NAMDEO RAMA BHAGAT,NAVI MUMBAI vs. DY. COMMISSIONER OF INCOME TAX CIRCLE 27(2) NAVI MUMBAI, NAVI MUMBAI

The assessee is an individual who filed his return of income for Assessment Year 2015-16 on 04.03.2016, declaring a total income of Rs. 15,41,940/- against a gross total income of Rs. 17,01,941/-. The case was selected for limited scrutiny through CASS on account of low capital gains vis-à-vis the sale consideration reported in the Annual Information Return (AIR) data.

During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had transferred immovable properties situated at Asode Village, Taluka Ambarnath, District Thane, under registered agreements dated 28.07.2014, as under:

The assessee claimed that the land constituted rural agricultural land and was, therefore, excluded from the definition of a capital asset under section 2(14)(iii) of the Act, with the resultant exemption from capital gains tax. The assessee further contended that the sale consideration was shared with his son, Shri Pankaj Bhagat, and his wife, Smt. Indumati Bhagat.

The AO rejected both contentions on the grounds that the land fell within the prescribed aerial distance from the Thane Municipal Corporation, whose population exceeded 10 lakh, and that no evidence of agricultural operations had been furnished. The AO further observed that the entire investment towards the acquisition of the land had been made by the assessee and that neither the son nor the wife had established any contribution towards the purchase consideration.

Accordingly, the AO, vide assessment order dated 29.12.2017 passed under section 143(3) of the Act, made an addition of Rs. 13,40,58,813/- (Rs. 12,67,40,518/- plus Rs. 73,18,295/-) on account of LTCG.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A)/NFAC, who confirmed the additions in full. The learned CIT(A) held that the land constituted a capital asset within the meaning of section 2(14)(iii)(b) of the Act, relying on the certificate issued by the Survey of India, which certified the aerial distance at 5.9 km. The Ld. CIT(A) further held that the entire capital gains were assessable in the hands of the assessee. The alternate claim for exemption under section 54B of the Act was also rejected.

The Ld. AR, appearing on behalf of the assessee, reiterated the submissions made before the lower authorities. It was contended that the land was rural agricultural land situated beyond the municipal limits and that the certificate issued by the Public Works Department (PWD), Thane, indicated a road distance of 12.10 km. The Ld. AR further submitted that the AO had initially relied on Google Maps, which could not be regarded as a certificate issued by a competent statutory authority.

With regard to the issue of joint ownership, the Ld. AR submitted that the sale deed dated 28.07.2014 and the purchase deeds referred to Shri Pankaj Bhagat and Smt. Indumati Bhagat and, therefore, the entire sale consideration of Rs. 13,40,58,813/- could not be assessed exclusively in the hands of the assessee.

The Ld. DR, on the other hand, strongly supported the orders of the lower authorities. It was submitted that, pursuant to the amendment introduced by the Finance Act, 2013, with effect from 01.04.2014, the distance contemplated under section 2(14)(iii)(b) of the Act was required to be measured aerially. The Revenue had obtained a certificate dated 12.03.2019 from the Directorate of Maharashtra & Goa Geo-Spatial Data Centre, Survey of India, Pune, certifying that the aerial distance between Asode Gaon and the boundary of the Thane Municipal Corporation was 5.9 km. Since the population of the Thane Municipal Corporation exceeded 10 lakh, the land constituted a capital asset within the meaning of section 2(14)(iii)(b) of the Act.

The Ld. DR further submitted that the assessee had admitted that the entire purchase consideration was funded by him and that the revenue records, including the 7/12 extracts, did not establish agricultural cultivation during the two preceding years. Accordingly, the Ld. DR prayed that the order of the Ld. CIT(A) be upheld.

We have heard the Ld. representatives of both parties, perused the material placed on record and the judgments cited before us, and considered the order passed by the Revenue Authorities. The first issue for consideration is whether the agricultural land situated at Asode Village, Taluka Ambarnath, District Thane, transferred by the assessee during the relevant previous year, falls within the definition of a “capital asset” under section 2(14) of the Act.

Under section 2(14)(iii)(b) of the Act, as amended by the Finance Act, 2013, with effect from Assessment Year 2014-15, agricultural land situated within the prescribed aerial distance of a municipality or municipal corporation having a population exceeding 10 lakh, according to the last preceding census, is included within the definition of a capital asset. The prescribed distance in the present case is eight kilometres.

The assessee has relied upon a certificate issued by the PWD, Thane, indicating a distance of 12.10 km. However, the said certificate records the distance by road and, therefore, does not establish the aerial distance contemplated under section 2(14)(iii)(b) of the Act, as applicable to the assessment year under consideration.

The Revenue, on the other hand, relied upon the certificate dated 12.03.2019 issued by the Directorate of Maharashtra & Goa Geo-Spatial Data Centre, Survey of India, Pune, which certified the aerial distance between Asode Gaon and the boundary of the Thane Municipal Corporation at 5.9 km. The said certificate was considered by the lower appellate authority while deciding the issue.

The population of the Thane Municipal Corporation has been stated to be 18,41,488. In view of the aerial distance of 5.9 km, as certified by the Survey of India, the land falls within the prescribed distance of eight kilometres from the municipal limits. Accordingly, the land falls within the definition of a capital asset under section 2(14)(iii)(b) of the Act.

Further, the revenue records, including the 7/12 extracts, and the report dated 28.12.2017 issued by the Tahsildar, Ambarnath, indicate that the land was lying fallow or vacant, with wild grass (“gavat”). The assessee has not brought on record sufficient evidence to establish that actual agricultural operations were carried out on the land during the relevant period.

In view of the foregoing facts and circumstances, we find no infirmity in the conclusion of the Ld. CIT(A) that the land constituted a capital asset within the meaning of section 2(14)(iii)(b) of the Act. Consequently, the assessee's claim that the gains arising from the transfer of the land were not chargeable to tax on the ground that the land was rural agricultural land cannot be accepted. Ground No. 2 is, accordingly, dismissed.

The next issue, raised in Ground No. 3, concerns the assessment of the entire capital gains in the hands of the assessee, notwithstanding his claim that the land was jointly owned by him, his son, Shri Pankaj Bhagat, and his wife, Smt. Indumati Bhagat.

In respect of the main parcel of land, the purchase deed dated 02.05.2005 stood in the names of the assessee and his son. However, the assessee admitted before the AO that the entire purchase consideration had been paid out of his own funds. No evidence was furnished to establish any contribution towards the acquisition of the land by the son, who was stated to be a student aged 20 years at the relevant time.

As regards Smt. Indumati Bhagat, the assessee relied upon the sale deed dated 28.07.2014. However, the assessee failed to furnish adequate documentary evidence establishing her legal or beneficial ownership in the land, including evidence of her contribution towards its acquisition or any other material substantiating her independent ownership rights.

In respect of the property bearing Survey No. 47/4B, sold for Rs. 75,00,000/-, the 7/12 extract reflected the name of the assessee alone.

The mere inclusion of family members in the sale deed, by itself, does not conclusively establish their respective beneficial ownership in the property or the proportion in which the capital gains arising from its transfer are assessable in their hands. The claim of apportionment must be supported by appropriate documentary evidence establishing the nature and extent of the ownership rights of the persons concerned.

In the present case, the assessee has not furnished sufficient evidence to establish the respective beneficial ownership of his son and wife or to substantiate the allocation of the sale consideration amongst them. In these circumstances, we find no reason to interfere with the conclusion of the Ld. CIT(A) confirming the assessment of the entire LTCG of Rs. 13,40,58,813/- in the hands of the assessee. Ground No. 3 is, accordingly, dismissed.

Ground No. 1 is general in nature and does not call for separate adjudication in view of our findings on the substantive grounds of appeal. Ground No. 4, being general and relating to the assessee's request for liberty to alter, add, delete, substitute or modify the grounds of appeal, also does not require separate adjudication.

In the result, we find no reason to interfere with the order passed by the Ld. CIT(A). The order of the Ld. CIT(A) is, accordingly, upheld, and the addition of Rs. 13,40,58,813/- is sustained.

In the result, the appeal filed by the assessee is dismissed.