IMPORTANT POINT
The actual carrying on of agricultural operation is not a necessary condition for deciding that a particular parcel of land was agricultural land, and the Assessing Officer must examine the evidence filed by the petitioner and conduct an enquiry to ascertain the authenticity of the certificates filed by the petitioner before concluding whether the lands sold are in the nature of agricultural land.

JUDGMENT :

K.R. SHRIRAM J.

1. Rule. Rule made returnable forthwith and heard. As the pleadings are completed, this court, by consent of the parties has taken up the matter for final hearing.

2. Petitioner is an individual, who had invested in certain parcels of lands at Ardhe and Aase at Taluka Karjat, District Raigad. During the pervious year, i.e., 2012-13, petitioner sold those parcels of lands. Petitioner filed return of income for A.Y.-2013-14 on 22nd April 2014 disclosing income of Rs.6,91,540/-. The return of income was processed under Section 143(1) of the Income Tax Act 1961 (the Act). Later, the case was selected for scrutiny under CASS and notice dated 28th August 2015 under Section 143(2) of the Act was issued. Subsequently, a notice dated 15th January 2016 under Section 142(1) of the Act was issued to petitioner calling upon to furnish copy of the agreement for purchase and sale of the agricultural lands. Petitioner was also called upon to furnish details of agricultural produce in the previous years and income offered in the return of income with documentary evidence and show cause as to why the capital gain earned or accrued should not be taxed as per the provisions of the Act. Therefore, by notice dated 12th February 2016 petitioner was also called upon to show cause as to why the sale of land should not be brought to tax as no agricultural activity were undertaken on the land under consideration. By another notice dated 7th March 2016 under Section 142(1) of the Act petitioner was asked to explain the applicability of Section 50C of the Act in respect of the sale of the land under consideration.

3. Petitioner, on its part, vide letter dated 24th February 2016, submitted, and which is also the case of petitioner in this petition as well, that the agricultural land sold was a rural agricultural land as per Section 2(14)(iii) of the Act and the agricultural land situated in rural area was not covered in the definition of capital asset. Therefore, no capital gain was applicable. It was submitted that provisions of Section 2(14)(iii) of the act does not require that agricultural operations should be undertaken on such land at the time of transfer or immediately prior to the transfer. It was also submitted that only in cases where Section 10(37) and Section 54B of the Act were applicable, for claiming exemption from sale of agricultural land, there was requirement that the land should be used for agricultural purposes during the preceding two years from the date of transfer. Petitioner also relied upon circular dated 13th April 2011 issued by Government of India, Ministry of Rural Department, New Delhi-F.M.24011/2009-LRD, which provides that there is no tax liability on the transfer of rural agricultural lands.

4. The Assessing Officer (AO) by his order dated 28th March 2016, rejected the contention of petitioner and held that land was a capital asset and, therefore, capital gain was payable. The AO proceeded on the basis that most of the alleged agricultural land sold was held for a period of less than two years and, therefore, intention of petitioner was not to do any agricultural activities but was to make investment and earn profit. The AO held that there was no evidence submitted by petitioner that petitioner had carried out agricultural operations during the year under consideration. The AO felt that the intention of the legislature will be defeated if the exemption in respect of sale of agricultural land is provided to petitioner without any agricultural activities made by petitioner. Aggrieved by this assessment order dated 28th March 2016, petitioner preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) called upon petitioner to submit documents that the parcels of land were agricultural lands. Admittedly, petitioner submitted documents from the Talati stating that the parcels of agricultural lands were located more than 8 k.m. away from the urban area and a letter from Gram Se