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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 23.04.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 31.12.2018 passed by learned ITO-5(2), Indore [“AO”] u/s 143(3) r.w.s. 147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2012-13, the assessee has filed this appeal.
The background facts leading to present appeal are as under:
(i) The assessee-individual filed her original return of income of AY 2012- 13 u/s 139 on 30.03.2013 declaring a total income of Rs. 3,50,327/-.
Rs. 68,11,461/- from three transactions of sale of 5 pieces of agricultural land [details mentioned in Para 10 of assessment-order] situated at two locations, namely (i) Village – Kapalyakhedi, and (ii)
Village – Palakhedi. The assessee, however, claimed exemption u/s 54B on the basis of investment in new agricultural land and offered taxable gain at Rs. Nil. The case of assessee was selected for scrutiny and the AO issued notices u/s 143(2)/142(1) which were complied by assessee. Ld. AR for assessee pointed out that during scrutiny- proceedings, the AO questioned assessee regarding the taxability of capital gain arising from sale of lands and in reply, the assessee filed submissions. Ld. AR referred Pages 25, 28, 29-30, 32, 35, 36-39, 42,
43-46, 48, 49 & 50 of Paper-Book to show the vehement queries raised by AO and replies/documents filed by assessee. Ld. AR demonstrated that the assessee not only filed details qua the eligibility and allowability of exemption u/s 54B but also made an alternative submission to the AO that the sold lands were situated beyond 8 kms. from municipal limit of Indore at the time of sale and hence shall not be considered as capital asset [Para No. 7 of assessee’s reply letter dated 01.09.2014 filed by assessee placed at Page No. 36-39 of Paper
Book; Para No. 1(b) of reply letter dated 05.11.2014 filed by assessee placed at Page No. 43-46 of Paper-Book; Second Para of reply letter filed by assessee placed at Page No. 48 of Paper-Book]. Further, vide
Page 2 of 18 filed 2 certificates, viz. (i) one dated 30.08.2014 of ‘Gram Panchayat, Sindhi Baroda, Janpad Indore’ for lands situated at ‘Village – Kapalyakhedi’, and (ii) other dated 18.02.2013 of ‘Gram Panchayat, Limbodagari, Tehsil Indore’ for lands situated at ‘Village – Palakhedi’.
Ultimately, after “considering papers and documents filed in response to queries raised, submissions made and the facts and circumstances of the case” [as noted by AO in assessment-order], the AO completed scrutiny-assessment u/s 143(3) vide assessment-order dated
25.02.2015 on total income of Rs. 4,04,660/- after making a disallowance of Rs. 54,331/- out of interest expenditure claimed by assessee. The AO, however, accepted taxable capital gain at Rs. Nil as declared by assessee.
(ii) Subsequently, following an audit objection in the case of assessee qua the wrong claim of exemption u/s 54B, the AO recorded reasons [copy of reasons at Page 3 of Paper-Book] and re-opened assessee’s case u/s 147 through a notice dated 29.03.2018 u/s 148. The objection raised by auditors was that the lands sold by assessee were not used for agricultural purposes during 2 years immediately preceding the date of transfer and therefore the assessee has not fulfilled essential condition prescribed in section 54B for allowability of exemption, hence the exemption was not allowable to assessee. In response to the aforesaid notice u/s 148, the assessee re-filed her return of income on Page 3 of 18 the AO issued notices u/s 143(2)/142(1) to assessee raising queries about the exemption u/s 54B. The assessee made submission which is re-produced by AO in Para 6 & 10 of assessment-order. In her submissions, the assessee also claimed before AO that the lands sold by her were not situated within the prescribed distance of 8 kilometers as per section 2(14)(iii)(b) and therefore the lands were excluded from the definition of ‘capital asset’ and the resultant capital gain was not taxable. However, the AO noted in Para 11 / bottom of Page 5 of assessment-order that the assessee did not submit any documentary evidence or confirmation letter of competent authority in support of her claim. Ultimately, the AO directly called information u/s 133(6) from respective Tehsildars of the lands, viz. (i) Tehsildar, Kampel for lands situated at Village - Kapalyakhedi and (ii) Tehsildar, Hatod for lands situated at Village - Palakhedi. In response, the ‘Tehsildar,
Kampel’ sent report vide letter dated 20.12.2018 but the Tehsildar,
Hatod did not respond [as noted by AO in assessment-order].
Ultimately, vide Paras 11.1 & 12 of assessment-order, the AO concluded that the assessee was not entitled to benefit of exclusion from ‘capital asset’ [although the AO has not mentioned relevant provision of law in assessment-order but the Ld. AR submitted that the AO meant to refer section 2(14)(iii)(b) of the Act] and therefore the resultant capital gain was taxable. Accordingly, the AO made addition
Page 4 of 18 at Village - Kapalyakhedi (+) Rs. 65,24,628/- from lands situated at Village – Palakhedi] and re-assessed total income at Rs. 71,61,203/- while completing re-opened assessment through order dated
31.12.2018.
(iii) Aggrieved, the assessee filed first appeal before CIT(A) and raised legal objections against the re-opening of assessment by AO u/s 147 as well as challenged the merit of addition made. However, the CIT(A) dismissed assessee’s appeal without granting any relief.
(iv) Still aggrieved, the assessee has come in next appeal before us.
The assessee has raised following effective grounds:
“1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the validity of the proceeding initiated by Ld. AO u/s 147 of the act which is illegal, without Jurisdiction and void ab initio. Therefore, the said proceedings may kindly be quashed.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in affirming the impugned addition made by Ld. AO of Rs. 67,56,545/-as short-term capital gain. The said addition being illegal and erroneous deserves to be deleted and may kindly be deleted in toto.
3. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in affirming the impugned addition made by Ld. AO treating the agricultural lands sold as capital asset without considering the fact that they were squarely falling under the ambit of Section 2(14)(iii) of the Income tax act.
On facts and circumstances of the case and in law, the Ld. CIT(A) erred in affirming the impugned addition made by the Ld. AO grossly ignoring the various details and documentary evidences on record.” Ground No. 2 to 4:
Page 5 of 18 the addition of Rs. 67,56,545/- made by AO.
At first, we re-produce the relevant portion of assessment-order passed by AO:
“11. Accordingly, assessee has not submitted any documentary evidence or confirmation letter of Competent Authority in regard to non-capital asset of her lands situated at Village Palakhedi, Tehsil Hatod.
Information received from Tehsildar, Kampel in regard to the land situated at village Kapalyakhedi: On 22.12.2018, a letter of Tehsildar, Kampel, Distt Indore was received in response to notice issued u/s 133(6) of the Act informing that the land of the assessee situated in village Kapalyakhedi is beyond the 13 K.M. of Chitawad, Indore, which was nearest place during the F.Y. 2011-12 of Municipal Corporation, Indore.
Page 6 of 18 Page 7 of 18 Page 8 of 18 by CIT(A):
“It reveals from the letter of Tahasildar, Kampel that he has sent information that "the land of the assessee situated in Kapalyakhedi, Tehsil Kampel bearing survey No. 50/2,50/3,50/5 and 50/6 is situated beyond 13 K.M. of previous Nagar Nigam limits Chitwad, Indore" Accordingly, the Tehsildar, Kampel has certified the information in respect of Indore Tehsil, because Chitwad falls under the Indore Tehsil, which is not related to Tehsil Kampel, whereas the matter is related to the Tehsil Kampel. Hence, in absence of proper clarification, the claim of the assessee in regard to non capital asset is not being considered and the amount of Rs. 2,31,917/-(after reducing loss of short term capital gain on sale of another land of village Kapalyakhedi) is being added to the Income of the assessee being from undisclosed capital gain. The addition of Rs. 2,31,917 is confirmed. The assessee objects to addition of Short Term Capital Gain of Rs. 65,24,628 in respect of sale of land situated at village Palakhedi. It reveals that assessee has claimed exempt income from short term capital gain of Rs. 65,24,628/ on selling of land situated at village Palakhedi, Tehsil Hatod during financial year 2011-12. Assessee was given many opportunities to furnish letter/certificate of Competent Authority in regard to confirmation of non-capital asset of land situated at Village Palakhedi, but after ample opportunities, she has not produced the desired information. Besides the above, a letter in this regard was also been sent to the Tehsildar, Tehsil Hatod. But, no any confirmation is received till the date of order. Accordingly, in interest of revenue, an amount of Rs. 65,24,628/ is being added to the income of the assessee being income from undisclosed short term capital gain for the A.Y. 2012-13. The addition of Rs. 65,24,628/- is confirmed. The assessment of total income at Rs.7161200 is confirmed. The appeal filed by the assessee is dismissed.”
Having heard learned Representatives of both sides and on a careful consideration of orders of lower-authorities as re-produced above and also the documents held in Paper-Book to which our attention has been drawn, we find that the CIT(A) has merely upheld AO’s order without giving his independent adjudication. So far the AO is concerned, he has observed in Para (11.1) of assessment-order (re-produced above) regarding the lands situated at ‘Village – Kapalyakhedi’ that the assessee’s land was situated in Page 9 of 18 Chitward, Indore Tehsil’. Therefore, ‘in absence of proper clarification, the claim of assessee in regard to non-capital asset is not being considered and the amount of Rs. 2,31,917/- … is being added …’. Further, he has observed in Para (12) of assessment-order (re-produced above) regarding the lands sitated at ‘Village – Palakhedi’ that “Assessee was given many opportunities to furnish letter/certificate of Competent Authority in regard to confirmation of non-capital asset of land situated at Village Palakhedi, but after sample opportunities, she has not produced the desired information. Beside the above, a letter in this regard was also been sent to the Tehsildar, Hatod. But, no any confirmation is received till the date of order. Accordingly, in the interest of revenue, an amount of Rs. 65,24,628/- is being added ….”. Thus, succinctly speaking, the AO has made additions in respect of both categories of lands citing the reason of lack of any evidence or confirmation letter qua the distance of impugned lands from municipality.
However, the Ld. AR for assessee has successfully demonstrated that the assessee filed a reply-letter on 24.04.2018 to AO during proceeding of re-assessment; the assessee’s letter is filed at Pages 4-5 of assessment-order and the same is scanned and re-produced below for an immediate reference:
Page 12 of 18 assessee made a categorical submission to AO that the sold lands were situated beyond 8 kms from Indore municipal limit and therefore do not fall in the definition of ‘capital asset’ and hence there shall be no question of capital gain on those lands. Further, the assessee also filed very same 2 certificates, viz. (i) one dated 30.08.2014 of ‘Gram Panchayat, Sindhi Baroda, Janpad Indore’ for lands situated at ‘Village – Kapalyakhedi’, and (ii) other dated 18.02.2013 of ‘Gram Panchayat, Limbodagari, Tehsil Indore’ for lands situated at ‘Village – Palakhedi’, which were already filed to AO during original scrutiny assessment proceedings [Refer earlier Para 2(i) of this order]. Those certificates are filed at Page 49-50 of Paper-Book and the same are also scanned and re-produced below for an immediate reference:
Page 15 of 18 assessee’s letter is duly acknowledged by seal of AO’s office. Thus, the adverse observation made by AO in Para 11 & 12 of assessment-order regarding non-filing of any documentary evidence or confirmation-letter is incorrect. Be that as it may, we may also mention that the assessee has also filed those very Certificates to AO during original scrutiny assessment- proceedings and the same would also be available in the departmental file.
Furthermore, in Para 11.1 of assessment-order, the AO is also wrong in linking the distance/location of land with ‘Tehsil’, the provision of section 2(14)(iii)(b) requires distance to be measured from nearest ‘Municipality’ which does not have any relation with Tehsil.
11. On further perusal of Certificates re-produced above, we find that the authorities of respective Gram Panchayats (where/within whose area the sold lands were situated) have certified that the assessee’s lands were situated at a distance of 10 Kms and 8 Kms. from Indore Municipal limit.
Thus, it is clearly discernible that the lands sold by assessee were not situated within the prescribed distance of 8 kms. from nearest Municipality in terms of section 2(14)(iii)(b). Faced with this situation, we hold that the assessee’s lands were excluded from the definition of ‘capital asset’ in terms of section 2(14)(iii) and therefore the resultant capital gain was not taxable.
Consequently, we direct the AO to delete the addition of Rs. 67,56,545/- madet. The Ground No. 2 to 4 raised by assessee are allowed.
Page 16 of 18 re-opening of assessee’s case is concerned i.e. the lands sold by assessee were not used for agricultural purpose in preceding 2 years before the date of transfer, the AO raised this issue in the reasons recorded but in assessment-order, the AO has not given any observation against assessee on this issue. Obviously, the AO has dropped this issue. Being so, we are not required to give any adjudication in so far as this issue is concerned.
Ground No. 1:
This is a legal ground in which the assessee has challenged legality of re-opening of assessee’s case u/s 147. Since we have already deleted the entire addition made by AO on merit in foregoing part of this order, there is no necessity to adjudicate Ground No. 1. Accordingly, we keep Ground No. 1 as open/unadjudicated at this stage.
Resultantly, this appeal is allowed.