Mr. Sharma, a senior citizen, recently sold a piece of agricultural land located in his ancestral village, Rampur, which is situated far from the limits of any major city or municipality. He deposited the substantial sale proceeds, amounting to a significant sum, into a Fixed Deposit (FD) account in a nationalized bank. This transaction took place in a recent financial year.

A few months later, Mr. Sharma was surprised to find an “e-Campaign” notice on his income tax portal. The notice flagged a high-value transaction (the FD) and pointed out that he had not filed an Income Tax Return (ITR) for that year. The bank had also deducted a small amount of TDS on the interest earned from the FD, which was reflected in his Annual Information Statement (AIS). Mr. Sharma was concerned because his only other income was minor interest from his savings, and his total income for the year was well below the taxable limit for senior citizens. He was unsure how to respond, knowing that the sale of rural agricultural land is generally exempt from tax.

Advice in such cases

• Do not ignore the notice. A response is mandatory.
• Gather all relevant documents related to the land sale and the FD.
• Understand the legal basis for the tax exemption on your transaction.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think
• File a response on the income tax portal within the stipulated time.

Applicable Sections of Law

This situation is primarily governed by the Income Tax Act, 1961.

• Section 2(14) of the Income Tax Act: This section defines a “capital asset.” Crucially, it excludes certain types of agricultural land from this definition. For land to be considered non-capital and its sale to be tax-exempt, it must not be situated within the jurisdiction of a municipality or cantonment board with a population of 10,000 or more, or within specified aerial distances from such municipalities based on their population.
• Section 139(1) of the Income Tax Act: This section outlines the conditions under which filing an Income Tax Return is mandatory. Even if income is exempt, high-value transactions can trigger a requirement to file.

If you are the complainant

In this context, the complainant is the person responding to the notice. Here are the steps to follow:

• Log in to the income tax portal and navigate to the e-Campaign section.
• Select the relevant transaction and choose the most appropriate response. In this case, it would likely be “Income is exempt.”
• Provide a clear and concise justification in the remarks section, stating that the funds are proceeds from the sale of rural agricultural land, which is not a capital asset as per Section 2(14)(iii) of the Income Tax Act, 1961.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think
• While the portal may not require immediate document upload, it is wise to keep all proofs ready in case the assessing officer asks for them later.

If you are the victim

If you find yourself in a situation like Mr. Sharma’s, here is how to proceed:

• Do not panic. An e-Campaign notice is a preliminary inquiry, not a confirmation of tax evasion.
• Gather your documents immediately. If you do not have the sale deed, obtain certified copies of land records like mutation records, Khasra, or Khatauni from the local land revenue office.
• Assess your total income for the year, including the FD interest. If it is below the taxable limit, you have a strong case.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think
• Consider filing a belated ITR for the relevant year, declaring the exempt income. This creates an official record and often resolves the issue permanently.

How the police behave in such cases

The police have no role in this matter. This is a civil tax compliance issue handled entirely by the Income Tax Department. The process involves electronic notices and responses through the official tax portal. If the department is not satisfied with the response, it may issue a more formal scrutiny notice under sections like 143(2) or 148 of the Income Tax Act, but it remains a civil proceeding between the taxpayer and the tax authority. There is no involvement of police or criminal proceedings at this stage.

FAQs people normally have

• Should I just mark “Income from exempt sources” in the e-Campaign response?
  Yes, that is the correct initial step. You must also provide a brief but clear explanation in the remarks box, mentioning the sale of rural agricultural land.
• Do I need to upload proof like the sale deed now?
  The initial e-Campaign response portal may not have an option to upload documents. However, you should keep them scanned and ready. If the tax officer requires further clarification, they will ask for these documents. It is better to be prepared.
• What if I don’t have the sale deed?
  If the sale deed is unavailable, other official land revenue records are crucial. Obtain certified copies of the mutation record (which officially records the change in ownership), Jamabandi, or other relevant land records from the Tehsildar’s office. These documents can serve as strong evidence of the sale and the nature of the land.

What evidence is required?

• Proof of Land Ownership & Nature: Record of Rights (Jamabandi), Khasra Girdawari, or title deeds showing the land was registered as agricultural.
• Proof of Sale: A registered sale deed is the best evidence. In its absence, mutation records and bank statements are vital.
• Proof of Location: A certificate from the local revenue authority (like the Tehsildar or Patwari) confirming that the land falls outside the specified municipal limits as defined in the Income Tax Act.
• Proof of Transaction: Bank passbook or statement showing the credit of the sale proceeds.
• Proof of Investment: The Fixed Deposit receipt or statement.

How long will the investigation take?

Resolving an e-Campaign notice can be very quick. If your online response is clear and satisfactory, the query may be closed within a few weeks without further communication. However, if the assessing officer decides to seek more details or issue a formal notice, the process can take several months to a year to be fully resolved. Prompt and accurate responses are key to a speedy resolution.

Advocate Sudhir Rao, Supreme Court of India