Court dismisses Commissioner of Income-tax appeal in agricultural land acquisition case, upholding Circular No. 455

The court dismissed the appeal by the Commissioner of Income-tax challenging the order of the Income-tax Appellate Tribunal in an acquisition case involving agricultural land. The Tribunal held that the apparent consideration for each transferee should be considered separately, and as it was below Rs. 5 lakhs, the acquisition was unjustified per Circular No. 455. The court emphasized the circular's binding nature, applying it to ongoing proceedings and mandating the dropping of proceedings if the apparent consideration was below the specified threshold. Consequently, the court ruled in favor of dropping the acquisition proceedings against the assessee.

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Issues:
1. Appeal under section 269H of the Income-tax Act, 1961 against the order of the Income-tax Appellate Tribunal.
2. Acquisition of agricultural land under Chapter XX-A of the Act.
3. Interpretation of Circular No. 455, dated May 16, 1986, by the Central Board of Direct Taxes.
4. Applicability of Circular No. 455 to ongoing acquisition proceedings.
5. Determination of apparent consideration in the case of multiple transferors and transferees.

The judgment pertains to an appeal filed by the Commissioner of Income-tax under section 269H of the Income-tax Act, 1961, challenging the order of the Income-tax Appellate Tribunal regarding the acquisition of agricultural land. The case involved two transferors who sold land to a transferee for Rs. 5 lakhs, triggering acquisition proceedings under Chapter XX-A of the Act. The transferee objected, citing Circular No. 455 issued by the Central Board of Direct Taxes, which exempted properties with an apparent consideration of Rs. 5 lakhs or less from acquisition proceedings. The competent authority rejected the plea, citing a significant difference between the market value and apparent consideration. However, the Tribunal accepted the transferee's contentions, determining that each transferor's apparent consideration should be considered separately based on their share in the land. The Tribunal also noted that the apparent consideration for each transferee, considering the partnership structure of the transferee entity, was below Rs. 5 lakhs. Consequently, the Tribunal held that the acquisition was unjustified and liable to be dropped in line with Circular No. 455.

The judgment emphasized the significance of Circular No. 455, dated May 16, 1986, issued by the Central Board of Direct Taxes. It highlighted that the circular exempted properties with an apparent consideration of Rs. 5 lakhs or less from acquisition proceedings. The court reiterated that the circular was binding on the Department and rejected the Revenue's argument that it did not apply to ongoing proceedings. Citing precedent, the court clarified that the circular's applicability was not limited to the initial stage of proceedings but extended to appeals as well. The court emphasized that the circular did not specify a cutoff date for its applicability and mandated dropping proceedings if the apparent consideration was below Rs. 5 lakhs. Consequently, the court held that in adherence to Circular No. 455, the acquisition proceedings against the assessee were to be dropped.

In conclusion, the court dismissed the appeal, finding no merit in the Revenue's arguments. The judgment underscored the binding nature of Circular No. 455 and its applicability to ongoing acquisition proceedings. The decision was based on the interpretation of the circular's directives and the determination that the apparent consideration fell below the threshold specified in the circular, warranting the dismissal of the acquisition proceedings.

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