DCIT, NEW DELHI vs. IMTIYAZ AHMED ANSARI, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3584/Del/2024 [Assessment Year : 2011-12] DCIT vs Imtiyaz Ahmed Ansari, Room No.-1001, E-2 Block, 301-B4, Govind Puri, Civic Centre, New Delhi- Kalkaji, New Delhi- 110002 110019. PAN-AAAPI7849D APPELLANT RESPONDENT C.O.No.-107/Del/2024 [In ITA No.3584/Del/2024] [Assessment Year : 2011-12] Imtiyaz Ahmed Ansari, vs DCIT 301-B4, Govind Puri, Room No.-1001, E-2 Kalkaji, New Delhi-110019. Block, Civic Centre, New PAN-AAAPI7849D Delhi-110002 APPELLANT RESPONDENT Revenue by Shri Om Prakash, Sr.DR Assessee by Smt. Prem Lata Bansal, Sr. Adv. and Shri Shivang Bansal, Adv. Date of Hearing 23.03.2026 Date of Pronouncement 17.06.2026

ORDER PER MANISH AGARWAL, AM : The present appeal is filed by the Revenue against the order dated 19.02.2024 by Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT (A), Delhi- 10/10346/2018-19 passed u/s 250 of the

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 29.12.2018 passed u/s 143(3) r.w.s. 147 of the Act pertaining to Assessment Year 2011-12 and the assessee has also filed a cross- objection.

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 right of hearing of appeal on merit ought not to be rejected. Considering the overall facts and circumstances of the case and in the larger interest of justice, delay in filling the appeal is hereby, condoned and appeal of the revenue is taken for adjudication on merits.

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 7. Aggrieved by the order of Ld.CIT(A), the Revenue preferred appeal before Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

With respect to Ground of appeal No.1 raised by the Revenue, 8. Ld. Sr. DR for the Revenue vehemently supported the order of AO and submits that in the instant case, the land in question was situated in the Posh locality of South Delhi and when the Inspector has visited the said land, he has reported that the residential colony is existed on the above piece of land and neighboring land are also used for residential purposes. It is further reported by Inspector that on the subject land a residential Colony namely, “Indra Enclave” is developed with gated society and the relevant copies of the photographs are also reproduced in the assessment order. Ld. Sr. DR further submitted that since the subjected land was used for the purpose of residential accommodation therefore, the circle rate as existed in FY 2010-11 for residential land as applied by the AO deserves to be uphold for the purpose of computing the long terms capital gains. He prayed accordingly.

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 therefore, confirmed the capital gain declared by the assessee computed in the basis of circle rate of agriculture land. Ld. AR submits that land owned by the assessee was an urban agriculture land and though he has not carried out any agricultural activity however, as land use was never converted from agriculture to residential, therefore, the profit arising from the sale of said property was offered for tax as LTCG computed on the basis of the circle rate of agriculture land. Ld. AR therefore, prayed that the matter being identical with the issue involved in AY 2013-14 wherein the Co- ordinate Bench has already taken a view that the subject land is an agricultural and capital gain declared by the assessee treating it as agriculture land was accepted therefore, in the year under appeal also, the capital gain as declared by the assessee based on the Circle rate of agriculture land be accepted. He prayed accordingly.

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 subsequent buyer/seller. It is further observed that during the course of assessment proceedings, the assessee has obtained a letter from SDM, Saket, New Delhi under RTI Act where vide letter dated 11.12.2018, the SDM has stated that the said land is an agricultural land and Circle rate was INR 53.00 Lakhs per acre of agriculture land. Ld. CIT(A) after appreciating these facts has deleted the addition by observing as under:- “Ground Nos 3 to 7: These grounds of appeal are interrelated and have been raised in respect of an addition of Rs.3,48,30,000/- u/s 50C of the Act by the Ld. JCIT by applying the circle rate applicable to a residential land which was sold by the appellant during the assessment year. During the course of assessment proceedings, the Ld. AO has evidenced that the assessee had sold a plot of land admeasuring 3375 Sq. Yards for consideration of 1,95,07,500/- vide agreement to sell dated 26.11.2010 by considering the same as agricultural land and taking a circle rate of Rs.5780 per sq. yards in village Neb Sarai, Hauz Khas, New Delhi in a colony named Indira Enclave. The said agricultural land was situated within the municipal limits of the Delhi and the sale documents were not got registered. As per the inquiries conducted by the Inspector of the Range, the said land was located in a residential colony and there were no signs of any agricultural activity ever having being done on the land as evidenced from the Giradwari report and the written inquiries made from DM (South) and ADM (Saket). The Ld. AO took the view that the provisions of section 2(14)(iii) of the Act in respect of an agricultural land were not applicable to the assessee. The Ld. AO has also remarked that the said land being adjacent to posh colonies of South Delhi, the circle rate had to be calculated as per the information available in public domain i.e. the land had to be category 'F' Colony for measuring the circle rates. The long term capital gain of the appellant were adjusted accordingly and an addition of Rs.3,48,30,000/- was made to the income of the assessee. The assessment order of the Ld. AO and the submissions made by the appellant have been considered. The Khasra Giradwari produced by the appellant reflects Nab Sarai as a Village in which agricultural land is situated. It is seen that the appellant had purchased the stated Urban Agricultural Land and subsequently sold the same without changing its land use. Further, as per the position of law, the

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 character of the land does not change even if no agricultural activity is carried out on this land. The appellant had filed a letter dated 12.11.2018 received from the office of SDM Saket, New Delhi confirming that the land in question is an agricultural land notified u/s 4 vide notification dated 05.11.1980 and u/s 6 vide notification dated 21.05.1985 and was awarded vide award no. 12/1987-87 dated 20.05.1987. It was also stated that as per records of land acquisition branch, any construction activity on this land is illegal. It is for this reason that the sale document was not a registered document and the land was purchased and sold on power of attorney only. Thus, the houses constructed in the vicinity of the said land as evidenced by the inspector of the range will not make the land residential and liable to circle rate applicable to the residential area. The Ld. A.O. had conducted inquiries only in respect of circle rate applicable to the residential land and no inquiry was conducted to ascertain the character of the land in question on which residential construction was not permitted. The appellant has not claimed the land in question as a purely agriculture land as defined in section 2(14)(iii) of the Act and the capital gain being exempt u/s 54B of the Act. The appellant has instead contended the land in question is urban agricultural land as notified under various sections of Land Acquisition Act. 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 compulsory acquisition for use other than for agricultural purpose where 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 as was held in Hindustan Industrial Resources Ltd. Vs. ACIT (2011) 335 ITR 77 (Del.). In this case, 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 that the assessee intended to use the land for industrial purpose or that the assessee did no carry out any agricultural operation did not in any way alter the nature and character of the land. Accordingly, High Court held that the amount received by the assessee was capital receipt, not liable to tax. Reliance is placed on the decision of Hon'ble High Court of Madras in the case of Mrs. Sakunthala Vedachalam V. Asst. CIT [2014] 369 ITR

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 558 wherein it was held that since the assessee produced a copy of Adangal and the letter from Tehsildar which showed that the land was agricultural in nature, the same has to be accepted as agricultural income. As per Adangal records, the land was classified as agricultural land and therefore, the exemption could not be denied to the assessee. The Hon'ble High Court has interalia averred that – “………….17. Yet other reason given by the Tribunal is that the adjacent lands are put to commercial use by way of plots and therefore, the very character of the lands of the assessee is doubted as agricultural in nature. The manner in which the adjacent lands are used by the owner therein is not a ground for the Tribunal to come to a conclusion that the assesses lands are not agricultural in nature. The reason given by the Tribunal that the adjacent lands have been divided into plots for sale would not mean that the lands s lands sold by the assessees were for the not purpose of development of plots. Also the reasoning given by the Tribunal "No agriculturists would have purchased the land sold by the assessee for pursuing any agricultural activity" is based on mere conjectures and surmises........” Similar is the decision of Hon'ble Calcutta High Court in the case of Borhat Tea Co. Ltd. 138 ITR 783 (Cal.) which, inter-alia, held that for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not necessary. It is to be seen whether such land is capable of agricultural operations being carried on. Thus, even if the land is capable of agricultural operations, the same would retain the character of agricultural land as such. This case law further supports the case of the assessee. The Hon'ble ITAT, Chennai Bench in the case of Pandit Vettrivel Vs. ACIT (2023) 155 taxmann.com 662 (Chennai-Trib.) has ordered that :- "..Where assessee sold its agricultural land and claimed exemption from capital gain tax, since assessee had fairly established that land was agricultural land evidenced by Adangal and letter of Tahsildar, impugned addition made by Assessing Officer was to be deleted...." In view of the facts and circumstances as stated above, being satisfied that the addition of Rs.3,48,30,000/- was wrongly made by the Ld. AO u/s 50C is hereby deleted. The ground of appeal nos.3 to 7 are allowed.”

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 treating it as agriculture land is correct and therefore, Co-ordinate Bench has deleted the additions made by AO by holding the said land as residential. The relevant observations in para 31 to 34 of the order are reproduced as under:- 31. “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. 32. We find that the assessee’s purchase and sale agreement of the 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/-. 33. 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 letterdated 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 confirmed that the land in question, situated in revenue

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 estate of village 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). 34. 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 compulsory acquisition for use other than for agricultural purpose where 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)

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 We find that the Revenue had filed SLP against this judgement which has been dismissed by the Supreme Court. Similarly, the hon’ble Bombay High Court, in the case of Smt Debbie Alemao & Joaquim 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.”

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 subsequent AY through banking channel to the said party . However, the AO has not accepted this contention of the assessee solely on the basis of reply filed by the partner of the said party that said party was not in existence and was dissolved in AY 2005-06 and accordingly, made the addition of outstanding balance of INR 1,47,66,783/- u/s 41(1) of the Act which was deleted by Ld.CIT(A) by accepting the contention of the assessee. Therefore, the Revenue is in appeal before the Tribunal

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 at pages 238 to 307 filed before us. Ld.AR submits that in the year of payment, the assessment was completed u/s 143(3) and no adverse view was taken. Ld.AR submits that Ld. CIT(A) after appreciating these facts has deleted the addition and thus, requested for the confirmation of the said order.

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 u/s 143(3) of the Act which were later deleted by my predecessor CIT(A) and later confirmed by Hon'ble ITAT. It is further mentioned that the amount outstanding as on 31.03.2011 to M/s Ridhi International has been fully repaid by the appellant in A.Y.2012-13. Also no benefit has been obtained by the appellant as the entire liability has been paid off. The provisions of section 41(1) are not applicable in this case thereof. Since, the facts of the case have not changed, the decision of higher Judicial Authority i.e. ITAT is being followed and the impugned additions are directed to the deleted.”

ITA No.3584/Del/2024 & C.O.No.-107/Del/2024 21. In the result, appeal of the Revenue in ITA No.3584/Del/2024 and Cross-objection No.107/Del/2024 of the assessee for Assessment Year 2011-12, both are dismissed.

Order pronounced in the open Court on 17.06.2026.

Sd/- Sd/- (YOGESH KUMAR U.S) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER

Date:- 17.06.2026 *Amit Kumar, Sr. P.S*