T.Nagi Reddy (HUF), Visakhapatnam V. THE ACIT, CENTRAL CIRCLE - 2, Visakhapatnam

ITA 109/VIZ/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0297 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CH SAJEEV
• Keywords: Capital asset; Reassessment proceedings
• Section: 143(3); 54B; 2(14); 147; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 109 / VIZ /201 4 (ASST. YEAR : 20 0 8 - 09 ) T. NAGIREDDY (HUF), D.NO. 17 - 40 - 23, PEDAGANTYADA, VISAKHAPATNAM. V S . A CIT, CENTRAL CIRCLE - 2 , VISAKHAPATNAM . PAN NO. AAAHT 4815 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADVOCATE . DEPARTMENT BY : SHRI CH. SAJEEV SR. DR DATE OF HEARING : 05 / 0 9 /201 8 . DATE OF PRONOUNCEMENT : 12 / 09 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VISAKHAPATNAM , DATED 1 0 /0 2 /201 4 FOR THE ASSESSMENT YEAR 200 8 - 09 . 2. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE, NO ADJUDICATION IS REQUIRED, THE SAME ARE DISMISSED. 3 . GROUND NOS. 2 & 3 ARE RELEVANT FOR ADJUDICATION , HAVE BEEN EXTRACTED AS UNDER: - 2 ITA NO. 109/VIZ/2014 [T. NAGIREDDY (HUF)] 2 . THE LD. CIT(A) OUGHT TO HAVE HELD THT THE LAND SOLD IS NOT A CAPITAL ASSET AND AS SUCH LEVY OF CAPITAL GAINS TAX IS NOT JUSTIFIED. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE APPELLANT IS ENTITLED FOR EXAMINATION UNDER SECTION 54B OF THE ACT. 4 . FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE IS A HUF, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION BY ADMITTING TOTAL INCOME OF RS. 44,960/ - AND AGRICULTURAL INCOME OF RS.5,50,0 00/ - . THE ASSESSEE HAD CLAIMED EXEMPTION UNDER SECTION 54B OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') IN RESPECT OF CAPITAL GAIN ARISING ON SALE OF AGRICULTURAL LAND. SINCE THE CLAIM OF THE ASSESSEE UNDER SECTION 54B WAS FOUND TO BE APPARENTLY INCORRECT, NOTICE UNDER SECTION 148 WAS ISSUED AND INITIATED REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. ACCORDINGLY, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT BY DETERMINING TOTAL INCOME OF RS. 46,12,130/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD OWNED TWO PIECE OF LAND ALONG WITH HIS FAMILY MEMBERS; ONE PIECE OF LAND MEASURING AC. 20, OUT OF WHICH THE ASSESSEE AND HIS FAMILY OWNED AC. 12.5 AND IN RESPECT OF OTHER PIECE OF LAND MEASURING 12 ACRES, THE ASSESSEE OWNED AC. 7.5 . THUS, THE ASSESSEE EFFECTIVELY SOLD AC. 20 FOR A TOTAL CONSIDERATION OF 3 ITA NO. 109/VIZ/2014 [T. NAGIREDDY (HUF)] RS.1,60,00,000/ - , IN WHICH ASSESSEES SHARE WAS FOUND TO BE RS.85 LAKHS. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS ASKED THE ASSESSEE HOW HE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54B OF THE ACT. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS CONTENDED T H A T THE LAND WAS SITUATED AT 8 KM. A WAY FROM VISAKHAPATNAM MUNICIPALITY LIMITS , AS SUCH PROPERTY TRANSFERRED WAS NOT A CAPITAL A S SE T AND IT WOULD NOT ATTRACT THE CAPITAL GAINS. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE SAME IS REJECTED FOR THE FOL LO WING REASONS: - CONTRARY TO THE CONTENTION OF THE ASSESSEE THAT, THE AGRICULTURAL LAND SOLD BY IT WAS N OT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) BEING SITUATED BEYOND 8 KMS FROM THE MUNICIPAL LIMITS OF VISAKHAPATNAM, IT IS EXAMINED THAT THE SAME IS FACTUALLY INCORRECT. IT IS OBSERVED THAT THE LIMITS OF ERSTWHILE MUNICIPAL CORPORATION OF VISAKHA PATNAM WERE EXTENDED BY THE GREATER VISAKHAPATNAM MUNICIPAL CORPORATION (GVMC) THROUGH THEIR G.O.M.S.NO.938 DATED 21.11.2005, ACCORDING TO WHICH THE GRAM PANC HAYAT OF APPIKONDA VILLAGE, WHEREIN THE LAND OF THE ASSESSEE IS SITUATED , IS COVERED WITHIN THE L IMITS OF GVMC. HENCE, AS THE LAND OF THE ASSEE SSEE WAS SITUATED WITHIN THE LIMITS OF GVMC AS AT THE TIME OF SALE, THE ASSET TRANSFERRED IS SQUARELY COVERED BY CLAUSE (A) TO SECTION 2(14) (III) OF THE ACT. ACCORDINGLY, THE ASSET CAN BE CLASSIFIED ONLY AS CA PITAL ASSET, AND THE TRANSFER OF WHICH WOULD ATTRACT CAPITAL GAINS. THE ISSUE WITH REGARD TO THE LOCATION OF THE TRANSFER ASSET BEING OUTSIDE THE MUNICIPAL LIMITS AS APPLICABLE UNDER CLAUSE (B) TO SECTION 2(14)(III), DOES NOT ARISE IN THE ASSESSEE'S CASE SINCE THE TRANSFERRED ASSET IS ACTUALLY WITHIN THE MUNICIPAL LIMITS OF GVMC AND AS SUCH THE PROVISIONS OF CLAUSE (B) TO SECTION 2(14)(III) WOULD NOT APPLY. 4 ITA NO. 109/VIZ/2014 [T. NAGIREDDY (HUF)] AS SEEN FROM THE RETURN OF INCOME FILED BY THE ASSESSEE ON 26.09.2008 BEFORE THE ADDITIONAL COMMISS IONER OF INCOME - TAX, RANGE - 5, VISAKHAPATNAM, THERE IS A CLEAR ADMISSION BY THE ASSESSEE OF LONG TERM CAPITAL GAIN ARISING TO IT ON ACCOUNT OF TRANSFER OF AGRICULTURAL LAND ON 04.02.2008. IT IS THEREFORE, APPARENT THAT THE ASSESSEE WAS AWARE OF THE FACT OF ITS AGRICULTURAL LAND FALLING WITHIN THE MUNICIPAL LIMITS OF GVMC AND ACCORDINGLY HAD ADMITTED THE CAPITAL GAIN. IT WOULD THEREFORE BE INCORRECT ON ITS PART TO NOW CONTEND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT, THE SAID TRANSFERRED ASSET WAS OUT SIDE THE MUNICIPAL LIMITS OF VISAKHAPATNAM. AS PER THE PROVISIONS OF THE ACT, THE CLAIM U/S.54 B IS NOT APPLICABLE TO THE STATUS OF HUF. ALTERNATIVELY AS PER THE PROVISIONS OF SECTION 54 B (1), THE QUALIFYING CAPITAL ASSET, WHICH IS TRANSFERRED, IS TO BE HELD BY THE ASSESSEE FOR A PERIOD TO TWO YEARS BEFORE THE SAME IS TRANSFERRED, AND THIS CONDITION IS ALSO NOT SATISFIED IN THE ASSESSEE'S CASE. 6 . INSOFAR CLAIM MADE BY THE ASSESSEE UNDER SECTION 54B IS CONCERNED, THE SAME IS ALSO REJECTED ON THE GROUND THAT THE ASSESSEE IS BEING A HUF . 7 . ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) , WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 8. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE GROUNDS OF APPEAL. 9. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 10. THE CASE OF THE ASSESSEE IS THAT THE SUBJECT LAND SOLD BY HIM IS SITUATED MORE THAN 8 KM. A WAY FROM THE VISAKHAPATNAM 5 ITA NO. 109/VIZ/2014 [T. NAGIREDDY (HUF)] MUNICIPALITY LIMITS . AS THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE, THE ASSESSING OFFICER DENIED THE CLAIM MADE BY THE ASSESSEE. O N APPEAL, LD. CIT(A) BY FOLLOWING THE DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF BORA RAMA NAIDU VS. ITO IN ITA NO. 264/VIZ/2010, DATED 28/09/2010 HELD THAT ONCE THE IMPUGNED LAND IS SITUATED WITHIN THE JURISDICTION OF THE LOCAL LIMITS OF GVMC, THE IMPUGNED LAND CEASE TO BE AGRICULTURAL ALND AND ON ITS SALE CAPITAL GAINS IS TO BE COMPUTED AND UPHELD THE ORDER OF THE ASSESSING OFFICE R. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A), IS EXTRACTED AS UNDER: - 5. I HAVE CONSIDERED THE SUBMISSIONS MADE AND THE DETAILS FILED. THE PRIMARY ISSUE TO BE RESOLVED IS WHETHER THE SUBJECT LAND CAN BE SAID TO BE CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE I.T. ACT. THE ASSESSEE'S MAIN CONTENTION IS THAT THE SUBJECT LAND IS SITUATED MORE THAN 8 KMS FROM THE VISAKHAPATNAM MUNICIPALITY. THE AO HAS HELD THAT AS THE SUBJECT LAND FALLS WITHIN THE LIMITS OF GVMC, IT WOULD BE A CAPITAL ASSET. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THE SUBJECT LAND DOES NOT FALL WITHIN THE LIMITS OF GVMC. IT IS RELEVANT TO NOTE THAT THE HON'BLE ITAT, VISAKHAPATNAM IN THE CASE OF BORA RAMA NAIDU (HUF) VS. ITO, W D - 4(1), VISAKHAPATNAM IN ITA NO. 264/VIZAG/2010, DATED 28/09/2010 HELD THAT ONCE THE IMPUGNED LAND IS SITUATED WITHIN THE JURISDICTION OF THE LOCAL LIMIT OF GVMC, THE IMPUGNED LAND CEASE TO BE AGRICULTURAL LAND AND ON ITS SALE CAPITAL GAINS IS TO BE COMPUT ED. AS IN THE PRESENT CASE, THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE TO SHOW THAT THE IMPUGNED LAND IS NOT WITHIN THE LIMITS OF GVMC, I FIND THAT THE AO IS JUSTIFIED IN HOLDING THE SAME TO BE CAPITAL ASSET. FURTHER, THE ASSESSEE HAD NOT DISPUTED ITS STATU S TO BE OF HUF. THE ASSESSEE ALSO FAILED TO ADDUCE THAT THE PERIOD OF HOLDING OF THE SUBJECT LAND IS MORE THAN TWO YEARS. IN THESE FACTUAL CIRCUMSTANCES, I AM OF 6 ITA NO. 109/VIZ/2014 [T. NAGIREDDY (HUF)] THE VIEW THAT THE AO IS JUSTIFIED IN DENYING THE EXEMPTION U/S.54 B AND ASSESSING THE GAINS ARISING ON THE TRANSFER OF THE LAND TO CAPITAL GAINS. 11. AS THE LD. CIT(A) HAS FOLLOW ED THE ORDER OF THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF BORA RAMA NAIDU (HUF) (SUPRA), WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) . THUS, TH E S E GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 2 T H DAY OF SEP . , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 2 T H SEP. , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE T. NAGIREDDY (HUF), D.NO. 17 - 40 - 23, PEDAGANTYADA, VISAKHAPATNAM. 2. THE REVENUE ACIT , C E N T R A L C I R C L E - 2 , VISAKHAPATNAM . 3. THE CIT 4. THE CIT(A) 5. THE D.R . , VISAKHAPATNAM . 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.