Kunhaysu Paravakkal House vs Commissioner of Income Tax

Antony Dominic, J.—These appeals filed by the assessees are directed against the order of the Income Tax Appellate Tribunal, Cochin Bench in ITA No. 184/Coch/2012 and connected cases, which in turn were directed against the orders of the Commissioner of Income Tax (Appeals)- I, Kochi arising out of the assessment orders passed for the assessment years 2008-2009 and 2009-10.

The appellants were joint owners of a plot of land having an extent of 222.93 cents in R.S. No. 45/3 of Kottakkal Amsom Desom and they sold it to Sri. Abdu Haji, who constructed on it a commercial complex by name "Smart Trade City". Subsequently, on 9/7/2008, the Department carried out search and seizure operations in the case of M/s. Smart Trade City, during the course of which, sale agreement dated 13/1/2006 entered into between the appellants and Sri. Abdu Haji for the sale of the property mentioned above was seized. The agreement revealed that the property was agreed to be sold at a sale consideration of Rs. 3,27,500/- per cent and the aggregate sale consideration worked out Rs. 7,30,09,575/- which was to be paid within 1-1= years after measurement of the property. However, in the sale deeds that were executed in respect of the property, the sale consideration declared was only Rs. 99,95,000/-.

In view of the above, the assessing officer initiated proceedings against the assessees under Section 153C of the Act and accordingly notices were issued and the assessees filed returns of income, claiming exemption of capital gains arising on sale of the land on the ground that the land is an agricultural land. This contention was rejected and adopting Rs. 3,27,500/- per cent as the sale consideration, the assessing officer computed the long term capital gain. For this purpose, the assessing officer adopted the market value as on 01/04/1981 as the cost of land which was determined at Rs. 100/- per cent. Accordingly, long term capital gain was computed at Rs. 7,28,86,741/- and this was allocated among the assessees in proportion to the rights held by them and was assessed in the assessment year 2008-09.

The Assessing Officer also found that the assessees have sold two more plots of land comprised in Sy. Nos. 45/3 and 158/16 having an extent of 32.19 cents and 16.17 cents. The property having an extent of 32.19 cents was sold to Sri. Saidalavi, Sri. Ashraf and Sri. Moideenkutty as per sale deed No. 1917/2008 dated 16/5/2008 for a total sale consideration of Rs. 6,50,000/-. The plot having an extent of 16.17 cents was sold to Sri. Abdu Haji, Sri. Abdul Khader and Sri. Ummer Haji vide sale deed No. 1933/2008 dated 12/5/2008 for a total consideration of Rs. 8,95,000/-. On the finding that these properties were located adjacent to 222.93 cents mentioned above, in the case of these properties also, the assessing officer adopted Rs. 3,27,500/- per cent as the sale consideration and on that basis, the long term capital gain was computed in the assessment year 2009-10. Here also, the contention that the properties were agricultural land was rejected and capital gain was allocated in the hands of the assessees in proportion to the shares held by them.

All the assessees challenged the assessment orders by filing appeals before the Commissioner of Income Tax (Appeals). The CIT(A) held that the land sold by the assessees are not agricultural lands and therefore constitute "capital asset" in terms of Section 2(14) of the Act. The CIT(A) found that the assesses received the sale consideration in instalments falling in the financial years relating to the assessment years 2006-07 to 2009-10 and accordingly took the view that the transfer has to be considered as having taken place in the assessment years 2006-07 to 2009-10 in proportion to the amount of sale consideration received in those years.

The CIT(A) also found that the assessees have sold 18.98 cents of land vide document No. 614/2008 dated 13/2/2008 to Sri. Moideen Haji for a total consideration of Rs. 4,80,000/-. Since the assessing officer did not assess the capital gain arising from this transaction, the appellate authority sent enhancement proposal to the assessees, proposing to adopt the sale consideration at Rs. 3,27,500/- per cent. Rejecting the plea of the assessees that the sale transaction had been completed much earlier and that the registration was done much later, the appellate authority directed the assessing officer to assess the capital gain in respect of this plot of land adopting Rs. 3,27,500/- as the sale consideration.

In the appeals filed for the assessment years 2009-10, the assessees contended that the assessing officer erred in assessing the capital gain in respect of 16.17 cents of land on the ground that the said land formed part of 222.93 cents mentioned above. This was accepted by the appellate authority but however the appellate authority confirmed the action of the assessing officer in adopting Rs. 3,27,500/- per cent as the sale consideration in respect of 32.19 cents of land. Before the First Appellate Authority the assessees also disputed the adoption of Rs. 100/- per cent as the market value as on 01/4/1981. However, the First Appellate Authority found that this determination was on the basis of the information collected about the comparative sale from the Sub Registrar''s Office and also for the reason that the assesses did not furnish any other evidence to contradict the value determined, the First Appellate Authority upheld the rate of Rs. 100/- per cent determined by the Assessing Officer as the market value as on 01/4/1981.

Aggrieved by the orders of the assessing authority as confirmed by the appellate authority, the appeals were filed before the Appellate Tribunal which partly allowed the appeals by its impugned order. It is in these circumstances, the appellants have filed these appeals raising the following questions of law for consideration.

"1. "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the lands at Kottakkal sold by the appellant fall within the meaning of "Capital asset" as defined under section 2(14) and the profit arising on sale thereof is exigible to tax u/s. 45 of the Income Tax Act, 1961?"

"Whether, on the facts and in the circumstances of the case, the Tribunal''s view regarding the nature of the impugned lands as non agricultural being contrary to the evidence in the form of Certificates issued by responsible local officials of the Government of Kerala viz., Agricultural Officer, Kottakkal, Village Officer, Kottakkal and the Additional Tahsildar, Tirur and without the assessing authority bringing in any evidence/material in rebuttal is sustainable in law?"

"Whether, on the facts and in the circumstances of the case, the Tribunal''s view regarding the nature of the land as non-agricultural is consistent with its finding that the transfer of the impugned land (measuring 222.93 cents) took place in January, 2006, the date for determination as to whether the impugned land was agricultural or not and is correct in law?"

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in inferring that the use of a portion of the land (50 cents out of 222.93 cents) temporarily for a non-agricultural purpose alters the character of the entire land from agricultural to non-agricultural to render it liable for capital gains tax on its sale?"

Before this Court, the only contention urged was that the finding that the land was not an agricultural land is incorrect and against the evidence on record. Answer to this question would determine whether the computation of long term capital gain and the consequent assessment of tax was legal or not. Therefore, we shall examine whether the finding of the lower authorities on this aspect was legal or not.

A reading of the orders passed itself would shows that the appellate authority applied the tests laid down by the Gujarat High Court in Commissioner of Income Tax, Gujarat-II Vs. Siddharth J. Desai, to determine whether the land is an agricultural land or not. Each of the tests laid down by the Gujarat High Court were applied and appreciating the evidence available before it, including the certificates of the Agricultural Officer, Village Officer, Additional Tahsildar and other documents, the assessing officer and the first appellate authority came to the conclusion that the land in question is not an agricultural land. Having considered these factual findings, which was confirmed by the Tribunal, we do not find any reason to hold the conclusions to be incorrect.

In so far as the certificates produced by the assesses before the first appellate authority, which are also referred to in the Tribunal''s order are concerned, copies of these certificates were produced before us for our perusal also. We have gone through these certificates and in our view, these documents were totally insufficient to conclusively prove that the land in question was an agricultural land at the time of the sale. The first appellate authority also has examined whether the character of the land sold is as an agricultural land or not. This question has been again examined in the context of the facts which are laid down by the Gujarat High Court in Rashiklal Chimanlal Nagri Vs. Commissioner of Wealth-tax, Gujarat . Accordingly, 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. Proceeding further, the question was again examined in the light of the judgment of the Apex Court in Commissioner of Wealth Tax, Andhra Pradesh Vs. Officer-in-charge (Court of Wards), Paigah, and considering the condition of the land and the intention of the owners and such other tests also, the lower authorities have concluded that the land is not an agricultural land. Therefore, in the absence of any satisfactory evidence produced by the assessees to hold that the land in question was an agricultural land, the finding of the lower authorities cannot be disturbed.

Admittedly, 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 assessees could not prove the existence of any coconut trees or cashew plants nor could they show any proof that they carried on agricultural activities in the land in question. It is also their own case that the land in question was used for conducting football tournament and they themselves described the land in the conveyance deed as stadium land. In addition to all these, 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.

All these facts, coupled with the absence of documentary proof produced by the assessees proving to the contrary, show that the conclusion of the lower authorities that the land in question was not an agricultural land cannot be held illegal. In such circumstances, in our view, these cases do not involve any question of law to be considered by this Court.

Appeals fail and are dismissed.