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2026 Supreme(Online)(ITAT) 11664
INCOME TAX APPELLATE TRIBUNAL (NAGPUR BENCH)
Pawan Singh, J, Khettra Mohan Roy, Accountant Member
Gajarsingh Mangusingh Rathod – Appellant
Versus
ITO, Ward – 3, Yavatmal – Respondent
ITA No. 16/NAG/2025
For the Appellants/Petitioners: Umang Agrawal
For the Respondents: Surjit Kumar Saha
Exemption under Section 54B requires proof of actual agricultural use of the land during the two years preceding transfer; mere classification as agricultural land in revenue records is insufficient without corroborative evidence like sale bills or labor records.
Headnote:The assessee sought exemption under Section 54B of the Income Tax Act, 1961, in respect of capital gains amounting to Rs. 1,43,77,547/- by claiming the land sold was used for agricultural purposes. The Assessing Officer (AO) disallowed the claim based on a Tehsildar's report indicating no agricultural activity. Although the assessee later produced revised 7/12 extracts showing the land as agricultural, the CIT(A) upheld the addition as the assessee failed to provide corroborative evidence like sale bills of agricultural produce. The court found that the assessee had not established active agricultural use of the land during the two years immediately preceding the transfer. The central issue was whether the mere classification of land as agricultural in revenue records, without supporting evidence of actual farming operations, is sufficient to qualify for exemption under "section 54B". The court reasoned that "the essential requirement is that the land must have been actively used for agricultural purposes" and that certificates may raise a presumption but are not "conclusive proof sans any corroborative evidence such as sale bills of agricultural produce" [Para 7]. In the result, appeal of the assessee is dismissed.
| Table of Content |
|---|
| 1. procedural history of the assessment and the initial denial of section 54b exemption based on revenue reports. (Para 1 , 2 , 3 , 4) |
| 2. contention that rectified revenue records should be sufficient evidence versus the lack of rebuttal to the remand report. (Para 5 , 6) |
| 3. actual agricultural use is the mandatory criterion for section 54b exemption, outweighing mere land classification. (Para 7) |
| 4. dismissal of appeal due to failure to prove active agricultural operations. (Para 8) |
O R D E R
PER KHETTRA MOHAN ROY, AM:
This appeal filed by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi, (for short, “CIT(A)”), dated 11/11/2024 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the assessment order dated 27.12.2018 passed u/s. 143(3) of the Act by the ITO, Ward-3, Yavatmal for the Assessment Year 2016-17.
2. The assessee has raised the following grounds of appeal:
1. That on the facts and circumstances of the case, the Appellate Order passed by Honble Commissioner of Income Tax Appeal, NFAC is bad in law and therefore deserves to be quashed.
2. That on the facts and circumstances of the case, Ld. CIT (A) has erred in relying solely on the findings of Assessing Officer in the remand report without appreciating the merits of the case for adjudicating the appeal of the assessee.
3. That on the facts and circumstances of the case, the Learned CIT (A) ought to have allowed the claim of 54B of Rs. 1,43,77,547/- and delete the addition made by the Ld. Assessing Officer.
4. That on the facts and circumstances of the case, the Learned CIT (A) has disallowed the appeal of the appellant merely on suspicion and surmises.
5. Any other grounds that may be taken at the time of hearing of the case.”
3. Brief facts of the case are that assessee, an individual, filed his return of income for A.Y. 2016-17 on 27.07.2016 declaring total income of Rs.8,42,420/-. The case was selected for limited scrutiny under CASS and accordingly statutory notices under sections 143(2) and 142(1) of the Act were issued and duly served upon the assessee. During the course of assessment proceedings, Ld.Assessing Officer (AO) observed that assessee had claimed exemption under section 54B of the Act in respect of capital gains amounting to Rs.1,43,77,547/-. In response to the queries raised, the assessee furnished copies of sale deeds and purchase deeds relating to three agricultural lands. For the purpose of verifying whether agricultural activities were actually carried out on the lands sold, the Ld. AO issued notice under section 133(6) of the Act to the Tehsildar, Patur, District Akola calling for copies of 7/12 extracts for the relevant year as well as for the two preceding years. In response, the Tehsildar furnished the 7/12 extracts and reported that no agricultural activities had been carried out on the said lands during F.Ys. 2011-12, 2012-13 and 2013-14. Based on the said report, the Ld. AO issued a show-cause notice to the assessee requiring him to explain as to why the exemption claimed under section 54B should not be disallowed. However, the explanation furnished by the assessee was not found satisfactory by the Ld. AO. Accordingly, relying upon the documentary evidence received from the Tehsildar, the Ld. AO disallowed the claim of exemption under section 54B amounting to Rs.1,43,77,547/- and added the same to the total income of the assessee.
4. Aggrieved by the assessment order, assessee preferred an appeal before the Ld.CIT(A). During the appellate proceedings, assessee furnished revised 7/12 extracts relating to the land sold. Since the said documents constituted additional evidence, the Ld.CIT(A) forwarded the same to the Ld.AO for verification and called for a remand report. In the remand report dated 04.11.2024, the Ld.AO observed that the order passed by the Tehsildar, Patur dated 26.03.2019 was primarily based on the affidavit filed by the
