INCOME TAX OFFICER 2(1), BHOPAL, BHOPAL vs. DEVI SINGH, BHOPAL

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).

"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

Page 3 of 7 & 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

Page 4 of 7 & 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 Page 5 of 7 & 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.

8. 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.

Order pronounced by putting up on notice board as per Rule 34 of ITAT Rules, 1963 on 13/01/2026