ITO, Pondicherry V. Shri R.Mohamed Yahiya, Pondicherry

ITA 1544/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5179 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TAPAS KUMAR DUTTA
• Keywords: Capital asset; Capital Gains
• Section: 143(3); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.1544/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ITO WARD I(1) PUDUCHERRY VS SHRI R.MOHAMED YAHIYA NO.28, KAMARAJ STREET SENTHAMARAI NAGAR, MUTHIALPET PONDICHERRY 605 003 [PAN ABTPY9580H] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TAPAS KUMAR DUTTA RESPONDENT BY : SHRI PHILIP GEORGE O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE, FOR ASSESSMENT YEAR 2007-08, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XII, C HENNAI, DATED 6.8.2010. 2. THE ASSESSEE IS THE OWNER OF A KALYANA MANDAPAM AND IS HAVING COMMISSION INCOME. FOR ASSESSMENT YEAR 2007 -08, HE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF ` 1,42,690/-. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AT A TOTAL INC OME OF ` 34,10,112/- . THE MAIN ADDITION WAS MADE ON ACCOUNT OF CAPITA L GAINS ARISING OUT ITA 1544/10 :- 2 -: OF SALE OF LAND WHICH, ACCORDING TO THE ASSESSEE IS AGRICULTURAL LAND AND ON THE SALE THEREOF NO INCOME-TAX IS EXIGIBLE. TH E ASSESSEE, ALONGWITH THREE OTHERS SOLD 22 ACRES AND 58 CENTS OF LAND VIDE SALE DEED DATED 22.12.2006 FOR A CONSIDERATION OF ` 96 LAKHS. SINCE THE ASSESSEE CLAIMED THAT THE LAND SOLD WAS AGRICULTURA L LAND, THE ASSESSING OFFICER MADE NECESSARY ENQUIRIES. AS PER THE RECORD OF THE VILLAGE ADMINISTRATIVE OFFICER(VAO), ALATHUR VILLAG E, TINDIVANAM TALUK, VILLUPURAM DISTRICT, THE LAND SOLD WAS ARABLE (KA RAMBU IN TAMIL) I.E THE LAND IS NOT FIT FOR AGRICULTURAL PURPOSES. ON THE BASIS OF THIS REPORT, THE ASSESSING OFFICER SOUGHT FURTHER EXPLANATION FR OM THE ASSESSEE VIDE LETTER DATED 24.12.2009. THE LD.AR VIDE LETTE R DATED 28.12.2009 INFORMED THAT THE ASSESSEE WAS OUT OF STATION ON AC COUNT OF BUSINESS EXIGENCIES AND THAT HE WAS NOT IN POSSESSION OF ANY PROOF TO SHOW THAT AGRICULTURAL OPERATIONS WERE CARRIED ON IN THE LAND SOLD. THE LAND IN QUESTION WAS ANCESTRAL PROPERTY OF THE ASSESSEE. F ROM THE REPORT OF THE VAO, THE ASSESSING OFFICER GATHERED THAT THE LA ND WAS NOT FIT FOR AGRICULTURAL PURPOSES NOR THE ASSESSEE HAD FURNIS HED ANY EVIDENCE FOR CARRYING ON ANY AGRICULTURAL ACTIVITIES. SO, HE HAS HELD THAT SALE OF THIS LAND WOULD NOT QUALIFY FOR EXEMPTION NOT BEIN G THE SALE OF AGRICULTURAL LAND. THE ASSESSING OFFICER ASCERTAIN ED THE COST OF LAND AS ON 1.4.1981 FROM THE OFFICE OF SUB-REGISTRAR, MARAK KANAM, VIDE LETTER ITA 1544/10 :- 3 -: DATED 30.12.2009. THE DETAILS OF THE LAND SOLD AND ITS GUIDELINE VALUE WAS ASCERTAINED BY THE ASSESSING OFFICER AS UNDER: OLD SURVEY NO. NEW SURVEY EXTENT NO. GUIDELINE VALUE 1. 207/1 .221/1 2. 207/2 221/1 & 221/2 3. 208/6 222/76 4. 206/2 220/4 5. 209/8 225/56 6. 209/9 225/56 7. 187 218 8. 186/2 218 9. 188 218 10. 186/1 218 11. 206/5 220/5 ACRES-CENTS 0.56 4.58 2.32 0.75 0.25 0.08 4.61 3.6 4.18 0.78 0.87 2500 22, 900 23, 200 375 2.500 800 23, 050 18, 000 20, 900 3,900 4,350 THE TOTAL EXTENT OF LAND SOLD IS 22.58 ACRES TOTAL SALE VALUE ` 96.00 LAKHS THE ASSESSEES SHARE IN SALE VALUE ` 35 LAKHS ASSESSEES SHARE IN PERCENTAGE 36.50% INDEXATION COST OF ` 1,22,775 X 519/100 = ` 6,37,202/- ASSESSEES SHARE IN COST 36.5% = ` 2,32,578/- SALE VALUE ASSESSEES SHARE = ` 35,00,000/- LESS: COST OF LAND FOR ASSESSEES SHARE = ` 2,32,578/- CAPITAL GAINS OF THE ASSESSEE = ` 32,67,422/- 3. IN THIS WAY, THE ASSESSING OFFICER COMPUTED CAPITA L GAINS AT ` 32,67,422/-. DURING FIRST APPEAL, THE LD. CIT(A) C ALLED FOR THE REMAND REPORT OF THE ASSESSING OFFICER. THE AVERMENTS OF THE REMAND REPORT DATED 15.6.2010, VERBATIM ARE AS UNDER: 'THE MAIN ISSUE WAS SALE OF LAND FOR ` 35 LACS FOR WHICH THE ASSESSEE HAS CLAIMED EXEMPTION AS AGRICULTURAL LAND S. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ENQUIR IES WERE MADE WITH THE VAO, ALATHUR VII/AGE, TINDIVANAM TALUK, VILLUPURAM DISTRICT. THE VAO HAS GIVEN CERTI FICATE TO ITA 1544/10 :- 4 -: THE EFFECT THAT THESE LANDS WERE ONLY 'KARAMBU WHI CH MEANS NON-ARABLE AND NOT FIT FOR AGRICULTURAL PURPO SES: AS SUCH, THE ASSESSEE'S CLAIM THAT THE SAID LANDS WERE AGRICULTURAL IN NATURE WAS NOT TRUE. SECONDLY, EVEN IF IT IS ASSUMED FOR THEORETICAL PUR POSES THAT THESE LANDS WERE AGRICULTURAL IN NATURE, THE ASSESS EE, IN SPITE OF AMPLE OPPORTUNITIES GIVEN, HAS NOT PRODUCE D ANY EVIDENCE FOR THE AGRICULTURAL ACTIVITIES UNDERTAKEN BY HIM. THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCES/DETAIL S LIKE NATURE OF CROPS RAISED, SOWING OF SEEDS, IRRIGATION , EMPLOYMENT OF LABOUR, MARKETING OF PRODUCE ETC. IN SUPPORT OF HIS CLAIM. THIRDLY, AS PER THE PROVISIONS OF S. 54B, THE ASSES SEE, IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHI CH THE TRANSFER TOOK PLACE, SHOULD HAVE USED THE LANDS FOR AGRICULTURAL PURPOSES. AS PER THE RECORDS, THE ASS ESSEE HAS NOT ADMITTED ANY AGRICULTURAL INCOME FROM THE S AID LANDS FOR THE AYS 2005-06 AND 2006-07. THE ATTESTED COPIES OF THE STATEMENTS OF INCOME FOR THE AYS 2006 -07 AND 2005-06 ARE ENCLOSED FOR THE READY REFERENCE OF THE LEARNED CIT(A). IT IS, THEREFORE, SUBMITTED THAT THE LANDS OWNED BY THE ASSESSEE WERE NOT ONLY NOT AGRICULTURE IN NATURE BU T ALSO THE ASSESSEE HAS NOT USED THE LANDS FOR AGRICULTURA L PURPOSES. ' WHEN A SPECIFIC QUERY WAS ASKED FOR REGARDING THE EXACT LOCATION OF THE APPELLANT'S LANDS WHICH WERE SOLD, THE ASSESSING OFFICER HAD SUBMITTED TWO REPORTS DT. 02. 08.10 AND 03.08. :LA, IN WHICH THE ASSESSING OFFICER HAD COMMENTED AS UNDER :- 'IT IS SUBMITTED THAT AS PER THE ENQUIRIES MADE BY THE INSPECTOR OF THIS OFFICE, IT IS ASCERTAINED THAT THE SAID LAN DS IN SURVEY NOS.218, 220, 221, 222 & 225, PREVIOUSLY HELD BY TH E ABOVE ASSESSEE, ARE SITUATED 32 KMS. AND 36 KMS. AWAY FRO M THE LIMITS OF TINDIVANAM AND PONDICHERRY MUNICIPALITY RESPECTIVELY. IN CONTINUATION TO THIS OFFICE LETTER UNDER REFEREN CE(2), IT IS SUBMITTED THAT THE SAID LANDS BELONGING TO THE ABOV E ASSESSEE ARE SITUATED WITHIN 5 KMS. FROM MARAKKANAM , WHICH IS A TOWN PANCHAYAT, WITH A POPULATION OF ARO UND 19,570, AS PER CENSUS TAKEN IN 2001. THIS IS FOR TH E KIND INFORMATION OF THE CIT(A)'. ITA 1544/10 :- 5 -: 4. TO COUNTER THE ABOVE REPORT, THE ASSESSEE HAS SUBMI TTED, VIDE LETTER DATED 4.8.2010, AS UNDER: '1. THE ASSESSING OFFICER HAS NOT APPRECIATED THAT SEC. 2(14)(III)(A) OF THE INCOME-TAX ACT, 1961 CLEARLY P ROVIDES 'NOT BEING LAND SITUATE IN ANY AREA WHICH IS COMPRISED W ITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOW N AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH A POPULATION OF NOT LESS THAN 10000 ACCORDING TO THE LAST PRECEDING CENSUS 2. THE LANGUAGE E M PLOYED I N S EC. 2(14) MAKES I T CLEAR THA T T HE INTENTION OF THE LEGISLATUR E I S TO TAX A LAND SITUATED WITHIN A MUNICIPAL I TY, CORPORATION, NOTIFIED AREA COMMITTEE, TOWN COMMIT T EE OR CANTONMENT BOARD. P ARLIAME N T DID NOT WANT TO TAX A LAND SITUATED EITHER IN A VILLAGE OR A PANCHAYAT . THUS THE OBSERVATION OF THE ASSESSING OFF I CER THAT THE LANDS ARE SITUATED WITHIN 5 KMS . FROM MARAKKANAM TOW N PANCHAYAT HAS N O A PPLICATION TO THE PRESENT CASE . 3 . F URTHE R , I T IS CLEA R THAT THE L A N DS S I T U ATED I N KA NT HAD U VI LL A G E F AL L S I N KANTHAD U V I LIA GE P AN CHA Y AT AN D NOT ON MARAKKANAM TOWN PANCHAYAT . KANTHADU V I L L AGE PANCHAYAT IS FORMING PA R T O F TIN D I V ANAM TALUK OF VILLUPURAM D I STRICT , WHEREIN THE POPULAT I ON I S ABOU T 40 0 0 ONLY. A CERTIFICATE DT . 02 . 08.10 ISSUED BY THE V I LLAGE ADMINISTRAT I V E OFFICER OF KANTHADU VILLAGE ; EAST, ABUNDANTLY MAKES IT ' CLEAR THA T VARIOUS SURVEY N OS. OF P U N S A I (DRY)LANDS ' AT KANTHADU VILLAGE FALL S UNDER KANTHADU VILLAGE P AN CHAYAT AND NOT ON MARAKKANAM TOWN PANCHAYAT . 4. FURTHER THESE LANDS ARE S ITUATED 32 KMS. AWAY FROM TIND I VANAM TALUK. HENCE , THE LANDS IS N OT A CAPITAL ASSET AS PRESCRIBED UNDER SEC.2(14)(I I I) O F THE INCOME-TAX ' ACT AND THEREFORE NO T LIABLE TO C A PITAL G A INS TAX. 5. IT IS FURTHER CLEAR FROM THE REVENUE RECORDS NAM ELY LA N D PA TTA DT. 06 . 04.10 ISSUED ' BY T HE R E VENUE DEPARTMENT, VILLUPU R AM D I STR I C T OF THE GOVERNMENT ' OF T AMIL NADU, THAT THE LANDS SITUATED A T KANTHADU EAST VI L LAGE OF T I N D IVANAM TALUK. THIS REVENUE RECORD DOES NOT MENT I ON ANYTHING ABOUT MARAKKANAM TOWN PANCHAYAT . I 6. SIMILARLY, ADANGAL (VILLA GE LEDGER EXTRACT) RECORDS MAI NTAINE D BY THE DIVISIONAL DEPUTY THASHILDAR, THASHILDAR OFFICE , TINDIVANAM A L SO MAINTAIN THE RECORDS AS KANTHADU EAST VILLAGE OF TINDIVANAM TALUK . THIS REVENUE RECORD DOE S NOT MENTION ' ANYTHING ABOUT MARAKKANAM TOWN PANCHAYAT . ITA 1544/10 :- 6 -: 7 . FURTHE R THE SALE DEED RE G ISTERED B Y THE APPE L LANT IN FAVOUR OF THE P U R CHA S E R S ALSO DES CR I B ES TH AT T HE LA N DS S I TUATED AT K ANTHAD U VILLAGE, TINDIVANAM T A LUK OF VIZHUP UR A M D I STRICT . 8 . THEREFO R E, TH E LETTER DT . 03.08 . 10 ISSUED BY THE ' ASSESSING OFF IC E R IS WITHOUT APPRECIATI N G V A LI D REVENUE RECORDS AND LIABLE TO BE REJECTED. IT IS THE SELF SAME OFF I CER HELD IN THE ASSESSMEN T ORDER T HA T THE LANDS ARE 'ARABLE' NO T F I T FO R AGRICULTURAL PURPOSES AND THEREFORE LIABLE FOR CAPITA L GAINS. HOWEVER, IN THE ENQUIRY REPORT FURNISHED BY HIS OWN INSPECTOR THAT T H E LANDS ARE DRY (NANSAI) LANDS (WH IC H ARE REFLECTED IN REVENUE RECOR D S). ' 9. ALL THE ABOVE DETAILS MAKES ABUNDANTLY CLEAR THA T THE ASSESSMENT WAS FRAMED WITHOUT APPLICATION OF MIND AND THE PROVISIONS OF THE INCOME-TAX ACT, BUT ONLY TO HAR ASS THE APPELLANT. 5. AFTER CONSIDERING THE ABOVE SUBMISSIONS, THE LD. CI T(A) HAS CONCLUDED THAT THE LAND IN QUESTION WAS KARAMBU AND BEING SITUATED BEYOND THE RADIUS OF 8 KMS FROM THE MUNICIPALITY AS DEFINED U/S 2(14 R.W.S 2(14)(III) (A) AND 2(14)(III)(B) OF THE ACT , THE LAND IN QUESTION CANNOT BE TREATED AS CAPITAL ASSET AND THE SALE PRO CEEDS IN THE HANDS OF THE ASSESSEE HAVE TO BE TREATED AS EXEMPT FROM T AX. NOW THE REVENUE IS AGGRIEVED AND HAS RAISED THE FOLLOWING G ROUNDS: 1. ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL) IS ERRONEOUS BOTH ON FACTS AND LAW. 2. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN INTERPRETING SEC.2(14)(III) IN SUCH A WAY THAT A LL LANDS BEYOND 8 KM FROM THE LOCAL LIMITS OF MUNICIPALITY ARE NOT CAPITAL ASSETS, WHEREAS ONLY AGRICULTURAL LANDS THAT ARE BEYOND 8 KM FROM A MUNICIPALITY DO NOT FALL UNDER THE DEFINITION OF 'C APITAL ASSET'. 3. EVEN THOUGH THERE IS NO DEFINITION FOR 'AGRICULTURA L LANDS' IN THE IT ACT 1961, THE EXPLANATION GIVEN IN SEC. 54B(I) FOR TREATING A LAND AS AGRICULTURAL LAN D VIZ ITA 1544/10 :- 7 -: LAND SHOULD HAVE BEEN USED FOR AGRICULTURAL PURPOSE IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER, SHOULD BE TAKEN AS DEFINITION FOR 'AGRICULTURAL LAND' AND THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN NOT HOLDING THAT THE LAND TRANSFERRED IS NOT AN AGRICULTURAL LAND. 4. COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE REALIZED THAT THERE IS NO PUMP SET I WATER SOURCES FOR THE LANDS IN QUESTION AND THEREFORE THE LANDS I N QUESTION CAN NOT BE TREATED AS 'AGRICULTURAL LAND'. 5. COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE REALIZED THAT THE ASSESSEE HAS NOT RETURNED ANY AGRICULTURAL INCOME IN THE RETURNS FILED FOR ANY OF THE EARLIER YEARS AND THEREFORE THE LANDS IN QUESTION C AN NOT BE TREATED AS 'AGRICULTURAL LAND'. 6. ANY OTHER GROUND THAT MAY BE TAKEN AT THE TIME OF HEARING. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE EVIDENCE AVAILABLE ON RECORD. THE UNDI SPUTED FACTS WHICH WE COULD CULL FROM THE RECORDS ARE AS UNDER: (I) IN THE REMAND REPORT, THE LAND SOLD WAS MARKED AS ARABLE. (II) THE LAND IN QUESTION WAS NOT CULTIVATED FOR MANY YEARS BECAUSE THE LAND BEING NOT FIT FOR CULTIVATION. (III) THE ASSESSEE DID NOT FILE ANY PROOF IN SUPPORT OF HAVING DONE ANY AGRICULTURAL ACTIVITIES ON THIS LAND. (IV) THE ASSESSEE HAS NEVER SHOWN AGRICULTURAL INCOME FROM THIS LAND PREVIOUSLY. (V) THE ASSESSING OFFICER HAS SOUGHT REPORT FROM A DIFFERENT VILLAGE. ITA 1544/10 :- 8 -: (VI) FROM THE ASSESSMENT ORDER IT IS EVIDENCE THAT THE ASSESSING OFFICER GAVE ONE OPPORTUNITY TO THE ASSESSEE ON WHICH DATE HE COULD NOT BE PRESENT BECAUSE HE HAD GONE OUT OF TOWN DUE TO CERTAIN BUSINESS EXIGENCIES. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE DEEM IT FIT TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO PROVE THAT THE LAND WHICH WAS SOLD WAS AGRICULTURAL LAND ON THE DATE OF SALE. IT WOULD BE UNJUST TO HOLD WITHOUT GIVING OPPORTUNITY TO THE A SSESSEE TO SHOW THAT THE LAND SOLD WAS NOT AGRICULTURAL LAND AS IT WAS N OT FIT FOR AGRICULTURAL OPERATIONS PARTICULARLY WHEN THE REPORT OF VAO PERT AINED TO SOME OTHER VILLAGE. CONSEQUENTLY, WE RESTORE THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE SAME, AFRESH, AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 29. 4.2011 SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 29 TH APRIL, 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR