AJAY BHATIA,NEW DELHI vs. ITO, WARD- 36(5), NEW DELHI

order dated 11.09.2017 of the Ld. Commissioner of Income Tax (Appeals)-12, New Delhi pertaining to assessment year 2013-14.

2.0 Brief facts of the case are that the assessee filed his return of income declaring total income of Rs. 2,70,370/-. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had earned capital gain on the sale of residential property, commercial property and agricultural land and had claimed deduction u/s 54 and 54F of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). On perusal of the sale agreement, the Assessing Officer observed that the agreement was made for sale of 85 kanals of land situated at Dharuhera whereas in the computation of capital gains, the assessee had shown that only 24 kanals of land as having been sold out of the total 85 kanals. On a query from the Assessing Officer, the assessee submitted before him that the deed of registration was executed only for 24 kanals as the balance land was acquired by the government and the amounts received from the purchaser for the balance land had been shown as advance in the books of the assessee. It was also submitted by the assessee that possession of land was only given with respect to 24 kanals of land as the notification under Land Acquisition Act was made much before the agreement for sale. The Assessing Officer made further inquiries from the purchaser M/s Vijay Logistics Pvt. Ltd. by issuing notice u/s 133(6) of the Act and in response to the notice u/s 133(6), the purchaser submitted that although the total area of land was 85 kanals, registered sale deed was executed only for 24 kanals because the balance 61 kanals was agricultural land. The Assessing Officer also observed that the compensation for acquisition amounting to Rs. 5,64,815,00/- was made to M/s Vijay Logistics Pvt. Ltd., thus, underlining the fact that the possession of land was with M/s Vijay Logistics Pvt. Ltd. The Assessing Officer proceeded to re-compute the capital gains by taking into account the sale consideration for the entire 85 kanals of land and computed the taxable capital gain at Rs. 1,69,56,192/-. The assessee’s appeal before the Ld. CIT (Appeals) was dismissed. Now, the assessee is before the ITAT and has challenged the action of the Ld. CIT (A) in upholding the computation of capital gains as made by the Assessing Officerby raising the following grounds:

“Learned A.O. as well as CIT(A) have erred in assessing the income of Rs. 1,69,56,192 as long term capital gain (As business income) and has confirmed the same in spite of the fact that there was no sale or transfer etc. of the land in question during the year under consideration, the land having been acquired by the Government by passing Notification u/s 4 of Acquisition Act on 13/05/2010 and u/s 6 on 12/05/2011; compensation for which was declared on 10/05/2013.

The land being agricultural land on which agricultural operations and crops used to be grown as per Patwari’s Certificate Farad Girdawari for Financial Year 2008- 09 & 2009-10. Consequently, it is not a capital asset and capital gain arising from its acquisition is exempt which has not been allowed by both the authorities.

Learned A.O. as well as CIT (A) have erred on facts as well as in law in holding that the possession of the land went to the purchaser who had paid the consideration for sale during the year under consideration but with passing of Notification u/s 6 the possession dejure passed on to Government and there cannot be transfer of land under acquisition to any other person except the Government. Consequently, there is no question of taxability of capital gain in the year under consideration.

Learned A.O. as well as CIT (A) have erred in not appreciating implication of acquisition and notification u/s 6 of Acquisition Act.

It is, prayed that it may kindly be ordered that no gain on alleged transfer of agricultural land accrued in the year under consideration and at any rate if it is held to have accrued, even then it is not taxable because no capital gain is chargeable to tax in respect of transfer of agricultural land.”

3.0 The Ld. AR submitted that there was no sale or transfer of the impugned 61 kanals of land as the land had been already acquired by the Government by passing Notification on 13.5.2010 whereas the agreement to sell was entered into on 10.10.2011. It was submitted after the notification, the possession de jure passed to the government and there could not have been any transfer of land which had been acquired by any other person except by the government and, therefore, there was no case of capital gain arising/accruing to the assessee with respect to the 61 kanals of land. The Ld. AR also emphasized that the agreement to sell does not mention passing of possession from the assessee to the buyer. The Ld. AR also submitted that the impugned 61 kanals of land was agricultural land and, therefore, the same would not fall under the definition of capital gains under the Income Tax Act for the purpose of computing the capital gains. He drew our attention to the Girdawari placed in the Paper Book to substantiate his argument.

4.0 In response, the Ld. Sr. DR placed reliance on the concurrent findings of both the lower authorities. The Ld. Sr. DR also submitted that a ‘Fact Finding Committee’ had been constituted to determine the nature of land but at the time of visit by the Fact Finding Committee, the impugned land was found to be vacant and, therefore, the assessee’s contention that the impugned land was agricultural land could not be substantiated.

The Ld. Sr. DR also submitted that it was beyond one’s imagination that a person would be giving advance for purchase of land which had already been acquired by the government.

5.0 We have heard the rival submissions and perused the material available on record. A perusal of the orders of both the lower authorities shows that the assessee could not substantiate with cogent evidence before them that the impugned land of 61 kanals was agricultural in nature so as to exclude the transaction from the purview of capital gains. We also note from the order of the Ld. CIT (A) that the only document submitted before him pertained to the crops cultivated on the impugned land but the assessee had failed to link them with the plot numbers transferred to the buyer. Thus, apparently, the assessee could not substantiate the claim with cogent evidence. On a query from the Bench, both the parties before us agreed that the interest of justice would be served if the issue is re-examined by the Ld. CIT (A). Accordingly, we deem it fit to restore this issue to the file of the Ld. CIT (A) with the direction to re-examine the issue and pass fresh orders after giving proper opportunity to the assessee to substantiate his claim regarding the impugned land being agricultural in nature. We also direct the assessee to appear before the Ld. CIT (A) when he is called upon to do so and furnish all the relevant documents without seeking any undue adjournment, failing which the Ld. CIT (A) will be at liberty to decide the issue ex parte qua the assessee in accordance with law.

6.0 In the result, the appeal of the assessee stands allowed for statistical purposes.

Order pronounced in the open court on 08.01.2019.