SMT. DHANWANTI DEVI (DECEASED),JAMMU vs. ASSISTANT COMMISSIONER OF INCOME TAX, JAMMU

ORDER Per: Bench.:

A batch of three (03) appeals of the different assessees are filed against the order of the ld. Commissioner of Income Tax (Appeals) Bathinda, [in brevity ‘the CIT (A)’] order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Ys. 1988-89. The impugned orders are emanated from the order of the ld. ACIT, Range-2, Jammu, (in brevity the AO) order passed u/s 144/148 of the Act.

2. On perusal of record we find that all three appeals are duly heard on dated 22/06/2009 and ex parte order was passed by the ITAT, Amritsar Bench. Later on, the appeals are recalled by the order of ITAT Amritsar bench bearingMA Nos. 95 to 97/Asr/2009 date of order 04/03/2010.

3. At the outset, all the appeals have the different assessees, and have common issue and same nature of fact. Accordingly, we have taken all the appeals together, heard together and disposed of together for the sake of convenience.ITA No. 75/Asr/2006 is taken as lead case. to 77/Asr/2006 Assessment Year.: 1988-89 3

4. The assessee has raised the following grounds which reads as under:

The notice u/s 148 was issued on dated 06.06.1991. The stay on reassessment proceedings were given by the Hon’ble J & K High Court on dated 05.08.1991.

This stay was vacated on dated 23.02.2000. Then the assessment order was passed on 26.03.2002. During assessment proceeding, the ld. AO has taken the legal heir Mr. Sunil Gupta. The grievance of the legal heir of the assessee is that Mr. Sunil to 77/Asr/2006 Assessment Year.: 1988-89 4 Gupta is not the legal heir as per Hindu Succession Act,1956 section 6. Mr. Sunil Gupta is only power of attorney holder on the assessee. After the death of the assessee, the power of attorney is automatically revoked. So, the claim of the legal heir is that the entire assessment is nullity. The assessee was holding the agricultural land which was duly on requisitions and acquisitions by the Indian Army, Government of India. The assessee received the enhanced compensation and entire enhanced compensation was added back with the total income of the assessee by the ld. AO. Aggrieved assessee filed an appeal before the ld. CIT(A).

The ld. CIT(A) after considering the section 45(5) had reduced the enhanced compensation and restricted only related to the enhanced compensation received during the impugned F.Y. which is amount to Rs.92,954.50. But the grievance of the assessee is that when the property was acquisitions the property was in nature of agricultural land i.e. in the year 01.04.1968. The grievance of the assessee was that the revenue has not considered the nature of land during the time of acquisition which was requisitions u/s 7(3) of J & K Requisitions and Acquisition of Immovable Property Act, 1968. Being aggrieved, the assessee filed an appeal before us. to 77/Asr/2006 Assessment Year.: 1988-89 5

7. The ld. DR vehemently argued and placed that the assessee was not able to substantiate its claim and as per the verification from Patwari, the land was treated as non-agricultural. The relevant paragraph of the appeal order is duly reproduced as below:-

“Ld. AO has admitted in the assessment order that Smt. Dhanwanti devi died in 1995 and he impleaded Sh. Sunil Gupta as legal heir which was illegal because he could not under law be called L/H. The legal heirs of a deceased Hindu are listed in section 6 of Hindu cession Act. Shri Sunil Gupta is not a relative as contemplated under section 6 of Hindu Succession Act. Similarly he could not be legal heir in terms of general power of attorney granted to him by the assessee during her life time because this GPA was only in connection with land acquisition proceedings and compensation thereunder. It conferred no power on him to attend to any other matter relating to her including Income tax. (GPA photostat enclosed as Annex-B). These arguments are supplemented further in written submissions dated 21.01.2003 already r laced on file (refer to para 6 and 6.1 of that letter). RE: RECEIPT OF COMPENSATION I am enclosing herewith certificate of Sh. Mohinder Singh, Arbitrator and Member of Special Tribunal J&K certifying to 77/Asr/2006 Assessment Year.: 1988-89 6 that compensation of Rs. 92954.50 was received by assessee during the previous year relevant to Asstt. Year 1988-89. Now the onus proving the receipt of assessed compensation is on the Ld. AO.”

“GROUND OF APPEAL

NO. 5 IN CASE OF LATE SMT DHANWANTI DEVI, GROUND OF APPEAL NO. 3 IN CASE OF SMT ANURADHA MAHAJAN AND GROUND OF APPEAL NO. 3 IN CASE OF SUNIL GUPTA GROUND OF APPEAL Without prejudice to above ground of appeal no capital gain is chargeable in respect of additional compensation of Rs.92944/- in case of Late Smt. Dhanwanti Devi, Rs. 180510/- in case of Smt Anuradha Mahajan And Rs. 175956/- in case of Sh. Sunil Gupta added by Worthy CIT (A) because the land was agriculture land on the date of requisition/ acquisition by the Indian Army and the government. SUBMISSION/WRITTEN ARGUMENTS FOR ABOVE GROUND 1. The common issue in all these appeals is that no capital gain is chargeable on the compulsory acquisition of these lands because these are agricultural land situated outside the municipal limits of Rajouri Town. All these lands are situated in villages near around Rajouri. to 77/Asr/2006 Assessment Year.: 1988-89 7

2. Particulars of Land Acquired in the case of three assesses are given as under: Name of the Assessee Situated at Village Sr. Area of No. Land 1. Smt Anuradha Mahajan 82 K 1 M Goverdhanpai

2. Sh. Sunil Gupta 37 K 4 M Rampur

3. Late Smt. Dhanwanti Devi 19 K 13 M Talwal

3. Further, it would be seen that these are agricultural lands because these are situated in villages as mentioned above and the size of holdings. No prudent person would buy such vast tracts of lands in remotest area of Kashmir for any purpose other than agricultural.

4. These lands were compulsorily acquired under section 7(3) of Jammu & Kashmir Requisitioning & Acquisition of Immovable Property Act, 1968. Form-J notification was issued on 29/01/1986, confirmatory document to that effect on page 1 and 2 of Paper Book No. 2. Dated Nov 26,2008 The lands were requisitioned by the Indian Army on the following dates:-

(CIT(A) has erroneously picked up the date of acquisition as 31.08.1984 from notice of -J notification Home Deptt u/s 7(1) J&K Requisition and Acquisition of Immoveable Property Act, 1968 on page 45 of Paper Book No: 1.

I. Lands in Village Rampur were requisitioned on 1/03/1949 as confirmed in para 2 of the acquisition report of the Army Authorities which is onpage 28 of the Paper Book No.1. II. Lands in village Talwal were requisitioned on 1/04/1968 as confirmed para 3 of the acquisition report of the Army Authorities which is on page 28 of the Paper Book No.1. III. Lands in village Goverdhanpai were requisitioned on 10/09/1965 as confirmed para 3 of the acquisition report of the Army Authorities which is on page 28 of the Paper Book No.1. to 77/Asr/2006 Assessment Year.: 1988-89 8

The reasons for acquisition of these lands have been given in para 6 of Report of the Board of Army Officers where they have stated that militarily strategic building involving big investments have been constructed on these lands. (Page 28 of paper book no. 1)

5. The Hon'ble Bench on an earlier hearing had directed that the copy of order of requisition passed under section 3 & 4 of Jammu & Kashmir Requisitioning & Acquisition of Immovable Property Act, 1968 be filed. We had talked to the Counsel of assessee at Jammu who had handled the case of compensation of orders of acquisition. He replied that the lands as per Army report were requisitioned on 1/03/1949, 10/09/1965 and 1/04/1968 and the Act had not been enacted and it was enacted in 1968. Therefore these lands were requisitioned by the Army under Defence of India Act or Armed Forces Act. But the date of requisition has mentioned in the Army report as referred supra which have been relied upon by them in their suits/ appeals for their compensation. • The jammu and Kashmir Requisitioning and acquisition of Immovable property Act 1968 is attached as per paper Book 2 dated 26 Nov 2008 page 3-11

FINDINGS RECORDED BY CIT (A) ABOUT NONAGRICULTURAL NATURE OFTHESE LANDS.

In case of Anuradha Mahajan:

In case of Sunil Gupta: CIT(A) order: page 6 para 2 "SAME FINDING AS ABOVE" In case of Dhanwanti Devi (Deceased) to 77/Asr/2006 Assessment Year.: 1988-89 9 CIT(A) order: page 5 para 2 "SAME FINDING AS ABOVE"

8. It has nowhere been stated as to date when the Patwari made the report. It must have been done when the reassessment proceedings were started in 1991. At that time army had converted into cantonment with military oriented constructions. Kindly refer to page 4, last para of CIT (A) in case of Dhanwanti Devi which refers to statement of Patwari Sh. Mohammad Nawaz. So this report is not contextual to 1949 when the Army requisitioned the lands.

Page 29 of my paper book No. 1 at para 9 in which the Army authority had denied the version of DC, Rajaouri that lands in Village Rampur is within notified area committee.

Page 37 of my paper book No. 1 in which the letter dated: 10/02/1986 written by Deputy Commissioner Rajouri to Army authority in which DC has stated that sale of land in these villages in banned in view of Agrarian Reform Act, 1972 which proves that these lands are agricultural lands.

Page 42 of my paper book No.1 in which the Tehsildar also signed and participate in the proceeding with Army Authority as per Army report. And has concurred about agricultural nature of these lands

Page 46 of my paper book No.1 in which all the notices of Home Department are reproduced with regard to Acquisition of requisitioned land of the village Talwal Rampur and Goverdhanpai.

9. Kindly refer to notification u/s 2(14)iii) of Income-tax Act, 1961 regarding urbanization of areas upto 8 Kms from municipal limits Page 16 on Paper Book No: II filed dated Nov 26,2008where only the areas around Jammu City have been notified. No other Town in J&K has been notified.

Further Relaince is placed on following judicial precedents a) Lavleen Singhal Vs. Dy. CIT cited at 111 TTJ 326 (Delhi "B" Tribunal), the assessee was owner of an agricultural land which was recorded as such in revenue records. However, the assessee could not cultivate it for fourteen years as he was an athlete and due to taking part in Olympics, remained out of country most of to 77/Asr/2006 Assessment Year.: 1988-89 10 time and thus could not devote time for cultivation of land. The land was shown as agricultural as situated beyond 8 KM from committee area. The revenue authorities treated the land as non-agricultural and computed capital gains arising from sale of such land taking the land as capital asset. It was held that the tax authorities below were not justified in treating the land in question as non- agricultural land merely because the assessee had not cultivated the land for a period of fourteen years, i.e. from the date of purchase till the date of its sale, ignoring the explanation given by the assessee why he could not cultivate the land for a period of fourteen years and also ignoring the other evidence placed on record by the assessee clearly indicating that from the date of purchase till the date of its sale the land remained an agricultural land in the revenue record and the assessee did not convert the user of the land as non-agricultural either temporarily or permanently. b) DLF Universal Ltd., Vs. CIT cited at 161 ITR 714 (Delhi) head notes are being reproduced as under-

BUSINESS PROFIT - CAPITAL GAIN - AGRICULTURAL LAND PURCHASED BY ASSESSEE FOR CONVERSION INTO BUILDING PLOTS – GOVERNMENT ACQUIRING LAND BEFORE CONVERSION - LAND REMAINING AGRICULTURAL TILL ACQUISITION AND PAYMENT OF COMPENSION PROFIT ON SALE OF LANDS NOT ASSESSABLE AS - BUSINESS PROFIT - AGRICULTURAL LANDS NOT "CAPITAL ASSET" – TAX ON CAPITAL GAINS NOT LEVIABLE- INCOME TAX ACT, 1961, ss 2(14), 45 8.1 The ld.AR for the assessee placed that the assessment of the deceased person is invalid and nullity. The ld. AO has made mistake not to consider the legal heir during proceeding of the assessment. The power of attorney holder Mr. Sunil Gupta was taken as legal heir which is contravening the Section 6 of Hindu Succession Act, 1956. The relevant paragraph of the submission is duly reproduced as below: to 77/Asr/2006 Assessment Year.: 1988-89 11 “GROUND OF APPEAL

NO.

2. IN CASE OF LATE SMT DHANWANTI DEVI That the assessment / re-assessment order has been passed beyond the limitation and the Ld. Assessing Officer and the worthy CIT (A) have erred in rejecting this contention.

SUBMISSION/WRITTEN ARGUMENTS FOR ABOVE GROUND In the case of Asstt. Order of Smt. Dhanwanti (deceased) (the ld. A.0. has admitted that Smt. Dhanwanti Devi died in September 1995. Therefore, as per mandate of section 159 of IT Act, it was mandatory for 1d. A.0. to implead the legal heirs of the deceased and then serve a notice on them for processing the asstt. proceedings. It has been admittedly not been done and Sh. Sunil Gupta who held only power of Attorney from the deceased in- respect of land acquisition proceedings has been impleaded. Sections 15 & 16 of Hindu Succession Act clearly mention that the legal heirs of Hindu female dying intestate shall be the following persons on whom her property will devalve:- a) Firstly, upon the sons and daughters and the husband; b) Secondly. on the heirs of the husband; c ) Thirdly, upon mother and father; d) Fourthly, upon the heirs of the father; e) Lastly, upon the heirs of the mother.

The perusal of the Asstt. Order passed by the ld. A.0. in the case of the deceased would reveal that he made no effort to find out the legal heirs of Smt. Dhanwanti Devi and impleaded Sh. Sunil Gupta as legal heir inspite of his protests. It is also a settled proposition of law that in case of asstt. in the case deceased assessee, the legal heirs should be impleaded and notices should be served on all of them. This is a fundamental lapse which makes the asstt. order illegal and nonest 1. GROUND OF APPEAL NO. 3IN CASE OF LATE SMT DHANWANTI DEVI That the assessment is legal nullity because assessment has been framed on a dead per non without bringing on record of the legal heirs of the deceased and without represented the character of Sh. Sunil Gupta and Worthy CIT (A) rejecting this legal position. SUBMISSION/WRITTEN ARGUMENTS FOR ABOVE GROUND to 77/Asr/2006 Assessment Year.: 1988-89 12

is he that is taxed in his own name and hence, his name and identity should be clearly specified in the order of assessment (CIT v Amarchand N. Shroff (1963) 48 ITR 59 SC)

9.1 The ld. AR relied on the order of Lovely Singhal (supra) and DLF Universal (supra). We respectfully relied on those orders and accept the to 77/Asr/2006 Assessment Year.: 1988-89 14 submission of the ld. AR. The nature of land is agricultural at the time of acquisition of land. The Indian Army had requisitioned the land on 1949, 1965 & 1968 and had acquired of 1986. The assessee was not able to continue farming on the said land. So, the transfer of land was agricultural in nature and not liable to be taxed. Accordingly, the addition made by the revenue is quashed.

In case of assessment of deceased person is legally valid or not. The ld. AR relied on the order of the Hon’ble Supreme Court of India case Commissioner of Income-tax vs. Amarchand N. Shroff[1963] 48ITR59 (SC). The relevant paragraphs are reproduced as below:-

“In the present case the amounts which are sought to be taxed and which have been held not to be liable to tax are those which were not received in the previous year and are therefore not liable to tax in the several years of assessment. It cannot be said that they were income which may be deemed by fiction to have been received by the dead person and therefore they are not liable to be taxed as income of the deceased, Amarchand, and are not liable to be taxed in the hands of the heirs and legal representatives who cannot be deemed to be asses- sees for the purpose of assessment in regard to those years. In our view the High Court rightly answered the question in the negative and against the Commissioner of Income-tax. The appeals, therefore, fail and are dismissed with costs.” to 77/Asr/2006 Assessment Year.: 1988-89 15 9.2 We respectfully relied on the order on Amarchand N. Shroff(supra) and the ground of the assessee is succeeded. The assessment order of the assessee is quashed.

Accordingly, the appeal of assessee is allowed.

9.3 As all the appeals are same nature and fact. So, is mutatis mutandis applicable to the and ITA 77/Asr/2006 followed accordingly.

Order pronounced in open court on 06.12.2023