SHRI SACHIN ARUN DHOTRE,MUMBAI vs. INCOME TAX OFFICER-29(3)(3), MUMBAI

Shri Reepal G. Tralshawala appearing on behalf of the assessee, narrating the facts of case submitted that the assessee along with five other persons had purchased agricultural land bearing S.No. 29, H-No.01 at Kasal, District Sindhudurg for a consideration of Rs.

On the other hand, Shri Sanjay J Sethi, representing the department vehemently supported the impugned order and prayed for dismissing the appeal of assessee. The learned AR submitted that on perusal of the definition of property under section 56(2)(vii) of the Act would show that it includes immovable property being land or building

We have heard the submissions made by rival sides and have examined the orders of the authorities below. At the outset, we observe that the impugned order passed by CIT(A) is an ex-parte order. When this fact was pointed to the AR of the assesee, the learned AR stated at the Bar that he is not willing to go back to CIT(A) and the matter may be decided in appeal before Tribunal. In view of the statement made by the AR of the assessee at Bar, the ground No. 1 of the appeal is dismissed.

In so far as factual matrix of the case is concerned both sides agree that it is a case of purchase of agriculture land. We find that even the AO while passing the assessment order has not disputed the fact that the land in question is agriculture land. Now, the issue before us is in narrow compass i.e. whether the agriculture land falls within the meaning of ‘property’ as defined in Explanation to section 56(2)(vii) of the Act. Before proceeding further, it is imperative to refer to the definition to the ‘property’ as defined in Explanation to section 56(2)(vii) of the Act, the same read as under:-

Explanation.—For the purposes of this clause,— (a) xx (b) xx (c) xx (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; or (ix) bullion;

A bare perusal of the definition of property shows that it is an inclusive definition. The expression ‘property’ includes capital asset of the assessee. The term ‘capital asset’ has been defined under section 2(14) of the Act. The capital asset does not include agriculture land, however, there are certain exceptions to it. The relevant extract of section 2(14) where reference to agriculture land is made is reproduced herein below:-

In the present case, we find that the assessee has not brought any evidence to show that the agricultural land purchased with other co purchasers does not fall within the exceptions as specified in definition of ‘agricultural land’ under section 2(14) of the Act. Even the AO has not made any effort to examine whether the agricultural land in question falls within the exception as specified under section 2(14) of the Act.

We find that the co-ordinate Bench of the Tribunal in the case of Prem Chand Vs. ACIT (supra) held that per se the agriculture land does not fall within the definition of ‘property’ as defined in Explanation to Section 56(2)(vii) of the Act. The Tribunal referred the issue back to the file of AO to examine whether the land in question falls under any of the exceptions provided in section 2(14) of the Act. For the sake of completeness, the relevant extract of the said order is reproduced herein below: -

In the instant case, whether agriculture land so acquired falls in the definition of capital asset or not, one has to refer to the provision of section 2(14) which exclude agriculture land in India subject to certain exceptions. However, there are no findings of the lower authorities in this regard. Therefore, we deem it appropriate to set-aside the matter to the file of the AO for the

In a scenario, where it is so determined by the Assessing officer that the agricultural land so acquired falls in the definition of capital asset, the provisions of section 56(2)(vii)(b) of the Act would be applicable. In this regard, the contention of the ld AR is that during the course of assessment proceedings, the assessee has objected to the DLC value adopted by the Assessing Officer and therefore before applying the DLC value, the matter should have been referred to the DVO for determination of fair market value.”

The learned AR during the course of his submission stated that in case the issue is restored back to the AO for determination of the fact, that the agriculture land falls under exception or not, and in case the agriculture land purchased by the assessee falls within the definition of the capital asset and consequently, the provisions of Section 56(2)(vii) of the Act are attracted, then the AO may be directed to refer the valuation of land to the DVO. We have considered the contentions of the assessee, liberty is granted to the assessee to make a requisite