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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SMT. P. MADHAVI DEVI & SHRI JASON P BOAZShri K.Mallikarjuna,
This appeal by the assessee is against the order of the CIT, Gulbarga, dated 03/01/2014 u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] for assessment year 2009-10.
Brief facts of the case are that the assessee-individual, who is engaged in the business of chemical and fertilizer
Shri K.Mallikarjuna Page 2 of 5 dealership, filed his return of income for the relevant assessment year declaring a loss of Rs.77,350/-. The Assessing Officer (AO) accepted the return filed by the assessee in the assessment proceedings u/s 143(3) of the Income-tax Act, 1961 ['the Act']. Thereafter, the Commissioner of Income-tax [‘CIT’], on perusal of the assessment record came to the conclusion that the assessee’s contention that his agricultural land was acquired by the State Government and the compensation of Rs.78,81,250/- is exempt u/s 10(37) of the Act, is not correct and that the AO has failed to verify the said contention, which has resulted in the assessment order to be erroneous and prejudicial to the interests of revenue. Thereafter, he issued notice u/s 263 and proceeded to consider the assessee’s contention in response to the said notice and set aside the assessment order with a direction to the AO to frame fresh assessment in accordance with law after verification of details and necessary opportunity of being heard given to the assessee. Aggrieved by this order of the CIT u/s 263, assessee is in appeal before us.
The learned counsel for the assessee submitted that though the CIT issued notice u/s 263 with regard to the claim of the assessee of exemption u/s 10(37) of the Act only, he proceeded to consider the claim of the assessee for exemption from the capital gains u/s 54 of the Act and had directed the AO to reframe the assessment which is in violation of the principles of natural justice. Even with regard to the assessee’s claim of Shri K.Mallikarjuna Page 3 of 5 exemption u/s 10(37) he submitted that the CIT has failed to consider the facts in proper perspective and has proceeded to assume that the land of the assessee was not acquired by the State Government but has been transferred voluntarily by the assessee. He has filed before us copy of the proceedings of the meeting on 02/12/2008 before the District Collector, Bellary to demonstrate that the land of the assessee was transferred for the Bellary City Ashraya Scheme sponsored by the Central Government and the rate is fixed by the Government. Therefore, the conditions prescribed u/s 10(37) are satisfied. The learned Departmental Representative, however, opposed the contentions of the assessee and submitted that from the minutes of the meeting held by the District Collector, Bellary it is evident that the land was not acquired but was purchased by the District Collector at a particular rate and therefore it would not fall within the transaction specified u/s 10(37) of the Act.
Having regard to the rival contentions and the material on record, we find that it is undisputed that the assessee’s agricultural land was transferred to the Government of Karnataka under the Bellary City Ashraya Scheme. Section 10(37) of the Act reads as under:
“10(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where—
Shri K.Mallikarjuna Page 4 of 5 (i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2;
(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;
(iii)such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;
(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.
Explanation.—For the purposes of this clause, the expression "compensation or consideration" includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority;”
From a literal reading of clause (iii) above, it is seen that the transaction of transfer may either be by way of compulsory acquisition or transfer, the consideration for which is determined or approved by the Central Government or RBI. In the case before us whether the land is transferred under a scheme sponsored by the Central Government or by the State Government and whether the rate is fixed by the Government? is not verified by the CIT before revising the assessment order. Further, we also find that the issue of exemption u/s 54 was also not part of the show cause notice issued to the assessee u/s 263 of the Act. Therefore, it is clear that the principles of natural
Shri K.Mallikarjuna Page 5 of 5 justice have not been followed by the CIT while completing the proceedings u/s 263. In view of the same, we deem it fit and proper to remit the issue to the file of the CIT for re-consideration after giving the assessee a fair opportunity of hearing.
In the result, the assessee’s appeal is treated as allowed for statistical purposes.