANGEMENT FOR SUPPLY OF FOOD TO THE PEOPLE. IN SP ITE OF BEST EFFORTS TAKEN BY THIS TRIBUNAL, NO EVIDENCE IS COMING FORWA RD FROM THE REVENUE TO SHOW THAT THE STATE GOVERNMENT WAS MAINTAINING A NY RECORD. IN FACT, THE ASSESSING OFFICER, AFTER EXAMINING THE VILLAGE ADMINISTRATIVE OFFICER, ADDITIONAL TAHSILDAR AND AGRICULTURAL OFFICER, FOUN D THAT THE VILLAGE ADMINISTRATIVE OFFICER AND TAHSILDAR ARE NOT MAINTA INING ANY RECORD FOR THE PURPOSE OF CULTIVATION. EVEN THE AGRICULTURAL OF FICER IS NOT MAINTAINING ANY RECORDS FOR CULTIVATION. THE RECORD S AVAILABLE WITH THE STATE GOVERNMENT ARE ONLY THE REGISTER FOR COLLECTI ON OF CONTRIBUTION TOWARDS KERALA AGRICULTURAL WORKERS WELFARE FUND, BASIC TAX REGISTER AND THE CLASSIFICATION OF LAND AS AGRICULTURAL LAND . APART FROM THESE, THERE IS NO OTHER MATERIAL AVAILABLE WITH THE STATE GOVER NMENT. IF THAT IS SO, IT IS NOT KNOWN HOW THE FOOD PRODUCTION OF THE STATE W AS ESTIMATED SO AS TO ENSURE SUFFICIENT SUPPLY OF FOOD TO THE PEOPLE O F THE STATE. THE FACT REMAINS IS THAT THE REVENUE COULD NOT PRODUCE ANY E VIDENCE FOR CULTIVATION OF LAND MAINTAINED BY GOVERNMENT OF KER ALA. FROM THE REMAND REPORT FILED BY THE ASSESSING OFFICER THE FO OD PRODUCTION OF THE STATE APPEARS TO HAVE BEEN ESTIMATED ON THE BASIS O F THE FARMERS, WHO WERE REGISTERED ON THE RECORDS OF PADDY FIELD WITHO UT CONSIDERING THE ACTUAL CULTIVATION. THEREFORE, THE STATE GOVERNMENT FOR THE PURPOSE OF FOOD PRODUCTION CONSIDERS THE PADDY FIELDS AND THE AGRICULTURISTS AS A BASIS FOR FOOD PRODUCTION. IN THOSE SITUATIONS, THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE VILLAGE OFFICER TO S HOW THAT THE SUBJECT LANDS WERE UNDER CULTIVATION. THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT IN THE ABSENCE OF ANY OTHER RECORD MAINTAINED BY THE STATE GOVERNMENT FOR CULTIVATION OF THE LAND, THE CERTIFI CATE GIVEN BY THE VILLAGE ADMINISTRATIVE OFFICER, WHO IS PERSONALLY A CQUAINTED WITH THE LAND MAY BE ONE OF THE FACTORS TO BE TAKEN INTO CONSIDER ATION. THIS TRIBUNAL CANNOT IGNORE THE CERTIFICATE GIVEN BY THE VILLAGE ADMINISTRATIVE OFFICER I.T.A. NO.456/COCH/2015 11 ON THE BASIS OF HIS ACQUAINTANCE WITH THE FIELD CER TIFYING THAT THE SUBJECT LANDS WERE SUBJECTED TO CULTIVATION. 28. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM AND OTHERS VS CIT (1993) 204 ITR 631 (SC). IN THE CASE BEFORE THE APEX COURT, TH E ASSESSEE SOLD A PIECE OF LAND SITUATED WITHIN THE REVENUE LIMITS OF NAVAGAON VILLAGE IN THE MUNICIPAL LIMITS OF SURAT MUNICIPALITY. IN THE YEAR 1967, THE ASSESSEE AGREED TO SELL THE LAND TO A HOUSING SOCIETY. THE A SSESSEE CLAIMED THE GAIN ON TRANSFER OF SUCH LAND AS EXEMPT U/S 2(14) O F THE ACT. THE APEX COURT FOUND THAT THE ASSESSEE APPLYING FOR PERMISSI ON TO SELL THE LAND FOR NON AGRICULTURAL PURPOSE AND IMMEDIATELY AFTER APPL ICATION FOR CONVERSION OF LAND, THE LAND WAS NOT CULTIVATED FOR A PERIOD OF FOUR YEAR. IN THOSE FACTUAL CIRCUMSTANCES, THE APEX COURT FOUN D THAT THE LAND IN QUESTION IS NOT AN AGRICULTURAL LAND. IN THE CASE B EFORE US, THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF LAND FOR NON AGRI CULTURAL PURPOSE. THE LAND IN QUESTION IS CLASSIFIED AS AGRICULTURAL LAND AND THE VILLAGE OFFICER CERTIFIED THAT THE LAND WAS SUBJECTED TO CULTIVATIO N. THE ASSESSEE IS CONTRIBUTING TO THE AGRICULTURAL LABOURERS WELFARE FUND AND ALSO PAYING REVENUE TAX AS AGRICULTURAL LAND WHICH IS EVIDENCE FROM BASIC TAX REGISTER. IN VIEW OF THE MATERIAL AVAILABLE ON RECO RD DISCLOSING THE CULTIVATION OF LAND, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT JUDGMENT OF THE APEX COURT IN THE CASE OF SARIFABIB I MOHMED IBRAHIM AND OTHERS (SUPRA) MAY NOT BE APPLICABLE TO THE FAC TS OF THE CASE. 29. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEORGE (SUPRA). IN T HE CASE BEFORE THE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEORGE ( SUPRA), THE QUESTION AROSE FOR CONSIDERATION WAS EXEMPTIONS U/S 54B AND 54F OF THE ACT. ONE OF THE PRE-CONDITIONS FOR GRANT OF EXEMPTIONS U/S 5 4B AND 54F IS THAT THE LAND SHOULD BE USED FOR CULTIVATION IMMEDIATELY TWO YEARS BEFORE THE DATE OF TRANSACTION. SUCH A CONDITION IS NOT AVAILABLE F OR TREATING THE LAND AS CAPITAL ASSET U/S 2(14) OF THE ACT. THEREFORE, AS O BSERVED EARLIER, WHAT IS REQUIRED IS THE CONNECTION BETWEEN THE LAND AND THE AGRICULTURAL PURPOSE AND IF THE LAND IS CULTIVATED IN ANY OF THE EARLIER YEARS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LAND HAS TO BE TREA TED AS AGRICULTURAL LAND. THE MATERIAL EVIDENCE PRODUCED BY THE ASSESSEES ARE - (I) THE CERTIFICATE ISSUED BY THE VILLAGE OFFICER; (II) CERTIFICATE ISS UED BY THE AGRICULTURAL OFFICER; (III) CLASSIFICATION OF LAND BY STATE GOVE RNMENT AS AGRICULTURAL LAND; (IV) RECEIPT FOR PAYMENT OF CONTRIBUTION TO AGRICUL TURAL WORKERS WELFARE FUND; AND (V) BASIC TAX REGISTER. FROM THESE MATERI ALS, IT APPEARS THAT THE STATE GOVERNMENT HAS CLASSIFIED THE SUBJECT LAND AS AGRICULTURAL LAND. THE GOVERNMENT IS COLLECTING TAX AS AGRICULTURAL LAND W HICH IS EVIDENT FROM THE I.T.A. NO.456/COCH/2015 12 BASIC TAX REGISTER. THE ASSESSEES ARE ALSO CONTRIBU TING TOWARDS AGRICULTURAL WORKERS WELFARE FUND. THE VILLAGE OFF ICER CERTIFIED THAT THE SUBJECT LANDS WERE SUBJECTED TO CULTIVATION. IN THO SE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SUBJ ECT LANDS WERE AGRICULTURAL LANDS BEYOND THE MUNICIPAL LIMITS OR B EYOND 8 KMS RADIUS OF THE NOTIFIED MUNICIPALITY. THEREFORE, THE SUBJECT L AND CANNOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) O F THE ACT; HENCE NOT LIABLE FOR CAPITAL GAIN TAX UNDER THE INCOME-TAX AC T. 14. THE LD. DR HAS TRIED TO DISTINGUISH THE AFORESA ID JUDGMENT RELIED UPON BY THE ASSESSEE BY SUBMITTING THAT IN THE PRES ENT CASE, THE ASSESSEE HAD NOT RETURNED ANY AGRICULTURAL INCOME FROM THE T RANSFERRED PROPERTY IN THE EARLIER ASSESSMENT YEARS. THE LD. AR HAS REBUT TED THE SAME BY STATING THAT THE AGRICULTURAL INCOME WAS MEAGRE AND WAS BEL OW RS.5000 AND THEREFORE, THE SAME WAS NOT DECLARED IN THE RETURN. WE SEE NO REASON TO DISBELIEVE THE SUBMISSION OF THE ASSESSEE IN VIEW O F THE CERTIFICATE OF THE VILLAGE OFFICER THAT ACTUAL AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASSESSEE. 15. THE RELIANCE PLACED BY THE ASSESSING OFFI CER ON THE REPORT OF THE INSPECTOR OF INCOME TAX TO COME TO THE CONCLUSION T HAT THE LAND WAS NOT AN AGRICULTURAL LAND IS MISPLACED. THE INSPECTION WAS DONE BY THE INSPECTOR AFTER THE TRANSFEREE HAD CONSTRUCTED THE BUILDING O N THE LAND. EVEN IN THE REPORT OF THE INSPECTOR, IT IS OBSERVED THAT THERE WERE SOME COCONUT TREES ON THE LAND. JUST BECAUSE THE TRANSFEREE HAD NOT US ED THE LAND FOR AGRICULTURAL PURPOSES, THE LAND DOES NOT LOOSE ITS CHARACTER OF BEING AN I.T.A. NO.456/COCH/2015 13 AGRICULTURAL LAND WHEN THE SAME IS SOLD BY THE ASSE SSEE. MOREOVER, THE SAID INSPECTION WAS DONE BEHIND THE BACK OF THE ASSESSEE AND THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO REBUT THE SAME. IN AN Y CASE, IT IS SETTLED LAW THAT EVIDENCE COLLECTED BEHIND THE BACK OF THE ASSE SSEE CAN BE USED AS EVIDENCE AGAINST THE ASSESSEE. IN THE CASE OF SHRI HITESH S. MEHTA, MUMBAI VS. ACIT, CENTRAL CIRCLE-23, MUMBAI IN I.T.A. NO. 8023/MUM/2011, THE ITAT BENCH, MUMBAI DELETED THE ADDITION BASED ON EV IDENCES COLLECTED BEHIND THE BACK OF THE ASSESSEE AND HELD AS UNDER:- PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT SINCE THE ASSESSEE WAS SHAREHOLDERS IN VARIOUS COMPANIES. THE ASSESSEE HIMSELF SHOULD HAVE OBTAINED THE LETTER FROM THE CO MPANY DIRECTLY. WE DO NOT AGREE WITH THE SUBMISSION OF THE LD. DR. ONE OF THE BASIC PRINCIPLES OF NATURAL JUSTICE IS THAT NO EVIDENCE COLLECTED BEHIN D THE BACK OF THE ASSESSEE COULD BE USED AGAINST THE ASSESSEE UNLESS AN OPPORTUNITY IS GIVEN TO THE ASSESSEE TO REBUT THE SAME. AS THE REV ENUE AUTHORITIES HAVE GROSSLY ERRED IN RELYING UPON THE EVIDENCES COLLECT ED BEHIND THE BACK OF THE ASSESSEE, THE ADDITIONS BASED ON SUCH MATERIALS DESERVES TO BE DELETED. WE, ACCORDINGLY REVERSE THE FINDINGS OF TH E LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 3,79,42,133/- WHICH HAVE BEEN MADE ON THE BASIS OF THE INFORMATION COLLECTED FROM VARIOUS COMPANIES BEHIND THE BACK OF THE ASSESSEE. THIS GRO UND OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 16. THE NEARNESS OF THE LAND TO HIGHWAY ALSO D OES NOT ALTER THE CHARACTER OF THE LAND AND APPRECIATION IN THE PRICE OF LAND CANNOT BE SEEN IN ISOLATION AND IF AGRICULTURAL OPERATIONS WERE CARR IED OUT BY THE ASSESSEE, THE APPRECIATION IN THE PRICE OF LAND ALONE WOULD N OT LEAD TO THE CONCLUSION THAT THE LAND IS NOT AN AGRICULTURAL LAND. THE OBJE CTION OF THE REVENUE THAT COCONUT PLANTATION COULD NOT HAVE BEEN CARRIED OUT ON THE SOIL WHICH WAS PRESENT ON THE SAID LAND AND THE RELIANCE PLACED ON THE LETTER OF THE GRAM I.T.A. NO.456/COCH/2015 14 PANCHAYAT SECRETARY CANNOT BE ACCEPTED IN VIEW OF T HE CLEAR REPORT OF THE VILLAGE OFFICER. THE JUDGMENT OF THE HONBLE HIGH C OURT OF KERALA IN THE CASE OF KALPETTA ESTATE LTD. VS. CIT (SUPRA) DOES NO T HELP THE CASE OF THE REVENUE AS THE FACTS IN THE PRESENT CASE ARE DISTIN GUISHABLE, MORE PARTICULARLY THE FACT OF THE AVAILABILITY OF THE CE RTIFICATE OF THE VILLAGE OFFICER IN THE PRESENT CASE. ALSO, THE LAND IN THE AFORESA ID JUDGMENT WAS FOREST LAND. 17. THUS, IN VIEW OF THE AFORESAID, WE HOLD THAT THE LAND IN QUESTION CANNOT BE TREATED AS CAPITAL ASSET U/S. 2(14) OF T HE ACT AND THEREFORE, CAPITAL GAINS CANNOT BE ASSESSED ON THE SALE OF THE LAND. ACCORDINGLY, GROUND NOS. 2 TO 4 RAISED BY THE REVENUE ARE DISMIS SED. 18. GROUND NOS. 1 AND 5 ARE GENERAL IN NATURE AND THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. THUS, IN VIEW OF THE AF ORESAID FINDINGS, THE APPEAL OF THE REVENUE IN I.T.A. NO.456/COCH/2015 IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 06-01-2016. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 06 TH JANUARY, 2016 GJ I.T.A. NO.456/COCH/2015 15 COPY TO: 1. SHRI KALATHINGAL FAIZAL RAHIMAN, 14/90, ROSE VIL LA, FEROKE, KOZHIKODE. 2. THE INCOME TAX OFFICER, WARD-2(3), KOZHIKODE. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHIKO DE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN