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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2008-09) Thakorbhai Maganbhai Patel, Vs. Income Tax Officer, D-85, Mahalaxmi Park Society, Ward-3(1)(1), Opp. Old Bus Stand, Old Jakat Baroda Naka, Waghodia Road, Bopad, Baroda-390019 [PAN No.ACZPP4029K] (Appellant) .. (Respondent) Appellant by : Shri Sakar Sharma, AR Respondent by: Shri Kamal Deep Singh, Sr. DR 11.12.2025 Date of Hearing Date of Pronouncement 16.12.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 12.05.2023 passed for A.Y. 2008-09.
The brief facts of the case are that the assessee, an individual deriving income from salary and other sources, filed his return of income for A.Y. 2008-09 on 09.02.2012 declaring total income of ₹1,28,170/-. The assessee had inherited ancestral agricultural land situated at village Hanumanpura, Vadodara, pursuant to a family arrangement/MOU dated 17.01.2008. During the financial year 2007-08, the assessee entered into a banakhat dated 25.03.2008 for sale of his share in the said land for a total Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 2– consideration of ₹1,10,70,000/-, though the registered sale deed dated 31.03.2008 reflected consideration of only ₹4,98,000/-. The assessee claimed that the land sold was agricultural land situated beyond the prescribed municipal limits and hence not a “capital asset” within the meaning of section 2(14)(iii) of the Act.
Initially, the assessment was completed under section 143(3) read with section 147 of the Act on 23.01.2013 accepting the returned income. Subsequently, based on information received from the Investigation Wing, including the assessee’s own statement recorded under section 131 of the Act admitting receipt of cash on sale of land, the Assessing Officer reopened the assessment by issuing notice under section 148 dated 27.03.2015 after obtaining approval from the competent authority. During reassessment proceedings, the Assessing Officer issued several notices under section 142(1) of the Act calling for details regarding the nature of land, distance from municipal limits and the alleged cash receipt of ₹1,05,72,000/-. The assessee objected to the reopening on legal grounds, contending that no income had escaped assessment and that no separate speaking order was passed on objections as mandated by the decision of the Hon’ble Supreme Court in GKN Driveshafts. The assessee also challenged the reopening before the Hon’ble Gujarat High Court, who, vide order dated 21.09.2016 in Special Civil Application (SCA) No. 4756 of 2016, upheld the validity of reopening and directed the Assessing Officer to complete the assessment after considering evidence brought on record. The Gujarat High Court while dismissing the SCA on 21/09/2016, held that there were serious doubts about the authenticity of the certificate that had been used by the assesee Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 3– to support his claim. The Court also found that the land was indeed within the limits of the VMC and rejected of the assessee's arguments.
On merits, the Assessing Officer held that the land sold was situated within 8 kilometers of the Vadodara Municipal Corporation limits based on statements of municipal authorities, certificates obtained during investigation and other material, and therefore constituted a capital asset under section 2(14)(iii) of the Act. The Assessing Officer further held that the sale consideration recorded in the sale deed was only ₹4,98,000/-, while the assessee had admittedly received on-money of ₹1,05,72,000/- in cash, which was not disclosed. Since the assessee failed to substantiate the receipt of such cash with any evidence, the Assessing Officer treated ₹1,05,72,000/- as unexplained receipt taxable as “income from other sources”. The Assessing Officer also treated ₹4,98,000/- as short-term capital gain by assuming cost of acquisition as nil. Accordingly, the reassessment was completed under section 143(3) read with section 147 on 22.11.2016 determining total income at ₹1,11,98,170/- and initiating penalty proceedings under section 271(1)(c) of the Act.
Aggrieved by the reassessment order, the assessee preferred an appeal before the Ld. CIT(A) raising several grounds. The assessee challenged the validity of reopening under section 147 and issuance of notice under section 148, contending that there was no escapement of income and that objections were not disposed of by a separate speaking order. On merits, the assessee contended that the land sold was agricultural land and not a capital asset, that capital gains could not be taxed in A.Y. 2008-09 as substantial consideration was received in subsequent years, that the land was an ancestral property and Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 4– hence a long-term capital asset, that capital gains could not be computed without determining cost of acquisition, and that the addition of ₹1,05,72,000/- as unexplained receipt was unjustified, particularly when only ₹1,55,000/- was stated to have been received during the year under consideration. The Ld. CIT(A), after considering the assessment order, submissions of the assessee and material available on record, held that the reopening of assessment was valid as it was based on fresh and tangible material received from the Investigation Wing, including the assessee’s own admission of receipt of cash. The CIT(Appeals) further held that the reasons for reopening were duly communicated to the assessee and sufficient opportunity was granted, and in view of the judgment of the Hon’ble Gujarat High Court, the contention regarding invalid reopening and non-passing of a separate speaking order on objections was rejected. Accordingly, the legal grounds challenging the reopening were dismissed. On the issue of whether the land was a capital asset, the Ld. CIT(A) held that the assessee failed to establish that the land was situated beyond 8 kilometers from the municipal limits. The CIT(Appeals) placed reliance on certificates and statements from municipal and revenue authorities shwoing that the land was within the prescribed distance. Accordingly, the finding of the Assessing Officer that the land was a capital asset was upheld and the related ground was dismissed. On the issue of year of taxability and treatment of on-money, the Ld. CIT(A) upheld the action of the Assessing Officer in treating ₹1,05,72,000/- as unexplained receipt for A.Y. 2008-09, observing that the assessee had admitted receipt of the said amount in connection with the sale transaction and had failed to produce any credible evidence to show that the cash was received in a subsequent year. The addition on account of undisclosed on- Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 5– money was therefore confirmed. However, on the issue of nature of capital gain, the Ld. CIT(A) accepted the assessee’s contention that the land was inherited ancestral property received under a family partition and, therefore, the holding period of the previous owner had to be considered. It was held that the land could not be treated as a short-term capital asset. Consequently, the Ld. CIT(A) directed the Assessing Officer to verify the year and cost of acquisition and recompute capital gains accordingly. Similarly, the ground relating to computation of capital gains without determining cost of acquisition was allowed for statistical purposes with a direction to the Assessing Officer to carry out proper computation after verification. The Ld. CIT(A) therefore partly allowed the appeal by granting relief only on the limited issues relating to nature of capital gain and determination of cost of acquisition, while confirming the reassessment proceedings and major additions made by the Assessing Officer.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. The assessee has raised the following Grounds of Appeal before us:
“1. The Ld. CIT(A)-NFAC erred on facts and in law in upholding the action of Assessing Officer in issuing notice u/s 148 of the Act even though mandatory conditions specified in section 147,148,149, 151 r.w.s 2(14)(iii) have not been satisfied.
2. The Ld. CIT (A)-NFAC erred on facts and in law in upholding the reopening of assessment u/s 147 by issuing notice u/s 148 based on inadmissible evidence and inapplicable law qua assessment year under reference.
3. The Ld. CIT (A)-NFAC erred on facts and in law in upholding the action of Assessing Officer in assuming jurisdiction to assess income u/s 147 of the Act without appreciating that all the objections on reopening had not been disposed off.
4. The Ld. CIT(A)-NFAC erred on facts and in law in upholding action of Assessing Officer in treating agricultural land exempt u/s 2(14)((iii) to be as capital asset ignoring CBDT Notification No. 9447 dtd 06-01-1994 Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 6– 5. The Ld. CIT(A)-NFAC erred on facts and in law in holding that sale of land was assessable in AY 2008-09 on the strength of date of purchase of stamp paper without appreciating that sale of land took place during AY 2009-10 and when deed got registered on 10-06-2008 on receipt of substantial sale consideration which fell in AY 2009-10 6. The Ld. CIT(A)-NFAC erred on facts and in law in upholding the action of the Assessing Officer that only Rs. 4,98,000/- is considered to be a sale consideration against Rs. 1,10,70,000/- received by the appellant as per the terms of banakhat on sale of agricultural land.
7. The Ld. CIT (A)-NFAC erred on facts and in law in upholding action of Assessing Officer that land sold by the appellant was held for less than 36 -months without appreciating that subject land was an ancestral land.
8. The Ld. CIT (A)-NFAC erred on facts and in law in Rs upholding action of Assessing Officer in assessing declared sale consideration of Rs. 4,98,000/- to be as short term capital gain without granting deduction for the indexed cost of ancestral land without which computation of capital gain is impermissible as held and explained by Hon'ble Supreme Court in the case of CIT vs B C Srinivassa Setty 128 ITR 294 (SC), in alternative to Ground Nos. 1 to 6 9. The Ld. CIT (A)-NFAC erred on facts and in law in upholding action of the Assessing Officer in assessing Rs. 1,05,72,000/- as unexplained money without appreciating that appellant received said amount in terms of banakhat referred to in the sale deed and in AY 2009-10 from a definite source.
The Ld. CIT (A)-NFAC erred on facts and in law upholding action of the Assessing Officer in assessing Rs. 1,05,72,000/- as unexplained money in the year under consideration without appreciating that appellant received only Rs. 1,55,000/- referred to in at the banakhat and balance in at the time of execution of sale deed and also on surrender of security cheques.”
The learned counsel for the assessee commenced the submissions by placing the basic factual background of the case and the sequence of events leading to the impugned reassessment for A.Y. 2008-09. It was submitted that the land sold by the assessee was ancestral agricultural land situated at village Hanumanpura and that the sale transaction has to be appreciated in the backdrop of revision of Jantri rates by the State Government with effect from 01.04.2008. According to the counsel, in order to save stamp duty, the purchasers procured backdated stamp papers dated 31.03.2008 and prepared Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 7– the banakhat on such papers, though the banakhat was actually executed and notarised on 04.04.2008 and specifically stated to be without possession. An affidavit of one of the named purchasers, Shri Navinbhai Punjabhai Patel, was relied upon to explain the use of stamp papers in his name and to clarify that he was not the real purchaser. On the issue of reopening, the counsel pointed out that the assessee’s case had already been reopened once in November 2011 and assessment under section 143(3) read with section 147 was completed on 23.01.2013, wherein the Assessing Officer accepted that the land was agricultural land not falling within the definition of capital asset under section 2(14), based on population of the village being below 10,000 and distance being beyond 8 kilometres from municipal limits as certified by the competent authority. It was argued that the second reopening initiated in March 2015 was based on a mere change of opinion and on incorrect appreciation of law and facts, particularly on the basis of statements and reports obtained during investigation in 2013. The counsel submitted that the validity of reopening has to be judged strictly on the reasons recorded and not on subsequent material or findings, placing reliance on decisions in support. It was further contended that the Assessing Officer proceeded on the erroneous assumption that distance of land from municipal limits was to be measured aerially. The counsel submitted that for A.Y. 2008-09, the law mandated measurement of distance by approach road and not aerial distance, and that the concept of aerial distance applies only from A.Y. 2014-15 onwards as clarified by CBDT Circular No. 17/2015. In support, reliance was placed on various judicial precedents. It was also argued that the State Government notifications expanding municipal limits could not be equated with notifications issued under section 2(14)(iii) of the Act. On merits, the Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 8– counsel contended that the land sold was agricultural land and not a capital asset. It was submitted that Hanumanpura village had a population of less than 10,000 as per Census 2001 and Census 2011, and that population criterion under section 2(14)(iii) was fully satisfied. The counsel argued that certificates issued by Gram Panchayat or Village Talati and road-distance measured through Google Maps ought to be accepted, as held in several Tribunal and High Court decisions. It was also submitted that the assessee was carrying out agricultural operations on the land and, therefore, the character of land as agricultural was never lost. With regard to the alleged “on-money” of ₹1,05,72,000/-, the counsel submitted that the entire consideration of ₹1,10,70,000/- was agreed under the banakhat and formed part of sale consideration of agricultural land, which is exempt from capital gains. It was argued that merely because part of the consideration was received in cash, it does not change the nature of receipt. The counsel contended that no addition under section 69A was permissible when the source of cash was explained as sale consideration of land, relying upon several Tribunal and High Court decisions. On the timing of taxability, the counsel submitted that the sale could not be said to have taken place in A.Y. 2008-09. It was argued that although the sale deed bears the date 31.03.2008, its execution on that date was practically impossible due to logistical reasons, the fact that cheques mentioned therein were cleared only in June 2008, and the registration of sale deed took place only on 10.06.2008. It was submitted that the agreement to sell notarised on 04.04.2008 clearly stated that it was without possession and, therefore, transfer within the meaning of section 2(47) of the Act took place only when possession and consideration were effectively transferred in the subsequent financial year relevant to A.Y. 2009- Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 9– 10. The counsel for the assessee placed reliance on judgments to submit that effective conveyance and possession are crucial for determining the year of transfer. Lastly, the counsel submitted that the assessee had inherited the land from his forefathers who held it prior to 01.04.1981, that there was no undisclosed investment in A.Y. 2008-09, and that all alleged investments out of sale proceeds were made only in A.Y. 2009-10. On the cumulative appreciation of facts and law, it was urged that the reopening itself was invalid and, without prejudice, no addition either on account of capital gains or alleged on-money could be sustained in A.Y. 2008-09.
In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record.
Ground Nos. 1, 2 and 3 – Validity of reopening under sections 147/148 and assumption of jurisdiction 10. These grounds relate to the challenge to the reopening of assessment on the footing that the mandatory conditions under sections 147, 148, 149 and 151 were not satisfied, that the reopening was based on inadmissible material and inapplicable law, and that the objections of the assessee were not disposed of in accordance with the law laid down in GKN Driveshafts. We note that the reopening of assessment in the present case was subjected to judicial scrutiny by the Hon’ble Gujarat High Court in SCA No. 4756 of 2016 vide order dated 21.09.2016, wherein the notice issued under section 148 of the Act was upheld and the Assessing Officer was permitted to complete the Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 10– reassessment after taking into account the evidence that may be brought on record by the assessee. The Ld. CIT(A) has followed the said binding decision while rejecting the legal challenge to the reopening.
The Hon'ble High Court of Gujarat in the assessee’s challenge to initiation of 147 proceedings has categorically observed that there was a serious doubt about the genuineness of the certificate dated 16-01-2013 of the executive engineer produced by the assessee that the land in question was situated beyond 8 km from the outer limit of Vadodara municipal Corporation. The High Court observed that the author of the said certificate has filed an Affidavit stating that he has never issued the said certificate and the documents do not carry his signature. Further, the High Court observed that the Road and Building division has also contended that the copy of the said certificate is not found in their official records. Therefore, from the facts placed on record, it is observed that the assessee had placed reliance on false certificates obtained only to mislead the Tax Authorities. Further, even the conduct of the assessee has all throughout been misleading, wherein in the return of its income for the impugned assessment year, the assessee had shown an incorrect figure of capital gains and it was only in the later statement that the assessee admitted of having received “on-money” with respect to sale of the aforesaid property. The Hon’ble Gujarat High Court also noted that the assessee is seeking to place reliance on falsified certificates in order to demonstrate that the property under consideration is an agricultural land and hence not subject to capital gains tax. In our considered view, the issue of reopening has been dealt in detail by the Ld. CIT(Appeals) in the appellate order, and looking into the facts of the instant case, we find no Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 11– infirmity in the order of Ld. CIT(Appeals) so as to call for any interference. Ld. CIT(Appeals) has undertaken a detailed discussion on the applicability and approvals taken under section 147 and 151 of the Act, and in our considered view, the order of Ld. CIT(Appeals) does not merit reconsideration. The case laws challenging the reopening of assessment under section 147 of the Act are applicable to the particular set of an assessee’s case and in our considered view, looking into the facts of the assessee’s case, the background which has also been taken note of by Hon'ble High Court of Gujarat and in light of the arguments placed before us, we are of the view that the case laws cited by the counsel for the assessee are of no help and therefore, the ground of appeal of the assessee challenging the initiation of 147 proceedings, is hereby dismissed.
12. Respectfully following the judgment of the Hon’ble Jurisdictional High Court and in the absence of any contrary binding material brought to our notice, we do not find it appropriate to interfere with the findings of the Ld. CIT(A) on this issue.
13. Accordingly, Ground Nos. 1, 2 and 3 are dismissed.
Ground No. 4 – Whether the land sold is a capital asset within the meaning of section 2(14)(iii) of the Act 14. This ground raises the substantive issue as to whether the agricultural land sold by the assessee is situated beyond the prescribed municipal limits and, therefore, excluded from the definition of “capital asset” under section 2(14)(iii) of the Act, particularly in light of CBDT Notification No. 9447 dated 06.01.1994 and the law applicable for A.Y. 2008-09.
Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 12– 15. We observe that the Hon'ble High Court of Gujarat has categorically noted that the assessee had submitted falsified statements/certificate in support of the fact that the said piece of land was situated outside the limits of Vadodara Municipal Corporation. Ld. CIT(Appeals), in our view, has correctly observed that the Assessing Officer provided several sources of information to establish that the land sold by the appellant was within the proximity of Vadodara Municipal Corporation (VMC) limits, thereby concluding that the property sold qualified as a capital asset under the relevant provisions. Firstly, the AO referred to a statement dated 10/07/2013 from Shri Soham N. Patel, the Additional Assistant Engineer at the Vadodara Municipal Corporation, which indicated that the distance between the land and the VMC was just 2 kilometers. Additionally, the AO noted that the aerial distance was even less than 2 kilometers, based on details provided in a letter dated 12/07/2023 from the Deputy Municipal Commissioner (A) of Mahanagar Seva Sadan, Vadodara. Furthermore, the Assessing Officer noted that a certificate issued by the Executive Engineer of the R & B Division in Vadodara confirmed that the land was situated about 2.8 kilometers away from the VMC. In addition to these sources, the AO also referred to a remand report dated 09/11/2017, which reiterated that the land was located at a distance of less than 8 kilometers from the VMC, based on a certificate received from the Vadodara Urban Development Authority (VUDA), under No. UDA/Plan-2/1434/207, dated 17/10/2017. Finally, the AO also mentioned that even a Google search revealed that the distance between the village of Hanumanpura and Vadodara was approximately 6 kilometers. Accordingly, we observe that there are various sources of information, including official certificates and data from local authorities, which were Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 13– utilized by the AO to hold that the land in question was within the proximity limits of the Vadodara Municipal Corporation and thus considered a “capital asset”. The assessee, in our considered view has not brought any genuine evidence in support of its claim that the said land under consideration is an agricultural land. The counsel for the assessee has placed reliance on the CBDT Notification No. 9447 dated 06.01.1994 and the law applicable for A.Y. 2008-09 to argue that the land is an agricultural land and hence exempt from tax.
Considering the totality of facts, the facts as laid out above and the applicable legal position for the relevant assessment year and the importance of this issue which goes to the root of taxability itself, we are of the considered view that the matter requires fresh factual verification. In the interests of justice, we set aside this issue to the file of the Assessing Officer with a direction to carry out a proper physical verification of the land, determine the correct distance from the relevant municipal limits and after affording opportunity of being heard to the assessee pass appropriate orders in accordance with law.
This ground is allowed for statistical purposes.
Ground No. 5 – Year of taxability of sale of land 18. This ground relates to the assessee’s contention that the sale/transfer of land did not take place in A.Y. 2008-09 but only in A.Y. 2009-10, when the sale deed was registered and substantial consideration was received. We observe that the determination of the year of taxability is closely connected with the findings on the nature of land, applicability of capital gains Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 14– provisions and the factual aspects surrounding execution, registration and possession of the property. Since the core issue regarding the distance and character of land has been restored to the file of the Assessing Officer for fresh adjudication, this issue also requires reconsideration.
Accordingly, Ground No. 5 is set aside to the file of the Assessing Officer to be decided afresh, consequentially and in accordance with law.
This ground is allowed for statistical purposes.
Ground No. 6 – Adoption of sale consideration at ₹4,98,000/- instead of ₹1,10,70,000/- 21. This ground challenges the action of the authorities below in adopting only ₹4,98,000/- as sale consideration ignoring the amount agreed under the banakhat. We find that the determination of correct sale consideration is dependent upon the findings on the nature of land, applicability of capital gains provisions and the year of transfer. As these foundational issues have been restored to the file of the Assessing Officer, this ground is also restored for fresh adjudication. The Assessing Officer shall decide the issue in accordance with law after considering the entire material and submissions of the assessee. This ground is allowed for statistical purposes.
Ground Nos. 7 and 8 – Nature of capital asset, holding period and computation of capital gains 22. These grounds pertain to the holding period of the land being ancestral in nature and the computation of capital gains without allowing indexed cost of acquisition.
Thakorbhai Maganbhai Patel vs. ITO Asst.Year –2008-09 - 15– 23. We note that the Ld. CIT(A) has already accepted the assessee’s contention that the land was inherited ancestral property and has directed the Assessing Officer to verify the year and cost of acquisition and recompute capital gains accordingly. However, the computation of capital gains itself is contingent upon the final determination of whether the land is a capital asset and the year in which the transfer is held to have taken place. Accordingly, these grounds are also restored to the file of the Assessing Officer to be decided afresh, consequentially, after giving effect to the directions on the issue of distance and character of land.
These grounds are allowed for statistical purposes.
Ground Nos. 9 and 10 – Addition of ₹1,05,72,000/- as unexplained money 25. These grounds relate to the addition of ₹1,05,72,000/- as unexplained money in A.Y. 2008-09. We find that the taxability of the said amount is inextricably linked with the determination of the nature of land, applicability of capital gains provisions and the year of transfer. Since these primary issues are being restored for fresh examination, the addition made on account of alleged unexplained money also requires reconsideration. Accordingly, these grounds are set aside to the file of the Assessing Officer to be adjudicated afresh in accordance with law, after deciding the primary issues and after affording adequate opportunity of being heard to the assessee.
These grounds are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes. The matter is set aside to the file of the Assessing Officer with a specific direction to carry out physical verification with respect to the issue of distance of the land from the municipal limits and thereafter pass a fresh order in accordance with law, after granting due and reasonable opportunity of being heard to the assessee and after deciding all other grounds consequentially. This Order pronounced in Open Court on 16/12/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 16/12/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,