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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 15/02/2010 of learned Commissioner of Income-tax (Appeals), Faridabad for assessment year 2007-08, raising following grounds: i. On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that the land under context, the impugned agricultural land is not treated to be a capital asset in terms of section 2(14)(iii) of the Income Tax Act, 1961 even through the assessee himself admitted that the ladn in question is a capital asset within the meaning of section 2(14) of the Income Tax Act, 1961, failing in a taxable area and that is why the assessee had claimed deduction u/s 54F, 54B of the Income Tax Act against the capital gain. ii. On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred on facts and in Rs.25,81,033/- in respect of addition made by the Assessing Officer on account of unexplained/undisclosed sources even though the assessee had failed to prove that the crops worth Rs.25,81,033/- were standing at the point of sale and to submit similar details in respect of the land purchased by him. iii. On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in deleting the addition of Rs.1,20,000/- made by the Assessing Officer on account of agricultural income disregarding the fact that the assessee had not given any details of total land holding during the year under consideration and particularly in view of the fact tht the assessee had sold his land in August 2006 by way of sale of crops in April and May 2006. iv. That the appellant craves for the permission to add, delete or amend the grounds of appeal
before or at the time of hearing of appeal.
2. The facts in brief of the case are that for the year under consideration, assessee filed return of income on 27/03/2008, declaring total income of Rs.18,444/- and agriculture income of Rs.9,92,700/-. The case was selected scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (for short “the Act”) was issued and complied with. In the course of scrutiny proceedings, the Assessing Officer observed that the assessee alongwith other co-owners sold agricultural and computed capital gain of Rs.99,52,800/- on the sale of part of agricultural land owned by him after reducing indexed cost of acquisition. Against the said capital gain, the assessee claimed deduction under section 54B of the Act amounting to Rs.78,49,630/- for purchase of agriculture land and deduction under section 54F of the Act amounting to Rs.21,70,000/- for purchase of residential house. The Assessing Officer completed the assessment under section 143(3) of the Act on 23/12/2009 at assessed income of Rs.1,20,47,780/- and agriculture income of Rs.1,20,000/-. The learned Commissioner of Income-tax (Appeals) partly allowed the appeal of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.
3. In ground No. 1, the Revenue has challenged the finding of the learned Commissioner of Income-tax (Appeals) that the impugned agriculture land sold by the assessee was not a capital asset in terms of section 2(14)(iii) of the Act. 3.1 The facts in brief in respect of the issue in dispute are that the assessee sold agricultural land along with other three co-owners of the land. The assessee shown sale consideration of Rs.1,45,20,000/- received and offered the same for capital gain in the return of income filed. The assessee took market value of the land as on 1/4/1981 at Rs.8,80,000/- and worked out the indexed cost of acquisition of the land at Rs.45,67,200/-. After subtracting the indexed cost of acquisition out of the sale consideration, the assessee computed capital gain of Rs.99,52,800/-. Against the capital gain computed, the assessee claimed deduction under section 54B of the Act amounting to Rs.78,49,630/- for purchase of agricultural lands of Rs.26,34,630/-and Rs.52,15,000/-. The assessee also claimed deduction under section 54F of the Act for purchase of residential house amounting to Rs.21,70,000/-. In view of the deduction claimed by the assessee being more than the capital gain computed, long-term capital gain was worked out at NIL in the return of income filed. 3.1.1 However, in the course of scrutiny proceedings, the assessee claimed that the agricultural land in question was not capital asset as it was located 10 kms from the Faridabad Municipal Corporation. The assessee also submitted a report from Patwari, according to which, the distance of the land in question was approximately 9 kms from the Faridabad Municipal Corporation. According to the assessee, the agricultural land in question was not capital asset liable for capital gain 8 km of limits of the Municipal Corporation and hence not liable for capital gain tax. 3.1.2 According to the Assessing Officer, the certificate of distance of the land in question could not be relied upon due to following reasons: 1. that according to the assessee, land was situated more than 10 km from Faridabad Municipal Corporation and according to the Patwari, the distance of the land was approximately 9 kms, so there was no certainty of distance of land in question from municipal corporation. 2. that neither the assessee nor the Patwari measured the exact distance of the land in question (a) from the outer limit of the Faridabad Municipal Corporation (b) on horizontal plane or straight-line method 3.1.3 The Assessing Officer concluded that assessee failed to discharge the burden of proof that land in question was more than 8 kms from the outer limits of Faridabad Municipal Corporation and no documents on the basis of which distance was measured were submitted before him. The Assessing Officer accordingly held the land in question is a capital asset liable for capital gain. 3.2 The issue whether the agricultural land in question was capital asset or not, the learned Commissioner of Income-tax (Appeals) decided in favour of the assessee. The Ld. Commissioner of Income-tax (Appeals) observed that first, the Assessing Officer had not challenged the certificate issued by the Patwari by affording any solid reasons for its rejection. Secondly, the distance was to be measured by shortest road and not by horizontal plane on straight-line method. 3.3 Before us, the Ld. Senior Departmental Representative submitted that the Assessing Officer rejected the certificate issued by the Patwari on two grounds. First ground was that the distance of 8 km was to be measured from the outer limits of the municipal Corporation and second it was to be measured by straight-line method on horizontal plane. According to the Departmental Representative, the learned Commissioner of Income-tax (Appeals) has accepted the contention of the assessee and certificate issued by the Patwari, without proper examination of the fact that distance of the land in question was to be measured from the outer limits of the Municipal Corporation. He prayed that to resolve the controversy, the Assessing Officer may be directed to verify the fact of distance of the land in question as per the provisions of section 2(14)(iii) of the Act. 3.4 The learned counsel of the assessee, on the other hand, relying on the order of the learned Commissioner of Income-tax (Appeals) submitted that the Assessing Officer has not given any reasons for rejection of the certificate issued by the Patwari and not brought on record any other evidence as the land in question was situated within 8 km from the outer limits of the municipal Corporation. He further submitted that distance of the land was to be measured from shortest road/route and not by straight-line method on horizontal plane. 3.5 We have heard the rival submission of the parties and perused the relevant record on the issue in dispute. According to the provisions of section 2(14)(iii) of the Act, in existence for relevant period, agricultural land in India, situated beyond the 8 kms from the local limit of any municipality or cantonments board was not to be included as a property for the purpose of definition of the capital asset. The relevant part of the section is reproduced as under: 2(14) capital asset means- (a) property of any kind held by the assessee, whether or not connected with his business or profession; (b) x -- x -------------x but does not include (i) x------------- x----- (ii) ------------------ (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of the municipality ( whether known as municipality, municipal Corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonments board and which has a population of not less than 10,000 according to the last preceding census offices the relevant figures have been published before the first day of previous year or (b) in any area within such distance, not being more than 8 kms from the local limits of any municipality or cantonments board referred to in item (a) is the Central government may having regard to the extent of, any scope for, urbanisation of that area and other relevant consideration specified in this behalf by notification in the official Gazette. 3.5.1 The part (iii) (b) of the section 2(14) of the Act has been amended w.e.f. 01/04/2014 as under: “2(14)(iii) agricultural land in India, not being land situate— (a) ………………………………………………………………… (b) in any area within the distance, measured aerially,— (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.” 3.5.2 On perusal of the above provisions of the Act, we find that w.e.f. 01/04/2014 the distance of the land in question from the local limit of the Municipal Corporation has to be measured aerially or by straight line distance method. But for the period before the said amendment i.e. for the relevant period no specific method has been prescribed but the Hon’ble courts and Tribunal have held that distance of the land in question is to be measured from the outer limits of the Municipal Corporation through a shortest road. 3.5.3 In the present case the Assessing Officer has made two observations in respect of the distance of the land. According to the first observation, the distance of the land in question was to be measured from the outer limits of the Municipal Corporation. The certificate issued by the Patwari was not produced before us by the parties. According to the second observation, the distance to be measured through straight- line method or aerially. In respect of second observations, the learned counsel has contended before us that method of measuring of distance through straight-line method or aerially was not in accordance with the judicial decisions on the issue. On this issue, we are agreed with the contention of the learned counsel of the assessee. The learned Commissioner of Income Tax (Appeals) has relied on the decision of the jurisdictional High Court in the case of CIT –II Vs. Satinderpal Singh in of 2009. The Tribunal Mumbai Bench in the case of Laukik Developers Vs. DCIT reported in 105 ITD 657 also held that distance of land is not to be measured by crow’s flight or straight line distance method and it should be measured by a shortest road from the outer limits of the municipal Corporation to the land in question.
3.5.4 As far as first observation of the Assessing Officer is considered, we are agreed that the distance of the land in question was to be measured from the outer limits of the Municipal Corporation. The certificate issued by the Patwari was not produced before us by the parties. We find from the facts on record before us that it is not clear whether distance of the land in question was measured from the outer limits of the Municipal Corporation. It is also not clear whether the distance measured by the Patwari was from the shortest road from the land in question. According to the Assessing Officer, the assessee initially in the return of income accepted the land in question as capital asset, however, could not substantiate the claim of deduction under section 54B and 54F of the Act and made a revised claim that land in question was not a capital asset, therefore, it was onus on the assessee to establish that land in question was not a capital asset. The Assessing Officer observed that the assessee did not discharge its burden of proof in this regard. We find that learned Commissioner of Income-tax (Appeals) has not examined this issue whether the distance of the land in question was measured from the outer limits of the Municipal Corporation through a shortest road. In this case, it is very essential to determine these facts, as the decision whether the land in question is capital asset or not, rest on these facts only. 3.5.5 In the circumstances, we feel it appropriate to restore the issue to the file of the Assessing Officer for verification of the fact that the during relevant period of sale of land, the land in question was situated beyond 8 kms from the outer limits from the Municipal Corporation of Faridabad by shortest road/route and decide the issue of land in question is a capital asset or not, in accordance with law. For the purpose of verification of distance of the land in question from the outer limits of the Municipal Corporation, at relevant time, the learned Assessing Officer, if Public Works Department engaged in constructing roads and may be directed to submit a report in the form of map of all possible roads through which the land in question could be approached from the outer limits of Municipal Corporation, indicating distance in Kms. It is needless to mention that assessee shall be afforded sufficient opportunity of hearing on the issue in dispute. Accordingly, the ground of the Revenue is allowed for statistical purpose.
In ground No. 2, the Revenue has raised the issue of addition of Rs.25,81,033/- made by the Assessing Officer on account of unexplained/undisclosed sources, which has been deleted by the learned Commissioner of Income-tax( Appeals). 4.1 The facts in respect of issue in dispute are that in the return of income, the assessee shown agriculture income of Rs.9,92,700/-. The Assessing Officer asked the assessee to substantiate the said income with documentary evidences. In response the assessee submitted that besides the agriculture income of Rs.9,92,700/-, he was also having agriculture income of Rs.15,88,333/-, which was not reported in the return of income. The assessee submitted that he received both these amounts by cheque from M/s. BPTP Ltd. against sale of agricultural crops and trees. The assessee submitted two receipts issued by M/s Shalimar Town Planners Private Limited, New Delhi. The Assessing Officer made enquiries from the said company. The company confirmed the purchase of land from the assessee as well as payment of Rs.15,88,333/- and Rs.9,92,708/- to the assessee but the company did not specify for what purpose the payments of Rs.15,83,333/- & Rs.9,92,708/- were made to the assessee. The Assessing Officer also collected report of the “Girdawari” i.e. crops details from Revenue authorities. The Assessing Officer further asked the assessee to submit details of agriculture income and details of gross sale of crops in past four years but the assessee submitted only copies of the “Jamabandi/Girdawari” report for the year under consideration. The Assessing Officer concluded that the assessee failed to prove that crops worth Rs.25,81,033/- were standing at the point-of-sale. The Assessing Officer also held that the assessee failed to submit details of crops in respect of land purchased by the assessee during the year under consideration. Accordingly, the Assessing Officer held the amount of Rs. 25,81,033/- as income of the assessee from other sources. The Assessing Officer made a separate addition for agriculture income of the assessee during the year till he sold the land at Rs.1,20,000/- 4.1.1 Before the learned Commissioner of Income-tax (Appeals), the assessee submitted confirmation from the company M/s. Shalimar Town Planners Private Limited regarding the fact that amount was paid for the standing crops, plants and trees. Relying on the confirmation of the company to whom the agriculture land was sold and the estimated addition of Rs.1,20,000/- from agriculture operation made by the Assessing Officer, the learner Commissioner of Income-tax (Appeals) deleted the addition and held the amount of Rs.25,80,033/-as in the nature of agriculture income. 4.2 Before us, the learned Senior Departmental Representative relying on the order of the Assessing Officer submitted that the assessee failed to justify the value of the standing crops and trees amounting to Rs.25,81,033/- with the documentary evidences. He further submitted that the assessee did not submit any evidence in respect of the amount of agriculture income from sale of crops in the earlier years, which could support the extent of agriculture income during the year. He further submitted that during the assessment proceeding before the Assessing Officer the company M/s. Shalimar Town Runners Private Limited only confirmed the fact of the payment but it was not explained whether the payment was towards sale of land or towards sale of crops/trees and only before the learned Commissioner of Income-tax (Appeals) the assessee filed confirmation from the said company that the amount was paid for standing crops, plants and trees. The learned Sr. Departmental Representative submitted that this being an additional evidence it should have been forwarded to the Assessing Officer for his comment and not providing opportunity to the Assessing Officer to rebut on this evidence, is a violation of Rule 46A of the Income Tax Rules, 1962 and denial of natural justice to the Assessing Officer. 4.3 On the other hand, the learned counsel of the assessee submitted that the assessee has discharged his burden of establishing whether the said income was agriculture income. He further submitted that even if the said payment were treated toward the sale of land, same being not the capital asset, the amount would not be liable for capital gain tax. 4.4 We have heard the rival submission of the parties and perused the relevant material on record. From the impugned order, it seems that the confirmation from the company M/s. Shalimar Town Planners Private Limited regarding the fact that amount was paid for standing crops, plants and trees etc. was filed for the first time before the learned Commissioner of Income-tax (Appeals). This fact was not disputed by the learned counsel of the assessee also before us. In our opinion, the learned Commissioner of Income-tax (Appeals) should have forwarded the said confirmation to the Assessing Officer following the Rule 46A of the Income Tax Rules, 1962. Before the Assessing Officer, the said company only confirmed the fact of payment but did not confirm whether the payment in question was toward purchase of crops, plant and trees or it was toward sale of land. The assessee also failed to justify the agricultural income earned in earlier years so as to give a broad idea of agricultural income of the assessee. In these circumstances, we feel it appropriate to restore the issue in dispute to the file of the Assessing Officer for deciding afresh after conducting necessary inquiry as deemed fit for deciding the issue in dispute. It is needless to mention that the assessee shall be afforded sufficient opportunity of hearing by the Assessing Officer to submit the necessary evidence in support of its claim. Accordingly, the ground of the appeal is allowed for statistical purpose.
In ground No. 3, the Revenue has contested the deletion of addition of Rs.1,20,000/-by the learned Commissioner of Income-tax (Appeals). 5.1 From the facts on record, we find that the agriculture income of Rs.25,81,033/- claimed by the assessee, was held by the Assessing Officer as income from other sources and he made separate addition of Rs.1,20,000/- towards agriculture income. Since the issue of amount of Rs.25,81,033/-, whether it is agriculture income or income from other sources has already been restored to the file of the Assessing Officer, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh as both the issue are interlinked. The assessee shall be afforded sufficient opportunity of hearing on the issue in dispute. Accordingly, the ground of appeal
is allowed for statistical purpose.
6. In the result, appeal of the Revenue is allowed for statistical purpose. The decision is pronounced in the open court on 28th February, 2017. Sd/- Sd/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28th February, 2017. RK/-(D.T.D)