ORDER
R.M. Mehta, Vice President
All these appeals have been filed by the revenue and having been heard together, are disposed of by means of a consolidated order. At the time of hearing, both the parties agreed and stated that the Tribunal be pleased to take up initially three appeals, which arose out of a consolidated order passed by the Commissioner (Appeals) for assessment years 1990-91, 1992-93 and 1994-96, and these were ITA Nos. 1828, 1829 and 1830/Del/2002. The common ground raised by the revenue in all these three appeals runs as under :
“On the facts and circumstances of the case, the learned Commissioner (Appeals)-XXVI, New Delhi, erred in deleting the addition by holding the recurring compensation as agricultural income exempt from tax, although the same is nothing but additional compensation chargeable under section 45(5) of the Income Tax Act.”
2. Coming to the facts of the case, these are identical for assessment years 1990-91 and 1992-93 inasmuch as proceedings were originally initiated under section 147/148 and in response to the notices issued, the respondent filed returns showing nil income. The assessments came to be completed under section 143(3)/148 bringing to tax the compensation on accrual basis as disclosed by the assessed in a “note” given in the statement of income attached with the returns.
3. On appeal to the Commissioner (Appeals), Jodhpur, the assessments were set aside and the assessing officer was asked to decide as to who was the actual owner of the rental income and further, he was to examine the assessed’s stand that the said income was agricultural income and, therefore, not taxable.
4. In order to complete the set aside proceedings, the assessing officer issued statutory notices to the respondent and the case was discussed with reference to the following brief facts :
“A land measuring 100 bighas in Khasra No. 632/4 of Jodhpur Tehsil entered into the land revenue records in the name of Smt. Sugan Kanwar w/o late Sh. Rud Singh was requisitioned by the Ministry of defense through the competent authority, Jodhpur, in the year 1976. Subsequently, on a petition filed vide his order dated 26-4-1988, the Collector, Jodhpur, allowed recurring compensation at the rate of Rs. 7,200 per annum. with effect from 4-8-1986 to 3-8–1989. Subsequently, Smt. Sugan Kanwar referred the matter to the arbitration and by an award of the arbitrator, dated 10-6-1992, the quantum was enhanced, Smt. Sugan Kanwar was ‘further allowed compensation amounting to Rs. 4,48,000 on 29-5-1993.
The following compensation was received by Smt. Sugan Kanwar on different dates :
“Sl. No.
Date of receipt of compensation
Amount (Rs.)
Relevant Asst. yr.
1.
17-10-1989
74,880
1990-91
2.
29-01-1992
17,75,580
1992-93
3.
29-05-1993
4,48,000
1994-95″
5. The assessing officer in the reassessment proceedings referred to the facts noted by his predecessor and these being that the amount of recurring compensation pertaining to different assessment years was treated as income earned on accrual basis but referring to the provisions of section 45(5) wherein it had been provided that additional compensation received was to be taxed in the year of its receipt, made addition on protective basis in different assessment years whereas substantive additions were made for assessment years 1990-91 and 1992-93.
6. A reference was also made in the reassessment proceedings to the view taken by the predecessor assessing officer to treat the respondent as the real and beneficial owner of the recurring compensation received by Smt. Sugan Kanwar and there was also a reference to the note appended in the income-tax returns of the respondent whereby she gave her no objection if the income was treated as such provided the proceedings against Smt. Sugan Kanwar were dropped and further that the amount of recurring compensation was to compensate her for the loss of agricultural income.
7. Considering the aforesaid facts and submissions, the predecessor assessing officer had held that the respondent was the substantial and beneficial owner of the land as also the compensation and included the same in her hands on substantive basis but to protect the interests of revenue, the same was subjected to assessment in the hands of Smt. Sugan Kanwar on protective basis.
8. The assessing officer thereafter in the reassessment referred to the non-acceptance by his predecessor of the assessed’s claim that the compensation received was to compensate the owner for the loss of agricultural income on the following grounds :
“(i) The land in question was an urban land situated well within the precincts of Jodhpur municipality.
(ii) After the land was requisitioned the same was put totally for the nonagricultural use.
(iii) The assessed has not brought to notice any evidence whatsoever that the land was actually used by the assessed for agricultural purpose.
(iv) Merely for the reason that the land was entered in revenue records as an agricultural land is not sufficient to claim that it was an agricultural land.”
9. As according to the assessing officer completing the reassessment, the facts had not changed vis-a-vis the original assessment, he proceeded to complete the assessments on the same income as determined in the original assessments framed under section 143(3)/148. For the assessment year 1990-91, the total income worked out was Rs. 2,90,400 and the corresponding figure came to Rs. 17,87,580. For the third assessment year 1994-95, the basic facts remained the same and the only distinguishing feature was that this was the case of a first assessment framed under section 148 at an income of Rs. 4,48,000.
10. Being aggrieved with the assessment orders so framed, the assessed filed appeals to the Commissioner (Appeals) and at which stage two main grievances were aired, the first being that the action of the assessing officer to treat the respondent as the real and beneficial owner of the compensation in question was improper and secondly, to treat such compensation as non-agricultural income. Coming to the first issue, the Commissioner (Appeals) in para 4 of her order observed that the assessing officer after a thorough examination of material evidence had come to the conclusion that the respondent was the real and beneficial owner of the compensation amount and in the absence of any new submissions as also the non-production of any fresh material to rebut the findings of the assessing officer, the stand of the assessed was required to be rejected, moreso, when during the hearing of the appeals the assessed’s counsel did not press the relevant ground.
11. During the course of the hearing of the present appeals, the learned Departmental Representative on behalf of the revenue sought to rake up this controversy and he in fact advanced some arguments with a request to the Tribunal to examine the validity of the power of attorney given’by Smt. Sugan Kanwar to the respondent as also the examination of the bank accounts of Smt. Sugan Kanwar as also the assessed for the purpose of examining the receipts on account of compensation and the utilisation thereof. We are afraid that it is a little late in the day to rake up this controversy since the assessing officer in the assessment order after due application of mind treated the compensation amount as taxable in the hands of the respondent on substantive basis and the further important fact, which is very apparent, is that the revenue in the present appeals has not challenged the factual and legal acceptance of the respondent as the owner of the receipt in question by raising any ground of appeal since it has restricted itself to the common ground already reproduced earlier. In this view of the matter, the various arguments advanced by the learned Departmental Representative on behalf of the revenue, both orally and subsequently in writing, stand rejected.
12. In reverting back to the order of the Commissioner (Appeals)’on the second issue, the Commissioner (Appeals) at the outset took on record the following documents, which according to her were not new evidence within the meaning of rule 46A :
“1. Copies of Khasra Girdawari and Jama Bandi for the years from 1968 to 1983
2. Judgment of Rajasthan High Court dated 4-1-1985, deciding the title of Sugan Kanwar.
3. Judgment of the Division Bench of the Rajasthan High Court dated 2-9-1986, rejecting the appeal filed by the State Government against the order mentioned at sl. No. 2 above.
4. Copy of the mutation of the land in favor of Sugan Kanwar.
5. Copy of the competent authority dated 26-4-1988, awarding the compensation to Sugan Kanwar.
6. Copy of the letter from defense Estate Officer, Rajasthan Circle, Jaipur, dated 10-1-1992.
7. Copy of the letter of defense Estate Officer dated 8-3-1993.
8. Copies of the assessment orders in the case of Sugan Kanwar and Commissioner (Appeals)’s order.
13. The submissions on behalf of the respondent with reference to the aforesaid documents were that the ownership and nature of the land being agricultural was decided in favor of Smt. Sugan Kanwar by the judgment of the Hon’ble Rajasthan High Court which had been passed in connection with the writ filed by Smt. Sugan Kanwar against the order of the competent authority holding that she was not entitled for any compensation. It was emphasised that the appeal of the Government against the order of the learned Single Judge of the Hon’ble High Court before the Division Bench of the same High Court came to be rejected. The further submissions were to the effect that the assessed had succeeded in establishing that the land was entered as agricultural land in the revenue records and that it was being regularly cultivated both before and after the requisition. It was emphasised before the Commissioner (Appeals) that the assessing officer had not brought any material on record to prove that the land was not being cultivated after its requisition and the assessed on the contrary had produced sufficient evidence by placing on record copies of Khasra Girdawari, which would show that not only before the requisition of the land in August, 1976, but much later after its requisition the land was being used for agricultural purposes.
14. In support of the aforesaid arguments, reliance was placed on the judgment of the Hon’ble Supreme Court in the case of CIT v. All India Tea & Trading Co. Ltd. (1996) 219 ITR 544 (SC), the judgment of the Hon’ble Delhi High Court in the case of DLF Universal Ltd. v. Asstt. CIT (2001) 119 Taxinan 373 (Del) and lastly, the decision of the Chandigarh Bench of the Tribunal in the case of Anil Kumar v. Asstt. CIT (2001 119 Taxman 203 (Chd)(Mag).
15. In considering the arguments advanced on behalf of the assessed with reference to the facts as also the legal position propounded, the Commissioner (Appeals) at the outset observed that the land of Smt. Sugan Kanwar was taken over by the Government in two phases, the first by way of requisition in 1976 by means of which the possession was given to the Government but the title continued to vest in Smt. Sugan Kanwar, and the second by way of acquisition in 1990 under which the title passed on to the Government. Coming to the second aspect, the Commissioner (Appeals) opined that compensation received on compulsory acquisition of agricultural land was to be assessed under the head “Capital gains” in view of the amended definition of “capital asset” under section 2(14) and “transfer” under section 2(47) with effect from assessment year 1970-71. According to her, the sum of Rs. 58,08 ‘ 000 received as compensation for acquisition in April, 1994, was to be considered for capital gains tax in assessment year 1995-96. It was stated before us by both the parties that there was no dispute on this aspect of the matter in the present appeals filed by the revenue and we really do not see any reason to dwell on this subject any more.
16. Coming to the amount paid as recurring compensation for requisition of land, the view of the Commissioner (Appeals) was that this did not attract capital gains since no transfer was involved and the ownership remained with the assessed. Further, according to her, the receipt was clearly of a revenue nature and the only issue which was to be decided was whether it represented “income from agriculture”.
17. The Commissioner (Appeals) at the outset referred to the judgment of the Hon’ble Supreme Court in the case of CIT v. All India Tea & Trading Co. Ltd. (supra) highlighting thereafter the principles that emerged from the said judgment and which broadly were as under :
“(i) rent or revenue which is directly derived from any land which is used for agricultural purposes will be agricultural in nature.
(ii) revenue which is derived must also be directly and not indirectly associated with the land which is used. for agricultural purposes before it can be said to be agricultural income.
(iii) The effective source of the receipt being from agricultural land is the decisive factor.”
18. In dealing with the assessed’s case in the light of the principles laid down by the Hon’ble Supreme Court, the Commissioner (Appeals) at the outset referred to the four reasons, which had been recorded by the assessing officer to come to the conclusion that the income in question was non-agricultural and these being :
“(i) The land in question was an urban land situated well within the precincts of Jodhpur municipality.
(ii) The assessed has not brought to notice any evidence whatsoever that the land was actually used by the assessed for agricultural purpose.
(iii) After the land was requisitioned, the same was put totally for the nonagricultural use.
(iv) Merely for the reason that the land was entered in revenue records as an agricultural land is not sufficient to claim that it was an agricultural land.”
19. In respect of the first reason, the Commissioner (Appeals) took the view that this was more relevant for deciding the issue of capital gains but according to her the urban or the rural character of the land was not material since even for the land so located within an urban area any income arising out of its cultivation would be agricultural income. During the course of the present appeal, this aspect of the matter was not challenged by the learned Departmental Representative and in fact no arguments were advanced by either side. This, therefore, need not detain us any further and we straightaway move to the second reason recorded by the assessing officer to reject the assessed’s claim. The Commissioner (Appeals) in para 12 of her order recorded the following facts and to which are linked the reasons, which weighed with the Commissioner (Appeals) in coming to the conclusion that she did :
“As regards point No. 2 that the assessed has not produced any evidence to show that the land was actually used by her for agricultural purposes, it is submitted by the appellant that all the relevant documents which are listed in para 5 above were produced before the learned assessing officer, but the same were not considered by him. After examining, these documents, I find that there is truth in the contention of the appellant. It is seen that the assessing officer has mentioned in detail the background of the case, which could not have been explained by him with reference to the documents mentioned above. Thus, although these documents were available on assessing officer’s record, he did not consider them on merit. Perusal,of all these documents, clearly answers the point made by the assessing officer. It may be recalled that Sugan Kanwar, in a writ petition, challenged the Government’s order declaring her ineligible for compensation. Hon’ble Rajasthan High Court, after examining the various documents produced by the petitioners to prove that they were regularly cultivating the land, gave a judgment dated 4-1-1985, in favor of the petitioners and upheld their right to receive compensation from the Government. The following observation of the Hon’ble court is relevant: ‘Thus, the various documents submitted by the petitioners go to show that the petitioners at the commencement of the Rajasthan Land Reforms and Acquisition of Land owners Estate Act, 1963, were in a cultivatory possession of the various portions of the land as tenants of the ex-ruler of the erstwhile State of Jodhpur.
Thus, it was established by the appellant in the High Court of Rajasthan that the land in question was cultivated by Sugan Kanwar prior to its requisition. While this judgment has been referred to by the assessing officer in the assessment order, no comments have been made on the findings of the court. Since this point has been settled by the court in favor of the appellant, it cannot be disputed that the compensation was directly related to agricultural land which was regularly cultivated by the appellant.”
20. Coming to the other reason recorded by the assessing officer and which was to the effect that there was no evidence with the assessed to prove that even after the land was requisitioned the same was put to agricultural use, the Commissioner (Appeals) observed that there was no basis or material with the assessing officer to record such a finding and it was clear that the assessing officer had not made any enquiries either from the land revenue, department or from the defense Ministry about the true state of affairs regarding the land, and the conclusion that the land was put to non-agricultural use was on the basis of a presumption. According to the Commissioner (Appeals), it would be quite logical to think that the defense Ministry had not used the land for agricultural purposes but then the question arose as to what was being done on the land during a long period of 14 years from 1976 to 1990. According to the Commissioner (Appeals), the assessing officer ‘had no answer whereas the assessed had produced Khasra Girdawari pass books for the period beginning 1976 and ending with 1983 to show that crops were in fact grown on the land during this period.
21. The further observations of the Commissioner (Appeals) were to the following effect :
“During this period, the appellant was not allowed to carry out agricultural operations, although her name was shown in the Girdawari as the owner of the land. For this loss of right to cultivate the land, she was given recurring compensation up to the date of acquisition. It is the contention of the appellant that during this period agricultural operations on the land were carried out on behalf of the Government before it was finally acquired. This contention is proved by the Khasra Girdawari of seven years for the period from Samvat 2034 (1976) to Samvat 2041 (1983) which clearly give the details of the crops grown in the land as ‘wheat, rice, badger, vegetables’. The Khasras are Government records, which are prepared after due inspection of the land. Their reliability, therefore, cannot be questioned in the absence of. any adverse material on record. Thus, it is clear that although the land was in the possession of the Government, some agricultural operations were carried out on this land on behalf of the Government. This land was acquired by the Government in 1990 (Samvat year 2048). For few years before its acquisition, copies of Khasra Girdawari are not available with the appellant. It is explained that perhaps the defense Authorities had put up boundary walls on the land acquired and, therefore, the Girdhavar could not inspect the land to find out whether the land was being used for agricultural purposes.
The learned counsel has drawn my attention to the order No. 18/85, dated 26-4-1988, of the District Collector, Jodhpur, awarding recurring compensation for requisition of agricultural land. At p. 4 of this letter, it is clearly stated that while deciding the amount of recurring compensation on the land requisitioned, he had relied on the advice of Agricultural Officer, which is based on the agricultural produce of the land durig relevant time. After going through this letter, I am inclined to agree with the appellant that the land was being used for agricultural purposes subsequent to the requisition and this fact was duly considered by the District Collector for determining the quantum of the recurring compensation in 1988. This proves that there were agricultuial produce on the land when the matter came up before the arbitrator in 1988 and the recurring compensation was paid in lieu of the use of land by the Government for agricultural purposes In view of this position, the appellant’s contention that the recurring compensation received was in consideration of agricultural income; has substantial merit.”
22. As regards the fourth reason recorded by the assessing officer to reject the assessed’s claim, i.e., the entry in the land records not being an adequate or important factor to make a claim for a receipt to be treated as agricultural income, the Commissioner (Appeals) while agreeing with the assessing officer observed that the assessed had not based her case merely on the entry in the land record since the Khasra Girdawari was not only a record of the type, size and title of the land but it also represented a record of the various crops produced every year on the land. According to her, there was no material available to decide the actual use to which the land had been put during the requisition period and under the aforesaid circumstances, the Khasra Girdawari, which was prepared on actual inspection of the land every year could not be dismissed as a document of no consequence. It was once again recorded as a fact by;the Commissioner (Appeals) that the land was cultivated subsequent to its taking over by the Government and although for the’ period beginning 1983 to 1990, no records were available with the respondent, the District Collector in his order had referred to agricultural operations even in the year 1988. For the purpose of treating the Khasra Girdawari as a relevant piece of evidence for deciding the question of agricultural income, the Commissioner (Appeals) placed reliance on the judgment of the Chandigarh Bench of the Tribunal in the case of Anil Kumar v. Asstt. ClT (supra).
23. In proceeding thereafter to the case law on the subject, the Commissioner (Appeals) at the outset observed that the burden was on the assessed to prove that a particular piece of land was “agricultural land” and the income there from was agricultural income but in a case where the assessed had produced cogent evidence to support his contention and the department wanted to controvert such contention then it had to lead convincing evidence on the point at issue. A reference was made to the judgment of the Hon’ble Supreme Court in the case of CWT v. Officer-in -charge (Court of Wards) (1976) 105 ITR 133 (SC). In examining the assessed’s case on the touchstone of the aforesaid judgment, the Commissioner (Appeals) held that the assessed had prima facie discharged the onus to prove that even after several years of requisition the land was being used for agricultural operations whereas the assessing officer had not been able to rebut such evidence and show that there was no cultivation on the land subsequent to its requisition. The decision of the Hon’ble Andhra Pradesh High Court relied upon by the assessing officer in the case of Pyadah Suryanarayan Murty v. CIT (1961) 42 ITR 83 (AP) was not found to be applicable by the Commissioner (Appeals) on the facts of the case and ultimately it was concluded that the case of the assessed was fully covered by the judgment of the Hon’ble Supreme Court in the case of All India Tea and Trading Co. Ltd. (supra) and we find it appropriate to reproduce the relevant observations of the Commissioner (Appeals) which are to the following effect
“Considering all the facts and circumstances of the case, I am of the opinion that the case of the appellant is fully covered by the judgment of the Hon’ble Supreme Court in the case of CIT v. All India Tea & Trading Co. Ltd. (1996) 219 ITR 544 (SC). In this case the land was requisitioned by the State of Assam and thereafter it was allotted to refugees who continued to use the land for cultivation. In the circumstances, it was held that since the refugees were put in the possession they became the tenant and for parting with the physical possession of the land, on which agricultural operation was continued to be carried on by the refugees, compensation was paid. Such compensation was clearly of the nature of agricultural income. The Hon’ble court further held that “if the assessed had voluntarily given the land on lease and had received the sum as rent, the same could not have been taxable as it would be agricultural income. What happened in this case was that instead of voluntarily giving this land on rent to the refugees the said land has been given to them by the order of requisition being passed by the State of Assam. The.amount received is directly related to the requisitioned land on which agricultural operations continued to be carried on by the refugees during the year in question and this amount has to be regarded as agricultural income as defined by section 2(l) of the Income Tax Act, 1922.
The facts of the appellant’s case are similar to those of the above case. The land in question continued to vest with the assessed during the relevant assessment years to which the receipts pertain (although it is assessed in the year of receipt in view of section 45(5)). On the requisitioning of the land, the possession of the same was taken by the Government and in a sense the Government became the tenant and for loosing the physical possession of the land, on which agricultural operations continued to be carried on, compensation was paid. This compensation was, thus, clearly rent derived directly from the land.
It may be mentioned that a similar issue came before the Hon’ble Delhi High Court in the case of DLF Universal. Ltd. v. Asstt. CIT (supra), In that case certain agricultural land was purchased by the assessed. Before being developed and converted into building plots the land in question was acquired by the Government and compensation therefore was paid. It was held that the agricultural land remained agricultural land till acquisition and payment of compensation, therefore, was not assessable to tax, it being exempt as agricultural income within the meaning of section.
In view of the facts of the case and the decisions of the Hon’ble Supreme Court and the jurisdictional Delhi High Court mentioned above, I am of the opinion that the recurring compensation received by Smt. Sugan Kanwar and assessed in the hands of the appellant is agricultural income exempt from tax.”
24. The learned Departmental Representative at the outset supported the orders passed by the assessing officer but on a query from the Bench, he straightaway accepted that the statement of facts filed by the respondent before the Commissioner (Appeals) was correct in every aspect. We find it appropriate at this stage to reproduce the said statement of facts and which, in our opinion, would be quite helpful in reaching (to) an opinion in the present appeals as follows
“The appellant is a power of attorney holder of Smt. Sugan Kanwar w/o late Shri Rud Singh. Smt. Sugan Kanwar is an old widow of more than 65 years in age and not largely lettered. She was cultivating an agricultural land measuring 100 bighas in village Pabupura in Tehsil Jodhpur, for more than 20 years in the year 1975. In 1975, the Collector, Jodhpur, issued a notice to Smt. Sugan Kanwar that she is unauthorisedly occupying the agricultural land and as, such should handover the possession within, 10 days from the receipt of the notice. Smt. Sugan Kanwar filed a writ petition to the Hon’ble Rajasthan High Court challenging the validity of the notice issued by the Collector, Jodhpur. The writ petition filed by Smt. Sugan Kanwar was decided in 1984, holding that she is a ‘Khatedar’ tenant of the State Government of the said agricultural land. The appeal filed by the State Government in the Division Bench of the Hon’ble Rajasthan High Court against the Single Bench judgment was also rejected. In the meantime defense department, Government of India, requisitioned the agriculture land of Smt. Sugan Kanwar and the possession was taken over on 4-8-1976. Smt. Sugan Kanwar claimed the recurring compensation for the loss of her agricultural income from the said land, which was determined by the competent authority (Collector), Jodhpur, vide his order dated 26-4-1988, awarding a sum of Rs. 7,200 per annum. On the basis of this award Smt. Sugan Kanwar received a sum of Rs. 74,880 during the period relevant to the assessment year 1990-91, which has been taken by the learned assessing officer in that assessment year. Smt. Sugan Kanwar was not satisfied with the order of the competent authority (Collector), Jodhpur, awarding her Rs. 7,200 per annum as the recurring compensation, hence she moved an application for the appointment of an arbitrator to the State Government. The Government of Rajasthan appointed Hon’ble District, Judge, Jodhpur, as the arbitrator for determining the recurring compensation payable to Smt. Sugan Kanwar. During the pendency of the arbitration proceedings, the defense department revised the recurring compensation payable @ Rs. 0.75 per sq. yd. per annum for the period 4-8-1981 to 3-8-1986 and @ Rs.. 1.50 per sq. yd. per annum for the period from 4-8-1986 to 4-6-1990; the agricultural land belonging to Smt. Sugan Kanwar was acquired by the Government through the competent authority vide gazette notification and from that date she ceased to be entitled for receiving the recurring compensation. The learned assessing officer issued a notice under section 148 of the Income Tax Act, 1961, which was complied with by filing the return of income showing nil taxable income. Further, Smt. Sugan Kanwar is an old lady and unaware of the tax laws and was feeling harassed with multiple legal proceedings pending at various levels, hence appointed the appellant as the power of attorney holder to deal with her legal and taxation matters. To save Smt. Sugan Kanwar from prolonged legal proceedings, the appellant offered herself to be taxed in place of Sint. Sugan Kanwar, provided all the proceedings against Smt. Sugan Kanwar are being; dropped. The assessment has been completed under section 143(3)/148 of the Income Tax Act vide order dated 29-3-1996. The aggrieved appellant made an appeal to the Commissioner (Appeals) against the order passed by the learned assessing officer. The Commissioner (Appeals) set aside the case with necessary instruction and directions to the learned assessing officer. The learned assessing officer has assessed the amount of recurring compensation receivable in the hands of the appellant on substantive basis (in the hands of Smt. Sugan Kanwar on protective basis). The learned assessing officer has further observed that the amount of recurring compensation shall be taxed on accrual basis in the year under appeal and on protective basis in the year of its receipt. The learned assessing officer following his predecessor’s order for the assessment year 1990-91, assessed Sint. Sugan Kanwar on protective basis with a finding that it shall be taxed on substantive basis in the hands of the appellant and further the accrued amount of recurring compensation shall be taxed on substantive basis in the year of its receipt. The learned assessing officer has further held that the agriculture land owned by the Government for the non-agriculture purposes, hence the amount of recurring compensation is taxable under the Income Tax Act.”
25. As already stated earlier, the learned Departmental Representative raised certain preliminary issues and one of these was that the present appeals be heard along with the appeals of Smt. Sugan Kanwar stated to be pending before the Jodhpur Bench of the Tribunal. On a query from the Bench, however, no details of any such appeals were furnished to us and we, therefore, decline the request made. The other submission was to the effect that there was no provision of substitution in the Income Tax Act whereby a person could agree to be taxed in respect of income, which was to be rightly taxed as per law in the case of another assessed. This argument also, we proceed to reject as we have already observed in the earlier para of the present order that the issue about the consideration of the income in question in the hands of the respondent is no more open since the assessing officer himself has framed the assessments on a substantive basis in the hands of the respondent.
26. Coming to the main argument of the learned Departmental Representative, the plea was to the effect that as per the provisions of the Requisitioning and Acquisition of Immovable Property Act, 1952, the notice for requisition in 1976 and the actual acquisition in 1990 was a continuous process and to this was linked his other submission that “transfer” within the meaning of section 2(47) took place in 1976 itself. The plea, in other words, was that the recurring compensation was required to be taxed by reference to the provisions of section 45(5).
27. The other submissions of the learned Departmental Representative were entirely in the direction of explaining as to what was agricultural income as defined in section 2(1A) vis-a-vis the stand of the respondent that the recurring compensation received for the various assessment years under appeal partook the character of agricultural income. The only other submission on the part of the learned Departmental Representative was that the payment of compensation pertained to the period subsequent to that for which the Khasra Girdawari had been placed on record and even otherwise according to the learned Departmental Representative, the Khasra Girdawari could not be treated as conclusive evidence.
28. In support of the aforesaid arguments, the learned departmental Representative placed reliance on the following judgments :-
1. CIT v. Mrs. Grace Collis & Ors. (2001) 248 ITR 323 (SC)
2. G.M. Omer Kban v. Addl. CIT (1992) 196 ITR 269 (SC)
3. Singhai Rakesh Kumar v. UOI & Ors. (2001) 247 ITR 150 (SC)
4. CIT v. M.L. Mahajan (2002) 255 ITR 272 (SC)
5. CIT v. Smt. Sheggy Abdulla (2000) 243 ITR 792 (Ker)
6. CIT v. National Electric Supply & Trading Corpn. (P) Ltd. (2001) 248 ITR 794 (Del)
7. Sanfabibi, Mohmed Ibrahim & Ors. v. CIT (1993) 204 ITR 631 (SC)
8. CIT v. Dumraon Cold Storage Refrigeration Service (P) Ltd. (1983) 141 ITR 700 (Pat)
9. Gordbanbhai Kahandas Dalwadi v. ClT (1981) 127 ITR 664 (Guj)
10. CIT v. S. N. Desai (1989) 177 ITR 151 (Bom)
11. Senairam Doongarmal v. CIT (1961) 42 ITR 392 (SC)
12. Pydah Suryanarayana Murty v. CIT (supra)
13. CIT v. Raja Benoy Kumar Sahas Roy (1959) 32 ITR 466 (SC)
14. CIT v. All India Tea & Trading Co. Ltd. (supra)
15. Mrs. Bacha F Guzdar v. CIT (1955) 27 ITR 1 (SC)
16. Jayshree Tea & Indusuies Ltd. & Anr. V. UOI & Ors. (2002) 253 ITR 608 (Cal)
17. Commr. of Agri. IT v. Narayanan Tratan Namboodiripad (1967) 64 ITR 57 (Ker) and
18. CIT v. Pandit Dhaneshwardhar Misra (1940) 18 ITR 416 (Pat).
29. Corning to the decisions relied upon by the Commissioner (Appeals) in her order, the learned Departmental Representative stated that these were distinguishable on facts. It was emphasised that in the decision of the Hon’ble Supreme Court, supra, relied upon by the Commissioner (Appeals), the land continued to be put to agricultural use even after requisition whereas in the case of the present respondent, such a fact was not clear from the record.
30. The learned counsel for the respondent, on the other hand, vehemently supported the consolidated order passed by the Commissioner (Appeals). According to the learned counsel, what was relevant was the date of acquisition and not requisition since no right passed on the latter event. Further, according to the learned counsel, Khasra Girdawari could not be treated as an irrelevant piece of evidence moreso when it was an accepted fact that the assessing officer had not made any enquiries in respect of the land in question. The learned counsel in fact made a statement to the effect that till date the land use had not been changed and no airport had been constructed on the said property and which was stated to be the reason for the requisition/acquisition of the land by the defense Ministry. The further submissions on the part of the learned counsel for the respondent were to the effect that ample material had been placed on record to show that the recurring compensation was in fact intimately related to agricultural operations, which were carried out on the land even after requisition and the Khasra Girdawari was, therefore, an important piece of evidence, and which the department had not rebutted by placing on record any material to the contrary.
31. In support of her arguments, the learned counsel placed reliance on the following reported decisions :
(i) Camelia Tea Group (P) Ltd. v. CIT (1993) 70 Taxman 350 (Cal): (1993) 203 ITR 80 (Cal)
(ii) CIT v. All India Tea & Trading Co. Ltd. (supra)
(iii) CIT v. Haroocharai Tea Co. (1978) 111 ITR 495 (Gau)
(iv) Harish Chandra & Ors. v. CIT (19B5) 154 ITR 478 (Del)
(v) Buddaiah v. CIT (19B5) 155 ITR 277 (Kar)
(vi) Syed Ahdul Basir v. CIT (1988) 170 ITR 566 (Raj)
(vii) Addl. ClT v. G.M Omar Khan (1979) 116 ITR 950 (AP)
(viii) Anil Kumar v. Asstt. CIT (supra)
(ix) DLF Universal Ltd. v. Asstt. CIT (supra).
32. The learned counsel for the respondent further sought to distinguish the various judgments relied upon by the learned Departmental Representative and we would straightaway refer to the’note appended at pp. 32 and 39 of the paper book filed on behalf of the respondent. The copies of the various judgments so distinguished were also placed on the paper book and which we have perused minutely.
33. In reply, the learned, Departmental Representative, placed on record a written note reiterating that the various sections of the Requisitioning and Acquisition of Immovable Property Act, 1952, had to be read together and the conclusion which ultimately was to be reached was that there had been a complete extinguishment of the right of the assessed in the property in question in 1976 itself. The further submission on the part of the learned Departmental Representative was that once a land had been requisitioned, the assessed could not carry on agricultural operations and it was not the job of the defense Ministry to carry on any such operations since the land had been acquired for a specific purpose.
34. In response to the aforesaid arguments, the learned counsel for the respondent contended that all sections of the Act were to be read together and there was also a provision in the said Act whereby a property requisitioned could be released back to the owner and in case of such an eventuality, what would be the position.
35. To a query from the Bench put to the learned Departmental Representative in respect of the said proposition, his submission was that in case of such an even tuality, the transaction could be treated as one of purchase by the owner but we must categorically state that this argument must straightaway fall to the ground since the title to the property remains all along with the owner and in the case of derequisition the owner does not have to do anything other than resuming possession and we really wonder as to how these events can be treated as purchase of property by a person who all along remains the owner and has a title to the property in question.
36. Coming to the other arguments advanced by the parties, we have examined the rival contentions and have also perused the orders passed by the tax authorities. The decisions cited at the Bar have also been taken into account. The common ground raised in the present three appeals primarily questions the action of the Commissioner (Appeals) in treating the recurring compensation as agricultural income (exempt from tax) and we, therefore, would like to restrict ourselves to this aspect of the matter although during the course of the hearing, the learned Departmental Representative raised various contentions, which, in our opinion cannot form the subject-matter of the present appeals as some of them stand concluded by the action of the assessing officer himself whereas others are not required to be decided by us. To mention some of the latter, the learned Departmental Representative in his written submissions has referred at length to the provisions of section 2(47) pertaining to the question of “transfer” of a capital asset, the stand being taken that on requisition in 1976, a transfer had taken place. Similarly, there is an argument that the land in question falls within the municipal jurisdiction of Jodhpur and it is, therefore, a “capital asset”. Another argument is that the receipt by the assessed from Smt. Sugan Kanwar does not partake the character of “agricultural income” as defined in section 2(1A). In our opinion, the aforesaid issues are apparently not covered by the specific common ground raised and qll that we are required to decide is to what is the nature of the receipt in question i.e., the recurring compensation. The fact that the land is within the municipal jurisdiction of Jodhpur is not in dispute and all that we would like to observe is that agricultural activities carried out on agricultural land within the municipal limits of a town/city and resulting in agricultural income do not change their character and the income remains; agricultural. The other argument about the receipts by the assessed being from Smt. Sugan Kanwar and, therefore, not agricultural income in her hands is an argument being raised before us for the first time and we must be categorical in stating that the learned departmental Representative cannot improve/change the case of the department before the Tribunal and he has to restrict his arguments with reference to the facts as also the reasoning recorded by the assessing officer and nothing more.
37. Coming to the provisions of the Requisitioning and Acquisition of Immovable Property Act, 1952, we have already referred to some aspects thereof but dealing with the written submissions filed by the learned Departmental Representative on behalf of the revenue all that we would like to say is that the reference to the various sections of the said Act by the learned Departmental Representative are relevant but these once again would lead us nowhere being seized with the limited issue as to what was the nature of the recurring compensation received by the assessed. It has been a good long period of 14 years from the date of requisition of the property, which is stated to be the l-7-1976, and the possession having been taken over on 4-8-1976. The date of acquisition of the property is stated to be 4-6-1990, and the compensation, which is the subject-matter of appeal for the three assessment years under consideration is stated to have been received on 17-10-1989, 29-6-1992, and lastly, on 29-5-1993. These dates have been noted by us from p. I of the assessed’s paper book and the learned Departmental Representative has not rebutted or countered any of these factual aspects during the course of the hearing of the present appeals.
38. In the present appeal, we do not find it necessary to give a decision as to whether the process of requisition and acquisition is a continuous one as canvassed by the learned Departmental Representative and going straightaway to the point at issue, the respondent placed on record relevant evidence before the Commissioner (Appeals) and which clearly showed that agricultural activities were carried on the piece of land in question even during the period when the same was in the possession of the defense Ministry pursuant to requisition order of 1976 and till the acquisition actually took place in 1990 when the title passed to the Central Government. By this we make a refererice to the Khasra Girdawanvi for the period 1976 to 1983 perused by the Commissioner (Appeals) and which resulted in various factual findings being. recorded as also those in law. The learned Departmental Representative did not refer to any material on record, which would rebut such factual findings and we have in the earlier part of the present order discussed this matter at some length. It has been the assessed’s case that such documents are not available for the period subsequent to 1983 but it has been emphasised with reference to the order of the Commissioner (Appeals) (para 13) that in awarding/computing the recurring compensation, the advice of the agricultural officer had been relied upon and which in turn was based on the agricultural produce on the land in question during the relevant point of time. According to the Commissioner (Appeals), the aforesaid facts further lent credence to the finding that there was agricultural produce on the land even when the matter came up before the arbitrator in 1988. None of the aforesaid facts have been challenged before us by the learned Departmental Representative by referring to any material on record, which would justify a finding to the contrary. The Chandigarh Bench of the Tribunal in the case of Anil Kumar (supra) relied upon by the Commissioner (Appeals) has referred to the relevance/importance of Khasra Girdawari as a piece of evidence for deciding disputes pertaining to those cases where it is the stand of the assessed that agricultural activities were being carried out on a particular piece of land.
39. Coming to some of the decisions relied upon, the Commissioner (Appeals) has placed reliance on the judgment of the Hon’ble Supreme Court in the case of CIT v. All India Tea & Trading Co. Ltd. (supra) and a perusal thereof shows that the facts are quite identical as that was the case of an assessed, who had tea estates in Assam and in order to accommodate refugees and other landless persons, the Assam legislature passed the Assam Land (Requisition and Acquisition) Act, 1948, and consequent thereto, the land of the assessed was requisitioned in January and May, 1949. The assessed received a sum of Rs. 1,24,638 as compensation and it was claimed during assessment year 1958-59 that the amount of compensation received was exempt from levy of income-tax as the same represented the assessed’s agricultural income. The Income Tax Officer did not accept this claim but the Appellate Assistant Commissioner accepted it. On further appeal to the Tribunal, it was found as a fact that after requisition the Government of Assam had given the land to refugees who continued to cultivate the same. In other words, there was a finding of fact by the Tribunal that the land in question was being used by the respondent for agricultural purposes in the relevant accounting year as also in earlier years and the said land even after requisition was being cultivated by the refugees and, therefore, the, agricultural character of the land did not undergo any change. The Tribunal upheld the view taken by the Appellate Assistant Commissioner and on reference at the instance of the department, the Hon’ble High Court confirmed the view taken by the Tribunal. Being aggrieved, the revenue filed an appeal before the Supreme Court and which in turn confirmed the view taken by the Hon’ble Calcutta High Court and which in turn would mean the decision of the Tribunal. Their Lordships of the Hon’ble Supreme Court have observed as under at p. 545 of the report :
“Held, affirming the decision of the High Court, that the finding of fact was that even after the requisition of the land, the refugees were carrying but agricultural operations on the land in question. Therefore, one of the requirements of section 2(1) of the Indian Income Tax Act, 1922, namely, that the land is used for agricultural purposes stood satisfied. The land in question continued to vest with therespondent during the relevant assessment year. On the requisitioning of the land, possession of the same was taken and the refugees were put in possession for which compensation was paid to the respondent. In a sense the refugees became statutory or compulsory tenants and for parting with the physical possession of the land, on which agricultural operations continued to be carried out, compensation was paid. The compensation clearly had the character of rent or in any case had to be regarded as being revenue which was derived from land. The amount received was directly related to the requisitioned land on which agricultural operations continued to be carried out by the refugees during the year in question and this amount had to be regarded as agricultural income as defined in section 2(1) of the Act and was not taxable.”
40. Coming to the facts of the assessed’s case, we have already referred to the Khasra Girdawari placed on record before the tax authorities and which was perused by the Commissioner (Appeals) to come to the conclusion what she did and we have I also adverted to the observations and the consequential findings of fact recorded by the Commissioner (Appeals) in para 13 of her order. These can only lead to the conclusion that even after requisition in 1976, agricultural operations continued to be carried out on the land in question and compensation received thereof would, therefore, assume the character of agricultural income as has been rightly opined by the Commissioner (Appeals). The learned Departmental Representative sought to distinguish the aforesaid judgment of the Hon’ble Supreme Court but we must mention without success since the facts of the appeals before us are quite identical to those considered by the Hon’ble Supreme Court aforesaid.
41. The other judgment relied upon by the learned Departmental Representative, viz., that of DLF Universal Ltd. v. Asstt. CIT (supra) is also relevant to the facts of the case before us and would, therefore, support the viewpoint canvassed on behalf of the respondent. The assessed in that case had purchased certain agricultural land with a view to develop it and thereafter to parcel it out into plots to be utilised for housing and commercial buildings. The said land was acquired by the Government and compensation awarded to the assessed. Thus,, prior to the acquisition of the land and till the date of award, the assessed had not taken steps to develop the land in its normal line of business. According to the department, the acquisition was of a business asset and further the character of the assessed’s land changed from stock-in-, trade, and the same stood sterilised, and was converted into a capital asset as a result of the issue of the notification under section 4 of the Land Acquisition Act, 1894.
42. On a reference to the Hon’ble High Court at the instance of the assessed, their Lordships took the view that the compensation amount was not assessable to tax as the profit of the assessed’s business, since the amount being in the nature of agricultural income within the meaning of section 2(l) was exempt from income-tax.
43. In applying the aforesaid case to the facts before us it is not rebutted by the learned Departmental Representative vis-a-vis the submissions made by the learned counsel on behalf of the respondent that till date no airport has been constructed on the land acquired and vis-a-vis the years under appeal the land use had not changed and it continued to be agricultural land, and admittedly till 1990 being used for agricultural purposes.
44. Before we conclude, we would like to observe that various other decisions relied upon by both the parties were duly considered by us and taken into account in deciding the present appeals. Making a specific reference to those (decisions) relied upon by the learned Departmental Representative, we would like to observe that these have been delivered on their own facts and considering the same, the tax authorities and subsequently the courts have taken the view that land is not agricultural or that the Khasra Girdawari is not to be relied upon when apparently there was other material available on record to substantiate the case of the revenue but in the present case no such evidence has been placed on record and, therefore, the present appeals of the respondent (sic-appellant) are decided on their own facts and applying thereto the case law.
45. In the final analysis, we uphold the consolidated order passed by the Commissioner (Appeals) for assessment years 1990-91, 1992-93 and 1994-95 vis-a-vis ITA Nos. 1828, 1829 and 1830/Del/2002.
46. It was an accepted proposition between the parties that if such a view is taken by the Tribunal, then consequentially, the remaining appeals filed by the revenue wherein the following common ground has been raised would stand rejected :
“On the facts and circumstances of the case, the learned Commissioner (Appeals)-XXVI, New Delhi, erred in deleting the addition in view of the provisions of section 45(5) holding the same as capital receipts, whereas in the year of receipt, i.e., in the assessment years 1990-91, 1992-93 and 1994-95, the learned Commissioner (Appeals) has granted relief holding the same as revenue receipt being in the nature of agricultural income.
47. In view of the aforesaid accepted position, the orders of the Commissioner (Appeals) for the remaining eight appeals would stand confirmed.
48. In the result, all the appeals filed by the revenue are dismissed.