ABDUL AZIZ,DUDU V. ITO WARD 7(3), LAL KOTHI

ITA 1025/JPR/2024

AI Insights

The case revolves around an appeal by Abdul Aziz against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of Rs.25,75,600 as long-term capital gains on the sale of agricultural land for the assessment year 2012-13. The Assessing Officer had initially assessed this amount under Section 144, based on the valuation of the property under Section 50C. The CIT(A) rejected additional evidence provided by the assessee under Rule 46A of the Income Tax Rules, 1962, which led to the appeal before the ITAT. The ITAT, after considering the additional evidence and the circumstances of the case, concluded that the land did not qualify as a capital asset and thus the gains were not taxable under the provisions of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315379 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: CIT vs. Manish Build Well Pvt. Ltd., ITO vs. Bajoria Foundation, Smt. Prabhavati S Shah vs. CIT, Sri Shankar Khandasari Sugar Mills vs. CIT, CIT vs. Kheti Lal Sharma, HUF, Collector Land Katji vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: RAJENDRA SISODIA
• Keywords: Set aside; Capital asset; Additional evidence; Reasonable cause; Reassessment proceedings; Sale consideration of property below Jantri Value; Capital Gains; Principle of natural justice
• Section: 148; 144; 142(1); 2(14)

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh xxu xks;y] ys[kk lnL;] ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 1025/JPR/2024 fu/kZkj.k o\"kZ@Assessment Year : 2012-13 Abdul Aziz through L/H Abdul Hakim, Karim Manzil Opp.-Rangmanch, Dudu cuke Vs. The ITO, Ward-7(3), Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: DBKPA4053F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Sh. Rajendra Sisodia, Adv. jktLo dh vksjls@Revenue by : Sh. Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@Date of Hearing : 19/03/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 13/05/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. The assessee has filed this appeal challenging the impugned order dated 04.06.2024, passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ in short ld. CIT(A)/NFAC)], for the assessment year 2012-13. 2. The assessee has raised following grounds:– “1. The impugned order u/s 147/144 dated 03.12.2019 is bad in law and on facts of the case, for want of jurisdiction, barred by limitation and various other reasons and hence the ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 2 same may kindly be quashed. 2. The CIT(A) has grossly erred in law as well as on facts of the case in not admitting additional evidence submitted by the assessee under Rule-46A(1) of the Income Tax Rules, 1962. 3. The CIT(A) has grossly erred in law as well as on facts in confirming the addition of Rs.25,75,600/- on account of Long term capital gain on the entire sale consideration of agricultural land, which was not a capital asset as per the Income Tax Act, made by the AO.” 3. Succinctly, the facts as culled out from the records arethat the appellant had not filed his return for AY 2012-13 as he did not have any taxable income. Notice u/s 148 was issued in the case, on the basis of information that the assessee had sold an immovable property for Rs.24,00,000/- which had been valued by the Sub-registrar at Rs.25,75,600/- for the purpose of section 50C. The AO completed the assessment at Rs.25,75,600/- u/s 144 assessing the income as LTCG. 4. Aggrieved from the order of Assessing Officer, the assessee preferred an appeal before the CIT(A). The assessee adduced additional evidence under Rule- 46A before the CIT(A). The assessee pleaded before the CIT (A) to accept these evidences as the same establishes the genuineness of the transactions done by him and go to the root of the additions made by the Assessing Officer. It was also submitted that since these documents/ evidences had been procured after completion of the assessee, there was no occasion to file these evidences during the course of the assessment. Apropos to the grounds raised, the ld. CIT(A) after referring to Rule-46A and citing two decisions in the case of CIT vs. Manish ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 3 Build Well Pvt. Ltd. [ITA No.928/2011] and ITO vs. Bajoria Foundation [254 ITR 065 (Cal)] rendered by Delhi and Calcutta High Courts respectively, observed in para 5.1.3 of his order – “Respectfully following the ratio of the above judgments and in view of the fact that the Appellant has furnished the additional evidence without making out a case under any of the four limbs of the Rule 46A(1) of the Income Tax Rules, 1962, I, being constrained by the procedural rules and law laid out, cannot consider the additional evidence. Thus, in the absence of the requisite documentary evidences, the contention of the Appellant remained unverified and unproved solely due to the conduct and latches on the part of the Appellant and these cannot be accepted.” On the merits of the case, in Para-5.2 of his order, observed as under- “Vide this ground, the Appellant has challenged the action of the AO in makingaddition of Rs.25,75,600/-. In this regard, the Appellant has submitted that the land sold is an agriculture land and hence not a capital asset. Therefore, the gain arisingon sale of agriculture land is tax exempt. The Appellant has submitted evidences insupport of the same with as request to admit as additional evidences u/R46A.I have already adjudicated on admissibility of additional evidence vide para5.1.3 above. I have held that the Appellant was not prevented from submitting detailsbefore the AO. I have also held that the Appellant is not covered under any of thefour limbs under Rule 46A and hence, the additional evidences can not be admitted.Accordingly, the fact that the land sold is a agriculture land remains unverified andunproved solely due to the conduct and latches on the part of the Appellant.Accordingly, the addition of Rs.25,75,600/- stands confirmed. The Ground is, thus, dismissed.” 5. Now the assessee is in appeal before the ITAT. While pleading on behalf of the assessee, the ld. AR has made the following ground wise submissions- “Ground No.1The impugned order u/s 147/144 dated 03.12.2019 is bad in law and on facts of the case, for want of jurisdiction, barred by limitation and various other reasons and hence the same may kindly be quashed. The above ground is not being pressed. ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 4 Ground No.2 The CIT(A) has grossly erred in law as well as on facts of the case in not admitting additional evidence submitted by the assessee under Rule 46(1) of the Income Tax Rules, 1962. Before the Ld.CIT(A), additional evidence under Rule 46A was filed in the form of Letter of Tehsildar as regards distance of the impugned land from Muncipal limits, Jamabandi of the impugned land, Sale deed and copy of bank account in which the sale proceeds were deposited. The CIT(A) summarily rejected the additional evidence filed by the assessee, whereas it clearly fell under the exception to Rule 46A(1)(c). The Ld.CIT(A) has observed that the appellant has furnished the additional evidence without making out a case under any of the four limbs of Rule 46A(1) of the Income Tax Rules, 1962and I being constrained by the procedural Rules and law laid out, can not consider the additional evidence. In this regard, it is stated that the case of the assessee clearly falls under Rule 46A(1)(c). At the outset, it is submitted that the assessee is a blind and old person aged 92 years, who lives with his wife, in a remote village in Dudu which is 62 kms from Jaipur. His son is a government employee posted at Jaipur, who occasionally comes to see his parents. It is a fact that notice u/s 148 was served on the assessee which was brought to the knowledge of his son by the assessee. Thereafter, only one statutory notice u/s 142(1) was issued to the assessee on 06.08.2015. The son of the assessee came to Dudu at the time of Eid in September, 2015, and by that time, the date of making compliance had elapsed. Assessee’s son visited the office of the AO, and told him that the agricultural land sold by his father is outside the municipal limits of Jaipur and is not subject to any capital gains. The AO, thereafter, issued SCN on 16.11.2015 and eventually went on to pass the assessment order on 03.12.2015. During this period, assessee’s son did not come to see him, so compliance of the notice could not be made. Therefore, it is clear that the assessee was prevented by sufficient cause from producing the evidence before the AO. As at the time of assessment, necessary evidence could not be submitted, the assessee rightly produced it before the Ld. CIT(A) under Rule 46A, who arbitrarily rejected the same. The powers of the first Appellate Authority are very wide and co-terminus with those of the AO and what AO can do, he can do and what AO fails to do, that also he can do [refer Kanpur Coal Syndicate, 53 ITR 225 (SC)]. Section 251 and Section 252 of the Act have also been worded keeping the same spirit, as also Rule 46A. Section 250(4) empowers the CIT(A) to make further inquiries on its own or to direct the AO to make further inquiry and to report to him. The embargo put on his power under Rule 46A(1) and (2) has also been loosened by sub-rule 4 which empowers the CIT(A) to direct the production of any document /examination of witness, to enable him to dispose of the appeal. Thus, the legislative intent is quite clear and the CIT(A) should not jump straightway to reject, if the appellant files some evidence before him under the provisions of Rule 46A(1). The powers of the CIT(A) as submitted above are also to be interpreted in the context of the amended law, wherein he is no ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 5 more empowered to restore back any matter which was earlier u/s.251(1)(a), necessitating a compulsory admission of the evidence before him in the interest of justice. The Bombay High Court in Smt. Prabhavati S Shah 's case (1998) 231 ITR 1 has given a new dimension to the provisions relating to admission of new evidence before the CIT(A). The interesting facts in this case were that loans taken by the assessee were added as undisclosed income u/s 68. Before the CIT(A), the assessee wanted to produce additional evidences in the form of xerox copies of cheques, a certificate from the bank and copies of the bank statements which were not accepted by him, holding that he was not obliged to accept additional evidences as the assessee's case did not fall in any of the four exceptions set out in rule 46A(l). The Bombay High Court negatived the contention of the CIT(A) and held that under section 250(4), he was empowered to make such further inquiry as he thinks fit and such power being quasi judicial power, it was incumbent on him to exercise the same if the facts and circumstances justify. It further held that if the first appellate authority failed to exercise his discretion judicially and arbitrarily refused to make inquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. In other words, the message from the Bombay High Court is that if prima facie an information/evidence is necessary to examine the claim of the assessee, the CIT(A) should consider the necessary evidence in exercise of powers u/s 250(4) even if the case of the assessee does not fall within the four comers of the circumstances enumerated in rule 46A(l). In ITO vs. Bajoria Foundation (2001) 71 TTJ 343, the Calcutta Bench of the Tribunal once again followed Smt. Prabhavati S Shah's case (supra) to reject the technical objection of the revenue and held that CIT(A) could consider the necessary evidence in exercise of his powers under section 250(4) if prima facie an information is necessary to examine the claim of the assessee. It is further submitted that the assessee adduced evidence in the form of Letter of Tehsildar, Jamabandi, Sale deed and copy of bank account,to clarify the issue that the sale of the impugned land was not exigible to capital gains, in order to substantiate that the agricultural land sold by him did not fall in the definition of capital asset as per section 2(14)(3).The above evidence is clarificatory in nature. Courts have held that clarificatory nature of materials is not additional evidence. This issue arose before the Karnataka High Court in Sri Shankar Khandasari Sugar Mills vs. CIT (1992) 193 ITR 669. The issue before the court, in brief, was that the ITO framed the best judgement assessment U/S 144 relying upon the material from the Commercial Tax Department relating to the turnover of the assessee. Before the CIT(A), the assessee produced Sales tax assessment order for the first time who refused to look into the same on the pretext of additional evidence. Holding the action of the CIT(A) to be unjustified, the court observed- “The appellate authority should have accepted the material produced by the assessee as clarificatory in nature and considered the same to test the fairness and propriety of the estimate of income made by the Income-tax Officer. Though it was belated production of very relevant material, no prejudice (in its legal sense) would have resulted to the Revenue by considering the material ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 6 produced by the assessee. In the absence of any prejudice to the Revenue, and the basis of the tax under the Act being to levy tax, as far as possible, on the real income, the approach should be liberal in applying the procedural provisions of the Act. An appeal is but a continuation of the original proceeding and what the Income-tax Officer could have done, the appellate authority also could do.\" (emphasis supplied) In view of the above facts and case laws, the additional evidence under Rule 46A(1) ought to have been accepted. Ground No.3 The CIT(A) has grossly erred in law as well as on facts in making an addition of Rs.25,75,600/-on account of Long term capital gain on the entire sale consideration of agricultural land, which was not a capital asset as per the Income Tax Act, thus the Ld.AO erred in taxing the sale of agricultural land under LTCG. The assessee sold 0.48 hectares of ancestral agricultural land situated two kms away from Dudu. The above land was used for agriculture and is about 64 kms from Jaipur. With regard to Muncipal limits, it is more than 20 kms away as certified by Tehsildar (Land Records) Dudu, vide his letter dated 22.03.2021. It may further be added that a certificate in respect of the impugned land was also issued by Tehsildar (Land Records) Dudu, vide letter dated 27.12.2019, which clarified that the land fell in the jurisdiction of Gram Panchayat, Dudu and not in the jurisdiction of Nagar Palika (Muncipality) The above certificates issued by the Competent authorities prove that the impugned land does not come in the purview of Capital asset as per section 2(14)(iii)(b). The land being agricultural is further proved by copy of Jamabandi. Sale Consideration is not taxable: Section 2(14) defines capital asset. As per this section agricultural land is not a capital asset but certain agricultural land falling in specified area are held as capital asset. As per section 2(14)(iii)(b) an agricultural land situated in any area within such distance, not being more than 8 kms, from the local limits of any municipality as the Central government may, specify in this behalf by notification in the Official Gazette is considered as capital asset. Therefore, any agricultural land which falls beyond 8 kms of the local limits of municipality as specified in the notification, is not considered as capital asset. The CBDT vide its notification no. 9447 dated 6th January, 1994 for the purpose of Section 2(14)(iii)(b) of the Income Tax Act, 1961 has notified the municipality of Jaipur as the areas up to distance of 8 Kms. from municipal limits in all directions. The reference to municipal limit or the limit of cantonment board in the schedule to this notification is to the limits as existing on the date on which the notification is published in the official Gazette. Notification reported at (1994)116 CTR(St.)13 In view of the above explanation, for the purpose of ascertaining whether a particular land is agricultural land or not as referred in section 2(14), the distance of 8Kms. is required to be considered from municipal limit which was existing on the date on which the aforesaid notification is published in the Official Gazette and not the municipal limit which is existing on ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 7 the date of sale of land. Moreover, as per the decision of Hon’ble jurisdictional High Court of Rajasthan, in the case of CIT vs. Kheti Lal Sharma, HUF, the distance is to be reckoned from the municipal limits that existed at the time of issue of notification in this regard, i.e. 06.01.1994. On the date of notification, the municipal limit of Jaipur towards Ajmer Road, on which the land of the assessee is located was up to ESI Hospital. The assessee’s land is 55 kms away from ESI Hospital. The google map showing the location of the land of the assessee from ESI garden is placed in the paper book for your kind perusal. In view of the fact, that the impugned land is not a capital asset as per section 2(14)(iii)(b) of the Income Tax Act, 1961, there arises no question of capital gains on it’s transfer. We are also submitting Certificate issued by Tehsildar (Land Records) Dudu which clearly shows that land sold by the appellant was more than 20 Kms. away from Municipal Limit. Therefore, the impugned land was not a capital asset as per section 2(14)(iii)(b) of the Act and was not liable to capital gain u/s 45 of the Income Tax Act 1961. In view of the above facts, the appellant prays that the addition made by the AO on account of capital gains may kindly be deleted.” 6. Ld. AR of the assessee in support of the contention so raised in the written submission, placed reliance on the following evidence / records : S.No. Particulars Page No. 1. Copy of Sale letter of Agricultural land 1-4 2. Copy of Bank statement 5 3. Copy of Jamabandi of the impugned land 6 4. Copy of Certificate issued by Tehsildar dated 27.12.2019 7-8 5. Copy of Certificate issued by Tehsildar dated 20.03.2021 9 6. Google map showing distance of land from Muncipal limit existing as on the date of Notification No.9447 dt. 06/01/1994 10 During the course of hearing on 10.03.2025, the Ld.AR informed that the assessee has died on 29.01.2025. The Bench, therefore, asked the AR to file a revised Form- 36, which was filed on 17.03.2025. 7. The ld. DR is heard who relied on the findings of the lower authorities and more particularly advanced similar contentions as stated in the order of the ld. ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 8 CIT(A). He vehemently argued that the assessee failed to adduce the evidence before the AO in spite of ample opportunities provided to him. 8. We have heard the rival contentions and perused the material placed on record vide the paper book, as well as the relevant provisions of law and the case laws cited by the Ld.AR in support of his case. In this case, after issue of notice u/s 148 on 30.03.2019, notice u/s 142(1) calling for evidence in support of the transaction of sale of land was issued on 19.08.2019 [almost five months after initiation of reassessment proceedings] Thereafter, Show cause notice for completing the assessment u/s 144 was issued on 16.11.2019 [three months after issue of notice u/s 142(1)] Effectively, only two notices were issued to the assessee, which cannot be considered as an adequate opportunity. Further, there existed a reasonable cause for non-compliance of these notices on the part of the assessee, which was on account of his blindness and his dependence on his son for filing reply and other supporting documents, who stayed away from his parents and occasionally visited them. In view of these facts, the assessee’s case clearly fell under Rule 46A(1)(c) where the appellant was prevented by sufficient cause from producing before the Income tax Officer any evidence which is relevant to any ground of appeal. If additional evidence was not to be admitted, the ld. CIT(A) ought to have furnished speaking reasons for non-admission so that the assessee could explain properly as to whether the reasons for non- ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 9 admission of additional evidence are in accordance with law or not. In the instant case, the ld. CIT (A) completely ignored to take notice of the additional evidence and cursorily rejected the same, without even sending it to the AO.The CIT(A), on receiving an application for admitting additional evidences, is not free to act on his choice; his actions are well defined in the law and in the various judicial pronouncements. If the additional evidences are crucial and its consideration and appraisal would render substantial justice to the appellant, the same deserve to be addressed. The Hon’ble Delhi High Court in judgement in CIT vs. Virgin Security & Credit Private Limited (2011) 332 ITR 396(Del.) has held that the CIT(A) should admit the additional evidence if he finds that the same is crucial for the disposal of the appeal. Further, the Hon’ble Delhi High Court in the case of Chandrakant Janu Bhai Patel 202 Taxman 262 has held that if additional evidence is without any blemish, in order to advance the cause of justice, the same ought to be admitted. We are of the strong view that in the instant case, as the evidences surfaced after the assessment orders and appellant moved with such evidences and produced the same before the CIT (A) which are vital evidences and touch the roots of the case, the admissibility of such evidences could not have been denied over riding the principles of natural justice. The Hon’ble Supreme Court in the case of Collector Land Katji, 167 ITR 471 (SC) has held that when technical considerations are pitted against the cause of substantial justice, it is the ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 10 cause of substantial justice that must prevail. Hence, additional evidences ought to have been admitted with a motive to provide justice. In normal circumstances we would have restored the matter to the CIT(A) to decide the case afresh after admitting the additional evidence. But since the assessee is no more, considering the entirety of facts, circumstances and material on record, we are inclined to accept the additional evidence at this stage and decide the appeal on merits. 9. We find that during the relevant year, the assessee had sold a piece of agricultural land in Dudu tehsil for a consideration of Rs.24,00,000/-. The consideration was received partly in cash (Rs.4,00,000/-) and partly through cheques (2 cheques of Rs.10,00,000/- each). The property was valued by the Sub- registrar at Rs.25,75,600/- as per section 50C. The assessee produced two certificates issued by Tehsildar, Dudu, to prove that the impugned land did not constitute a capital asset. The first certificate dated 27.12.2019 mentioned that the impugned land falls in the jurisdiction of Gram Panchayat. The second certificate dated 22.03.23021 states that there exists no Municipality up to 20 kms. from the periphery of the impugned land. Apart from these authentic official records, the AR of the assessee provided a screen shot showing the distance of the impugned land from the municipal limit as per notification No.9447 dated 06.01.1994, on the relevant road. He also provided copy of the order of Hon’ble Rajasthan High Court in the case of CIT vs. Kheti Lal Sharma, HUFto drive home his point. The ITA No. 1025/JPR/2024 Abdul Aziz thr. L/H Abdul Hakim, Dudu 11 Ld. DR was fair enough to concede that the impugned land fell outside the municipal limits of Jaipur. In view of the above facts, we conclude that the impugned land sold by the assessee did not constitute a capital asset so as to entail capital gains on its transfer.Accordingly we set aside the orders of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the addition made by him and to accept the returned income. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 13 /05/2025. Sd/- Sd/- ¼ xxu xks;y ½ ¼MkWa-,l-lhrky{eh½ (Gagan Goyal) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 13/05/2025. *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Abdul Aziz through L/h Abdul Hakim, Dudu. 2. izR;FkhZ@ The Respondent- ITO, Ward-7(3), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File {ITA No. 1025/JPR/2024} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar "