JAGUBHAI CHHAGNBHAI PATEL,SURAT vs. INCOME TAX OFFICER, WARD-2(1)(2), SURAT

Facts as extracted from the orders of the lower authorities are that the land of aforesaid individual assessee was acquired by Special Land Acquisition Officer, Surat for M/s Essar Steel Ltd. The Revenue / Assessing Officer made re-opening in this case under section 147 of the Income Tax Act, 1961 (in short, the Act). Assessment was completed under section 144 r.w.s. 147 of the Act in this case on 08/03/2013. The Assessing Officer while passing the assessment order made addition on account of Long Term Capital Gains (LTCG) on transfer of land, capital gain on the certain amount received for permanent (pacca) structure was treated as income from other sources and agriculture income shown by the assessee was treated as unexplained cash credit under section 68, therby making additions of Rs. 23,09,700/-. The assessing officer levied penalty under section 271(1)(c) on various additions. The Assessing officer levied penalty @100% of tax sought to be evaded. The assessing officer worked out penalty of Rs. 6,13,500/-. On appeal the Ld. CIT(A) upheld the action of assessing officer. Thus, further aggrieved the assessee has filed present appeal before this Tribunal.

We have heard the submissions of learned authorised representative (AR) of the assessee and the learned departmental representative (DR) for the revenue and have gone through the orders of the lower authorities. The ld Jagubhai Chhaganbhai Patel Vs ITO AR of the assessee submits that in all quantum assessment appeals of the Hazira land appeals/ cases either the additions has been deleted or in some cases the additions on accounts of capital gain for the receipt against the pucca structure has been sustained only on estimation basis. The penalty in lead case of Ambaben J Patel has also been deleted. Thus, the grounds of appeal

On further appeal before Tribunal, the Tribunal held that addition of capital gain on account of transfer of land/ acquisition of land is not taxable as the said land / impugned land is not ‘capital asset’ as defined under section 2(14)(iii)(a) of the Act. The land transferred by individual assessee(s) does not falls in the Municipal Area. Hazira Notified area is not a Municipal area or deemed municipal area, therefore, the receipt/ gain on transfer of land is not taxable under Income tax Act. Further, the assessee on their alternative pleas were also held eligible for exemption under section 10(37) of the Act as the land was compulsorily acquired by Government of Gujarat by completing statutory formalities under Land Acquisition Act, 1882. The land was used for agriculture purpose for two years prior to its acquisition. And the assessee(s) fulfilled all the requisite condition for seeking exemption under section 10(37) of the Act. The other addition made under the head “capital gains” against the cost of pucca structure, the assessee’s was allowed 60% as cost of acquisition or cost of improvement, against the relief of 50% as allowed by Ld. CIT(A). Further, in some cases, the agricultural income offered by assessee(s) were treated as “income from other sources” has been held as “income from agricultural activities”. Thus, in quantum appeals all the assessee was granted substantial relief in deleting major part 4 Jagubhai Chhaganbhai Patel Vs ITO of additions and only part of capital gains only on account of cost of improvement on pucca structure was partly upheld on estimation basis. Therefore, all substantial additions were either deleted or upheld only on estimation basis. In our considered view no penalty under section 271(1)(c) of the Act is leviable on this assessee. In the result, the grounds of appeal raised by the assessee are allowed.

In the result, this appeal of the assessee is allowed.