ACIT, Circle-1, Bareilly V. Shri Wasim Imtiaz, Bareilly

ITA 322/LKW/2020

AI Insights

The case revolves around the dispute concerning the classification of two agricultural lands sold by Shri Wasim Imtiaz during the Assessment Year 2017-18. The Assessing Officer (AO) treated the lands as capital assets and taxable under long-term capital gains, citing their proximity to the municipal limits of Bareilly. However, the CIT(A) reversed this decision, supported by evidence that the lands are outside the municipal jurisdiction and meet the criteria for exclusion under Section 2(14)(iii) of the Act. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136107 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 08-10-2020
• Other Referred Cases: Pr. CIT vs. Anthony John Pereira, CIT vs. P.J. Thomas
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains
• Section: 143(3); 2(14)

Judgement Text

। आयकर अपीलीय अिधकरण Ɋायपीठ, लखनऊ । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, LUCKNOW BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT & SHRI GIRISH AGRAWAL, HON’BLE ACCOUNTANT MEMBER ITA No. 322/LKW/2020 Assessment Years: 2017-18 ACIT, Circle-1, Bareilly Vs. Shri Wasim Imtiaz S/o Imtiaz Hussain Nabadia, Pilibhit Road Bareilly – 243001 [PAN: AAEPI8055P] (Appellant) (Respondent) Assessee by : Shri Vivek Agarwal, CA Revenue by : Smt. Alka Singh, D/R सुनवाई की तारीख/Date of Hearing : 29/11/2022 घोषणा की तारीख/Date of Pronouncement : 20/02/2023 O R D E R PER BENCH : This appeal by the revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Bareilly, (hereinafter the “ld. CIT(A)”) dated 05/05/2020 for Assessment Year 2017-18 against the assessment order passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ACIT -2, Bareilly-New, dated 26/12/2019. 2. In the present appeal, the revenue has taken as many as four (4) grounds of appeal, all of which relate to the issue of addition of Rs.2,19,20,513/- under the head “long term capital gains” towards sale of two agricultural lands by the assessee, claimed as exempt since it does not fall within the definition of capital asset u/s 2(14)(iii) of the Act. For the sake of brevity the grounds of appeal are not reproduced. ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 2 3. Brief facts of the case are that assessee filed his return of income on 14/08/2017 reporting total income at Rs.20,85,110/- along with agricultural income of Rs.35,000/-. Case of the assessee was selected for complete scrutiny through CASS for which statutory notices were issue and served on the assessee. Assessee complied with the requirements by making both online and offline submissions. From the submission of sale deeds of the two agricultural land, ld. AO noted that assessee has disposed off agricultural land measuring 0.3165 hectare and 0.4810 hectare, situated at Mudia Ahmad Nagar, Bareilly on 08/07/2016 for Rs.1,07,00,000/- and for Rs.1,34,00,000/- respectively, totaling for a consideration of Rs.2,41,00,000/-. For these transactions, ld. AO noted the circle rate of Rs.1,02,09,000/- and Rs. 1,28,70,000/- respectively. Notice u/s 142(1) of the Act was issued requiring the assessee to submit his explanation in respect of applicability of exclusion given in Section 2(14)(iii) of the Act, in respect of the two agricultural land sold by the assessee. According to the ld. AO, these lands were capital assets in terms of Section 2(14) and required the assessee to demonstrate the basis on which these lands have been treated to be not situated in the municipal limits of Bareilly, so as to get coverage of exclusion provided in Section 2(14)(iii)(b) of the Act. In the course of assessment, assessee submitted that the lands in question are situated at village Mudia Ahmad Nagar with location/village code as 130351, which in itself is a rural municipality with census statistics of year 2009 stating it to be a gram panchayat with a population of 4554 people. Assessee claimed that these lands do not fall under the municipality of Bareilly, in support of which, a certificate from Nagar Nigam, Bareilly was furnished. 3.1. Before the ld. AO, the assessee claimed that, exclusion from the definition of capital asset in the case of assessee falls within the provisions contained in Section 2(14)(iii)(a) of the Act. Assessee also moved an application u/s 144A of the Act before the Joint Commissioner of Income-tax, Range-II, Bareilly (‘JCIT’), ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 3 for suitable directions for ld. AO for excluding the said rural agricultural land from the ambit of definition of capital asset u/s 2(14)(iii)(a) of the Act. Directions issued by JCIT, did not find favour with the submission made by the assessee. Thus, keeping in view the directions received from JCIT, ld. AO held the lands sold by assessee as capital assets by further observing that the said lands were situated within 3.8 Kms distance from the limits of municipality of Bareilly, which has a population in the range of 1 – 10 lakhs, as per the last census. Accordingly, taxable long term capital gain of Rs.2,19,20,513/- was computed and added to the total income of the assessee. 4. Aggrieved, assessee went in appeal to ld. CIT(A), before whom all the submissions were reiterated. Before the ld. CIT(A), assesse also submitted that ld. AO has not followed the online tax utilities provided by CBDT to decide and derive the conclusion as to which rural agricultural land is a capital asset and which is not as provided by Section 2(14)(iii) of the Act. The assessee further submitted the slides provided by the utilities of CBDT obtained online by the assessee to demonstrate his case. Assessee submitted that according to the utility in respect of capital assets for the year under consideration, result obtained by the assessee shows that the lands under consideration are agricultural land and are to be excluded from the definition of capital asset as per Section 2(14)(iii)(a) of the Act. The screenshot submitted by the assessee in this respect forming part of the submissions made before the Tribunal is extracted below:- ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 4 ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 5 4.1. By considering the submissions made by the assessee and placing reliance on the decision of the Hon’ble High Court of Bombay in the case of Pr. CIT vs. Anthony John Pereira in Income Tax Appeal No. 1223 of 2017 dated 04/02/2020 and that of Hon’ble Madras High Court in the case of CIT vs. P.J. Thomas reported in [1992] 211 ITR 897 (Mad.), ld. CIT(A) held that the two agricultural lands situated in village Mudia Ahmad Nagar, Bareilly, having its own gram panchayat with a population of only 4554 people, are not capital assets u/s 2(14)(iii) of the Act and thus, allowed the appeal of the assessee. 5. Aggrieved, Revenue is in appeal before the Tribunal. 6. Before us, ld. Counsel for the assessee, Shri Vivek Agarwal, C.A., represented the assessee and Smt. Alka Singh, D/R, represented the Department. 6.1. Before us, ld. D/R relied on the order of ld. AO and submitted to reverse the relief granted by the ld. CIT(A). 6.2. Per contra, ld. Counsel for the assessee reiterated the facts and referred to the certificate of Nagar Nigam Bareilly, copy of which is placed along with the written submission, to demonstrate that village Mudia Ahmad Nagar, Bareilly, ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 6 does not fall under the jurisdiction of municipality of Bareilly. The said certificate issued by the Nagar Nigam, Bareilly is reproduced below:- 7. Before adverting on the issue, relevant provisions of Section 2(14)(iii) of the Act are extracted below for ease of reference:- ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 7 “2(14) ["capital asset" means— (i) ...... (ii) ....... (iii) agricultural land 59 in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality 59 (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population 60 of not less than ten thousand 61 [***] ; or [(b) in any area within the distance, measured aerially,— (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation.—For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;]]” 8. From perusal of the above Section, we note that agricultural land situated in India is a capital asset unless, it falls under the exclusion prescribed under sub-Clause (a) or (b) of Section 2(14)(iii) of the Act. In the present case before us, assessee has claimed exclusion of the two lands under sub-Clause (a), whereas, ld. AO has made the addition by referring to the provisions contained in sub- Clause (b). It is noted that sub-Clause (a) refers to any area which is comprised within the jurisdiction of a municipality and which has a population of not less than ten thousand people. However, sub-Clause (b) refers to any area within the distance measured aerially giving the prescribed limits ranging from 2 to 8 Kms., coupled with size of population ranging from 10,000 to 10,00,000. Ld. CIT(A), in this respect has noted that the two lands are situated in a village ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 8 Mudia Ahmad Nagar, Bareilly, having its own gram panchayat with a population of only 4554 people and is not disputed by ld. AO. Ld. CIT(A) also noted that aerial distance of the above two lands is 3.8 Kms from the municipality of Bareilly as stated in the assessment order which is not disputed by the assessee. However, he noted that certificate of Nagar Nigam certifying that rural municipality of village Mudia Ahmad Nagar, is not within the municipal jurisdiction of Bareilly, has also not been disputed by the ld. AO. 9. Considering the facts on record, the material placed by assessee and the factual findings given by ld. CIT (A) as noted above, we do not find any reason to interfere with the said findings to hold that the two lands are not capital assets within the meaning of Section 2(14)(iii) of the Act. Accordingly, grounds taken by the revenue are dismissed. 10. In the result, appeal of the revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 1963, by placing result on the notice board on 20.02.2023. Sd/- Sd/- (MAHAVIR SINGH) (GIRISH AGRAWAL) VICE PRESIDENT ACCOUNTANT MEMBER Lucknow, Dated: 20.02.2023 SC. Sr. P.S. ITA No. 322/LKW/2020 Assessment Years: 2017-18 Shri Wasim Imtiaz 9 Copy to: 1. The Appellant: 2. Respondent : 3. The CIT(A)- Lucknow 4. The CIT , Lucknow 5. The DR ITAT, Lucknow //True Copy// By Order Assistant Registrar ITAT, Lucknow Benches, Lucknow