MAHAVEER ENTERPRISES Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS writ application has been filed by the Mahaveer Enterprises, Pindwara, District Sirohi, impugning certain assessment orders whereby the taxing authority levied tax on the writ petitioner as regards the sale of agricultural lands by the writ petitioner. There was a further prayer for quashing of the impugned penalty orders and a further prayer directing the respondents to refund the entire amount of tax, interest and penalty recovered from the petitioner on this account with interest. A general prayer was made so as to hold that the sale of agricultural lands does not give rise to any taxable income under the Income-tax Act irrespective of the fact of the location of the agricultural lands within or outside the municipal limits. There was a challenge to the vires of the Explanation inserted in Section 2(1A) of the Income-tax Act incorporated by the Finance Act, 1989, with retrospective effect from April 1, 1970, contending, inter alia, that the same was illegal and unconstitutional. There was also a further prayer restraining the respondents from recovering any tax, interest and penalty from the writ petitioner in this perspective.

(2.) THE writ petitioner-firm sold during the relevant assessment year certain agricultural lands which were being used for agricultural operations. THE assessing authority imposed income-tax treating the same as business income of the writ petitioner and also imposed penalty for non-payment of advance tax. THE contention of the writ petitioner is that it has already paid the disputed amount of tax under protest, but it has not paid the penalty in question imposed on the writ petitioner as well as its partners by the assessing authority and the writ petitioner prayed for stay of recovery of such penalty imposed by the assessing authority contending, inter alia, that the same was illegal and perverse levy and the retrospective amendment of law could not confer any mens rea on the writ petitioner and, therefore, there could be no justification for any penalty. THE writ petitioner also disputes the very levy of tax on the sale of agricultural lands.

(3.) SIMILARLY, capital gain on transfer of land used for agricultural purposes is not to be charged in certain cases, as per the provisions contained in Section 54B of the Income-tax Act, which is quoted hereinbelow :