2021 (6) TMI 272 - AT - Income Tax

Tribunal Grants Appeal, Orders Exemption under Income Tax Act Section 54B Upheld

Shri Ashokbhai kanubhai Patel Versus A.C.I.T., (Int. Taxation) -1, Ahmedabad.

The Tribunal allowed the appeal, directing the AO to delete the addition made by denying the exemption under section 54B of the Income Tax Act, 1961. The ... Exemption claimed u/s 54B - exemption denied as AO concluded there was no agricultural operation carried out the lands in dispute - as per assessee lands sold were used for the agricultural operations - HELD THAT:- The onus is upon the revenue to prove that the land in dispute was not used for the purpose of agricultural operations by bringing tangible material on record which can be used against the assessee and against the form 7/12 along with form 8 available on record. In the case on hand, the assessee has furnished the necessary details such as affidavit of the party who carried out the agricultural operations as well as form 7/12 along with form 8 which have rejected by the authorities below but without assigning sensible reason and bringing any corroborative evidence on record. Accordingly, we are inclined to reverse the order of the authorities below and direct the AO to delete the addition made by him. Ground of appeal of the assessee is allowed. Issues Involved:1. Denial of exemption under section 54B of the Income Tax Act, 1961.2. Use of land for agricultural purposes in the preceding two years.3. Validity of evidence provided by the assessee.4. Consistency in the treatment of co-owners' claims.Issue-wise Detailed Analysis:1. Denial of Exemption under Section 54B:The primary issue in the appeal was whether the assessee was entitled to claim an exemption under section 54B of the Income Tax Act, 1961, for an amount of Rs. 4,77,58,546/-. The Assessing Officer (AO) denied the exemption on the grounds that the assessee failed to prove the agricultural use of the land in the preceding two years and the new land purchased was not used for agricultural purposes.2. Use of Land for Agricultural Purposes:The assessee contended that the lands sold were used for agricultural operations and provided evidence such as extracts from forms 7/12 and 8A, and an affidavit from a third party who carried out agricultural activities on a crop-sharing basis. The AO, however, found several discrepancies:- No details or agreements were provided regarding the third party conducting agricultural operations.- Lack of irrigation facilities on the land.- Minimal agricultural income reported.- The land was sold on a per square meter basis, indicating commercial potential.- Inspector's report and photographs suggested no recent agricultural activity.3. Validity of Evidence Provided by the Assessee:The assessee provided various documents to support the claim, including:- Extracts from forms 7/12 and 8A showing agricultural activities.- An affidavit from Shri Hemrajbhai R Rabari, who conducted agricultural operations.- Income tax returns showing agricultural income from new lands.The AO and CIT(A) rejected these documents, questioning their credibility and the lack of corroborative evidence, such as expenses incurred for agricultural activities.4. Consistency in Treatment of Co-owners' Claims:The assessee argued that similar claims by co-owners were accepted by the Revenue in their assessments under section 143(3). The Tribunal noted that the Revenue had allowed the deduction under section 54B for the co-owners of the same land, which was jointly owned by the assessee, his father, and his brother. Therefore, the Revenue could not take a different stand against the assessee.Tribunal's Findings:- The Tribunal held that the Revenue could not deny the exemption under section 54B to the assessee when it had allowed the same for the co-owners.- The Tribunal found that the affidavit from the third party and the extracts from forms 7/12 and 8A were sufficient evidence of agricultural activities.- The Tribunal observed that the AO did not exercise the power to verify the third party's affidavit under sections 133(6)/131 of the Act.- The Tribunal noted that agricultural land could be sold on a per square meter basis and that the assessee's NRI status did not preclude the agricultural use of the land by family members.Conclusion:The Tribunal allowed the appeal, directing the AO to delete the addition made by denying the exemption under section 54B. The Tribunal emphasized the importance of consistency in the treatment of co-owners' claims and the adequacy of the evidence provided by the assessee. The judgment reinforced that the onus was on the Revenue to disprove the assessee's claims with tangible evidence.