Facts of the Case

The assessee, Shri Rajiv Dass, sold land situated in Ghaziabad for ₹6.51 crores, which had been purchased earlier for ₹58.90 lakhs. The assessee claimed exemption under Section 54B on capital gains arising from the sale, asserting that the land was used for agricultural purposes during the two years preceding the transfer.

The assessee contended that agricultural activities such as cultivation of fodder crops were carried out on the land, allegedly through a person named Amar Pal Singh under a batai arrangement. However, revenue authorities relied on Tehsildar records and inspection reports indicating that no agricultural activity had been carried out on the land during the relevant period.

Issues Involved

  1. Whether the assessee was entitled to exemption under Section 54B of the Income Tax Act.
  2. Whether the land sold was used for agricultural purposes during the two years preceding its transfer.
  3. Whether reliance on Khasra Girdwari alone is sufficient to establish agricultural use.
  4. Whether findings of the Tribunal were perverse or contrary to evidence.

Petitioner’s Arguments

  • The assessee argued that Khasra Girdwari records established agricultural use of the land.
  • It was contended that crops like “jai chara” and “jawar chara” were cultivated.
  • The assessee claimed that agricultural operations were conducted through Amar Pal Singh on a sharing basis.
  • It was further argued that the Tribunal wrongly relied on inspection reports conducted after the sale of land.
  • The principle of consistency was invoked, stating that agricultural income had been accepted in earlier assessment years.

Respondent’s Arguments

  • The Revenue contended that no agricultural activity was carried out on the land as per official revenue records.
  • The statement of Amar Pal Singh was unreliable, contradictory, and unsupported by documentary evidence.
  • The Tehsildar’s report clearly indicated that no crops were grown during the relevant years.
  • It was argued that mere entries in Khasra Girdwari cannot override factual findings and surrounding circumstances.
  • The exemption under Section 54B requires strict compliance, which the assessee failed to establish.

Court’s Findings / Order

  • The Delhi High Court upheld the findings of the Assessing Officer, CIT(A), and the Tribunal.
  • It held that the assessee failed to prove actual agricultural use of the land during the relevant period.
  • The Court noted inconsistencies and lack of credibility in the testimony of Amar Pal Singh.
  • Revenue records and Tehsildar reports were given greater evidentiary value.
  • The Court emphasized that mere Khasra Girdwari entries are not conclusive proof when contradicted by other evidence.
  • The findings of the Tribunal were held to be reasonable and not perverse.
  • The appeal was dismissed as devoid of merit.

Important Clarifications

  • Section 54B exemption requires actual use of land for agricultural purposes by the assessee or parents for at least two years prior to transfer.
  • Documentary evidence must be credible, consistent, and supported by conduct.
  • Statements lacking corroboration and containing contradictions will be rejected.
  • Revenue records maintained by authorities carry significant evidentiary weight.
  • The principle of res judicata does not strictly apply to income tax proceedings.

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8009-DB/SKN18122018ITA3272017.pdf

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