Sale Deed Is Not A Document Issued By Revenue Or Govt Authority Which Would Certify Agricultural Nature Of Land: Delhi HC

The Delhi High Court observed that a Sale Deed is not a document issued by the Revenue authorities or any Government authority which would certify the agricultural nature of the land.

The Court observed thus in an Appeal under Section 260A of the Income Tax Act, 1961 (ITA) preferred against the Order of the Income Tax Appellate Tribunal (ITAT).

A Division Bench of Justice Vibhu Bakhru and Justice Swarana Kanta Sharma enunciated, “The assessee had also relied upon the sale deeds pertaining to the land in question. It is to be noted that a sale deed is not a document issued by the revenue authorities or any government authority which would certify the agricultural nature of the land. A sale deed primarily reflects the transaction between the parties and the terms of sale, but it does not, in itself, verify the land’s classification as agricultural for the taxation purposes. Therefore, heavy reliance on the sale deed to establish the agricultural character of the land would be misplaced.”

SSC Aseem Chawla appeared on behalf of the Appellant/Revenue while Advocate Rashmi Chopra appeared on behalf of the Respondent/Assessee.

Brief Facts -

The assessee (Respondent) carrying her business through a proprietary concern, had filed her return of income in 2013 declaring total income of Rs. 2,64,51,220/- and the return was processed under Section 143(1) of ITA. The same was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). A notice was issued with a questionnaire forming part of it and in response to the same, the assessee informed the Assessing Officer (AO) that she had earned long term capital gain of Rs. 10,72,76,180/- on sale of agricultural which was situated beyond the prescribed limits of Sohna District in Haryana. The prescribed limit for Sohna District was 5 kms and thus, the assessee claimed that the land did not qualify as a capital asset defined under Section 2(14) of the Act, and was thus exempt from capital gains.

An Order was passed by AO by which it was held that the assessee had debited expenses of Rs. 4,244/- under the head ‘Challan and Penalty’ and the amount being non-business in nature, was to be disallowed under Section 37 of ITA. The Principal Commissioner of Income Tax (Appellant) issued a show cause notice. The assessee was given an opportunity of being heard and to show cause as to why the AO’s Order be not modified or set aside under Section 263 of ITA by the Appellant. Thereafter, the Appellant concluded that the evidence provided by the assessee had no evidentiary value compared to the substantial evidence possessed by the department, which proved that no agricultural operations had been conducted by either the assessee or the buyer on the land. Being aggrieved, the assessee filed an Appeal before ITAT and the same was allowed. Hence, this was challenged before the High Court.

The High Court in view of the above facts, remarked, “… the AO had not applied his mind to the relevant point whether the asset sold by the assessee was the agricultural land situated 5 kms / 8 kms beyond the boundary limits of the municipal corporation. The noting made by the Tehsildar on 24.04.2012, which the assessee claims to be a certificate, merely stated that the land in question was “outside the border of Sohna Municipal Corporation.”

The Court added that the question is not whether the land in question was outside the municipal limits but whether it was an agricultural land that was located 5 kms/8 kms beyond the municipal limits.

“It is thus clear that this is not a case where the enquiries conducted by the AO were inadequate; this is a case of lack of enquiry as the AO had not conducted any enquiry to verify whether the land sold by the assessee was beyond the prescribed distance from the boundary of Sohna Municipal Corporation. It is apparent that no enquiry to the said effect was conducted by the AO and there is no material before the AO, other than the self serving statement of the assessee, to corroborate the same”, it said.

The Court further noted that the Assessment Order passed by the AO under Section 143(3) of ITA records no reasons for accepting the version of the assessee that the land was agricultural land, and not capital asset, and thus exempt from capital gain.

“… the present case would be one where the absence of any effective inquiry and a total non-application of mind by the AO is evident, and thus, the order passed by the AO would clearly fall within the meaning of an „erroneous order‟. The order is also, undisputedly, prejudicial to the interests of the Revenue inasmuch as it results in loss of the Revenue in the form of tax”, it also said.

The Court, therefore, concluded that the Appellant had exercised the jurisdiction under Section 263 of ITA correctly and legally, in view of the fact that the Order passed by the AO was erroneous and prejudicial to the interest of the Revenue since the same was passed without conducting any enquiries and applying mind to the claims of the assessee.

Accordingly, the High Court disposed of the Appeal and set aside the impugned Order.

Cause Title- Pr. Commissioner of Income Tax Delhi-11 v. Sangeeta Jain (Neutral Citation: 2024:DHC:8650-DB)

Appearance:

Appellant: SSC Aseem Chawla and Advocate Pratishtha Chaudhary.

Respondent: Advocate Rashmi Chopra

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