Shri Neel Narendra Patel, Vadodara V. The ITO, Ward-4(1)(3), Vadodara

ITA 1572/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9349 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Capital asset; Salary income; Date of conversion; Fair market value; Capital Gains
• Section: 208; 147

Judgement Text

ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBE R AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1571/AHD/2017 AY: 2011-12 SHRI VISHAL NARENDRABHAI PATEL, 17, SHANTIKUNJ SOCIETY NO. 1, NEAR DEEP CHAMBERS, MANJALPUR, VADODARA 390 001 (PAN: AIQPP1816K) VS DCIT, CIRCLE 4(2), BARODA. (APPELLANT) (RESPONDENT) ITA NO. 1572/AHD/2017 AY: 2011-12 SHRI NEEL NARENDRA PATEL, 17, SHANTIKUNJ SOCIETY NO. 1, NEAR DEEP CHAMBERS, MANJALPUR, VADODARA 390 001 (PAN: AIQPP1816K) VS INCOME TAX OFFICER, WARD 4(1)(3), BARODA. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI BANDISH SOPARKAR, AR RESPONDENT BY: SHRI S.K. DEV, SR. DR DATE OF HEARING : 27.0 6.2019 DATE OF PRONOUNCEMENT: 01.10.2019 ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 2 ORDER PER SUDHANSHU SRIVASTAVA, J.M.: BOTH THE APPEALS ARE PREFERRED BY THE ASSESSEES A ND INVOLVE IDENTICAL ISSUES. THE YEAR UNDER CONSIDERAT ION IS ASSESSMENT YEAR 2011 12. BOTH THE APPEALS WERE HE ARD TOGETHER AND THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2.0 THE BRIEF FACTS IN THE CASE OF THE FIRST ASSES SEE I.E. SH. VISHAL NARENDRABHAI PATEL IS THAT THE ASSESSEE EARN S INCOME FROM SALARY AND IS ALSO AN AGRICULTURIST. THE RETURN OF INCOME WAS FILED DECLARING A TOTAL INCOME OF RS. 5,06,940/-. THE ASS ESSMENT WAS COMPLETED UNDER SECTION 143 (3) READ WITH SECTION 1 47 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) AT AN INCOME OF RS. 57,12,870/- AFTER MAKING AN ADDITION OF RS. 52,05,926/- ON ACCOUNT OF LONG TERM CAPITAL GAIN. IN THE CASE O F THE SECOND ASSESSEE I.E. SH. NEEL NARENDRA PATEL, THE ASSESSEE DERIVES INCOME FROM INTEREST AND LONG TERM CAPITAL GAIN. TH E RETURN WAS FILED DECLARING TOTAL INCOME OF RS. 5,300/- AND THE TOTAL INCOME WAS DETERMINED UNDER SECTION 143 (3) READ WITH SECT ION 147 OF ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 3 THE ACT AT AN INCOME OF RS. 61,80,856/- AFTER MAKIN G AN ADDITION OF RS. 61,55,056/- ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2.1 THE FACTUAL MATRIX LEADING TO THE REOPENING OF THE CASES WAS THAT IT CAME TO THE KNOWLEDGE OF THE ASSE SSING OFFICER THAT THE TWO ASSESSEES HAD ENTERED INTO A TRANSACTI ON OF A SALE OF LAND BEARING RS NO. 65 AND 66/2 ADMEASURING 5314 M IN PADRA, BARODA ALONG WITH ONE MORE PERSON FOR A TOTAL CONSI DERATION OF RS. 2.087 CRORES. SINCE THE ASSESSEES HAD NOT REFLE CTED THE CAPITAL GAINS IN THEIR RETURNS OF INCOME, THEIR CAS ES WERE REOPENED UNDER SECTION 147 OF THE ACT. 2.2 IT WAS THE CONTENTION OF THE ASSESSEES BEFORE THE ASSESSING OFFICER THAT THE SAID LAND IN QUESTION WA S ANCESTRAL LAND WHICH HAD BEEN INHERITED FROM THE FOREFATHERS. IT WAS FURTHER IS SUBMITTED THAT THE COMPUTATION OF CAPITA L GAINS HAD NOT BEEN MADE SINCE THE LAND IN QUESTION WAS AGRICU LTURAL LAND AND THE SALE WAS EXEMPT FROM THE CAPITAL GAINS TAX. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE TO THE SUBMISSIONS OF THE ASSESSEES. THE ASSESSING OFFICER MADE A REFERENCE T O THE PADRA MUNICIPALITY AND REQUESTED IT TO PROVIDE INFORMATIO N UNDER SECTION 133 (6) OF THE ACT ON THE QUESTION AS TO WH ETHER THE LAND IN QUESTION FELL WITHIN THE LOCAL LIMITS OF MUNICIP ALITY OF PADRA. IN ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 4 REPLY TO THE SAME, THE CHIEF OFFICER OF THE MUNICIP AL BOARD OF PADRA, VIDE CERTIFICATE DATED 25/03/2015, STATED TH AT THE LAND IN QUESTION WAS FALLING WITHIN THE MUNICIPAL LIMITS OF THE PADRA MUNICIPALITY. THE ASSESSING OFFICER WENT ON TO HOLD THAT SINCE THE LAND WAS NOT FALLING OUTSIDE THE JURISDICTION OF TH E PADRA MUNICIPAL BOARD, THE SAME WOULD ATTRACT THE RIGOURS OF CAPITAL GAINS TAX. ACCORDINGLY, THE ASSESSMENTS WERE COMPLE TED BY TREATING THE SALE PROCEEDS AS BEING LIABLE FOR CAPI TAL GAINS TAX AS AFORESAID. 2.3 THE APPEALS OF BOTH THE ASSESSEES WERE ALSO DI SMISSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). NO W, THE ASSESSEES HAVE APPROACHED THE TRIBUNAL AND HAVE CHA LLENGED THE FINDING AND ADJUDICATION BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 3.0 THE LD. AUTHORISED REPRESENTATIVE SUBMITTED TH AT THE LD. FIRST APPELLATE AUTHORITY HAD ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF T REATING THE SALE PROCEEDS AS LONG TERM CAPITAL GAINS RATE BY TREATIN G THE SAME AS NON-AGRICULTURAL LAND. IT WAS SUBMITTED THAT THE LA ND WAS AN ANCESTRAL AGRICULTURAL LAND. HE ALSO SUBMITTED THAT THE RECORDS I.E. 7/12 EXTRACTS CLEARLY SHOW THE SUBJECT LAND AS AGRICULTURAL ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 5 LAND. IT WAS FURTHER SUBMITTED THAT THE LD. FIRST A PPELLATE AUTHORITY HAD ERRED IN TREATING THE SUBJECT LAND AS CAPITAL ASSET AND NOT AGRICULTURAL SITUATED IN THE AREA AND WITHI N DISTANCE OF 8 KMS FROM THE LIMITS OF PADRA MUNICIPAL BOARD. 3.1 IT WAS FURTHER SUBMITTED THAT THE AGREEMENT TO SELL HAD CLEARLY INDICATED THAT THE LAND IN QUESTION WAS AGR ICULTURAL LAND BUT THE LAND HAD TO BE CONVERTED TO NON-AGRICULTURA L FOR THE PURPOSE OF GETTING THE RELEVANT PERMISSIONS FOR THE PURCHASER WHO WAS NOT AN AGRICULTURIST BUT THIS DID NOT CHANG E THE NATURE OF THE LAND SOLD. 3.2 THE LD. AUTHORISED REPRESENTATIVE SUBMITTED T HAT NOTIFICATION NO. 9447 BEARING F NO. 164/3/87 [IT (A I)] DATED 06/01/1994 ISSUED UNDER SECTION 2 (1A)/(14) OF THE ACT CLEARLY DID NOT INCLUDE PADRA MUNICIPAL BOARD FOR THE PURPO SES OF SECTION 2(14)(III)(B) AND THAT THERE HAS BEEN NO FURTHER NO TIFICATION SUBSEQUENT TO THIS NOTIFICATION SO AS TO BRING THE LAND WITHIN THE MUNICIPAL LIMITS OF THE PADRA MUNICIPAL BOARD FOR T HE PURPOSES OF THE ACT. 3.3 THE LD. AUTHORISED REPRESENTATIVE FURTHER SUBM ITTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AD ONLY RELIED ON THE CERTIFICATE ISSUED BY THE CHIEF OFFIC ER OF THE PADRA ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 6 MUNICIPALITY AND HAD TOTALLY IGNORED THAT THE ABOVE NOTIFICATION DATED 6/01/1994 WHICH DID NOT INCLUDE PADRA MUNICIP ALITY IN THE LIST OF MUNICIPAL BOARDS FOR THE PURPOSE OF SEC TION 2(14)(III)(B). 3.4 THE LD. AUTHORISED REPRESENTATIVE PLACED RELIA NCE ON AN ORDER OF ITAT JAIPUR BENCH IN THE CASE OF SATYA DEV SHARMA VERSUS ITO REPORTED IN (2014) 149 ITD 725 (JAIPUR T RIBUNAL) FOR THE PROPOSITION THAT WHERE THE ASSESSING OFFICER RE JECTS THE ASSESSEES EXPLANATION THAT THE LAND IN QUESTION WA S AGRICULTURAL LAND AND WHERE THE ASSESSING OFFICER PROPOSES TO BR ING CAPITAL GAIN ARISING FROM SALE OF LAND TO TAX, FOR THE PURP OSE OF APPLICATION OF ITEM (B) OF SUB CLAUSE (III) OF SUBS ECTION 2 (14) AND FOR THE PURPOSE OF MEASURING KILOMETRES FROM THE RA DIUS OF MUNICIPAL CORPORATION, THE RELEVANT DATE WOULD BE D ATE OF NOTIFICATION AND NOT THE DATE OF SALE OF LAND IN QU ESTION. 3.5 FURTHER RELIANCE WAS ALSO PLACED ON THE JUDGEM ENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VERSUS MADHU KUMAR N (HUF) REPORTED IN 208 TAXMAN 394 (KAR NATAKA) FOR THE PROPOSITION THAT WHERE AN ASSESSEE HAD SOLD A PIECE OF LAND WHICH THE ASSESSEE HELD TO BE A CAPITAL ASSET, ALTHOUGH THE SAID LAND WAS LOCATED WITHIN 8 KM OF THE MUNICIPAL CITY LIMITS BUT SINCE THE CENTRAL GOVERNMENT HAD NOT ISSUED ANY NOT IFICATION ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 7 UNDER SECTION 2 (14) (III) (B) FOR THE PURPOSE OF I NCLUDING THE SAID AREA WITHIN 8 KMS FROM THE MUNICIPAL LIMITS, THE LA ND IN QUESTION WAS TO BE ASSESSED AS AGRICULTURAL LAND. 3.6 THE LD. AUTHORISED REPRESENTATIVE FURTHER SUBM ITTED THAT THE ASSESSEES WERE ALSO CHALLENGING THE ACTION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DETERMINING THE COST OF AC QUISITION BY TAKING THE FAIR MARKET VALUE AS ON 01/04/1981 AS PE R THE DVO FOR COMPUTING THE LONG TERM CAPITAL GAINS AND IN NO T APPRECIATING THE CONTENTION THAT THE FAIR MARKET VALUE IS TO BE DETERMINED ON THE DATE OF CONVERSION OF AGRICULTURAL INTO CAPITAL ASSET. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IF THE EAR LIER GROUND OF THE ASSESSEES WAS ALLOWED THEN THE ALTERNATIVE PLEA WOULD BECOME ACADEMIC IN NATURE. 4.0 IN RESPONSE, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE PLACED EXTENSIVE RELIANCE ON THE FIN DINGS AND OBSERVATIONS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THE LOWER AUTHORITIES HAD CORREC TLY CONCLUDED THAT THE IMPUGNED TRANSACTION WAS LIABLE TO CAPITAL GAINS TAX BECAUSE THE IMPUGNED LAND FELL WITHIN THE MUNICIPAL LIMITS OF PADRA MUNICIPAL BOARD AND WAS ALSO NOT AGRICULTURAL LAND. ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 8 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. IT IS THE CLAIM OF THE ASSESSEE THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND AND THE ABSTRACTS OF 7/12 ALSO SHOW THE SAME AS AGRICULTURAL LAND. IT IS THE FURTHER CLAIM OF THE ASSESSEE IS THAT THE LAND WAS INHERITE D FROM THE ANCESTORS AND IT CONTINUED TO BE AGRICULTURAL LAND WHILE ITS OWNERSHIP VESTED WITH THEM. THE ASSESSEES HAVE ALSO RELIED ON THE AGREEMENT TO SELL WHEREIN IT HAS BEEN MENTIONED THAT THE AGREEMENT WAS FOR THE SALE OF AGRICULTURAL LAND. IT IS FURTHER SUBMITTED THAT SINCE THE PROPOSED BUYER OF THE LAND WAS NOT AN AGRICULTURIST AND VARIOUS PERMISSIONS WERE NEEDED T O DEVELOP THE LAND, LAND WAS CONVERTED TO NON-AGRICULTURAL. IT IS FURTHER CONTENTION OF THE ASSESSEE THAT THE LAND IN QUESTIO N DID NOT FALL WITHIN 8 KM OF THE MUNICIPAL LIMITS OF PADRA FOR TH E PURPOSES OF SECTION 2(14)(III)(B) OF THE ACT AND THAT THE LOWER AUTHORITIES HAD ERRED IN TREATING THE SAME AS BEING WITHIN 8 KM OF THE PADRA MUNICIPALITY BY RELYING ON A CERTIFICATE FROM THE C HIEF OFFICER OF THE PADRA MUNICIPALITY BECAUSE PADRA MUNICIPALITY H AS NOT BEEN NOTIFIED IN THE NOTIFICATION (SUPRA). 5.1 A PERUSAL OF THE ORDER OF THE LOWER AUTHORITIE S SHOWS THAT THESE SUBMISSIONS OF THE ASSESSEE WERE NOT DUL Y CONSIDERED ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 9 BY THEM. IT IS THE ASSESSEES CONTENTION THAT SINCE PADRA MUNICIPALITY WAS NOT NOTIFIED REGARDING THE SAME BE ING A CAPITAL ASSET, THE LAND IN QUESTION COULD NOT BE TREATED AS CAPITAL ASSET. THE ITAT JAIPUR BENCH IN THE CASE OF THE SATYA DEV SHARMA VERSUS ITO (SUPRA) AND THE ITAT MUMBAI BENCH IN THE CASE OF ITO VERSUS AMRUTILA B. SHAH REPORTED IN (2013) 50 S OT 14 (MUMBAI TRIBUNAL) HAVE ALSO HELD THAT WHERE THE LAN D IN QUESTION IS LOCATED BEYOND 8 KMS AND THERE WAS NO NOTIFICATI ON OF THE CENTRAL GOVERNMENT PRESCRIBING THE SAME AS BEING A CAPITAL ASSET, THE LAND IN QUESTION COULD NOT BE TREATED AS CAPITAL ASSET. FURTHER, THE HONBLE KARNATAKA HIGH COURT IN THE CA SE OF CIT VERSUS MADHUKUMAR N (SUPRA) HAS ALSO HELD SIMILARLY . WE FIND THAT THIS ASPECT HAS NOT BEEN EXAMINED IN THE CORRE CT PERSPECTIVE BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). TH EREFORE, IN VIEW OF THE FACTS OF THE CASE AND THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD, IT IS OUR CONSIDERED OPINION THAT INTE REST OF JUSTICE WOULD BE SERVED IF THIS ISSUE IS RE-EXAMINED BY THE LD. FIRST APPELLATE AUTHORITY IN LIGHT OF THE JUDICIAL PRECED ENTS AS STATED ABOVE AFTER DULY CONSIDERING THE SUBMISSIONS WHICH THE ASSESSEE MAY MAKE IN THIS REGARD AND AFTER GIVING DUE OPPORT UNITY TO THE ASSESSEE TO PRESENT ITS CASE. ITA NO. 1571 & 1572/AHD/2017 ASSESSMENT YEAR 2011-12 10 6.0 IN THE FINAL RESULT APPEALS OF BOTH THE ASSESS EES STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 01.10.2019 SD/- SD/- (AMARJIT SINGH) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY DATED: 01 ST OCTOBER, 2019 *DRAGON* *DRAGON* *DRAGON* *DRAGON* COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER ASSTT. REGISTRAR ITAT, NEW DELHI