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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 3,03,25,000/- on account of Short Term Capital Gain from the sale of agricultural land and an addition of Rs. 5 lacs for alleged agriculture income. The assessee did not file a return, and the AO made an ex-parte assessment based on information about a withdrawal of funds linked to the assessee.
Held
The Tribunal held that the CIT(A) correctly deleted the addition on Short Term Capital Gain as the land sold was agricultural land and located beyond 5 km from the municipality limits at the time of sale, thus not a capital asset as per Section 2(14)(iii) of the Income Tax Act. The Tribunal also upheld the deletion of the Rs. 5 lacs addition, noting that the land was in the name of HUF and the Revenue provided no evidence to the contrary.
Key Issues
Whether the agricultural land sold by the assessee was a capital asset as per Section 2(14)(iii) of the Income Tax Act given its location and status at the time of sale. Whether the addition for estimated agricultural income was justified when the land was allegedly in the name of HUF.
Sections Cited
147, 148, 144, 46A, 2(14), 2(47), 251(2)
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The present appeal is directed at the instance of the Revenue against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 11.08.2014 passed for assessment year 2007-08.
2. The Revenue has taken ten grounds of appeal, which are argumentative and descriptive in nature. In brief, its grievance revolves around two issues, namely; A.Y.2007-08 2 a) The CIT (Appeals) has erred in deleting the addition of Rs.3,03,25,000/- which was added by the AO on account of Short Term Capital Gain earned by the assessee on sale of agricultural land; b) The CIT (Appeals) has erred in deleting addition of Rs.5 lacs which was added by the AO by denying the claim of agriculture income.
3. Though the Revenue has filed an application to adduce additional evidence, but we would like to first take note of brief facts before taking the application of the Revenue. The brief facts are that assessee did not file the return of income. The AO has received an information from Dy. Inspector General of Police, PHQ U.T. Chandigarh vide office letter No. D-866/DSP/EOW dated 30.12.2009. A perusal of this letter would reveal that a case was registered on the complaint of Mr. K.J.S. Sawhney against Shri Vijyant Chaudhary. Shri Vijyant Chaudhary has withdrawn a sum of Rs.1,05,00,000/- in the name of Shri Mahabir Singh S/o Shri Het Ram i.e. the present assessee before us. The AO has issued a notice u/s 148 of the Act on the ground that interest income of Rs.1,90,895/- has escaped assessment for assessment year 2007-08. However, the assessee did not respond to the notice A.Y.2007-08 3 u/s 148 or subsequent notices. The AO has observed that assessee has sold land situated at village Malpura, Tehsil Dharuhera for consideration of Rs.3,56,25,000/- on 28.11.2006. This land was purchased by him for a sum of Rs.53,00,000/- on 30.01.2006, hence a Short Term Capital Gain amounting to Rs.3,03,25,000/- has arisen in the hands of the assessee. Accordingly, ld. AO has made an addition of this amount and passed the ex-parte assessment order on 22.03.2013 u/s 144 read with Section 147 of the Income Tax Act. It is pertinent to note that Section 144 empowers the AO to pass an ex-parte order according to his best judgement, in case an assessee did not respond to his notice.
4. Dissatisfied with the additions, assessee carried the matter in appeal before the ld.CIT (Appeals). The assessee has filed an application for additional evidence under Rule 46A of the Income Tax Rules. Such application was allowed by the CIT (Appeals) and ld. First Appellate Authority has called for a remand report from the AO on the evidences submitted by the assessee. The AO has duly given a remand report which A.Y.2007-08 4 has been considered by the ld.CIT (Appeals). The assessee has produced following documents in support of his contentions:
1) Copy of Certificate of Nayab Tesildar stating distance of Village Malpura from Tehsil Dharuhera, Distt. Rewari 2) Copy of certificate from Municipal Committee, Dhruhera 3) Copy of Map downloaded from Google Earth 4) Copy of Haryana Govt. Notification dt. 20/07/2007 5) Copy of Onefivenine.com website showing distance between Malpura and Dharuhera 6) Copy of Notification No. 9447 dated 06/01/ 1994 7) Copy of Girdawari of Land.
4.1 The comments of the AO have also been noticed by the ld. First Appellate Authority on page 7 of the impugned order. Thereafter, he noticed submissions of the assessee and decided this issue. The ld.CIT (Appeals) deleted the alleged addition of Short Term Capital Gain. The finding of the ld.CIT (Appeals) reads as under :
Submission of the appellant (i) That the AO in his letter to the Tehsildar asked the distance of the land in dispute from Municipal committee Dhruhera, where as the Dharuhera Municipality was formed only on 20-07-2007 vide notification no 18/2/2007- 3CI. Further the Tehsildar has also stated in his report that Municipality was formed in 2007. Further as per information received under RTI Act 2005, the report submitted to the Income Tax officer Sirsa was for the year 2014, instead of the year 2006-07, when the Tehl. Dharuhera was not a Municipality rather it was a Gram Panchat. Further the limits of municipality of Tehl Dharuhera extended so many times from the year 2007 to year 2014 because of rapid urbanization / industrialization of the area. (ii) Further when an application for distance of the disputed land was filed by the assessee to the Nab Tehsildar Dharuhera asking him the distance in the A.Y.2007-08 5 year 2005-06 from municipal committee Dharuhera to the disputed land. The Naib Tehsildar in his report dated 19/05/2014 stated as under: "In the year 2005-06 Dharuhera was not a Municipality. Gazette notification to become municipality was made in year 2007. Further the said land was only 2 Acres (means only 440 FT) away from Village Malpura 'ABADI DEH'." That the assessee has already filed a certificate dated 28-11-2006 from Naib Tehsildar Dharuhera that Village Malpura was 5.4 Km away from Tehl Dharuhera. Now the assessee is filing a certificate from Naib Tehsildar Dharuhera stating the disputed land is only 2 Acres away from village Malpura 'ABADI DEH", means we take it in. any direction the distance is more than 5 Km from Tehl Dharuhera. That the AO in his remand report stated that distance of 5.4 Km is of Village Malpura from Tehsil Dharuhera rather than the distance of disputed land, hence as per the above certificate, where in it is stated that the disputed land is 2 Acre away from village Malpura "ABADI DEH", we take it in any direction still the disputed land is more than 5 km away from Tehsil Dharuhera. (iii) That the AO in his remand report stated that while making notification no 9447 dated 06-01-1994, the mistake of writing Dharuhera Distt Mahendergarh instead of Dist Rewari may be due to Typographical error. In this regard the appellant version is that no corrigendum has been issued by the CBDT regarding the said typographical mistake. (iv)That the appellant filed the Girdawari of the Land stating the fact that the land was used for agriculture. The AO in his remand report said that there is no meaning that the said land is used for agriculture. In other way we can say that Land is used for agriculture but there is no meaning that the land is used for agriculture. (v) That the appellant filed the Map as downloaded from Google' Earth where in the distance of Village Malpura from Tehl Dharuhera was 5.7 Km. The Ld AO in his remand report stated that this distance is from Dharuhera to Malpura Mau Road and the disputed land is not indicated on the Map. In this regard the appellant version is that the AO in his assessment order has taken distance of 3.1 km from internet site 'ONEFIVENINE.COM', whether in that map the disputed land was earmarked, than how he has taken the distance as 3.1 Km. Further as per the certificate dated 19/05/2014 from Naib Tehsildar Dharuhera, the disputed land is just 2 acre away from village Malpura "ABADI DEH'. Hence we take it in any direction, it is more than 5 Km away from Tehsil Dharuhera. Further the distance given by Naib Tehsildar Dharuhera in his certificate dated 02-05-2014 to the Income Tax officer Sirsa was for the year 2014 and i.e from municipal limits of Dharuhera, where as the Dharuhera was became municipality only on 20-07-2007 and Limits of the municipality extended so many times from the year 2007 to year 2014 because of rapid urbanization/ industrialization of the area. From the above stated facts, your honour is requested to kindly delete the additions made on this ground as agriculture land sold was not a capital asset as per the provisions of Sec 2(14)(iii) of the I T Act 1961 as the same was beyond 5 Km from the Limits of-Tehl Dharuhera (as at the time of sale of the said land Tehl Dharuhera was not a Municipality and the-same was a Gram Panchat) as required as per Notification No 9447 dated 06-01-1994 of the I T
ITA No.900/CHD/2014 A.Y.2007-08 6
Act 1961, without going into the validity of the said notification, further the said land was also used for agriculture.
I have considered both the views of the AO and the appellant as submitted before me. The appellant filed additional evidence which was sent to the AO for his comments and report. The appellant filed a Copy of Certificate of Nayab Tesildar stating distance of 5.4 Km of Village Malpura from Tehsil Dharuhera, Distt. Rewari, and also a copy of Haryana Government Notification No 18/2/2007- 3CI dated 5th April 2007 stating that Dharuhera became a municipality only on 20th July 2007. The AO in his remand report has only commented that the distance of 5.4 Km is of Village Malpura from Tehsil Dharuhera and not the distance of disputed land from Dharuhera. The AO also stated in his remand report that the distance of the disputed land from -the Municipality of Dharuhera is 1/2 Km and from the Office of the Municipal committee Dharuhera 1-1/2 Km. as per the report called from the Tehsildar Dharuhera dated 06-05-2014 where in the Tehsildar has also stated that Municipal committee Dharuhera was established in 2007. The appellant submitted that the as per information received under RTI Act 2005, the report submitted to Income Tax Officer Sirsa was for the year 2014 instead of the year 2006-07 and also filed a certificate from the Naib Tehsildar Dharuhera. The appellant also filed a certificate from the Naib Tehsildar Dharuhera stating that the distance of disputed land from village Malpura 'ABADI DEH' is 2 Acres. From the above stated facts it is apparent that the Municipal Committee Dharuhera was established on 20-07-2007 where as the disputed Land was sold on 28-11-2006, hence the report of Tehsildar dated 06-05-2014 has no relevance. Further as per the certificate from the Naib Tehsildar Dharuhera dated 19/05/2014 filed by the appellant and place on record, the distance of disputed land from village Malpura 'ABADI DEH' is 2 Acres. Hence at the time of sale of the disputed land i.e on 28-11-2006 the distance was more than 5 Km from the Limits of Tehl Dharuhera as required vide notification No 9447 dated 06 January 1994 and the same was not a capital asset as per the provisions of Sec 2(14)(iii) of the I T Act 1961.
In view of the above, the addition is deleted and this ground of appeal is allowed.
4.2 This finding is being challenged by the Revenue before this Tribunal. The AO has filed an application for permission to adduce additional evidence vide letter dated 04.04.2025. The ld. AO wants to place on record copies of the following letters : A.Y.2007-08 7 To The Register Hon'ble Income Tax Appellate Tribunal, Kendariya Sadan, Sector-9, Chandigarh Sir, Sub.: Application for admitting additional/new evidence alongwih Affidavit in the case of Shri Mahabir Singh in A.Y. 2007-08- Regarding- Kindly refer to the subject cited above.
It is submitted that the appellant i.e ITO, Ward-1, Sirsa is filing application to admit new/ additional evidence in the case of Shri Mahabir Singh in for the A.Y. 2007-08. The following documents as additional evidence/ new evidence are enclosed herewith alongwith Affidavit. i) Documents received from the Secretary, Municipal Council, Dharuhera submitted its report vide letter no. MCD/2024/1892 dated 05.12.2024 is enclosed. ii) Documents / information received from District town Planner, Rewari vide its report vide memo No. 7080 dated 16.12.2024 is enclosed. iii) Documents / information received from the Naib Tehsildar, Dharuhera submitted its report vide letter No. 1978 dated 13.12.2024 iv) Notification dated 27.02.1978 submitted by the District town planner, Rewari. v) Report of Sh. Ghanshyam, Inspector of Income Tax, O/o Income Tax Officer, Ward-1, Sirsa dated 10.12.2025 vi) Affidavit in respect of additional evidence/ new evidence. It is therefore respectfully prayed that in view of the facts and circumstances and additional evidence submitted in shape of report and letter received from Municipal Committee, Dharuhera, Naib Tehsildar, Municipal Committed, Rewari and Distt. Town and Country Planner, Rewari the additional / new evidence may kindly be accepted. Yours faithfully, Sd/- (Rohtas Singh) ITO, Ward-1, Sirsa 4.3 Copies of these documents are being placed in the Paper Book running into 50 pages. The ld. CIT DR has submitted that the land in dispute which was sold by the assessee was not an agricultural land on the date of sale, hence, Short Term Capital Gain deserves to be assessed in the hands of the assessee. On the other hand, ld. counsel for the assessee A.Y.2007-08 8 relied upon the order of ld.CIT (Appeals). He has pointed out to us Certificate of Tehsildar issued in response to the letter of ITO Ward-3, Sirsa, though this letter was also issued in the year 2015.
We have duly considered the rival contentions and gone through the record carefully. Rule 29 of the ITAT Rules, 1963 empowers the Tribunal for entertaining additional evidence. Therefore, we deem it appropriate to take note of this Rule, which reads as under :
[Production of additional evidence before the Tribunal.
The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.] 5.1 A perusal of the above Rule would indicate that it contemplates that parties to the appeal shall not be entitled to produce additional evidence either orally or documentary before the Tribunal. It means the parties at their own end cannot produce additional evidence before the Tribunal but if Tribunal felt necessity for certain documents, for deciding the A.Y.2007-08 9 appeal justifiably, then it can permit the partis to produce additional evidence.
5.2 It is pertinent to note that in the Scheme of Income Tax Act, no appeal has been provided in favour of the Revenue against the assessment order. The statutory appeal has only been provided to an assessee because AO was not only an executing authority but a Judicial Officer also. He has to prosecute as well as adjudicate the issue of determination of income.
5.3 Apart from the above, Section 251 sub-clause (2) empowers the Commissioner of Income Tax (Appeals) in the capacity of First Appellate Authority to enhance an assessment or a penalty or reduce the amount of refund admissible to an assessee. Thus, under this clause, a CIT (Appeals) can exercise co-terminus power to that of the AO. Therefore, no separate statutory appeal is being provided in favour of the revenue. Thus, Revenue cannot strengthen the assessment order by producing additional evidence which has been collected even subsequent to the assessment proceedings. One can appreciate that an additional evidence A.Y.2007-08 10 can be produced which was on the file of the AO but not dealt with by him. In exceptional circumstances, Tribunal can entertain additional evidence, even on the asking of the Revenue. There is no absolute bar on the powers of the Tribunal to take additional evidence on the request of revenue but it is a question of prudence. As a general rule of practice, it is unsafe to provide a second round of opportunity to the revenue for strengthening its assessment, even in the circumstances where no such appeal has been provided in favour of the revenue against an assessment order. Thus, principally, we are not inclined to entertain this additional evidence filed by the revenue and the application of the AO in this regard deserves to be rejected. However, for the sake of argument and considering the nature of litigation pending in the Tribunal for such a long period, we deem it appropriate to have a glance over the material sought to be produced before the Tribunal because the litigation may travel to the higher appellate authority.
5.4 The first document put in service is a Notification dated 27.02.1978 and on the strength of this document, it has been A.Y.2007-08 11 submitted that this area was declared as a controlled area under Section 4 of Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963. It is pertinent to observe that by declaring a controlled area would not cease the existence of an agricultural land as agricultural land because it only restricts that agricultural land owners would not raise any construction which would create hinderance in a regulated development later on. It is only putting a restriction on the construction in an agricultural area but the land owners can continue with their agriculture activity. But if they want to change the character of the land, then a Change of Land User Certificate is to be obtained from a Competent Authority. Thus, this document is neither here nor there for furthering the case of the Revenue.
5.5 The second document put in service is on account of a Notification dated 25.04.2006 vide which Dharuhera has been declared as an urban area by the Town & Country Planning Department. It is pertinent to note that land of the assessee was situated within the revenue estate of Malpura, not in Dharuhera. As observed by the CIT (Appeals), Dharuhera was A.Y.2007-08 12 not declared as a Municipality on 28.11.2006 when assessee has sold his agricultural land. At this stage, before adverting to the next document, we would like to make a reference of Section 2(14) of the Income Tax Act. A perusal of this Section would reveal that it provides definition of ‘Capital Asset’ and if a ‘capital asset’ is being transferred u/s 2(47), then gain arisen on such transfer of capital asset would be taxable in the hands of the owner of the capital asset. However, perusal of sub-clause (3) of Section 2(14) would reveal that;
(a) Agricultural land would not be construed as a capital asset unless it is comprising within the jurisdiction of a Municipal Corporation cantonment area which has population of not less than 10000; (b) In any area within the distance measured aerially, namely ; (i) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (ii)not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (iii)not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.
5.6 The case of the assessee was that it was an agricultural land which was situated beyond 5 kms. from Dharuhera. At A.Y.2007-08 13 that point of time, population of Dharuhera must not be more than one lakh.
5.7 The next document put in service by the Revenue is a letter written by District Town Planner, Rewari dated 16.12.2024. This letter was written in response to some query sought by the Income Tax Department. A perusal of this letter would indicate that in the Final Development Plan 2021, this area was covered under Sector 9 of Dharuhera Industrial Area. However, in 1978, it was only a controlled area. Thus, as on 28.11.2006, it was not part of industrial area. It has been included later on. It was only a controlled area wherein status of agricultural land was not changed. It has been further provided that change of land user was taken regarding this land bearing Rectangle Khasra No. 48/11, 12/1, 20/1 on 10.11.2008 by the vendee of the assessee. Thus, this letter do indicate that prior to obtaining the change of land user, it was an agricultural land and the vendee of the assessee has obtained a change of land user in 2008. Therefore, this letter is of no use.
A.Y.2007-08 14 5.8 The next document is also a certificate vide which change of the land user of agricultural land was given on 10.11.2008. Thus, documents are of no use for deciding the status of agricultural land as on 28.11.2006.
5.9 The Revenue has also placed on record copy of a Notification dated 20.07.2007 vide which area of Municipal Committee, Dharuhera in Rewari District has been notified but this Notification came on 20.07.2007 whereas land was sold on 28.11.2006. Therefore, this document is of no use for demonstrating the fact that this land ceases to be an agricultural land.
On due consideration of all these documents, we are of the view that ld.CIT (Appeals) has decided the issue in right perspective and no interference is called for. The finding of the CIT (Appeals) on first fold of issue is affirmed.
In the next ground of appeal, grievance of the Revenue is that ld.CIT (Appeals) has deleted the addition of Rs.5 lacs which was added by the AO on an estimated agriculture A.Y.2007-08 15 income. The ld.CIT (Appeals) has observed that agricultural land was in the name of HUF, hence it cannot be assessed in the hands of individual. Contrary to this finding, no evidence has been produced by the Revenue nor any document has been raised specifically. Therefore, we do not find any error in the finding of the ld.CIT (Appeals). This fold of grievance of the Revenue is also rejected.
In the result, we do not find any merit in this appeal of the Revenue. It is dismissed. Order pronounced on 25.09.2025.