Bombay HC: Agricultural Operation Not Mandatory for Qualification as Agricultural Land

The Bombay High Court, actual carrying on of agricultural operations is not a critical condition for determining that the parcels of land were agricultural lands.

The order has been quashed by the bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale and remanded the case for passing the fresh assessment order. The AO would analyze if the evidence carried on record to confirm the claim that the lands sold are like agricultural land is authentic. If the Assessing Officer (AO) refuses the applicant’s furnished evidence then he carries the contrary material on record.

The AO needs to conduct an inquiry to verify the genuineness of the certificates that the applicant filed. The AO can opt for the measure as required by conducting a crucial inquiry with the concerned government authorities. The petitioner’s opinion cannot be denied on the presumption that the lands sold were not agricultural as the petitioner sold the parcels of land within 2 years of purchase.

The applicant is an individual who has invested in specific parcels of land. The applicant has furnished an income return, declaring income. Under Section 143(1) of the Income Tax Act of 1961 the return of income was processed.

The Assessing Officer mentioned that land was a capital asset and, hence, capital gain was levied to be paid. The AO proceeded because most of the alleged agricultural land sold was held for less than 2 years, and, hence, the applicant’s intention was not to do any agricultural activities but to make investments and earn profit.

No proof was furnished by the applicant, and the applicant has performed the functioning of agriculture in the year under consideration, AO mentioned. The AO supposed that the purpose of the legislature would be defeated if the exemption for the sale of agricultural land is furnished before the petitioner without any agricultural activities made by the petitioner.

An appeal before the Commissioner of Income Tax (Appeals) is been picked by the applicant. The CIT(A) asked the petitioner to furnish the documents showing that the parcels of land were agricultural lands.

The petitioner furnished the documents from the Talati expressing 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 petitioner’s contention was admitted by the CIT(A) that the actual carrying on of agricultural processes is not a crucial condition for determining that a certain parcel of land was agricultural land. CIT(A) denied the claim of the applicant on the solitary basis that the applicant failed to provide any evidence to show that the land sold via the applicant has been referred to as agricultural land in government records.

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On the part of CIT (A) it was incorrect to conclude that there was no proof to show that the land was referred to as agricultural land in government records. The CIT (A) in the order has also recorded that the AO was asked to remark on the admissibility of the documents furnished via the petitioner and was asked to provide his reply dated March 20, 2019.

Before the Income Tax Appellate Tribunal (ITAT) the applicant preferred a plea. The ITAT cited 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).

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The court observed that the ITAT order must be read and comprehended as limiting the extent of the department only to examine the taxpayer’s proof, which is evident from the fact that the ITAT has not disturbed the CIT(A) findings that actual carrying on of agricultural operations is not a required condition for deciding that a certain parcel of land is agricultural land.

Case Title	Ashok Chaganlal Thakkar Vs. National Faceless Assessment Centre
Case No.	Writ Petition No. 3099 of 2022
Date	13.02.2024
For the Petitioner	Mr. Devendra H. Jain, Ms Radha Halbe
For the Respondents	Mr. Akhileshwar Sharma
Bombay High Court	Read Order