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Facts
The deceased assessee, Shri Shankar Lal, sold agricultural land, and the AO treated Rs. 16,00,000 as taxable capital gain. His legal heir appealed, arguing the land was exempt and that the assessee had reinvested the proceeds. During the appeal, the assessee passed away, but the CIT(A) dismissed the appeal ex-parte without impleading all legal heirs or considering the submitted documents.
Held
The Tribunal set aside the ex-parte orders of both the AO and CIT(A). It directed the AO to implead all legal heirs and re-examine the taxability of the land sale, specifically whether the agricultural land constituted a "capital asset" under the Income Tax Act, and to verify the reinvestment claim.
Key Issues
Impleadment of all legal heirs of a deceased assessee; determination of whether agricultural land constitutes a "capital asset" for capital gains tax purposes; validity of ex-parte orders by lower authorities without due consideration of facts and legal heirs.
Sections Cited
159(2), 2(14)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH ,CHANDIGARH
Before: SHRI RAJPAL YADAV
PHYSICAL HEARING O R D E R
The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 30.03.2022 passed for assessment year 2012-13.
The notice of service issued to the assessee returned back. Ultimately it was sent with the help of Assessing Officer.
It emerges out from the record that Shri Shankar Lal S/o Shri Bastiram has expired on 12.07.2020 i.e. after passing of the assessment order. Smt. Sudershana Devi W/o Shri A.Y.2012-13 2 Shankar Lal has filed an affidavit pleading therein that she is the lawful Legal Heir of the deceased and therefore, she be impleaded as Legal Heir and be permitted to prosecute this appeal. She has also annexed affidavits of Shri Vipin Kumar, aged 30 years and Shri Uttam Kumar, aged 27 years, sons of late Shri Shankar Lal who have deposed that they have no objection if their mother would prosecute the litigation exclusively. They have also submitted that they have no objection if their mother represents the assets of the deceased assessee.
I have considered these affidavits and I am of the view that all the Legal Heirs deserve to be impleaded as party to the litigation. The simple reason is that u/s 159(2), whosoever Legal Heir has inherited the property of deceased, Shri Shankar Lal, then taxes could be recovered from those Legal Heirs of Shri Shankar Lal. For example, if both the sons have inherited the property from Late Shri Shankar Lal and I implead only Smt. Sudershana Devi, who did not inherit any property, then in case additions are confirmed, no taxes could be recovered from her and both the sons would raise an A.Y.2012-13 3 objection that they have not been given opportunity to defend themselves. Therefore, following Legal Heirs are impleaded : 1. Smt. Sudershana Devi, Wife of late Shri Shankar Lal 2. Shri Vipin Kumar, Son ( Aged 30 years) 3. Shri Uttam Kumar, Son (Aged 27 years)
Faced with the situation, I have gone through the record carefully with the help of ld. Sr.DR. A perusal of the statement of facts filed before me as well as before ld.CIT (Appeals) would reveal the following facts and circumstances : 1. That the appellant is the Legal heir and wife of the deceased assessee Late Sh. Shankar lal who was an individual residing in Village Kaimbwala, Chandigarh having Pan Card no.ABGPL9378P.
That the deceased assessee along with his co-sharers owned agricultural land situated at Village Bitna, Tehsil Kalka, District Panchkula, which was sold on 10.08.2011 for a total consideration of Rs. 1,08,00,000/-. The sale deed is also annexed.
That the deceased assessee was only a co-sharer to the extent of Rs. 16,00,000 in the said land and accordingly his share of consideration Rs. 16,00,000 was duly credited in his bank account. The Bank statement also annexed.
That the Learned Assessing Officer (AO), without appreciating the correct facts, treated the consideration of Rs. 16,00,000 as taxable capital gain and created a demand of Rs.8,80,627/- for A.Y.2012-2013. The assessment order is annexed herewith.
That the land sold was certified to be agricultural land by the Tehsildar, Zone Pinjore, Distt. Panchula and accordingly, falls outside the definition of "capital asset" under section 2(14) (iii) of the Income Tax Act, 1961. The Report of Tehsildar and Population Census is also annexed.
That further, on 29.03.2012, within 7 months of sale, the deceased assessee utilized the very same sale proceeds of Rs. 16,00,000/- (as A.Y.2012-13 4 reflected in his bank statement) towards the purchase of another agricultural land situated at Village Nangoli, Tehsil Naraingarh, District Ambala, in the joint names of his wife Smt. Sudarshaha Devi and his brother's wife Smt. Savitri Devi. The Purchase deed is also annexed.
That the deceased assessee contributed his share of consideration for the said purchase from the very sale proceeds received that he received by selling the land on which the Ld. AO wrongly levied tax demand of Rs. 8,80,627/-. The bank statement of the deceased assessee is also annexed which shows the receipt and withdrawal of said funds.
That the deceased assessee preferred the appeal against the assessment order within time before the CIT (A). But unfortunately, he died on 12.07.2020, during pendency of the appeal. The legal heir of the deceased, Uttam (Son of deceased) filed a set of documents along with information of the death of the original assessee on the portal before the Learned CIT (A) on 19.03.2022.
However the Ld. CIT (A) proceeded ex parte and passed an order dated 30th March 2022, dismissing the appeal without taking on record the documents filed by the legal heir of the deceased and afterwards neither the appellant (being deceased) nor his legal heirs were ever informed or made aware of the passing of the said order.The order of CIT (A) is annexed herewith and Death certificate of the Assessee is also annexed.
Both the orders of Revenue Authorities i.e. AO as well as CIT (Appeals) are ex-parte. A perusal of the above would indicate that according to the assessee, his share in the total land was only of Rs.16 lacs. This whole amount could not be added by the AO. He has to give credit of acquisition cost. The AO has to determine whether it actually falls within the ambit of capital asset or not mentioned in Section 2(14)(iii) of the Income Tax Act because it was a rural agricultural land and if it falls outside the municipal limit at a distance of more than 2 kms. of municipality having population not less than A.Y.2012-13 5 10000, then it will not fall in the definition of Capital Assets. All these aspects are required to be examined by the AO. The assessee has also pointed out that he has purchased agricultural land within 7 months of the sale. These facts are required to be collected.
After considering the totality of facts and circumstances, I deem it appropriate to set aside both the orders and restore this issue to the file of AO with the direction and ld. AO shall issue notice to all the Legal Heirs. The AO would also examine the claim of the assessee for purchase of agricultural land whose details have been placed in the Paper Book.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 02.02.2026. Sd/-