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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Annapurna Gupta & Shri Siddhartha Nautiyal
Date of hearing : 21-06-2022 Date of pronouncement : 07-09-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad in Appeal no. CIT(A)-9/10325/DCIT(E)(HQ)/17-18 vide order dated 04/03/2019 passed for the assessment year 2010-11.
The assessee has raised the following grounds of appeal:-
Page No. 2 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO “1. The learned CIT(A) erred in law and on facts in confirming the addition amounting to Rs.50,51,000/-, being Long term capital gain from sale of Non-agriculture land, such addition is requested to be deleted.
2. The learned CIT(A) erred in law and on facts in confirming the addition amounting to Rs. 1,02,641/-, considering the Agricultural Income as other income, such addition is requested to be deleted. Your appellant prays for leave to add, to alter and/or to amend the above ground before the final hearing of the appeal.”
The brief facts of the case are that the assessee is an individual who sold his agricultural land on 22-04-2013 bearing survey number 462 of account number 459 at village Chandrala, district Gandhinagar for the total sale consideration of � 50,51,000/-. This land was an ancestral land and at the time of/prior to sale, the assessee converted the land-use to non- agricultural purposes. The assessee treated this land as agricultural land since he was of the opinion that such land does not come within the purview of a capital asset and therefore, he did not offer any capital gains tax on such sale of land. The case of the assessee was reopened under section 147 of the Act on 06-11-2017. The assessee filed return of income in response to notice under section 148 of the Act declaring the income on sale of such land as exempt and also claimed the agricultural income of � 1,02,641/- as exempt. Since the assessee has claimed sale of agricultural as exempt, he did not mention the cost of acquisition of such land in the return of income. In the assessment, the AO observed that the purchasers of the land have mentioned in the sale deed that this land is purchased for the purpose of construction of residential houses/flats. Thus, there was an intention of the assessee that he would not use the land for agricultural purposes. Moreover, the agricultural Page No. 3 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO income has not been substantiated by furnishing the copies of sale bills of the agricultural produce and no proof of incurring any expenses for getting the crops ready for selling in the market have been produced. Therefore, looking into the totality of facts, the AO disallowed assessee’s claim for exemption of capital gains on the ground that the land was admittedly non- agricultural at the time of sale. Further, since the assessee has not given any details of cost of acquisition and the date of acquisition by the forefathers, the acquisition of said land is taken at “Nil” in the hands of assessee. The long-term capital gains was thus worked out at � 50,51,000/- and the same was taxed in the hands of the assessee. In addition, the agricultural income of � 1,02,641/- which was claimed as exempt in the return of income, was taxed as “income from other sources”.
In appeal, Ld. CIT(Appeals) dismissed the assessee’s appeal on the ground that admittedly the land was converted into non-agricultural land for residential purposes on 04-02-2013 and the same was subsequently sold on 22-04-2013. Therefore, at the time of sale the land sold was not agricultural land. The Honourable Supreme Court in the case of Smt.SarifabibiMohd. Ibrahim v CIT 204 ITR 633 has held that when the land was not an agricultural land at the time of sale, then the income arising from its sale would not be exempt from capital gains tax. Further, the assessee has not filed any evidences in respect of land being agricultural land and being used as such during the relevant period. While dismissing the appeal of the assessee, Ld. CIT(Appeals) made the following observations:
Page No. 4 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO
“From a perusal of the assessment order and the submissions filed, it is seen that the appellant had sold land for a consideration of Rs.50,51,000/- on 22/04/2013. The said land had been converted into NA land for residential purposes on 04/02/2013. Therefore, on the date of sale, it is very clear that the land sold was NA land. The relevant period in this case is FY 2013-14 i.e. 01/04/2013 to 22/04/2013. During this period, the land sold was not agricultural land. Therefore, the case law relied on by the appellant does not come to his help. Moreover, it is also seen that no details or evidences have been furnished in respect of land being agricultural land and being used as such during the relevant period by the appellant.
The Hon'ble Supreme Court in the case of Smt Sarifabibi Mohmed Ibrahim vs CIT 204 ITR 633 has clearly held that when the land was not an agricultural land at the time of its sale, then the income arising from its sale would not be exempt from capital gains tax. The appellant has tried to distinguish the case law relied upon and the decision of Smt. Sarifabibi Mohmed Ibrahim relied upon by the AO. However, these are not relevant in view of the basic fact that the said land was not agricultural land at the time of its sale and during the year under consideration. Therefore, the appellant's arguments in respect of the distance between the land and the closest municipal corporation or the fact that no construction activity had started on the land on the date of sale, do not hold any merit.
In view of the detailed discussion above, I am of the considered opinion that as the said land was not an agricultural land and had been converted into NA land in the year prior to the year of sale itself, the same cannot be claimed as exempt by the appellant and was correctly held liable for capital gains tax by the AO. In view of the same, the addition of Rs.50,51,000/- is confirmed. As regards the claim of the appellant that the AO had erred in law by taking the cost of acquisition as nil, as the appellant has failed to provide the relevant details in this regard even during the course of remand proceedings as well as the appellate proceedings, I am constrained to uphold the decision of the assessing officer. Thus, this ground of appeal is also rejected.
Page No. 5 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO
Ground of appeal nos. 1 & 2 are confirmed.”
5. Before us, the counsel for the assessee reiterated the arguments made before Ld. CIT(Appeals) in appeal proceedings. The counsel for the assessee submitted that the Ld. CIT(Appeals) has erred in facts and in law in not allowing the cost of acquisition while computing capital gains tax, which is mandatorily allowable in terms of section 48 of the Act. The assessee drew our attention to page 119 of the paper book containing the valuation report regarding the cost of acquisition, and submitted that the Ld. CIT(Appeals) in his appeal order has not dealt with the observations made by the Assessing Officer in his remand report, with respect to the valuation report submitted by the assessee. Accordingly, the counsel for the assessee submitted that the matter may be set-aside to allow the assessee the benefit of cost of acquisition for computing capital gains tax. In response, the Ld. DR relied upon the observations made by the Ld. CIT(Appeals) in the appellate order.
We have heard the rival contentions and perused the material on record. Regarding the first ground of the assessee in which assessee challenged the additions amounting to � 50.51 lakhs being long-term capital from sale of non-agricultural land, we observe that the honourable Supreme Court in the case of Smt. SarifabibiMohd. Ibrahim v CIT 204 ITR 631 (SC) has held that when the land was not an agricultural land at the time of sale, then the income arising from its sale would not be exempt from capital gains tax. In this case, on 28-3-1958 a portion of said plot was converted to non-agricultural purposes but remaining extent continued to be registered as Page No. 6 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO agricultural land in revenue records. On 15-3-1967 assessees agreed to sell remaining part of land to a housing co-operative society. They applied for permission under section 63 of Bombay Tenancy and Agricultural Lands Act, 1948 which was granted on 22-4-1969.The SC held that that the said land was non- agricultural land at time when it was sold to housing society and therefore income arising from sale of said land was chargeable to capital gains tax. Further, the assessee has also produced before us copy of the Ahmedabad ITAT decision the case of Shaileshbhai v ITO in ITA number 581/Ahmedabad/2019, wherein it was held that that merely showing the land as agricultural land in the revenue records is not decisive factor to hold that the land is an agricultural land especially after considering the future use of the land which is for non-agricultural purposes. Since at the time of transfer, the land was not an agricultural land and the same was transferred for the purpose of residential project, the assessee is not entitled for claiming that the land is agricultural land so as to get out of the purview of provision of capital gains tax. In the present facts of the case, we observe that the land was converted into non-agricultural for the purpose of sale and therefore at the time of sale, the land was non-agricultural land. In view of the decision of the honourable Supreme Court referred to above in the case of Smt. Sarifabibi Mohd. Ibrahim v CIT 204 ITR 631 (SC) and also the decision of the Ahmedabad ITAT in the case of Shaileshbhai v ITO in ITA number 581/Ahmedabad/2019, we are of the considered view that the Ld. CIT(Appeals) has not erred in facts and in law in disallowing the assessee’s claim of capital gains tax exemption on sale of the above land.
Page No. 7 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO 6.1 So far as the allowability of the cost of acquisition is concerned, Ahmedabad ITAT in the case of Shaileshbhai v ITO in ITA number 581/Ahmedabad/2019, held that the assessee is entitled deduction of cost of acquisition of the capital asset against the full value of consideration from the transfer of capital asset. The cost of acquisition cannot be treated as “Nil” merely on the reason that the assessee has not furnished any details for the same. In this regard, the relevant extracts of the judgement are quoted below for reference:
“The 2nd question comes for determining the cost of acquisition of the impugned land which was acquired by way of inheritance. The Income chargeable under the head "Capital gains" is calculated by deducting from full value of consideration received or accruing as a result of transfer: i. The cost at which the asset was acquired ii. The cost incurred subsequently on improvement of the capital asset.
10.1 The provisions of section 49(1) of the Act provides that where a capital asset becomes the property of the assessee by way inheritance, the cost to the previous owner shall be deemed to be the cost of acquisition to the assessee. From the above provisions, there remains no ambiguity to the fact that the assessee is very much entitled against the full value of consideration from the transfer of capital asset, the ceduction for the cost of acquisition of the capital asset. In other words, the same cannot be made nil merely on the reasoning that the assessee has not furnished any detail for the same. Admittedly, the primary onus lies upon the assessee to furnish the necessary details but in the event, the assessee fails to discharge the onus, it does not mean that the revenue can determine the income in arbitrarily manner. It is incumbent upon the revenue to calculate the income chargeable to tax in the manner provided under the statute. If the assessee failed to furnish the cost of acquisition, then the revenue was Page No. 8 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO empowered to find out the same by exercising the authority provided under the statute under the provisions of section 131/133 (6) of the Act. But we find that the revenue has not exercised such powers.”
6.2 Respectfully following the ratio of the above ruling and in the interests of justice, we are restoring the file to the Ld. CIT(Appeals) to adjudicate on the limited point of determining the cost of acquisition, keeping in view the evidence that the assessee may file in support of determining the cost of acquisition.
In the result, ground number 1 of the assessee’s appeal is partly allowed.
Ground number 2: addition of � 1,02,641/- considering agricultural income as income from other sources:
In respect of ground number 2, we observe that this issue was not dealt with by the Ld. CIT(Appeals) in the appellate order. In fact, apparently this point was not raised before Ld. CIT(Appeals) in appellate proceedings. In the interest of justice, we are restoring this issue before the Ld. CIT(Appeals) so as to enable the assessee to furnish any supporting documents in support of claim that it was engaged in sale of agricultural produce, duly supported by evidence showing receipt of income from sale of agricultural produce and details of expenses incurred for purpose of earning agricultural income.
In the result, Ground No. 2 of the assessee’s appeal is allowed for statistical purposes.
Page No. 9 Shri Sendhabhai Ranchhodbhai Chaudhary vs. ITO
In the combined result, the assessee’s appeal is partly allowed.
Order pronounced in the open court on 07-09-2022