The Kerala High Court has held that the burden of proof on assessee to prove agricultural nature of land for capital gains tax exemption.
The bench of Dr. Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. while disallowing the capital gain exemption has observed that the assessee did not produce any evidence other than a certificate from the Village Officer that the land in question was agricultural land, which certificate went against the revenue records itself that pointed to the land being in the nature of ‘Purayidam’ which translates as dry land suitable for construction of houses.
The appellant/assessee had returned his income for the assessment year 2006-2007 at Rs.63,420. In as much as he was found to have credit of Rs.899.10 Lakhs in his bank account on 14.2.2006, a query was raised by the department, to which the appellant explained that he had sold an extent of 5.21 Acres of land at Kakkanad village for Rs.977.10 Lakhs vide registered Sale Deed dated 13.2.2006.
It was the stand of the appellant that in as much as this was a sale of agricultural land, it was deemed to be not a ‘capital asset’ in terms of Section 2(14)(iii) of the Income Tax Act and therefore not liable to tax under the Income Tax Act. The said explanation of the assessee was not accepted by the assessing authority who proceeded to assess the appellant in the said amount under the head of capital gains.
In an appeal preferred by the appellant before the First Appellate Authority, the First Appellate Authority found in favour of the appellant based solely on the certificates issued by the Village Officer, which suggested that the land sold by the assessee was shown as agricultural land in the revenue records. Aggrieved by the finding of the First Appellate Authority, the revenue preferred an appeal before the Income Tax Appellate Tribunal.
The appellate tribunal, after hearing the appeal for some time, set aside the order of the First Appellate Authority and remitted the matter to the assessing authority to reconsider the factual question as to whether the land in question was within 8 Kms limits of the Cochin Municipality.
The Court found that inasmuch as the appellate tribunal had itself found that the land in question was situated beyond 8 Kms, they did not have to remit the case for examining issues on which parties were not at variance and ought to have considered the evidence on record to determine the question as to whether the land was agricultural land or otherwise. The order of the appellate tribunal was therefore set aside and the matter was remitted to the appellate tribunal for fresh consideration based on the evidence on record.
It is on account of the absence of any cogent evidence adduced by the appellant that the appellate tribunal proceeded to hold, based on the evidence on record, that the appellant/assessee had not established that the land sold by him was agricultural in nature.
The court while upholding the ITAT’s decision held that in the absence of any evidence adduced by the assessee, cannot be said to be arbitrary or perverse for the purposes of maintaining an Income Tax Appeal under Section 260A of the Income Tax Act.
Case Details
Case Title: M J George Versus Deputy Commissioner Of Income Tax
Case No.: ITA NO. 1 OF 2024
Date: 04/03/2025
Counsel For Appellant: Nisha John
Counsel For Respondent: Jose Joseph
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