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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
ORDER
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is against order dated 13.12.2024 of Learned Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 (hereinafter referred as “the Act”) arising out of Order dated 24.10.2016 of the Learned Assessing Officer/Income Tax Officer, Ward-1, Delhi (hereinafter referred as “the Ld. AO”) under Sections 143(3)/147 of the Act for assessment year 2013-14.
Brief facts of the case are that notice under Section 148 of the Act was issued after obtaining approval and recording reasons to the assessee on 21.03.2016. Assessee filed her return of income on 11.07.2016 declaring interest income of Rs.7200/-. In the return, assessee neither showed details or income from capital gain nor any kind of exemption under Section 54 of the Act. Notice under Section 143(2) and 142(1) of the Act along with questionnaire were issued. Learned counsel for the assessee appeared and filed reply. On completion of proceedings, Ld. AO vide order dated 24.10.2016 made addition of Rs.53,81,757/-.
Against order dated 24.10.2016 of Ld. AO, the appellant/assessee preferred appeal before the Ld. CIT(A) which was dismissed vide order dated 13.12.2024.
4. Being aggrieved, the appellant/assessee preferred present appeal with following Grounds of Appeal:
1. That the agricultural land sold by the appellant situated at Village "Garhi Alawalpur", District Rewari and is within
5. KMs of the present Municipality "Dharuhera" which has not been mentioned in the notification No. [SO 9447] (File No. 164/3/87-ITA.I)], dated 6-1-1994 consequence to the provisions of Section 2(14) of the Income Tax Act, 1961. Hence, the land which is situated at Garhi Alawalpur cannot be treated as the capital asset, ergo the proceeds are not liable to tax under the head "Long Term Capital Gains" considering in view of the decision delivered by jurisdictional Honorable ITAT, Delhi Bench in case of Sh.
Amar Singh Vs ITO, Rewari, ITA.No. 115/Del./2019 vide Order Dated 25.04.2023 (para 17 to 19) 2. That on the facts and in the circumstances of the case and in law, Ld Ao erred in assumption of jurisdiction U/s 147/148 of the Act on the basis of non-existent section deleted w.e.f. 01.04.1989 and also mechanical approval of Ld. Addl. CIT, Rewari Range, which made reopening proceedings absolutely illegal, void ab initio and needs to be quashed.
3. That the Ld. CIT(A) has erred in law and on facts in passing exparte order without properly serving the hearing notice thereby not providing proper opportunities to the appellant in her case and also not followed principles of natural justice and equity.
4. That the appellant craves, leave to add, modify and / or delete any of the ground of appeal at the time of hearing of appeal, if deemed necessary, in the interest of justice and equity”.
5. Appellant/assessee submitted that the assessee had sold immoveable property on 11.02.2013 as a co-sharer. Hon’ble Income Tax Appellate Tribunal, Delhi in titled as “Amar Singh, Rewari Vs. ITO, Ward-1, Rewari” regarding the sale deed granted relief to the co-sharer.
6. Learned Authorized Representative for the Department of Revenue relied on orders of departmental authorities.
7. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. CIT(A) in order dated 13.12.2024 confirmed the addition of Rs.53,81,751/- made by Ld. AO vide order dated 24.10.2016. Ld. AO had made addition on the basis of assessee sold immoveable property valued at Rs.3,75,28,125/- on 11.02.2013 as a co-sharer. A Co-ordinate Bench of the Income Tax Appellate Tribunal, Delhi in case of co-sharer in titled as “Amar Singh, Rewari Vs. ITO, Ward-1, Rewari” on 25.04.2023 in para nos. 3 to 21, reproduced below: 3. Notice u/s 148 was issued by ITO, Ward-3, Rewari on 26.3.2014 after recording reasons that the assessee has sold immovable property valued at Rs.5,96,62,500/- on 11.02.2013. In response to the query letter dated 07.07.2015, the assessee has furnished his reply alongwith copy of sale deed. The sale deed reveal that the assessee has sold land for Rs.7,18,03,125/- vide sale deed No.2137 dated 21.03.2013 situated at Garhi Alawalpur, Teh- Dharuhera, Rewari wherein the assessee has ½ share. The share of sale consideration of the assessee works out to Rs.3,59,01,592/-.
As the land is situated within 5 KMs from the municipality limits of Dharuhera Municipality, the Assessing Officer treated it is a capital asset chargeable to tax u/s 2(14) of the IT Act, 1961. The A.O completed the assessment u/s 143(3) of the IT Act, 1961 determining income of Rs.3,59,20,152/- on account of Long Term Capital Gain. The AO has also denied exemption claimed u/s 54B & 54F of the IT Act, 1961 as the assessee had not been able to substantiate the purchase of agricultural land subsequent to the said sale.
During the appellate proceedings, the appellant has filed an application u/r 46A of the IT Rules, 1962 for admission of additional evidence with stating that: “(1) The land sold by the Assessee comes under the local municipality of Dharuhera and Dharuhera having population 30,344 according to last preceding census 2011. Hence, distance of land will be calculated within 2 KM from the local municipality i.e. Dharuhera. (2) Deductions u/s 54B & 54F w.r.t. re-investment in Agriculture land and construction of residential house out of sale proceed from agriculture land. The same were not given before the A.O. during the assessment proceedings.”
Thereafter, considering that assessee is an agriculturist and in view of principles & natural justice, the evidence given by the assessee was sent to the assessing officer and the AO was asked for give comments.
The A.O. in the remand report submitted that, “(1) The question of census or situation of land within the municipal limits or distance within 2 KMs is wrong and mistaken. Perhaps the pleadings of the assessee are based upon the amended provisions of section 2(14)(iii)(b) according to which the land situated beyond a distance of municipal limits of a town having population up to one lakh is not a capital asset. This amended section has come into effect from 01.04.2014 i.e. from A.Y. 2014-15. This case of the assessee relates to F.Y. 2012-13 i.e. A.Y. 2013-14 and this amended section is not applicable in the case of the assessee. (2) As per the provision of section 54B and 54F, amount not utilized for the purchase of new asset up to the date of filing of return u/s 139, should have been, deposited in bank in capital gain account scheme. The assessee has not filed return of income within the time prescribed u/s 139 of IT Act. Return was filed only on 11.07.2016 in response to notice u/s 148 of IT Act. Thus, the assessee is not entitled for deduction claimed u/s 54B & 54F beyond the amount limit of Rs. 66,39,450/- (Rs.15,00,000 + Rs.51,39,450).”
The assessee further submitted before the ld. CIT(A) that the assessee sold agricultural land at Vill.- Alawalpur, Teh- Dharuhera, Rewari dated 10.02.2013 (FY 12-13) and the AO has wrongly treated it as urban land and further the assessee has re- invested the sale proceeds in his wife and son’s name and hence no taxability arises. The ld. CIT(A) concluded that the land was situated within 5 KMs from Dharuhera notified area and the assessee’s contention that Dharuhera became Municipality in the year 2007 holds no ground. The ld. CIT(A) also held that the assessee failed to furnish documents of ownership of houses claimed to have been constructed by him nor proved that the amount of capital gains was invested in construction of house, hence no deduction u/s 54F of the Income Tax Act, 1961 is allowable. The ld. CIT(A) also held that the new agricultural land purportedly purchased from the sale proceeds of the agricultural land in question was in the name of assessee’s wife and sons who had no source of income. Thus, it appears to be a case of benami transaction. The ld. CIT(A) held that the land should be in the name of the assessee who has sold the property to make it eligible for deduction u/s 54B.
Aggrieved, the assessee filed appeal before us.
The ld. AR argued about the constitutional provisions relating to tax laws with specific reference to Article 245 dealing with extent of laws made by Parliament and by the Legislatures of States, Article 246 dealing with the subject matter of laws made by Parliament and by the Legislatures of States and Article 265 wherein it was declared that no tax shall be levied or collected except by authority of law. The ld. AR argued on the prior recommendation of the President required to bills effecting taxation in which States are interested as per the Article 274 and hence the income from sale of land cannot be taxed by the Union in the absence of specific provisions. The ld. AR also filed application under Rule 29 of ITAT Rules for admitting additional evidences wherein it was plead that the land is situated more than 22 KMs from the Municipality Rewari and there was no mention of Dharehera Municipality of District Rewari in the notification issued by the CBDT dated 06.01.1994. The arguments in writing of the ld. AR are as under: “2.4 The agricultural land being state subject was always outside the purview of any tax by central government and so the legislature brought notification only to include such land which have changed the nature of agriculture on account of proximity with the urban development. The notification was brought first time in 1973 and thereafter in 1994 on account of development of various cities and almost again about after 20 years notification was brought in 2014. Since the land was sold in the period 2012- 13 the notification dated 06.01.1994 was applicable which is enclosed as Annexure 2. From the perusal of the notification the relevant contents relating to Haryana are placed at S No. 9 in which internal S No. at 12 name of Municipal Committee of Daruhera District Mohindergarh was mentioned and apart from this at S No. 49 district Rewadi was mentioned and against both municipalities “Areas upto distance of 5 Km from the municipal committee in all direction” was mentioned. The Ld. AO while reopening the assessment in 2016 has merely looked into the word “Daruhera” and ignored District Mohindergarh and issued notice u/s 148 of the IT Act. This Daruhera Municipal Committee was situated in district Mohindergarh and not in Rewadi. The Land situated of the assessee in Tehsil “Dharuhera” but not “Daruhera” which is situated in district Rewadi but not in District Mohindergarh as provided in the notification.
2.5 It is necessary to submit that as per present situation also Dharuhera is about 20Kms from District Rewari. While Dharuhera is on the other side of district Rewari as compared to Mohindergarh which is on the other side. While Dharuhera is about 75Kms from District Mohindergarh. Copy of Google Maps are enclosed as Annexure A, B and C which were earlier also enclosed with the application dated 19.10.2022 filed on 20.10.2022 and for the sake of convenience again enclosed. 2.6 It is therefore humbly submitted that the Land sold by the assessee in village Garhi Alawalpur, Tehsil Dharuhera, District Rewari was outside the scope of agricultural land included in the notification because the same was more than 22 Kms from the Municipality Rewadi as provided in the Notification dated 06.01.1994 applicable in the present case. 2.7 It is humbly submitted that the Ld. AO has not appreciated the notification properly and adamant to treat Dharuhera of District Rewari in the notification which was never mentioned anywhere due to which assessee was unable to submit any evidence or google location. The Ld. CIT(A) also ignored that Dharuhera was not a Municipality in 1994 as it became Municipality in 2007 due to which assessee could not submit any certificate or evidence before the Lower Authorities. On the last date of hearing i.e., on 20.10.2022 along with the additional grounds of appeal google location was submitted in the enclosed Annexures A, B, C and maps clearly shown that Dharuhera was part of District Rewari and notification relates to Daruhera of District Mohindergarh while Dharuhera is part of District Rewadi and more than 20 kms from municipality of Rewadi provided in the notification. The Ld. DR sought time to examine this aspect and required time. During the course of argument it was also stated that certificate has already been obtained but could not reach today though the google location clearly clarify that the land in question is far from the limit provided in the notification. The Hon’ble Bench also provided us opportunity to submit the certificate. The matter was adjourned for 10.11.2022 but on that date Bench was not functioning and the matter is now fixed for hearing for today. It is humbly submitted that this certificate was required by the Hon’ble ITAT due to substantial cause and both the Lower authorities AO and CIT(A) were adamant to interpret the notification in the wrong direction due to which the Hon’ble ITAT asked the revenue on the last date of hearing who sought adjournment on 20.10.2022 and also to the assessee appellant for submitting this evidence from Tehsildar due to which it is humbly submitted such evidence may kindly be admitted under Rule 29 of ITAT Rules 1963. Copy of Certificate obtained from Tehsildar is enclosed as Annexure 3 for your kind perusal as an additional evidence obtained on 18.10.2022 as it is bringing the factual aspect relevant to the grounds of appeal though google location was already submitted and was appreciated by the Hon’ble Bench and the Ld. DR sought time to examine this aspect. It is therefore prayed that this certificate from Tehsildar may kindly be admitted. In the light of the notification and Google location this aspect of distance is very much evident in the present days. Submissions
3. It is humbly submitted that Agricultural Land was always outside the purview of central legislation which includes Income Tax Act and so agricultural income was never included as taxable under Income Tax Act. Central Government on account of urbanization found that nature of agricultural land has been changed due to urbanization or industrial development or any other similar reason by the notification includes such land under the scope of Income Tax Act from time to time. Thus the scope of Income Tax is extended only within the limits provided in the notification but not beyond the notification. In the present case notification dated 06.01.1994 applicable because the land was sold before the subsequent notification brought by the legislature. In this notification only area in all directions of distance of 5 Kms from the municipality of Rewadi could be under the scope of Income Tax Act but not beyond 5 Kms.
4. It may be appreciated that the land in question is more than 22Kms from the municipality of Rewadi as provided in the notification and so is outside the purview of the Income Tax Act. It is necessary to state that assessing officer while recording reasons noticed that notification issued by CBDT on 06.01.1994 is relevant and land in question is covered in the definition of capital asset but ignored that Dharuhera of District Rewadi was never included in the notification but Daruhera of District Mohindergarh was only included and in the notification wherever required name of District against each municipal committee was mentioned and there is no mentioning of Dharuhera which was since beginning was in the district Rewadi. Thus, it is humbly submitted that the Ld. AO is not empowered to bring on its own any land under the purview of Income Tax Act which was never brought by the legislature. The Agricultural land of the assessee is outside the definition of capital asset as provided u/s 2(14) of IT Act.
5. It is humbly submitted that reopening of the assessment made by the Ld. AO is bad in law as the land in question was outside the definition of capital asset and so assessment made is required to be quashed. The assessee being agriculturalist was not aware of tax laws and was not getting proper professional advice during assessment proceedings though the return of income was filed by him as per advice due to which this ground was never raised before the assessing officer. During the first appellate stage also there was a discussion the notification of 2014 by which the land in question was outside the purview of Income tax act on account of lower population but plea on the notification dated 06.01.94 was also raised and the Ld. CIT(A) at para 3.2.1 has disposed of the plea. It is therefore humbly requested that the relevant para 3.2.1 may kindly be brought into your kind notice where the Ld. CIT(A) despite noticing that Dharuhera became Municipality in 2007 only did not accept the argument merely because CBDT notification dated 06.01.1994. The Ld. CIT(A) ignored that the legislature has not included Dharuhera of District Rewadi but included only Daruhera of District Mohindergarh which has no*' relevance with the land of the assessee situated in district Rewari Tehsil Dharuhera which was not a municipality in 1994 due to which it was not included in the notification.
6. It is humbly submitted that that the additional grounds 7 and 8 raised are purely legal by which both reopening of assessment and addition made are challenged being bad in law. It is necessary to bring factual aspects into your kind notice by which land in question is outside the scope of Income Tax Act as the same was not capital asset as per notification dated 06.01.1994 which was understood incorrectly by both the lower authorities due to which ground No. 7 challenging the reassessment proceeding is raised and so reassessment proceeding may kindly be held to be bad in law by admitting this ground.
7. That the ground no. 8 is again highlighting the legal ground that addition made is bad in law as the land in question is not a capital asset as explained above the factual aspect which is clearly evident from the google location as well as certificate from Tehsildar that the land in question is more than 22Kms from the Municipality Rewadi as mentioned at S no. 49.
8. It is necessary to bring into your kind notice decision of Jurisdictional High Court i.e., Hon’ble High Court of P&H in the case of CIT Vs. Lai Singh reported in 195taxmann 420 (2010) in which it was held that certificate from Tehsildar correctly relied upon by the Ld. CIT(A) and it cannot be discarded. This decision was subsequently followed by Delhi High Court in CIT vs Vijay Singh Kadan reported in 63 taxmann.com 22 (2015). Subsequently Hon’ble ITAT Chandigarh Bench in the case of Bhupender Singh and Others also held similarly and held that certificate of land revenue authorities is very much relevant and deleted the addition. Similar view has been expressed by Hon’ble ITAT Kolkata bench reported in 106 taxmann.com 191 (2019) in the case of Naiyer Sultan Vs. ITO Kolkata in which assessment u/s 147 was challenged and the Hon’ble Bench held that such assessment are liable to be cancelled being bad in law. Copy of all these decisions in the separate PB filed on 20.10.2022 at Pages 1 to 7, 8-14,15-20 and 21-33 respectively.”
The ld. DR submitted that the Village-Ghari, Alawalpur is to 2.3 KM from the Municipal limit of Dharuhera and hence it should be considered as a capital asset. He has submitted the google map depicting the distance. Further, he relied on the orders of the ld. CIT(A) in support of his arguments.
Heard the arguments of both the parties and perused the material available on record.
The issue before us is twofold, a. Whether the land sold is a capital asset as per the provisions of the Act applicable to the A.Y. 2013-14? b. (1) If so, whether the assessee is eligible for deduction u/s 54F or not? (2) If so, whether the assessee is eligible for deduction u/s 54B or not? 14. The provisions relating to taxability of the receipts on agriculture land are as under: Section 2 (14) “(14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include— (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; [(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes— (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. Explanation.—For the purposes of this sub-clause, "jewellery" includes— (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;] [(iii) agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette47;]”
In accordance with the provisions of Section 2(14), the notification dated 06.01.1994 has been issued wherein the Municipalities and Cantonment Boards have been notified. The said notification is reproduced as under: INCOME-TAX ACT, 1961: NOTIFICATION UNDER SECTION 2(1A)(C), PROVISO, CLAUSE (II)(B) AND SECTION 2(14)(III)(B) : URBANISATION OF AREAS Notification No. [SO 9447] (File No. 164/3/87-ITA.I)], dated 6-1-1994 Whereas a draft notification was published by the Central Government in exercise of the 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 Income-tax Act, 1961 (43 of 1961), in the Gazette of India, Extraordinary, Part II, section 3, subsection (ii), dated February 13, 1991, under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. S.O. 91(E), dated February 8, 1991, for specifying certain areas for the purposes of the said clauses and objections and suggestions were invited from the public within a period of 45 days from the date the copies of the Gazette of India containing such notification became available to the public; And whereas copies of the said Gazette were made available to the public on February 13, 1991; And whereas the objections and suggestions received from the public on the said draft notification have been considered by the Central Government; Now, therefore, in exercise of the powers conferred by item (B) of clause (ii) of the proviso to sub-clause (c) of clause (1A) and item (b) of subclause (iii) of clause (14) of section 2 of the Income-tax Act, 1961 (43 of 1961), and in supersession of the notification of the Government of India i n the erstwhile Ministry of Finance (Department of Revenue and Insurance) No. S.O. 77(E), dated February 6, 1973, the Central Government having regard to the extent of, and scope for urbanization of the areas concerned and other relevant considerations, 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 purposes of the above mentioned provision of the Income-tax Act, 1961 (43 of 1961). ……………………………………………………………..
2. This notification shall have effect on and from the date of its publication in the Official Gazette. Explanation 1. (1) In this notification, “Municipality” shall mean any areas which is comprised within the jurisdiction of a municipality, (whether known as a municipality, municipal corporation, notified areas committee, town areas committee, town committee or by any other name) which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year. (2) The reference to municipal limits or the limit of Cantonment Board in the schedule to this notification is to the limits as existing on the date on which the limits as existing on the date on which the notification is published in the Official Gazette.”
On going through the notification, we find that in the State of Haryana mentioned at Serial No. 9 in the Column 1, the Municipality of “Daruhera” of District Mohindergarh has been mentioned at Serial No. 12 in Column 3.
The land in question is undisputedly situated in the village “Garhi Alawalpur” situated in the District Rewari which is within 5 KMs of the present Municipality “Dharuhera”. We find that this Municipality has not been mentioned in the said notification. The Revenue could not bring to our notice any other notification issued wherein the Municipality “Dharuhera” situated in District Rewari is mentioned for the purpose of provisions of Section 2(14) of the Income Tax Act, 1961.
Further, we have also gone through the details from the Government of Haryana with regard to Municipalities situated in the District Rewari and we find that the District Rewari has three Municipalities namely, Dharuhera, Bawal and Rewari as notified Municipalities as on today (Annexure-A). We have also gone through the Municipalities situated in District “Mahendragarh” (which was typed as “Mohindergarh” in the said notification) (Annexure-B). The Municipalities are Ateli, Kanina, Nangal Choudhary, Narnaul and Mahendragarh. We have also gone through the entire list of Municipal Committees/Municipal Counsel in the State of Haryana and we could not find “Daruhera” as notified Municipal Committee in the District Mahendragarh (Annexure-C). We have gone further to verify whether there is any village/municipality by name “Daruhera” in the entire district of Mahendragarh from the Government of Haryana public document (Annexure-D). We could find none. We have also gone through the list of PIOs as per the Directorate of Urban Local Bodies to verify whether any local body in the name of “Daruhera” (Annexure-E). We could find none. Hence, we 18 Amar Singh apprehend that an error might have crept in the notification dated 06.01.1994. The concerned authorities may look into this issue. Since, the Tribunal cannot venture to alter/modify the notification, the issue is being adjudicated as per the notification in force.
On going through the entire facts, it can be held that “Dharuhera” of District Rewari do not find place in the notification issued consequence to the provisions of Section 2(14) of the Income Tax Act, 1961. Hence, the land which is situated at Garhi Alawalpur cannot be treated as the capital asset, ergo the proceeds are not liable to tax under the head “Long Term Capital Gains”.
We are conscious of the fact that the amendment in the said Section has been brought w.e.f. 01.04.2014 and the land in question before us was sold on 21.03.2013 pertaining to A.Y. 2013-14. Hence, the provisions applicable to that period has been taken into consideration. Since, the proceeds cannot be treated as taxable in the hands of assessee any adjudication on the issue of deduction u/s 54F and u/s 54B becomes only academic in nature and hence not resorted to.
In the result, the appeal of the assessee is allowed” 8. In view of above material facts, respectfully following the judicial precedents, it is held that the addition made by the Ld. AO vide order dated 24.10.2016 being illegal is set aside. The ground of appeal
no.1 is allowed. For the findings on ground no.1, grounds of appeal nos. 2 to 4 have become academic in nature.