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Facts
The appeal concerns an assessee engaged in manufacturing and exporting garments. The Assessing Officer (AO) made additions for unexplained cash credit under Section 68 and for capital gains on sale of land under Section 50C. The CIT(A) granted relief on both counts, leading to the Revenue's appeal.
Held
The Tribunal held that the assessment order was passed within the limitation period, as supported by evidence of postal pickup on 31.03.2016. Regarding the land sale, it was held to be urban agricultural land, and the circle rate for residential areas was not warranted. However, the issue of cash credit under Section 68 was restored to the AO for fresh adjudication.
Key Issues
Whether the assessment order was passed within the limitation period? Whether the land sold was agricultural or residential for the purpose of Section 50C? Whether the additions for cash credit under Section 68 were justified?
Sections Cited
68, 50C, 153(1)(a), 143(3), 114, 46A, 250(4), 250(5), 2(14)(iii), 54B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: SHRI CHALLA NAGENDRA PRASAD, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, AM :- This appeal by the assessee is directed against the order of the ld.
CIT(A), New Delhi dated 19.02.2024 for A.Y 2013-14.
“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.5,25,71,419/- made by the AO on account of section 68 of the Act by ignoring the fact that identify, genuineness and creditworthiness of M/s R.K.G. Finvest Ltd. remained unverified.
Whether on the facts & circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.4,18,98,128/- made as per section 50C of the Act after physical enquiry of the land, several statements of the persons staying nearby the land were taken in the presence of representative of the assessee and after considering the circle rate of aforesaid land provided by Sub- Registrar (V-A) Hauz Khas, Mehrauli. The assessee has failed to prove the claim of sale of land being agriculture land, therefore the same remained questioned and unexplained.
The appellant reserves right to add, alter or amend the grounds of appeal on or, before the date of disposal of appeal.”
3. The assessee has filed a cross objection along with a petition for condonation of delay of 11 days in filing the CO. The grounds of CO is as under:
1. That the Ld. CIT(A) has erred in law and on facts in upholding the assessment order passed by Assessing Officer despite the fact that the same was framed beyond the time as prescribed u/s 153(1)(a) of the Act.
2. That the Ld. CIT(A) has erred in upholding the limitation for framing assessment holding that the assessee had not produced any Page 2 of 27 documentary evidence to support his contention that the assessment order was dispatched on 01.04.2016 when the same was produced before the Ld. CIT(A).
3. That the order passed by CIT(A) is perverse on the ground of limitation when he did not consider the fact that onus to prove the order framed within time and dispatched within time is on the revenue and not on the assessee.
4. That the respondent seeks leave to add, amend, alter, abandon or substitute any of the above grounds during the hearing of the appeal.
The ld. counsel for the assessee, on the issue of delay, submitted that there was a delay of 15 days in filing the cross objections. It is submitted that the assessee was suffering from heart disease and is under the medical supervision and not aware of the legal intricacies.
Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs Mst Katiji & Ors (1987) 167 ITR 471 (SC), on Auto Centre vs State of Uttar Pradesh (2005) 278 ITR 291 (ALL), on Esha Bhattacharjee vs Managing Committee of Raghunathpur Nafar Academy (2013) 12 SCC 649 for taking a liberal pragmatic, justice oriented, non-pedantic approach. Considering the reasons for delay in filing the CO, we hereby condone the delay in filing the CO and admit the same. As the assessee has raised the fundamental jurisdictional ground in its CO, we decided to deal with same first.
Page 3 of 27 order reflects the date as 31.03.2016, however, the same is framed by the Assessing Officer on 01.04.2016 and the assessee received the assessment order on 04.04.2016 by speed post. It is submitted that the assessee on 29.03.2016, had submitted the details as required by the Assessing Officer and had discussed the case. The assessee then had attended the last hearing on 31.03.2016 at 5.30 PM. As per general practice, the orders framed by the Assessing Officer on or before 31st March are usually being dispatched on the same day or in the early hours of 01st April but before noon. The present assessment order, as per track record, was dispatched by the Assessing Officer on 01.04.2016 at 17.07 hrs (5.07 PM) vide booking No. ED937843070IN which raises a presumption that the order was not passed by the Assessing Officer on 31.03.2016 but was passed on 01.04.2016 and booked for dispatch in the evening on the same day.
The ld. counsel for the assessee further submitted that B.M.P.L.
Articles pick-up man from I.P.H.O. had collected the packet on 31.03.2016, having no mention of time, hence, document produced by the Assessing Officer is not reliable. Moreover, document produced by the Revenue has only one entry whereas in general practice, more than
Page 4 of 27 day of limitation period, hence it appears that the document produced, is created in connivance with pick-up man. The ld AR stated that the AO did not respond to the query with regard to number of orders dispatched on the last day i.e. 31.03.2016 in Range-29 nor any reply was given under Right to information Act application which clearly raises the doubt as to the reliability of document produced by the Assessing Officer.
The ld AR further doubted the entry in the order sheet dated 31.03.2016, which reads "the assessee himself alongwith his Accountant appeared, filed reply, but went without signing the order-sheet, case discussed, order passed". It is the averment of the assessee that he had, on all earlier hearings/occasions, signed the order-sheet as required by the Assessing Officer. The ld AR alleged the AO subsequently on 01.04.2016, completed the order-sheet, passed the order and dispatched the same at 17.07 hrs on 01.04.2016 and therefore the assessee has all the reasons to presume that order was passed by the Assessing Officer beyond limitation period as prescribed in section 153(1)(a) and therefore, liable to be quashed as null and void. The ld AR relied on the decision of Pankaj Sharma vs DCIT (ITA No.3556 & 3557/Del/2015 decided on 08.02.2019) where the order was dated
Page 5 of 27 was received by the assessee on 02.04.2013. In these circumstances, ITAT Delhi Bench, relying upon the order-dated 27.09.2018 passed by ITAT Cuttak Bench in IT(S)A No.44 to 46/CTK/2016 titled as Shri Trinadh Chowdary vs ACIT, set aside the assessment order passed by the Assessing Officer stating that it was barred by limitation. The ld. counsel for the assessee further relied on the case in Sumanjeet Aggarwal vs Income Tax Officer & Ors (2022) 449 ITR 517 (Del).
Per contra, the ld DR strongly relied on the orders of the CIT(A).
The ld DR stated that the order was passed on 31.03.2016 and the same is proved by the fact that the man from the postal authorities picked up the packet on 31.03.2016 itself which was placed for dispatch by the postal authorities in the evening of 01.04.2016. The ld DR produced the assessment record as directed by the Bench to establish that the assessment order was indeed, as per the order sheet, passed on 31.03.2016. With respect to the ld AR submissions that the track record shows date of dispatch as 01.04.2016, the Ld DR submitted that it so happens that the postal authorities may take time to dispatch the packet. The ld DR asserted that the important thing to note is that person from postal authorities picked up the packet on 31st April 2016
Page 6 of 27 assessee are purely based on presumptions and surmises and are devoid of any evidences.
We have heard the rival submissions and have perused the relevant material on record. The Revenue produced the assessment record, as directed by the Bench, in original which was inspected by us to ascertain the date of passing order u/s 143(3). We find from the assessment record that the assessment order was ‘made’ on 31.03.2016 and that the order sheet recorded by the AO, records that the order u/s 143(3) was passed on 31.03.2016. The assessee could not controvert the fact that as per assessment record, the assessment order was made and the tax payable was determined on 31.03.2016.
We find that the assessee has made an allegation that the assessment order was made on 01.04.2016 and to substantiate the allegation, the assessee has submitted evidence in the form of track record of the postal department showing the booking of item on 01.04.2016 at 17.07 hrs and his own statement that he attended the hearing on 31.03.2016 at 5.30 pm. According to the assessee, since the assessment order was booked for dispatch in the evening of 01.04.2016,
Page 7 of 27 on 31.03.2016. The assessee further dismissed the documents filed by the AO in the remand report regarding B.M.P.L. Articles pick-up man from I.P.H.O. who collected the packet on 31.03.2016, as not reliable and being created in connivance with the pick-up man.
In the above factual matrix, we are of the considered view that the fact of assessment order being dispatched on 01.04.2016 would not in itself prove that order was framed on that same day. The fact that the assessment order is dated 31.03.2016 is a proof in itself that it was ‘made’ on 31.03.2016. This fact is proved with the aid of Clause (e) of section 114 of the Indian Evidence Act, 1872 which provides that the presumption in law is that all official and judicial acts were regularly performed. The hon’ble Calcutta High Court, in similar facts, in the case of Commissioner of Income-tax Versus Subrata Roy 2014 (7) TMI 42 – (Cal) had upheld the application of clause (e) of section 114 of the Indian Evidence Act, 1872 to prove the fact of assessment order being ‘made’ within the limitation period. The case involved the timing of an income tax assessment order and demand notice, which were served 47 days after the limitation period expired on December 31, 2008. The assessee challenged the validity of the assessment due to the late service, arguing
Page 8 of 27 The Commissioner (Appeals) found that the assessment was completed on time, but the Tribunal initially sided with the assessee as the assessment record was not produced before the ITAT. The Calcutta High Court reversed the Tribunal's decision, applying the presumption under clause (e) of Section 114 of the Indian Evidence Act, 1872, that official acts are regularly performed, thus validating the order's date.
We further are of the considered view that the fact that the B.M.P.L. Articles pick-up man from Indian Postal Headquarter office (I.P.H.O.) had collected the packet on 31.03.2016, can not be simply be brushed aside as not-reliable or procured in connivance with the pick- up man. The fact that the personnel from postal authorities picked up the packet for dispatch on 31st March 2016 itself, is sufficient to prove that the assessment order was made on 31st March 2016, within the prescribed time limitation. Once the postal authorities picked up the packet on 31st March 2016 itself, the assessment order was put beyond the control of the AO for any possible change or modification as held by the hon’ble Kerala High Court in the case of CAgIT v. Kappumalai Estate, (1998) 234 ITR 187, 188 (Ker), applying Government Wood Works v. State of Kerala, (1988) 69 STC 62 (Ker).
Coming to the legality of assessment order being made within the limitation period and service of the same after the limitation period, the law is clear. The provisions of section 143(3) of the Act provides that the AO shall ‘make’ an assessment order and determine the tax payable. It is the provisions under section 153 of the I T Act which provides for limitation for making the assessment. Section 143(3) reads as under:
"(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall by an order in writing. make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment." The word "assessment" in section 153 means not merely the computation of the income of the assessee but also the determination of the tax payable by him as held in Mohendra J. Thacker & Co. v. CIT, (1983)
139 ITR 793 (Cal)].
It is the provisions of section 153(1)(a) which deals with time limitation for making the assessment order which reads as under:
Time limit for completion of assessments and reassessments. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of-
Page 10 of 27 CO No. 106/DEL/2024 Imtiyaz Ahmed Ansari (a) two years from the end of the assessment year in which the income was first assessable; or ***** (b) The issue of limitation for passing an assessment order has been dealt with various courts where it has been held that the period of limitation is for completion of assessment only and not for communication to the assessee. It has been held by the Madras High Court in the case of RM.P.R. Viswanathan Chettiar v. CIT, (1954) 25 ITR 79 (Mad) and approved in CIT v. Balkrishna Malhotra, (1971) 81 ITR 759 (SC) that the limitation period prescribed in section 153 is the period within which the Assessing Officer has to complete one stage of the proceedings, that is, the assessment of the income and the determination of the tax payable.
It is not necessary that the terms of the order of assessment should also be communicated to the assessee within that period.
The hon’ble jurisdictional Delhi High Court have held in the case of Prem Nath Motors (P.) Ltd. v. CST, (1991) 82 STC 124, 128-29 (Del) that where the assessment order, quantifying the amount of tax, has been passed within the period of limitation, merely because the notice of demand is issued after the expiry of the period of limitation, does not vitiate the assessment order. Similarly, the hon’ble Calcutta High Court in the case of India Ferro Alloy Industry Pvt. Ltd. v. CIT, (1993) 202
Page 11 of 27 assessment is the determination of the tax liability and issue of demand notice but certainly not the service of the same on the assessee. The hon’ble Punjab and Haryana High Court have likewise held in the case of Mrs. Rama Sinha v. CIT, (2002) 256 ITR 481, 487 (Punj) that where an assessment order has been passed within the prescribed period of limitation, it cannot be regarded barred by limitation even though the same has been served on the assessee after the expiry of such period of limitation.
In Ramanand Agarwalla v. CIT, (1985) 151 ITR 216 (Gauh), the court held that where the notice of demand was issued after the expiry of the period of limitation, it does not make the assessment as time- barred as the notice of demand does not form part of the assessment order. In K.U. Srinivasa Rao v. CWT, (1985) 152 ITR 128 (AP), the assessment order was passed within the period of limitation but communicated thereafter, the court held that the same was not barred by limitation. The hon’ble Karnataka High Court in the case of P.G.
Nagendra v. CCT, (1998) 109 STC 143, (Karn) held, following the hon’ble Supreme Court judgement in the case of State of Andhra Pradesh v. M. Ramakishtaiah and Co. [1994] 93 STC 406 (SC), that Page 12 of 27 that it is served on the dealer after the period of limitation, is of no consequence for computing limitation. The hon’ble Kerala High Court held the same in the case of CAgIT v. Kappumalai Estate, (1998) 234 ITR 187, 188 (Ker), applying Government Wood Works v. State of Kerala, (1988) 69 STC 62 (Ker).
The reliance on the decision of Pankaj Sharma; Trinadh Chowdary (supra) are distinguishable on facts. In the instant case, the AO is able to show that the assessment order along with tax payable notice was picked up by the postal authorities on 31st March 2016 itself for dispatch on 01.04.2016. No such fact was available in the cases relied upon by the assessee. The reliance on the case of Sumanjeet Aggarwal vs Income Tax Officer & Ors (supra) is again misplaced. The hon’ble Delhi High Court in that case was interpreting the meaning of phrase no notice u/s 148 “shall be issued’ under the provision of section 149 of the Act. In contrast, the phrase “issue” of assessment order does not exist in the provisions of section 153(1)(a). Instead the provisions in section 153(1)(a) only provides for “making” of the assessment order within prescribed period. In the light of the above factual aspects of the case, we hold that the assessee has based its theory on surmises and Page 13 of 27 allegation with any cogent and substantial evidence. There is no doubt regarding the existence of the assessment order dated 31.03.2016 and there equally is no reason to doubt that the assessment order was made on 31.03.2016. The CO of the assessee therefore, fails and the same is dismissed.
With respect to merits of the case, briefly stated, the facts of the case are that the assessee, Imtiyaz Ahmed Ansari is engaged in manufacturing and exporting readymade garments under the name "Ellora Creations". The assessee filed return of income on 26.03.2014 declaring total income of Rs. 87,39,450/-. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has obtained unsecured loans of Rs. 5,25,71,419/- crore from RKG Finvest Ltd., including accrued interest of Rs. 37,71,419/-. The Assessing Officer finding that there is a significant increase in loan balance from 2.06 crore to 5.31 crore, sought evidence for creditworthiness of the lender. Finding no response from the assessee, the AO added the said amount as unexplained cash credit u/s 68 of the Income Tax Act.
The Assessing Officer further noticed that the assessee also sold 3 pieces of agricultural land admeasuring 1244 sq yards (1137 sq mts) and Page 14 of 27 land. The AO made enquiries and concluded that the said land was located in Neb Valley, Neb Sarai, a residential area, with no evidence of agricultural activities on the land; adjacent to Sanik Farm and 500 meters away from Saket area. The AO invoked the provision of section 50C, applied the residential area Circle rate supplied by the Sub- Registrar's of Rs 38,640/- per sq.mt for Neb Valley being in category F; calculated the deemed value of land u/s 50C at Rs.4,39,33,680/-and levied a long term capital Gain of Rs. 4,18,98,128/-.
On appeal before the CIT(A)/NFAC, relief was granted to the assessee on both the accounts. Aggrieved, the Revenue is in appeal before us.
With respect to ground no 1, the ld DR submitted that while it is true that the CIT(A) forwarded the additional evidences under Rule 46A submitted by the assessee before the CIT(A), to the AO for verification which was not complied with. Nevertheless, the ld DR argued that it was incumbent upon the CIT(A), in such a situation, to examine critically the additional evidence at his own level instead of simply admitting the same and declaring that the assessee has discharged his initial onus to Page 15 of 27 more obliged to enquire the veracity of cash credits when he himself found that the AO had not made any enquiries in respect of identity , creditworthiness and genuineness of the transaction.
Per contra, the ld AR stated that out of Rs 5.25 crore loan taken by the assessee, loan of Rs 2 crore pertained to AY 2010-11. It is submitted that, during the year under consideration, only Rs 2.88 crore was taken from M/s RKG Finvest Ltd. The ld AR submitted that as a proof, the assessee had furnished ITR, confirmation of the lender on 01.02.2016 and the bank statement of the lender in the evening of 31.03.2016. It is stated that the same bank statement was produced before the CIT(A) as additional evidence since the AO had ignored the same bank statement in the assessment proceedings. The ld AR relied on the following decision for the proposition that no addition can be made of the amount which was credited in the preceding previous years: a) CIT vs Mrs Baljeet Jolly (2003) 263 ITR 239 (Del) b) CIT vs Prameshwar Bohra (2008) 301 ITR 404 (Raj) c) Rita Stephen Pinto vs ITO (ITA No.1219/Mum/2013) The ld AR relied on the following decision for the proposition that the Assessee had established identity and credit-worthiness of the creditor and genuineness of transaction:
Page 16 of 27 CO No. 106/DEL/2024 Imtiyaz Ahmed Ansari a) CIT vs Oasis Hospitalities (P) Ltd. (2011) 333 ITR 119 (Del) b)CIT vs Divine Leasing and Finance Ltd. (2008) 299 ITR 268 (Del) c) CIT vs Lovely Exports (P) Ltd. (2008) 216 CTR 195(SC) d) CIT vs Fair Finvest Ltd. (2013) 357 ITR 146 (Del) e) CIT vs Expo Globe India Ltd. (2014) 361 ITR 147 (Del)
We have heard the rival submissions and have perused the relevant material on record. We find that the AO enquired regarding veracity of the loan whereupon the assessee furnished confirmation of lender and the ITR acknowledgement of M/s RKG Finvest. The ITR of the lender showed a loss of Rs 31,06,159/-. It is the averment of the assessee that it filed the bank statement of M/s RKG Finvest at the fag end of assessment year which was ignored by the assessing officer. We find that this same bank statement of M/s RKG Finvest was filed as additional evidence which again remained unverified both by the AO as well as the CIT(A). We are of the view that while no addition u/s 68 can be made of the amount credited in the preceding assessment year, the credits made in the impugned year needs to be investigated before accepting the same as genuine. We are of the view that mere production of PAN, ITR and confirmation of lender does not absolve the assessee from the onus cast on him under Section 68 of the Act to establish identity, genuineness and creditworthiness of the lenders.
Page 17 of 27 Income-tax Rules is that it only fetters rights of assessee to produce additional evidence but it does not restrain Commissioner (Appeals) power under section 250(4) or section 250(5). The hon’ble Supreme Court in the case of Jute Corporation Of India Limited [1991] 187 ITR 688 (SC) had held that in the absence of any statutory provision, the general principle relating to the amplitude of the powers of the CIT(A) is that such powers are plenary and are coterminous with that of the subordinate authority. We therefore, find considerable force in the arguments of the ld DR that where the AO failed to make the inquiry, it was an obligation upon the CIT(A) to make enquiry regarding the veracity of the loan from RKG Finvest instead of declaring simpliciter that the assessee had discharged his initial onus. We find that in the instant case, the ITR of the lender showed losses which needed further enquiry on the part of CIT(A) to establish the three limbs under section 68 of the Act with respect to the credits in the books, especially the creditworthiness of the lender. We are therefore of the view that the initial onus of the Assessee to establish with cogent evidence, the identity, genuineness of the transaction, and credit-worthiness of the lender under Section 68 of the Act was not fulfilled. Accordingly, we deem it fit to restore the issue of identity, genuineness of transactions and creditworthiness of credit
Page 18 of 27 Needless to add that the examination of credits should be limited to the credits made in the books in the impugned year only. The ground no 1 is accordingly allowed for statistical purpose.
Before us, with respect to ground no 2, the ld. DR submitted that the land in question was adjacent to posh residential colonies in South Delhi, as verified by the Inspector. No evidence of agricultural activity was found on the land. The Khasra Girdwari or RTI replies do not negate the fact that the land was located in an urban residential area, making it liable for taxation under the circle rate applicable to residential property.
The ld. DR submitted that Section 50C of the Act applies when there is a transfer of land or building, and the consideration declared is less than the circle rate. The land's classification as agricultural land in records does not preclude its revaluation under Section 50C, given its actual usage and surrounding conditions. The ld DR submitted that the assessee failed to substantiate that any agricultural activity was carried out on the land. Land incapable of agricultural use or not used for agricultural purposes cannot retain the benefit of being treated as agricultural land merely due to classification in old records.
Page 19 of 27 unregistered and executed through a power of attorney, which raises concerns about the genuineness of the transaction and the valuation declared. The lack of a registered deed reinforces the need for relying on circle rates for proper valuation. The RTI reply and notifications under the Land Acquisition Act pertain to the past status of the land, not its character or use at the time of sale. The assessee's reliance on case laws of Hindustan Industrial Resources Ltd. and Mrs. Sakunthala Vedachalam are distinguishable as these judgments addressed lands actively used or demonstrably capable of agricultural activity, which is not the case here. The Inspector's report and field inquiries clearly established that the land had no agricultural features and was in a residential zone, warranting its classification as residential for taxation.
The ld. DR submitted that the JCIT conducted inquiries based on the land's actual usage and location. The residential circle rate reflects the reality of the land's value and its market conditions. Ignoring this would result in tax evasion and an undervaluation of the capital gains.
Section 50C is an anti-abuse provision to curb undervaluation of property transactions. The appellant's reliance on old classification records and RTI responses undermines this legislative intent.
Page 20 of 27 CIT(A)/NFAC. The ld AR submitted that the Assessing Officer rejected the claim of assessee on account of the fact that no agricultural activity was being carried out on the land by the assessee. The ld AR stated that it is an admitted fact that the assessee, being exporter of readymade garments, did not carry out any agricultural activity. Assessee never claimed that the land in question was an agricultural land exempted u/s 2(14)(iii) of the Income Tax Act and that the capital gain was exempt u/s 54B of the Act. Rather, the Assessee has sold part of urban agricultural land and accordingly offered a sum of ₹29,64,448/- as long term capital gain.
The ld AR further submitted that the SDM, New Delhi in its report vide letter-dated 03.08.2016 stated that the land in question is a private agricultural land, falling in revenue estate of village Neb Sarai and the same was acquired vide Award No.12/87-88 dated 20.05.1987 as per the record of Land Acquisition Branch (South). Hence, the ld AR argued that the circle rate of ₹53 lakh per acre as applicable to urban agricultural land was to be applied. It is submitted that the status of the land is still agriculture, it is under acquisition, no construction activity is permitted thereon and therefore, any residential house constructed on such land is unauthorized and illegal, it will not make the land residential liable
Page 21 of 27 Officer. Hence there is no error in the order passed by CIT(A) who had passed the reasoned order. The ld AR relied on the following decisions: i) Smt Debbie Alemao & Joaquim Alemao (2011) 331 ITR 59 (Bom) ii) Hindustan Industrial Resources Ltd. vs ACIT (2011) 335 ITR 77 (Del). iii) CIT vs Smt K Leelavathy (2012) 341 ITR 287(Kar) iv) CWT vs H V Mungle (1984) 145 ITR 208 (Bom)
We have heard the rival submissions and have carefully perused the documents on record. We find that the quarrel is with respect to the nature of land whether it is agricultural land or a residential land for valuation purposes and whether the provisions of section 50C is applicable on sale of such land. We find that the assessee has not claimed the said land as agricultural land exempt from being a capital asset u/s 2(14)(iii) of the Act and has paid capital gain tax on it. The assessee has only claimed the said land as agricultural land for valuing the same at a lower circle rate of Rs 50 lakh per acre. The AO, on the other hand, has held the same as a residential land, where agricultural activity has not taken place, and applied a higher circle rate of Rs 38,640
per sq. mt. for valuation considering the said land falling under ‘Category F’ on account of the fact that it is located near posh locality of Sanik Farm, Delhi.
Page 22 of 27 said land depict the character of the land as agricultural land. The khasra girdawari produced by the assessee before the Assessing officer reflected Neb Sarai as village in which the said agricultural land is situated. We find that though the land is situated near a posh residential locality of Delhi, the authorities had not notified any change in the character of land i.e. from agriculture to residential use. There is no permission of the Government to carry out any residential activity on the land in question. The CIT(A) has given a finding of fact that even the registration for the same was banned at the time of purchase as well as at the time of sale by the assessee and therefore, assessee had purchased and sold the property on power of attorney/agreement to sell on stamp paper of ₹50/-.
We further find that the assessee had also filed RTI application on 12.04.2016 in order to verify the nature of usage of land. Vide letter- dated 17.06.2016, it was replied by the concerned authorities that the land in question being Khasra No.234/1, 237/2 and 237/4 is notified u/s 4 of Land Acquisition Act vide Notification dated 05.11.1980 and u/s 6 vide Notification dated 21.05.1985 and the compensation was awarded vide Award No. 12/1987-88 dated 20.05.1987. The office of SDM (Saket), New Delhi vide their letter No.1332 dated 03.08.2016 replied and Page 23 of 27 Neb Sarai, is private agriculture land as per the record maintained in the office and the same stands acquired vide Award No. 12/87- 88 dated 20.05.1987 as per the record of Land Acquisition Branch (South).
We find that the Assessee had never claimed that he had carried out any agricultural activity on the said land. The fact that the land was not cultivated, does not erase the fact that the competent authorities have not converted the use of land from agriculture to residential use.
We are therefore of the view that the land belonging to the assessee is an urban agricultural land and not a land for residential use. This is apparent from the SDM’s letter-dated 03.08.2016, that the status of the land is still agriculture, it is under acquisition, no construction activity is permitted thereon and therefore, any residential house constructed on such land is unauthorized and illegal. We therefore hold that for valuation purposes for the aforesaid land, the circle rate applicable to residential area as applied by the Assessing Officer is not warranted. We are supported in our view by the decision of the hon’ble Delhi Court in the case of Hindustan Industrial Resources Ltd. vs ACIT (2011) 335 ITR 77 (Del) held that it is the character of the land at the time of sale that is relevant and not the purpose for which the land was purchased from the assessee or the fact that such land was the subject matter of Page 24 of 27 the land was subject to acquisition for industrial use, it was held that it retained the character of agricultural land at the time of sale, so that there could be no liability. In this case, hon’ble Delhi High Court have held that when the assessee purchased the land, it was agricultural land.
The award passed by the District Collector was a document which established beyond doubt that the land was agricultural land. Thus on the date of purchase, the land was agricultural and on the date of acquisition, the character of the land continued to be agricultural.
Hence it was apparent that in the transitional period, the nature and character of the land did not change. The fact the assessee intended to use the land for industrial purpose or that the assessee not carry out any agricultural operation did not in any way alter the nature character of the land. Accordingly, High Court held that the amount received by the assessee was capital receipt, not liable to tax. For arriving at such conclusion, Delhi High Court has relied upon the following cases:
DLF Housing & Construction (P) Ltd. vs CIT (1983) 141 ITR 806 (Del) DLF United Ltd. vs CIT (1986) 161 ITR 714 (Del) DLF United Ltd. vs CIT (1996) 217 ITR 333 (Del)
We find that the Revenue had filed SLP against this judgement which has been dismissed by the Supreme Court. Similarly, the hon’ble
Page 25 of 27 Alemao (2011) 331 ITR 59 (Bom) wherein the land in question was shown in the Revenue record as agricultural land and no permission was taken for conversion of land use, it was held that since no agricultural income was shown in the return is not material for the purposes of gains from sale of such land. In view of the same, we find no reason to interfere with the decision of the CIT(A) and direct the AO to delete the said addition. The ground no 2 is dismissed. allowed. The CO No. 106/DEL/2024 of the assessee is dismissed.
Order pronounced in open court on 21.07.2025.