Actual Agricultural Operation, Not a Necessary Condition To Qualify As Agricultural Land; Bombay High Court

The Bombay High Court has held that actual carrying on of agricultural operations is not a necessary condition for deciding that the parcels of land were agricultural lands.

The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has quashed the order and remanded the matter for passing the fresh assessment order. The AO will only examine whether the evidence brought on record to establish the claim that the lands sold are in the nature of agricultural land is authentic. If the AO has to reject the evidence filed by the petitioner, he shall bring contrary material on record. For that, the AO has to conduct an inquiry to ascertain the authenticity of the certificates filed by the petitioner. The AO may take such steps as required by conducting a necessary inquiry with the concerned government authorities. The contention of the petitioner cannot be rejected purely on the presumption that the lands sold were not agricultural lands because the petitioner sold the parcels of land within two years of purchase.

The petitioner/assessee is an individual who has invested in certain parcels of land. The petitioner filed a return of income, disclosing income. The return of income was processed under Section 143(1) of the Income Tax Act of 1961.

The Assessing Officer held that land was a capital asset and,therefore, capital gain was payable. The AO proceeded on the basis that most of the alleged agricultural land sold was held for a period of less than two years, and, therefore, the intention of the petitioner was not to do any agricultural activities but to make investments and earn profit.

The AO held that there was no evidence submitted by the petitioner that the petitioner had carried out agricultural operations during the year under consideration. The AO felt that the intention of the legislature will be defeated if the exemption in respect of the sale of agricultural land is provided to the petitioner without any agricultural activities made by the petitioner.

The petitioner preferred an appeal before the CIT (A). The CIT(A) called upon the petitioner to submit documents indicating that the parcels of land were agricultural lands.

The petitioner submitted documents from the Talati stating that the parcels of agricultural land were located more than 8 km . away from the urban area and a letter from Gram Sevak in Grampanchayat certifying that the total population of these villages was 1216.

The CIT(A) accepted the petitioner's contention that actual carrying on of agricultural operations is not a necessary condition for deciding that a particular parcel of land was agricultural land. At the same time, CIT(A) rejected the petitioner's claim on the solitary ground that the petitioner has failed to furnish any evidence to show that the land sold by the petitioner has been referred to as agricultural land in government records.

It was not correct on the part of CIT (A) to come to the conclusion that there was no evidence to show that the land was referred to as agricultural land in government records. In the order, the CIT (A) has also recorded that the AO was requested to comment on the admissibility of the documents submitted by the petitioner and was requested to furnish his reply on March 20, 2019.

The petitioner preferred an appeal before the Income Tax Appellate Tribunal (ITAT). The ITAT noted that carrying on agricultural activity was conditional on treating the parcel of land as agricultural land. The ITAT did not disturb the findings of CIT (A).

The court noted that the order of the ITAT must be read and understood as restricting the scope of the department only to question the evidence filed by the assessee, which is also obvious from the fact that the ITAT has not disturbed the findings of the CIT(A) that actual carrying on of agricultural operations is not a necessary condition for deciding that a particular parcel of land is agricultural land.

Counsel For Petitioner: Devendra H. Jain

Counsel For Respondent: Akhileshwar Sharma

Case Title: Ashok Chaganlal Thakkar Versus National Faceless Assessment Centre

Case No.: Writ Petition No. 3099 Of 2022

Click Here To Read The Order