SHRI KANAV KHANNA,,AMRITSAR. vs. THE ASSTT. COMMISSIONER OF INCOME-TAX,, AMRITSAR.

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. No. 77/Asr/2015 Assessment Year: 2010-11

Sh. Kanav Khanna Vs. Asstt. Commissioner of Income 569-A, Basant Avenue Tax, Circle V, Amritsar Amritsar [PAN: AATPK 5859L] (Appellant) (Respondent)

Appellant by : Sh. R. K. Magow, CA Respondent by: Sh. Rahul Dhawan, CIT-DR Date of Hearing: 21.04.2022 Date of Pronouncement: 12.07.2022

ORDER Per Anikesh Banerjee, JM:

The instant appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), Amritsar (in brevity the CIT(A) ) bearing appeal no. 24/2013-14, date of order 03.11.2014 passed u/s. 250(6) of the Income Tax Act, 1961 (in brevity the Act) for the assessment year 2010-11. The instant

2 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT appeal was generated by the order of Asst. Commissioner of Income-Tax, Circle-

V, Amritsar bearing order dated 30.03.2013 passed u/s. 143(3) of the Act.

agitated on 2 issues:

a. challenging jurisdiction of the notice u/s. 143(2) of the Act and b. disallowance the claim of the transfer of agriculture properties u/s. 10(37) of the Act.

2.1 The assessee has claimed that land measuring 3 Kanal 17 Marlas bearing

Khasra no. 1034/3 and 2 Kanal 8 Marlas bearing Khasra no. 1444 were acquired

by the Sub Divisional Magistrate-cum-Competent Authority-cum-the Land

Acquisition Collector, Amritsar (in brevity is SDM) for Highway Authorities of

India under the Ministry of Road Transport and Highway and he received total

amount of Rs.8,57,41,680/- for acquisition of land. The TDS was deducted amount

to Rs. 96,80,881/- u/s. 194LA of the Act. Accordingly, the assessee claimed

exemption u/s. `10(37) in the Long Term Capital Gain (LTCG) during the filing

his return. During the assessment proceedings the ld. AO made verification and

called the revenue record. Sh. Jagjit Singh Patwari of Verka Village was called along with “Khasra Garduari” (generally done twice a year, Winter/Rabi 1st March to 31st March Rainly/Haari 1st October to 31st October). The Patwari attended the

office of the ld. A.O. on 21.01.2013 and provided the copy of “Khasra Garduari”

3 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT for crop year 2002-03 to 2011-12 (i.e. Shauni of 2002 and Haari 2003 to Shauni of

2011 and Haari of 2012). On examination Patwari revealed that land measuring 15

Kanal 13 Marlas comprise in the Khasra 1034/3 has been shown as “Ghair

Mumkin” (uncultivated land) and “Karkhana” for crop year 2007-08 to 2008-09.

Out of total land of 15 Kanal 13 Marlas, the land measuring 3 Kanal 17 Marlas was

acquired by SDM 2009. The balance land of 11 Kanal and 16 Marlas had been

shown “Ghair Mumkin and Karkhana” in crop year 2009-10 in the Garduri of

Village Verka. The land 15 Kanal 13 Marlas comprise in Khasra no. 1034/3 was

not put to use for agricultural purposes for the crop year 2002-03 to 2008-09 and

balance land of 11 Kanal 16 Marlas was not put to use to agriculture purposes for

the crop year 2009-10. In evidence Khasra no. 1444 was cultivated land and the

other was in cultivation paddy & wheat. Accordingly, the ld. A.O. disallowed 70%

of the value of the land received as taxable income and will not come under the

exemption under provisions of 10(37) of the Act. Accordingly, value of land

amount to Rs.5,12,87,411/- is added back with the total income of the assessee for

the amount received from sale non-agricultural land under LTCG.

2.2 In the legal point the assessee was agitated the jurisdiction of notice u/s.

143(2) of the Act which was issued unlawfully and not valid. Both the issues are

dealt with ld. CIT(A). Ld. CIT(A) rejected the grounds of the assessee. Being

aggrieved the assessee filed the appeal before us.

4 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT 3. The grounds of the appeal are extracted as follows:-

“1. That the order of CIT(A), upholding the order of A.O., is illegal, violative of natural justice, without fair and objective application of mind and as such the impugned addition by denying exemptions u/s 10(37) to the appellant to the extent of Rs.5,12,87,411/- cannot be sustained. 2. That the learned CIT(A) has erred in ignoring the fact that the authorities below have already done verification regarding the nature of the land while issuing the refund vide order dated 21.04.2011, when exemptions u/s 10(37) was allowed to the appellant. 3. That the learned CIT(A) has erred in denying exemptions u/s 10(37) on flimsy and baseless ground of agriculture income shown not having been specified with reference to khasra No. 4. That in the absence of valid and lawful issue and service of the notice u/s 143(2) mandatorily required by statute, the impugned order of the assessment made without jurisdiction and authority of law, must be quashed as nonest in law. 5. That the appellant craves leave to add o amend any other grounds of appeal either at the time of hearing or before the hearing.”

entry in the “Khasra Garduari” presented before the ld. A.O. during the assessment

was wrong in related to Khasra no. 1034/3. Later the assessee made application

before the SDM and in “Khasra Garduari”, the entry was changed and the

agricultural product was entered. As brief the land was cultivated. The Khasra

Garduari dated 11.07.2012 (APB page 106) which was submitted before the ld.

A.O. and the rectified copy of Khasra Garduari dated 22.05.2018 (APB 105) which

was submitted before the ITAT. The ld. Counsel also filed entry in the Jamabandi

(ownership of land) for dated 22.05.2018.

5 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT The Khasra Garduari (Gardwari) dated 22/05/2018 is the new document before the

ITAT. So, the ld. Counsel prayed to place the additional evidence before the

Bench.

4.1 In this issue the ld. Counsel relied on the certain points of the appeal order

which extracted from page nos. 3 & 4

During the course of appellate proceedings, Sh. Parveen Jain, Advocate attended “5. as learned counsel for the appellant and filed written submissions, which are reproduced below: “The appellant is aggrieved by the illegal order of assessment dated 30.3.2013 passed by the Respondent u/s 143(3) of the I T Act for A Y 2010-11 by which he has denied the exemption legitimately admissible to the appellant u/s 10(37) of the I T Act in respect of a part of the agricultural land which was compulsorily acquired by the Government under the Land Acquisition Act, 1894 for which exemption from Capital Gains Tax admissible u/s 10(37) was duly verified thoroughly by the A O as well as the Commissioner based on which the refund of tax deducted at source of Rs. 97,59,570/- was granted on 21.4.2011 as per orders of the A O as well as the Commissioner based on the verification reports of the departmental officers deputed for the purpose and further verified and accepted by the A O and the Commissioner. Subsequently, the A O has changed his mind and attempted to bring a part of the long-term Capital Gain to tax by denying the exemption in the course of so-called assessment u/s 143(3) which s effectively a reassessment in the present case and that too without providing to the assessee all the records and documents including verification reports already with the department in connection with the same issue for the same assessee and for the same Assessment Year based on which refund of TDS was allowed and approved both by the A O and by the Commissioner. Such illegal action of the A O is the subject matter of challenge in the present appeal. 2. The appellant had claimed in the return exemption from tax on long-term Capital Gain of Rs. 8,32,58,783/- in respect of the agricultural land which was compulsorily acquired by the Government and out of this sum, exemption of Rs.3,19,71,372/- has been allowed in respect of 48 Maria in Khasra No. 1444 while the Capital Gain of Rs. 5,12,87,410/- in respect of 77 Maria from Khasra No. 1034/3 has been denied exemption and thereby Income Tax liability of Rs. 1,07,59,391/- has been demanded along with Education Cess of Rs.3,22,782/- besides interest of Rs. 5,04,468/- u/s 234B and Rs. 11,71,148/- u/s 234D in addition to withdrawing interest of Rs.5,95,654/ granted earlier

6 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT u/s 244A, thus, raising illegal demand of Rs. 1,33,53,443/- against which prepaid taxes of Rs.5,16,965/- had been adjusted and the balance of Rs. 1,28,36,480/- is being demanded illegally, arbitrarily and vexatiously to harass the appellant and to meet predetermined revenue targets of the Respondent.

4.2 The ld. CIT-DR, Mr Rahul Dhawan vehemently argued and mentioned that

the rectification of report after 8 years made on the basis of statement is not

acceptable. He further mentioned that the patwari shall supply a copy of the Fard

Raftar to the Lambardar concerned. He should take with him and the persons

concerned at the time of his field to field inspection. An entry to the effect that

harvest inspection was done in the presence of the particular Lambardar and a few

notable persons (mentioning their be made by him in his Roznamchawaqiati. The

signatures of the Lambardar who accompanied the patwari shall be obtained

against this entry.

4.2.1. The patwari must enter in his diary a list of all field numbers in which any

change of cultivating occupancy or rent has occurred in the following form:-

Change in rent-field numbers so and so changes in cultivating occupancy-field

7 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT numbers so and place this list before the Field Kanungo at his next visit for

verification. The numbers so entered will be verified by the Kanungo totalled

under his signatures.

4.2.2. But if the change is such as to necessitate an entry in the register of

mutations it need not to be entered in the diary as well.

4.2.3. A patwari may alter an entry once made in the Khasra Girdawari after

making an entry in his diary during the crop inspection period in the following

circumstances: -

i) When all the interested parties agree to a change being made: and ii) Where specific orders have been passed by a competent authority regarding a change in the girdawari entry. In case where any of the interested parties does not turn up before the patwari, but the change is verified by the person present at the time of girdawari to his satisfaction he should make the necessary entry in the khasra girdawari as verified on the spot, but should record a note in his Roznamoha Waqiati giving reasons on the basis of which he was so satisfied. However, in cases in which the change is disputed the patwari should make a note of the entry regarding the rent or cultivation being disputed and also record a note to this effect in his 'Roznamcha Waqiati” and put up a list of such cases before the Kanungo, at the time of the latter's visit for checking of girdawari. The Kanungo will then, refer the matter to the competent Revenue Officer for decision. iii) whenever east patwari has to correct a typographical or clerical error in any entry once made he the khasra girdawari he may after making a note of such an error in his 'Roznamcha Waqiati”, correct withdraw link the error in question. All such entries shall be scrutinised Kanungo on his next visit. No such correction me however be made after the kachaa paper of the harvest have been drawn or corrected iv) the entry regarding crops in the khasra girdawari may be corrected by the patwari during the girdawari inspection period after making a note on his effect in his diary and that may be endorsed by the supervisory revenue officers under their signatures.

8 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT 4.3 The ld. CIT-Dr further argued that in the case of Harbhajan Singh Vs. State

of Punjab CWP no. 327 of 2013 date of decision 10.01.2013:

“It is settled proposition of law that in the cases of correction of Khasra girdwari, the basic rule to be followed by the Revenue Officer, before he orders the correction of Khasra girdwari, is that he should conduct the inspection at the site, so as to ascertain and satisfy himself as to which out of the contesting parties, was in actual cultivbating possession over the suit land. In the present case, Assistant Collector 2nd Grade, Dina Nagar, himself inspected the disputed land on 13.07.2011 in the presence of respectable of the village including Lamberdar and Chowkidar of the village. It has been so recorded by Assistant collector 2nd Grade, Dina Nagar, that the petitioner refused stop sign the notice. He also recorded the statement of the respectable present, at the spot, who, in on voice verified that respondent no. 5 was in cultivating possession over the suit land. It was found that the respondent no.5 had shown the Chari-Chara (green-fodder) in the dispute land. The petition was not cultivating this land”

4.4 The ld. CIT-DR Mr. Rahul Dhawan further mentioned in the case of Rajbir

Singh and Others vs. Taka (deceased) through LRS and others. The said order was

challenged in appeal, wherein the same was set aside on the ground of SDO (Civil)

has not jurisdiction to entertain the application for correction of Khasra Gardwari and the case was remanded back to Assistant Collector, 2nd Grade, Bhiwani-6 of

2012 for the decision. The ld. CIT-Dr relied on the order of the ld. AO for ascertain

the proper facts, The page-6 of the order of ld AO is extracted here under:-

“On the request of the assessee, Sh. Jatinder Kumar Patwari and Sh Ranjil Singh Patwari, in whose tenure the land belonging to the a33csscc was acquired by the SDM were summoned u/s 131 and were examined as also cross examined by the assessee. The award dated 17.02.2009 of the SDM in connection with acquisition of land of the assessee falling in Khasra no 1034/3 and 1444 and extract of concerned disbursement register, as provided by SDM vide letter no. SDA/RC/1735 dated 26.02.2013 has also been examined.

9 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT 5. He further relied on the order of CIT(A) in page no.10 which is extracted as

follows:-

“18. The Punjab Land Revenue Act requires the Local Land Revenue Authorities to levy and collect revenue in respect of agricultural lands based upon the crop cultivated, in respect of each crop /Fazal. For the period between 2006 to 2009 the assessee has been subjected to levy and collection of land revenue by the State for which the Competent Officer of the State Sh. Sukhvinder Singh (Numbardar) had levied and collected the land revenue after verifying the cultivation made and the amount so collected has been deposited by him to the credit of Punjab Government as land revenue for which a Mamla Receipt issued by him for the period 2006-2009 is enclosed as ANNEXURE IMO.2 for your record. This clearly shows that the land has been used for agricultural and cultivation and the revenue was collected by the State correctly.

Shri Jatender Kumar and Shri Ranjit Singh and the version given by him before the A 0 in Punjabi is correct both during written statement and also in cross examination before you. In the statement as well as cross examination before you all the three Patwaris have_ccmfirmed before you that the nature of the land is agricultural land for both kasra nos. as written by the SDM at the time of land acquisition by issue of public notice by him, as already filed before the A. O. and is part of the records. Therefore the question of treating the land as non-agricultural or as not used for agricultural operations by the assessee does not arise. The three Patwaries have further confirmed to you that there is no change of land was sought by the assessee nor anything done by the State to allow the change of land use till date. They have thus reaffirmed our contention and supported the same to the effect that the land is used for agricultural purposes only. 20. Still further the statute recognizes both active use and passive use of the asset by the assessee for allowing the legitimate claim. For instance in section 32 depreciation is admissible on plant and machinery which are actually used and the words 'actual use' have been held by the Courts and Tribunals to be wide enough to cover intended use including passive use even though it may not be actually used as may seen from the following decisions:

10 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT a CTT Vs. O.P. Khanna & Sons (1983) 140ITR 558(P&H); b) CIT Vs. Geo Tech Construction Corpn. (2000) 244 ITR 452(Ker.);

c) CIT Vs. Refrigeration & Allied Industries (2001) 247 ITR 12 (Del);

d) CIT Vs. Vindhyachal Distilleries Pvt. Ltd. (2005) 272 ITR 583(MP.);

e) CIT Vs. Dalmia Cement Ltd. (1945) 13 ITR 415(Pat.);

f) CIT Vs. Kanoria General Dealers Pvt. Ltd. (1986) 159 ITR 524(Cal).”

ld Counsel of the assessee argued that the additional evidence which was filed by

the assessee in which mistakes in the earlier land records are duly corrected and

filed in the Tribunal in 2017 and 2018 with English translation. The income for

both the years that are assessment year 2008- 09 and 2009-10 revenue loss has

been verified and accepted by the revenue. For the khasra no. 1444 the section

10(37) of the Act had already been accepted. The question is that how the same

place of agricultural land held by the same assessee for the same could be denied

similar exemption merely because the khasra had different number although it is

the same piece and parcel of one agricultural land covered by the two khasra held

by the same assessee and acquired by the NHAI by single order. Further the

request was made to SDM by letter dated 25.02.2016 which is annexed in APB

page-83. Learned counsel further quote that the translated copy of order of SD

dated 11.03.2016 bearing number 9543 is enclosed in APB page 87. The certificate

11 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT itself self-explanatory, the Numberdar accepted that the land is irrigated land with

cultivation of charichara.

record. From the primary evidence of the assessee, it is clear that in Khasra

Gardwari which was placed the time of assessment, the nature of land was “Ghair

Mumkin and Karkhana”, which was non cultivated. In Khasra no. 1034/3,

was“Ghair Mumkin” for the period 2002-03 to 2006-07 and “Ghair Mumkin and

Karkhana” for the crop year 2007-08 and 2008-09. As a result, the nature of land

was not agricultural which is violating the provisions of section 10(37) of the Act.

It is clear that for claiming exemption u/s. 10(37) the land should not merely the

agricultural land, but it should also be used for agricultural purposes by such HUF

or Individual or the parent of the assessee. As per the Chapter-9 of Punjab Land

Record Manual in connection with Chapter IX of Land Administration Manual

clause 9.2 where Gardwari/Garduari used to land is noted after every six months in

this regard to every crop period. The assessee submitted of receipt of Mamla which

is not accepted by the Revenue Authorities. The ld. CIT-DR, Mr Dhawan argued

about the sanctity about the acceptance of additional evidence, “Khasra Garduari”

dated 22.05.2018. From the above discussion, the valid question of revenue is that

the rectification of Khasra Garduari dated 22.05.2018 after six years. Nature of

land is determined on basis of crop. The patwari how to remember the nature of

12 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT crops after six years. Factually the statements made by the patwaris before the ld.

AO were in favour of agricultural land. There is documentary evidence related

certificate of Sub Divisional Magistrate (in brevity SDM)-Cum-A.C.I. Grade,

Amritsar-2 which was filed by assessee. Translated copy of the said document is

attached in APB Page-87 bearing document no-9543 dated 11/03/2016, certified

copy dated 14/11/2017. Here, we are accepting the document of the assessee, filed

before the ITAT by considering its evidentiary value. The evidence is issued by the

State Government Authority. The assessee should another opportunity for

adjudication the issue on basis of document, issued by State Govt Authority. The

matter is setting aside to ld AO for further adjudication only related the said

evidence, filed by the assessee before the ITAT. The assessee should get the

reasonable opportunity for his case.

for statistical purpose.

14 is as follows:

“In the ground no. 10(F) of the appeal, the assessee has stated that notice u/s. 143(2) was not served and in view of the same assessment order was without jurisdiction and in valid in law and must be quashed, however during the appellate proceedings, the assessee could not submit any proof or evidence in this regard and has also not filed any submission on this ground of appeal raised. The assessee has also not raised objection before the AO in this regard and the case was discussed with the counsel on 13.09.2014

13 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT and he was also shown from assessment record service of notice u/s. 143(2) on the assessee. ON 08.10.2014, Sh. Rakesh Magow, CA admitted that no objection was raised during assessment proceedings regarding service of notice u/s. 143(2) and in view of the same and in view of section 292BB this ground of appeal is dismissed.”

Pvt. Ltd vs. Union of India in 2012-TIOL-176-HC-P&H-IT, and

(b) CIT Hissar vs. Ram Naryan Bansal ITA no.814 of 2010. In this case, the ld.

CIT-DR specifically mentioned that the assessee in the assessment proceedings, no

objection was filed before the A.O for non-receiving the notice u/s. 143(2) &

participated in assessment proceeding. So, the assessment cannot be said invalid.

did not able to draw our attention of any new evidence/ fact against the above-

mentioned observation of the ld CIT(A). The ld. CIT(A) in his order stated that the

assessment record was examined related service of notice. We considered the

observation of the ld CIT(A). Here we see there is no infirmity in the order of

CIT(A).

14 ITA No. 77/Asr/2015 Kanav Khanna v. Asstt. CIT 12. In the result, the ground no- G of appeal of the assessee is dismissed.

purpose. The Ground no-G is dismissed. Ground no- H & J are general in nature.

The appeal of the assessee is partly allowed.

Order pronounced in the open court on 12.07.2022

Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T (6) The Guard File True Copy By Order