2014 (10) TMI 261 - HC - Income Tax

Court upholds non-agricultural land assessment for capital gains, dismissing appeals due to insufficient evidence.

Kunhaysu Versus Commissioner of Income Tax

The High Court upheld the lower authorities' findings that the land in question was not agricultural, justifying the assessment of capital gains. The ... Capital asset u/s 2(14) - Claim of exemption of capital gains on sale of land – nature of land – Agricultural or not – Held that:- The certificates produced by the assesses before the FAA, which are also referred to in the Tribunal's were totally insufficient to conclusively prove that the land in question was an agricultural land at the time of the sale – Following the order in Rasiklal Chimanlal Nagri v. CWT [1988 (8) TMI 117 - HIGH COURT AT CALCUTTA] - the situation of the land and its surroundings, physical characteristics of the land, the intention of the owner as gathered from the relevant circumstances, environment and situation of land, the previous, present and future use to which the land is put and the intention of the assessees at the time of sale were also appreciated by the lower authorities - in the absence of any satisfactory evidence produced by the assessees to hold that the land was an agricultural land, the finding of the lower authorities cannot be disturbed. None of the assesses had declared any agricultural income even in the returns filed after the date of search and even though the assesses had admitted that the possession of the land was given in January, 2006, for the subsequent years also they showed agricultural income - This showed that the cash flow statements were without any basis - the land was used for conducting football tournament and they themselves described the land in the conveyance deed as stadium land - the land was located very near to the Kottakkal Bus stand. Immediately after the land was handed over to the purchaser, he constructed a commercial complex in that land – thus, the order of the Tribunal is upheld – Decided against assessee. Issues:1. Assessment of capital gains on the sale of land2. Determination of whether the land is agricultural or notAnalysis:Issue 1: Assessment of capital gains on the sale of landThe case involved appeals against the order of the Income Tax Appellate Tribunal concerning the assessment orders passed for the assessment years 2008-2009 and 2009-10 regarding the sale of land. The assessing officer initiated proceedings under Section 153C of the Act based on discrepancies between the sale consideration declared in sale deeds and the actual agreement. The assessing officer computed long-term capital gains based on the market value as of 01/04/1981. The Commissioner of Income Tax (Appeals) upheld the assessment, considering the land as a 'capital asset.' The Appellate Tribunal partly allowed the appeals, leading to further challenges before the High Court.Issue 2: Determination of whether the land is agricultural or notThe main contention in the case was whether the land in question was agricultural or not, impacting the tax liability on capital gains. The lower authorities applied tests laid down by the Gujarat High Court to determine the nature of the land. Certificates from responsible local officials were produced to support the claim that the land was agricultural. However, the authorities concluded that the land was not agricultural based on various factors, including the physical characteristics of the land, its use, and the intentions of the owners. The High Court examined the evidence and upheld the lower authorities' findings, stating that the documents provided were insufficient to prove the land was agricultural. The absence of declared agricultural income and other factors led to the conclusion that the land was not agricultural, justifying the assessment of capital gains.In conclusion, the High Court dismissed the appeals, stating that the lower authorities' findings regarding the land not being agricultural were based on sufficient evidence and could not be disturbed. The case did not involve any legal questions for further consideration, leading to the rejection of the appeals.