ITO 24(1)(2), MUMBAI vs. ANUSUYA R. GUPTA, MUMBAI

The learned CIT (A) erred in law and in circumstances of the case in not considering the fact that additional evidence should have been examined by the assessing officer as per Rules 46A(3) of I.T. Rules 1962, as the assessee had produced additional evidence during the appellate proceedings.”

Briefly stated facts are that the assessee owned agricultural land of 14.705 hectare at Bhoomidari arazi No.20,22,33 K. 177/1 Village Gonamau, Pargana Mourawan Tehsil & Distt. Unnao, Uttar Pradesh by way of inheritance. According to assessee, cultivations were carried out around 10 hectares of land and remaining was in water body. According to assessee she shifted to Mumbai in the year 1972 and ‘Kamdaars’ cultivated such land and give her share of cultivation. According to her, this land is disputed due to the fact that the same land was sold by ‘Kamdaars’ under forged documents and to buy peace, she settled with them and sold the land for a sum of ₹ 13.20 lakhs due to the fact being 322/Mum/2017 property under encroachment. According to assessee, the stamp duty valuation was at ₹ 70.65 lakhs. The assessee submitted the registered valuation report dated 06-12-2010 worked out the fair market value of the property as on the date to sale of ₹ 40,77,397/-. Before the AO, it was claimed that this is a capital asset in term of section 2(14) of the Act and hence, do not attract capital gains under section 48 read with section 50C of the Act. It was contended that this is agricultural land and assessee filed certificate from local authority i.e. from Pradhan of Gram Panchayat as well as Tehsildar office records. According to AO, on these copies of documents there is no stamp affixed or any signature on these papers and hence, these have no evidencary value. Accordingly, he assessed the sum of ₹ 70.65 lakh as sale consideration and added as long term capital gain. Aggrieved, assessee preferred the appeal before CIT(A), who after considering the submissions of the assessee and documentary evidences produced by assessee i.e. the certificate from Gram Panchayat and Tehsildar regarding cultivation on the land in question being carried out, consider the issue. The CIT(A) also found that the land is located one kilometer from the nearest road and is surrounded by other agricultural lands chakmarg and the village lake. According to him, the used of land in the registration paper is shown to be agriculture and assessee also produced apart from certificate from Tehsildar, the Khatauni and Khasara which reflects the name of crop shown in the field. The CIT(A) finally deleted the addition by observing in Para 5.1 and 5.2 as under: - “5.1 I have considered the comments of the AO in the assessment order and the arguments put forth by the appellant during the appellate proceedings. The AO while making the impugned addition held that the appellant has 322/Mum/2017 failed to prove that land sold has been used for agricultural purposes commenting that the claim of the appellant regarding the land is agricultural is not acceptable merely on the basis on the papers which are not stamped or signed by any government officials, therefore, he held that Capital Gain will be taxed in the hands of the appellant. On the other hand the appellant has contended that the land was under cultivation through the Kamdaars since 1972 and she was in receipt of money/grain through them. She has submitted the certificate from the Gram Pradhan and Tahsildar that the cultivation on the land in question was being carried She has also contended that the land was sold on the price less than the stamp duty value as part of the land was submerged under water and the persons cultivating the land on behalf of the appellant has sold some part of the land through forged documents in the year 2008. Since tne appellant was not in a position to fight with them at various legal forums, hence, she decided to sell the property on whatever price it could fetch 5.2 I have gone through the submissions of the appellant and the assessment order and also verified copies of certificates issued by Thesildar and Gram Pardhan by calling original documents during appellate proceedings. It is Observed that the AC received information from 322/Mum/2017 the Income tax Authorities, Kanpur about selling of immovable property by the appellant. On the basis of this information. AC has pointed out that the appellant has not offered the Capital gain in his Return of income, hence reopened the assessment proceedings u/s 147 of the Act During the assessment proceedings, me appellant submitted the relevant documents before the AO, however. the AO disputed the authenticity of the certificates produced before him by the appellant and added the sale proceed equivalent to the stamp duty and determined the same to be his Long Term Capital gain. I have perused the original and the photocopy of the certificates produced by the appellant during the appellate proceedings and did not find any discrepancy in the same. The AO also observed that the appellant has claimed that the land was under encroachment: hence the claim of the appellant that it was under cultivation cannot be accepted. I find that the AC has nowhere in the order disputed the location of the land in accordance with the provisions of section 2(14)(iii), hence, the only dispute before the appeal is the use of the land. On perusal of the details of the sale agreement it is found that the land is located at around one kilometer from the nearest road and is surrounded by other agriculture land, chakmarg and the village lake. The use of land in the 322/Mum/2017 registration paper is shown to be agricultural, the certificates issued by the Gram Pradhan (Village head) and Tehsildar along with the Khatauni and Khasara reflects the name of crop sown in the field. Hence, there is little doubt that utilize of land is agriculture. The AO has compared the nature of encroachment with the kind of encroachment found in the urban areas, here the encroachment bears to the land used by the Kamdaars for their own use but this does not change the nature of use as the Kamdaars are also known to be using the land under their possession for agriculture. The provisions of the Act does not insist on the agricultural activity to be carried out by the owner himself but only lays that the land use must be of agriculture, which is abundantly clear in this case. In view of this I hold that there is no dispute that the land is used for agricultural purposes hence, cannot be treated a capital asset in accordance to the provisions of section 2(14)(iü) of the Act and is exempted from the Capital Gains under the provisions of section 10(37) of the Act. Accordingly. I direct the AC to delete the addition made on this account and allow the grounds of appeal raised by the appellant.”

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has inherited 322/Mum/2017 agricultural land of 147.05 hectare at Bnoomidari arazi no. 20. 22. 33 K 17711 village Gonamau, Pargana Mourawan Tehsil & Distt lJnr.ao. Uttar Pradesh Cultivation work is still earned out on around 10 hectare area of such land and the remaining is in water body for irrigation. The assessee and her relatives were carrying cultivation activity and growing crops till the year 1972 and then shifted Mumbai The assessee allowed / given the land to Kamdaars to cultivate such land and remit money and grain after deducting their share for cultivation in the financial year 2007 - 2008, some of them have sold this property by means of forged documents. The assessee could not fight with them and sold such land for a consideration of Rs 13,20000/- due to being the property under encroachment while the stamp duty was paid by the buyer on the fair market value of Rs. 70,65.000/- at circle rate due to being near to the developed village road. The assessee stated during assessment proceeding that the impugned property is an agricultural land on that cultivation is still going on and hence the property falls u/s. 2(14)(iii) that excludes from capital assets as defined in section 2(14) of the Act, and therefore does not attract the section 48 or section 50C of Act, for the purpose of capital gain tax calculation. The assessee submitted sale agreement, letter from Pradhan of Gram Panchayat, certificate from Tehsildar office and valuation report of the said property from a government approved and registered valuers before the assessing officer during the assessment proceeding in support of the claim being the land as agricultural land falling under section 2(14) of the Act.

Now, we have to see whether this land falls in clause (b) of section 2(14)(iii) of the Act as this section prescribes that any area within such distance, not being more than 8 km, from the local limits of any Municipality or Cantonment Board as referred to in sub-clause (a) of section 2(14)(iii) of the Act, as the central government may having regard 322/Mum/2017 to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the official gazette. As referred by Ld. Counsel the latest notification that is Notification under section 2(1A)(c), proviso (ii)(B) and 2(14)(iii)(b), i.e. Notification No.9947[F. No.164/3/87-ITA-I] dated 6.1.1994 whereas a draft notification was published by central government in exercise of powers conferred by item B of clause (ii) of the proviso to sub-clause (c) of clause (1A), and item (b) of sub-clause (iii) of clause 14 of section 2 of the Act, in the Gazette of India, Extraordinary, Part II, Section3, subsection (ii), dated 13.2.1991 under the Notification of Govt. of India in the Ministry of Finance, Department of Revenue, No. SO 91(E) dated 8.2.1991, for specifying certain areas for the purpose of said clauses and objections and suggestions were invited from the public within a period of 45 days from the date of the copies of the Gazette of India containing notification became available to the public. Further, this was amended by Notification No. 11186 dated 28/12/1999 in exercise of powers conferred by item (B) of clause (ii) of the proviso to sub-clause (c) of clause (1A), and item (b) of sub-clause (iii) of clause 14 of section 2 of the Act, and in supersession of the notification of Govt. of India in the erstwhile Ministry of Finance, Department of Revenue, No. SO 77(E) dated 6.2.1973, the Central Government having regard to the extent of, and scope for urbanization of the areas concerned and other relevant consideration, hereby specifies the areas shown in column (4) of the Schedule hereto annexed and falling outside the local limits of municipality or cantonment board, as the case may be, shown in the corresponding entry in column (3) thereof and against the State or Union Territory shown in column (2) thereof for the purpose of the above mentioned provision of the Income-tax Act, 1961 (43 of 1961).

Coming to Assessee’s CO, which is on the issue of jurisdiction for reopening of assessment under section 147 r.w.s. 148 of the Act, since, we have adjudicated the issue on merits, we need not to go into the 322/Mum/2017 jurisdictional issue and hence, the CO of the assessee is infructuous and dismissed.

In the result, the appeal Revenue as well as CO of the assessee is dismissed.