D SHAKSHADIPATHY,CHENNAI vs. ITO, NCW 23(3), CHENNAI

The assessee has raised following grounds of appeal:-

Brief facts of the case are that the assessee has filed his return of income for the assessment year 2011-12 on 07.6.2011 declaring total income of Rs.3,18,870/-. The case has been subsequently reopened u/s.147 of the Income Tax Act, 1961, for the reasons recorded as per which information received from the Directorate of Intelligence & Criminal Investigation, Chennai, reveals that the assessee along with 5 other persons had sold land measuring 2.92 acres situated in the village of Jalladianpettai, Sholinganallur Taluk, Kancheepuram District, on 26.11.2010 for net consideration of Rs.5.84 crores. It was further noticed that the assessee has received his share of consideration at Rs.1.46 crores. The reasons recorded further reveals that although, land sold by the assessee is mentioned in the document as agricultural land, but it was sold to M/s.Airmid Infrastructure Ltd., New Delhi, for non-agricultural purposes and thus, the Assessing Officer was of the opinion that income chargeable to tax had been escaped assessment within the meaning of section 147 of the Act. During the course of assessment proceedings, the Assessing Officer noticed that land sold by the assessee although classified as agricultural land in patta, chitta & adangal etc., but said land is situated within the territorial jurisdiction of Greater Chennai Corporation and thus, comes under capital asset as defined u/s.2(14) of the Income Tax Act, 1961 ad thus, computed long term capital gain on consideration received for transfer of land. Further, the Assessing Officer has admitted fresh claim made by the assessee towards deduction claimed towards section 54F of the Act for purchase and construction of house property, however, allowed relief only in respect of purchase of plot of land and rejected cost of construction incurred by the assessee for the purpose of house property. The assessee carried matter in appeal before the first appellate authority, but could not succeed. The learned CIT(A), for the reasons stated in his appellate order dated 30.10.2017 rejected contention of the assessee and sustained additions made by the Assessing Officer towards computation of long term capital gain solely on the ground that impugned land capital asset as defined u/s.2(14) of the Act, and consequently, the assessee needs to compute capital gain from sale of land. The learned CIT(A) also rejected claim of the assessee towards deduction claimed u/s.54F of the Act. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us.

The learned A.R for the assessee submitted that the learned CIT(A) erred in assessing long term capital gain on sale of agricultural land without appreciating fact that land sold was agricultural land and further, it is situated beyond 8 kms from the territory jurisdiction of Greater Chennai Municipal Corporation. The learned A.R for the assessee further submitted that the Assessing Officer had relied upon G.O.(Ms)

The learned DR, on the other hand, referring to G.O (Ms)

We have heard both the parties, perused material available on record and gone through orders of the authorities below. There is no dispute with regard to nature of land sold by the assessee. In fact, the Assessing Officer himself had admitted fact that as per revenue records, land in question was agricultural land. The only reason for the Assessing Officer to bring sale consideration received for transfer of impugned land under the head ‘capital gains’ is land has been sold for non- agricultural purpose and further, impugned land is situated within jurisdiction of Chennai City Municipal Corporation. The Revenue considered G.O. (Ms) No 280 dated 09.11.2010 issued by Municipal Administration & Water Supply (Election)

Having considered arguments on both the sides, we find that there is no dispute with regard to nature of land, because in the revenue records, the land has been classified as agricultural land. The assessee has also furnished various evidences to prove that his father has carried out agricultural operations for many years. The only dispute with regard to distance in which such land is situated from the limits of Chennai Municipal Corporation and from which date said distance has been extended to the village in which impugned land is situated. The assessee claims that village in which impugned land situated was included in the Chennai City Corporation limits from 19.07.2011 onwards, whereas the Revenue claims that place has been included within Chennai City Corporation limits on 09.11.2010 itself. In case, the G.O referred to by the Assessing Officer is correct, then nature of land has to be examined with reference to said G.O. and distance of the place to determine nature of the asset. In case G.O. referred to by the assessee is correct, then impugned land in question is definitely as agricultural land which is outside scope of capital asset as defined u/s.2(14) of the Act. This fact needs to be verified by the Assessing Officer in light of two Government orders referred to above. Hence, we set aside the issue to the file of the Assessing Officer and direct the A.O to decide the issue after considering necessary facts and also by referring to G.Os brought on record by both the parties and also decide the issue in accordance with law.

In the result, appeal filed by the assessee is treated as allowed for statistical purposes.