INCOME TAX OFFICER 2(1), BHOPAL, BHOPAL vs. DEVI SINGH, BHOPAL
Facts
The assessee sold agricultural land for Rs. 4.25 Crore in AY 2010-11. The Assessing Officer (AO) treated the land as a 'capital asset' under Section 2(14) and assessed a long-term capital gain of Rs. 4.14 Crore, subsequently imposing a penalty under Section 271(1)(c). The CIT(A) reversed the AO's order, ruling that the land was rural agricultural land outside municipal limits at the time of sale.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that the land sold by the assessee was rural agricultural land at the time of sale (AY 2009-10) and thus did not fall under the definition of 'capital asset' as per Section 2(14). Consequently, the addition of long-term capital gain was deleted. As the underlying addition for capital gain was deleted, the penalty imposed under Section 271(1)(c) was also deleted.
Key Issues
1. Whether the agricultural land sold by the assessee constituted a 'capital asset' under Section 2(14) of the Income Tax Act, 1961. 2. Whether the long-term capital gain addition and penalty under Section 271(1)(c) were justified.
Sections Cited
144, 147, 142(1), 2(14), 271(1)(c), Rule 34 of ITAT Rules, 1963
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI B.M. BIYANI
आदेश/ O R D E R
Per B.M. Biyani, AM:
The captioned two appeals are filed by revenue. The details of appeals are as under:
(i) I.T.A. No. 20/Ind/2024 is a quantum-appeal directed against order of first appeal dated 21.11.2023 passed by Commissioner of Income- tax (Appeals), NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 21.03.2016 passed by ITO 2(2), Bhopal [“AO”] u/s 144 r.w.s. 147 of the Income-tax Act, 1961 [“Act”] for assessment year [“AY”] 2010-11.
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Devi Singh ITA Nos.20 & 201/Ind/2024 – A.Y. 2010-11 (ii) I.T.A. No. 201/Ind/2024 is a penalty-appeal directed against order
of first appeal dated 19.01.2024 passed by CIT(A) which in turn
arises out of penalty-order dated 29.09.2016 passed by AO u/s
271(1)(c) of the Act for AY 2010-11.
None appeared nor any adjournment application is filed on behalf of
assessee/respondent when the case is called, despite service of notices.
However, the Ld. DR is ready to represent the revenue/appellant. We,
therefore, proceeded to decide the appeal ex-parte qua the assessee/
respondent, on merit after considering the material available on record and
after hearing the Ld. DR.
Since these appeals are inter-related, they were heard together and
are being disposed of by this common order for the sake of convenience,
brevity and clarity. We first take up quantum-appeal and thereafter
penalty-appeal.
I.T.A. No. 20/Ind/2024 – Quantum-appeal:
The background facts leading to present appeal are such that the AO,
on the basis of information available in AIR indicating that the assessee
sold an immovable property i.e. an agricultural land situated at village –
Bhairopur, Patwari Halka No. 42/45, Rajaswa Nirikshak Mandal 04,
Vikashkhand Phands, Tehsil Huzur, District Bhopal for Rs. 4,25,00,000/-
on 13.11.2019 to M/s R.K. Aditya Developers Pvt. Ltd., which transaction
had escaped assessment, issued notice u/s 148 dated 20.03.2015 to
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Devi Singh ITA Nos.20 & 201/Ind/2024 – A.Y. 2010-11 assessee for assessment u/s 147. Subsequently, the AO also issued notices
u/s 142(1) to assessee from time to time but all notices u/s 148/142(1)
remained unreplied by assessee. Ultimately, the AO called a report from
Tehsildar regarding location of land and the Tehsildar, vide reply-letter
dated 04.03.2016, informed that the immovable property i.e. the
agricultural land sold by assessee was situated within the municipal limit.
Therefore, the AO treated assessee’s land as a “capital asset” u/s 2(14) and
assessed taxable long-term capital gain at Rs. 4,14,11,696/-. Aggrieved,
the assessee carried matter in first-appeal whereupon the CIT(A) reversed
AO’s action and granted full relief. Now, the revenue has come in next
appeal before us impugning the order passed by CIT(A).
The grounds raised in this appeal are as under:
"On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 4,14,11,696/- made on account of LTCG or transfer of land without appreciating the facts that the land so transferred was a Capital Asset within the meaning of section of the I.T. Act, 1961". 6. At first, we re-produce the impugned order passed by Ld. CIT(A)
reading as under:
“6.3:- I have duly examined and considered the facts of the case, findings of the AO contained in the assessment order, Remand Report received from the AO and the reply filed by the appellant along with documentary evidence during appellate proceedings. From the perusal of assessment order, it is seen that the case was reopened u/s 147 on the basis of credible AIR information that appellant has sold immovable property worth Rs. 42500000/- without quoting PAN in the registered deed executed on 13/11/2009. To M/s RK. Aditya (P) Ltd. The AO issued several notices and questionnaire during assessment proceedings seeking explanation with regard to sale of immovable property during the year under consideration. From the perusal of assessment order it is seen that despite providing several opportunity
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Devi Singh ITA Nos.20 & 201/Ind/2024 – A.Y. 2010-11 the appellant could not respond/ furnish any reply in response to notices issued. In this backgrounds and circumstances the AO resorted to best judgement assessment u/s 144 on the basis of information available on the record. During the assessment proceeding the AO noted that the appellant has sold agricultural land situated in gram Bhairopur, patwari blka No. 42/25, Rajasav Nirikshak Mandal 04, Vikas Khand-phands, Tehsil Huzur, district Bhopal, measuring 14.35 acres for Rs. 42500000/-through registered sale deed on 13.11.2009 to RK Aditya (P) Ltd, Bhopal. The AO has further noted that Tehsildar on his inquiry has informed vide letter dated 04.03.2016 that the said land is within the municipal limit. Thus based on Tehsildar report the AO has held that agricultural land sold is capital asset u/s 2(14) of the IT Act. Hence he has worked out Long term capital gain on the sold land amounting to Rs. 41411696 and has treated the same in his total income for the year under consideration. 6.4:- The appellant has strongly refuted the findings of the AO with regard to capital gain on agricultural land sold by him. During the appellate proceedings the appellate has furnished documentary evidence to support his claim that the agricultural land was not capital asset in terms with sec 2(14) of the IT Act. The appellant has explained that the land measuring 14.35 acres at village Bhairopur in tehsil Huzur is rural agricultural land which was sold 13.11.2009 as per sale deed furnished by him. The appellant has furnished the copies of registered sale deed and copies of census directory of Bhopal District for the year 2011. The appellant has argued that these documentary evidence clearly proves that the land sold by him is agricultural land during the year under consideration which is very much evident on the page No. 2 of the sale deed where in it is mentioned that the above sold land measuring 14.35 acre in village Bhairopur, patwari hlka no. 42/25, Rajasva Nirikshak mandal 04, Vikas Khand-phanda, Tehsil- Huzur is situated outside the boundary of Bhopal Nagar Nigam. From the perusal of the sale deed it is seen that the land sold by the appellant is agricultural land situated in village Bhairopur in District Bhopal. The appellant has argued that during the year when the land was sold, i. e. Year 2009-10 , the village Bhairopur was not part of the Bhopal Nagar Nigam which is very much evident from the census directory of Bhopal district (2011) wherein the village Bhairopur where land is situated is categorised as village code 48256 which is 16 Km away from Bhopal. The appellant has admitted that the village has come under municipal limit of Bhopal during year 2015-16. However the land was sold during year 2009-10 when the village was outside the municipal limit of Bhopal. Therefore the land sold is rural agricultural land, which is not falling under the definition of capital asset u/s 2(14) of the IT Act. The appellant has argued that the AO has made addition on the basis of wrong facts. Therefore addition
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Devi Singh ITA Nos.20 & 201/Ind/2024 – A.Y. 2010-11 made on account of capital gain to the tune of Rs. 41411496/- should be deleted 6.5:- On the proper appreciation and evaluation of the findings of the AO contained in the assessment order and reply of the appellant well supported by documentary evidences, It is seen that the AO e AO has made addition /s 144 on the ground that the immovable property sold by the appellant falls under cap he appellant falls under capital asset U/s 2(14) of the he Act. However AO has not pointed out or brought any facts on the record as to how the above sold land is capital asset. All the documentary evidence such as copy of sale deed and census directory of Bhopal District (2011) suggest otherwise. On the perusal of the sale deed it is seen that there is clear mentioned at page no. 2 that the agricultural land falls outside the municipal boundary of the Bhopal. Considering the totality of facts and relevant documentary evidence, I am inclined to accept the explanation of the appellant with regard to addition of capital gain. Accordingly AO is directed to delete the addition of Rs. 41411496/- made on account of Capital gain. Therefore, This ground of appeal is allowed.” 7. We have heard learned DR for revenue. After discussions and on a
careful consideration, we find that the Ld. CIT(A) has, in para 6.4 of
impugned order re-produced above, given a finding that the village-
Bhairopur in which the impugned land sold by assessee was situated, was
16 kms. outside the boundary of Bhopal Nagar Nigam (municipal
corporation) at the relevant time of sale by assessee. It is subsequently in
the year 2015-16 that the village – Bhairopur had come in the municipal
limit of Bhopal. The Ld. CIT(A) has taken cognizance of the evidences filed
by assessee and thereafter arrived at such a finding and finally concluded
that the land sold by assessee was not falling under the definition of
“capital asset” u/s 2(14). Hence, the order passed by CIT(A) is based on
proper appreciation of the evidences and material. No material or evidence
is produced before us by revenue to contradict the findings of fact recorded
by Ld. CIT(A). We accordingly do not find any justification to interfere with
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Devi Singh ITA Nos.20 & 201/Ind/2024 – A.Y. 2010-11 the impugned order of the Ld. CIT(A) in deleting the addition; the same is
hereby upheld and the revenue’s appeal is dismissed being devoid of any
merit.
I.T.A. No. 201/Ind/2024 – Penalty-appeal:
This appeal challenges the penalty of Rs. 82,82,340/- imposed by AO.
The penalty was imposed qua the capital gain of Rs. 4,14,11,696/-
assessed by AO in assessment-order. Since we have already dismissed
revenue’s quantum-appeal and upheld the CIT(A)’s order deleting the
addition of capital gain made by AO, the penalty u/s 271(1)(c) cannot
survive in absence of underlying addition. Hence, we also approve the order
passed by Ld. CIT(A) deleting the impugned penalty and the revenue’s
appeal is dismissed being devoid of any merit.
Resultantly, both of these appeals are dismissed.
Order pronounced by putting up on notice board as per Rule 34 of ITAT Rules, 1963 on 13/01/2026
Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore िदनांक/ Dated : 13/01/2026
Patel/Sr. PS
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Devi Singh ITA Nos.20 & 201/Ind/2024 – A.Y. 2010-11
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYSenior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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