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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SMT.ANNAPURNA GUPTA & Ms.SUCHITRA KAMBLE
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, , , , राजकोट "यायपीठ, आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण "यायपीठ, "यायपीठ, राजकोट "यायपीठ, IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms.SUCHITRA KAMBLE, JUDICIAL MEMBER Assessment Year :2009-10 ITO, Ward-1(1)(1) Thakarshibhai Dayabhai Shingala Rajkot. Vs At : Mota Mava Kalavad Road Rajkot. (Applicant) (Responent) Assessee by : Shri Rashmin Vekariya, ld.AR Revenue by : Shri Ashish Kumar Pandey, Sr.DR सुनवाई क" तारीख/Date of Hearing : 29/11/2023 घोषणा क" तारीख /Date of Pronouncement: 30/11/2023 आदेश आदेश/O R D E R आदेश आदेश PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the Revenue against the order passed by the ld.Commissioner of Income Tax (Appeals)-1, Rajkot (in short referred to as ld.CIT(A)), dated 17.7.2015 pertaining to Assessment Year 2009-10 under section 250(6) of the Income Tax Act, 1961 ("the Act" for short).
This is a recalled matter. The Tribunal vide order dated 18.1.2023 passed in MA No.43/RJT/2019 recalled the earlier order passed dismissing the Revenues appeal on account of low tax effect involved as per CBDT Instruction No.3 of 2018, accepting the contention of the Revenue that the case fell within the exception to 2 the application of the circular, provided in para-10(3) of the said circular, wherein the Department had accepted the Revenue audit objection on the issue on which reopening was resorted to u/s 147 of the Act. Accordingly, the appeal of the Revenue has come up before us for hearing afresh. Thus, we proceed to dispose of the appeal of the Revenue on merit.
The grounds raised by the Revenue are as under:
1. The ld.CIT(A) erred in law as well as on facts in directing to delete the addition of Rs.55,82,780/- made by the AO on account of capital gain on sale of common plot & internal road land.
The facts relating to the case are that the assessee is a farmer. He had converted his agricultural land situated at Revenue Survey No.140/2, Mota Mava, Rajkot into non-agriculture land. Upon conversion out of total area of agricultural land measuring 8094 sq. meters, plot area measuring 5302.61 sq.meters was allotted and rest land measuring 2791.39 sq.meters was reserved towards common plot & internal roads. The assessee sold all plot area of 5302.61 sq.meters to a common purchaser by way of executing separate sale deeds and offered capital gain on sale of all the plots in the return ofincome filed. In assessment framed u/s 143(3) of the Act r.w.s 147 of the Act, the AO held that since the assessee had sold entire plots measuring 5302.61 to a common party, the land reserved for common plot and internal roads should also be treated as sold with plot area. He, therefore, estimated fair market value of common plot and internal roads land at Rs.55,82,780/- and made addition of the same to the total income of the assessee as income from capital gain.
This action of the AO was challenged before the ld.CIT(A) by the assessee contending that on conversion of his agricultural land 3 to non agricultural, he was divested from ownership of land identified for common plot and for approach road as per Rules for seeking approval from the town planning department. He pointed out that for conversion of land user purposes, he had to submit a lay out plan of land pointing out common plot whose possession was to be handed to the concerned municipality, approach roads from which one could approach the concerned plots and plot area which could be developed and constructed; that as per the rule of Town Planning Division, as also laws of the land, only plotted area could be sold by the assessee, since that was only what could be developed and constructed by the assessee. That once the lay out plan was approved, the assessee’s right to common road as well as approach road was released and the assessee remained owner only of the plotted area. The assessee submitted development permission granted to it by the Rajkot Urban Development Authority pointing out specifically the clause mentioned thereon, stating that the common land and road land cannot be transferred by way of auction, gift, sale etc. by any direct or indirect manner and the same shouldbe keptopen forever; and the clause stating that ownership of the common plots and roads would be jointly of all the plot owners, and there would not be any right of the owner over the said land. He stated therefore to the ld.CIT(A) that the assessee had no right to sell common plots and approach roads nor did he do so. He drew attention to the sale agreement, pointing out that it was only plotted area which was sold by him. He also contended that the AO had not brought on record any sale deed for the sale of common plots or the approach road nor had pointed out or proved any consideration being passed to the assessee on account of the sale of such reserved land. 4
The ld.CIT(A) agreed with the contention of the assessee and deleted the addition made by the AO by estimating fair market value of the common land and internal roads. His finding in this regard at para 5.3 to 5.8 of the order are as under:
“5.3 I have perused the assessment order and the written submission filed by the Id. AR in this regard. It is seen from, the assessment order that the AO is of the opinion that the appellant has sold the land of common plot & internal road along with plot area, reason being the common purchaser and common seller.
5.4 During the course of appellate proceedings the appellant furnished copy of Development Permission issued by the Rajkot Urban Development Authority [RUDA] being local authority for approving the Development permission. On perusal of the condition it is seen that the conversion was subject to the ire ion that owner being the appellant has no right to transfer the Common lot land and internal roads land and c4n only sell the plot area. Besides the appellant also furnished copy of order of Deputy Collector, Stamp Duty Valuation Cell, Rajkot (Rural) Division-2. On perusal of the order it is seen that the appellant had given his resignation for deduction of land pertaining to Common Plot & internal roads, which was accepted by Shri Mota Mava Gram Panchayat and deducted that portion of land from the account of appellant.
5.5 Further the AO has not brought any evidence on record to support his contention of sale of common plot & internal roads land. The action of the AO of taxing the common plot & internal roads Hand seems to be only on presumption or suspicion.
5.6 The AO has made addition by estimating the Fair Market Value being the value adopted by the Stamp Duty Authority for collection of stamp duty. The appellant has offered capital gain on sale of plots consideration of which was i accepted at the time of registration of sale deeds. Further as the stamp duty authority itself has dismissed the appeal of the Auditor General for collection of stamp duty on portion of common plot & |road area of land, then the question of taxing the same notionally does not arise. The appellant has furnished all the evidences, which very well prove that he did not have any right to sell the common plot & internal roads land admeasuring 2791.39 Sq. Mtrs. There is no hesitation in believing the explanation of the appellant.
5.7 In the light of above findings, I j find that the appellant has not sold common plot & internal roads land rather he did not have even right to sell common plot & internal roads land.
5.8 In view of the above, it is held that, no addition on account of notional capital gain on sale of common plot & internal roads land remains in the hands of appellant. The addition made of Rs.55,82,780/- is therefore directed to be deleted. In the result, the appellant's appeal is allowed on this ground.” 5
Against this order of the ld.CIT(A), the Revenue has come in appeal before us.
We have gone through the orders of the authorities below, and have also heard both the parties.
The claim of the Revenue is that the assessee has not shown any consideration received on sale of common plot area as well as approach roads having sold all the plots to one buyer. Accordingly, addition on account of sale consideration on the alleged sale of common plot area as well as approach roads has been made to the income of the assessee by estimating fair market value of such land.
We have carefully gone through the order of the Ld.CIT(A) and have noted that he has deleted the addition noting certain pertinent facts to the effect that the assessee neither could have sold these lands having surrendered ownership over this land ,nor did he actually sell them.
He noted from the development permission granted to the assessee by Rajkot Urban Development Authority for conversion of the agricultural land to non-agriculture land, that the assessee was not owner of these pieces of land since the permission granted specified and was subject to the condition that the assessee would have no right of ownership on the common plot and the internal roads, and that, his ownership was only vis-à-vis plotted area.
The Ld.CIT(A) noted that the assessee, as consequence of this condition in the permission granted to it by RUDA ,had submitted his resignation to Gram Panchayat from the ownership of the land 6 pertaining to the common plot or and approach roads, which was accepted by the Gram Panchayat; The Ld.CIT(A) also noted the fact that no evidence was brought on record by the AO to prove that the assessee had sold common plot and internal roadsand he noted that the stamp duty valuation authority itself had dismissed the appeal of the Auditor General for collection of stamp duty on the portion of common plot and approach roads of the land.
All the above findings of facts have been remained uncontroverted before us by the ld.DR. Therefore, the facts itself demonstrate that the assessee had no ownership over common plots and internal roads, and therefore, there was no question of assessee selling the same to anybody. Coupled with the fact that the act of the Revenue was based merely on presumption that the assessee had not reflected the sale of the total area of land owned by it, we have no hesitation in confirming the order of the ld.CIT(A), deleting the addition made on alleged sale of common land and approach road amounting to Rs.55,82,780/-.
In view of the above discussion, we do not find any merit in the grounds of the appeal of the Revenue, and they are accordingly dismissed.