Smt. G. Vijaya Padma, Bangalore V. ITO, Bangalore

ITA 679/BANG/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73348 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L V BHASKARA REDDY JT
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Reopening of assessment; Capital asset; Opportunity of being heard; Cost of acquisition; Revised return; Reassessment proceedings
• Section: 54F; 2(14); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.679/BANG/2011 ASSESSMENT YEAR : 2007-08 SMT. G. VIJAYA PADMA, NO.135/A, 7 TH MAIN, 40 TH CROSS, 5 TH BLOCK, JAYANAGAR, BANGALORE 560 041. PAN : ABCPV 8123E VS. THE INCOME TAX OFFICER, WARD 4(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. CHANDRASHEKAR, ADVOCATE RESPONDENT BY : SHRI L.V. BHASKARA REDDY, JT.CIT(DR) DATE OF HEARING : 09.01.2014 DATE OF PRONOUNCEMENT : 09.01.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 22.02.2011 OF THE CIT(APPEALS)-II, BANGALORE RELATI NG TO ASSESSMENT YEAR 2007-08. ITA NO.679/BANG/2011 PAGE 2 OF 12 2. THE ASSESSEE IS AN INDIVIDUAL. FOR THE A.Y. 20 07-08, THE ASSESSEE DECLARED A RETURN OF INCOME ON 12.10.2007 DECLARING TOTAL INCOME OF RS.2,69,996. IN THE NOTES TO THE STATEMENT OF COMP UTATION OF INCOME AT SL.NO.2, THE ASSESSEE SUBMITTED AS FOLLOWS:- 2. LONG TERM CAPITAL GAINS ON SALE OF AGRICULTURAL LAND DURING THE YEAR IS NOT CALCULATED, SINCE THE AGRICU LTURAL LAND SOLD IS EXEMPTED. 3. THERE WAS A SURVEY CONDUCTED IN THE BUSINESS PRE MISES OF THE ASSESSEE ON 22.01.2009. IN THE COURSE OF SURVEY, A DOCUMENT TITLED REGISTERED AGREEMENT TO SELL WHICH PERTAINED TO P ROPERTY IN SY.NO.54/2 WAS FOUND. AS PER THE AGREEMENT, THE ASSESSEE AGRE ED TO SELL PROPERTY IN SY.NO.54/2 TO ONE K. MUNIRAJU FOR A TOTAL CONSIDERA TION OF RS.2,50,05,000. ANOTHER DOCUMENT WHICH WAS TITLED POSSESSION NOTE WAS ALSO FOUND. AS PER THIS NOTE, POSSESSION OF THE PROPERTY WAS HANDE D OVER TO K. MUNIRAJU ON 23.11.2006. BESIDES THE ABOVE, RECEIPTS EVIDENC ING RECEIPT OF THE CONSIDERATION AS STATED IN THE REGISTERED AGREEMENT TO SELL WAS ALSO FOUND. THESE DOCUMENTS WERE IMPOUNDED U/S.133A(3) OF THE A CT AND RETAINED. ACCORDING TO THE REVENUE, THE ABOVE DOCUMENTS CLEAR LY EVIDENCED A TRANSFER OF PROPERTY BY THE ASSESSEE WITHIN THE MEA NING OF SECTION 2(47)(V) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED T O AS THE ACT IN SHORT], WHICH LAYS DOWN THAT TRANSFER IN RELATION TO A CAPI TAL ASSET INCLUDES ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSIO N OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE ITA NO.679/BANG/2011 PAGE 3 OF 12 NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT, 1882. SINCE IN THE RETURN OF INCOME FILED BY THE ASSESSEE ON 12.10.2007, NO CAPITAL GAIN ON TRANSFER OF CAPITAL ASSET WAS DECLA RED BY THE ASSESSEE, THE AO AFTER RECORDING REASONS TO BELIEVE THAT INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT, ISSUED A NOTICE U/S. 148 OF THE ACT DATED 27.01.2009. THE ASSESSEE IN REPLY TO THE SAID NOTICE BY HER LET TER DATED 28.01.09 POINTED OUT THAT SHE HAD ALREADY FILED A RETURN OF INCOME WHEREIN SHE HAD DULY DISCLOSED HER INCOME CHARGEABLE TO TAX. THE A SSESSEE ALSO DEMANDED REASONS FOR INITIATING REASSESSMENT PROCEE DINGS. 4. THE REASONS RECORDED BY THE AO BEFORE ISSUING NO TICE U/S. 148 READS THUS:- A SURVEY U/S 133A WAS CARRIED OUT ON 22.1.2009 IN THE ASSESSEES PREMISES. IN THE COURSE OF SURVEY, CERTA IN DOCUMENTS FOUND IN ASSESSEES PREMISES ARE IMPOUNDED AND AMON GST THEM ONE IS A REGISTERED AGREEMENT TO SELL DATED 23.11 .2006 IN REGARD TO A CAPITAL ASSET ACQUIRED BY THE ASSESSEE ON 04.0 9.2002. BY VIRTUE OF THIS DEED, RECEIPTS AND POSSESSION NOTE, ASSESSEE HAS RECEIVED THE ENTIRE SALE CONSIDERATION AMOUNT OF RS . 2,50,05,000/- AND ALSO HANDED OVER THE POSSESSION TO THE PURCHASE R ON 23.11.2006 ITSELF. HOWEVER, AS SEEN FROM THE RETURN OF INCOME FILED ON 12.10.2007 FOR THE ASST. YEAR 2007-08, ASS ESSEE HAS NOT ADMITTED ANY INCOME FROM LONG TERM CAPITAL GAINS. AS PER PROVISIONS OF SECTION 2(47)(V), TRANSFER IN RELATIO N TO A CAPITAL ASSET INCLUDES ANY TRANSACTION INVOLVING THE ALLOWI NG OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERR ED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. 1882 (4 OF 188 2). THE ASSESSEE HAS PURCHASED THE PROPERTY FOR RS. 4,13,00 0/- AND AGREED TO SELL THE SAME FOR RS.2,50,05,000/- AND SINCE ASS ESSEE HAS NOT ADMITTED/DECLARED LONG TERM CAPITAL GAIN IN THE RET URN OF INCOME FILED ON 12.10.2007. THEREFORE, I HAVE REASON TO BE LIEVE THE SAID ITA NO.679/BANG/2011 PAGE 4 OF 12 LONG TERM CAPITAL GAIN CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE L.T. ACT, 1961. IN ORDER TO ASSESS THE ESCAPED TAX IN REGARD TO LONG TERM CA PITAL GAIN, BY INVOKING THE PROVISIONS OF SECTION 147 OF THE INTAC T. 1961. OFFICE IS DIRECTED TO ISSUE NOTICE U/S 148 IMMEDIATELY. OFFICE TO ISSUE NOTICE U/S 148 OF THE L.T. ACT, 196 1 IN ORDER TO TAX THE INCOME ESCAPED ASSESSMENT. SD/- ITO. 5. ON 12.03.2009, THE ASSESSEE FILED A REVISED RETU RN U/S. 148 OF THE ACT DECLARING CAPITAL GAIN ON SALE OF THE PROPERTY IN SY. NO.54/2 AT RS.1,91,19,782. ACCORDING TO THE AO, IN PROCEEDING S U/S. 148 OF THE ACT, THERE WAS NO PROVISION TO ACCEPT A REVISED RETURN A ND THEREFORE THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE WAS TREATED AS NON EST , WITH A CAVEAT THAT EVIDENTIARY VALUE OF THE CONTENTS OF TH E REVISED RETURN WILL, HOWEVER, BE CONSIDERED BY THE AO. 6. IN THE PROCEEDINGS BEFORE THE AO, THE CONTENTION PUT FORTH BY THE ASSESSEE WAS THAT THE PROPERTY WAS NOT ULTIMATELY S OLD TO K. MUNIRAJU, BUT WAS FINALLY SOLD TO SMT. MUNIRATHNAMMA AND MANJUNAT H ON 17.12.2007. THE AO, HOWEVER, REFERRING TO THE PROVISIONS OF SEC TION 2(47)(V) OF THE ACT, CAME TO THE CONCLUSION THAT THE ULTIMATE PURCHASERS WERE ONLY NOMINEES OF K. MUNIRAJU AND THAT AS FAR AS THE ASSESSEE IS CONC ERNED, TRANSFER HAD TAKEN PLACE WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT ON 23.11.2006, WHEN POSSESSION OF THE PROPERTY WAS DEL IVERED TO K. MUNIRAJU ITA NO.679/BANG/2011 PAGE 5 OF 12 BY THE ASSESSEE. THE ASSESSEE HAD FILED A COMPUTAT ION OF CAPITAL GAIN IN THE REVISED RETURN OF INCOME WHICH WAS TREATED AS NON EST BY THE AO. IN THE REVISED RETURN OF INCOME, THE ASSESSEE HAD GIVE N THE COMPUTATION OF LONG TERM CAPITAL GAIN ON SALE OF THE PROPERTY AS F OLLOWS:- LONG TERM CAPITAL GAINS DATE OF TRANSFER 23-NOV-06 SALE CONSIDERATION 2,50,05,000 LESS - SELLING EXPENSES COMMISSION PAID 7,50,000 COMPENSATION PAID TO TENANTS FOR VACATION 29,75,000 37,25,000 NET SALE CONSIDERATION 2,12,80,000 ACQUISITION DETAILS FINANCIAL YEAR COST INDEXED COST AGRICULTURAL LAND 4825OO*519/447 2002-03 4,82,500 5,60,218 NET GAIN 2,07,19,782 EXEMPTIONS INVESTMENT EXEMPTION KODAGIHALLI 16,00,000 16,00,000 16,00,000 CAPITAL GAINS 1,91,19,782 7. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION, WHILE COMPUTING CAPITAL GAIN, OF EXPENSES IN CONNECTION W ITH THE TRANSFER OF RS.29,75,000. IT WAS CLAIMED BY THE ASSESSEE THAT THE AFORESAID AMOUNT HAD BEEN PAID TO TENANTS FOR VACATING THE PROPERTY. A FURTHER SUM OF RS.5 LAKHS AND RS.2,50,000 WAS PAID TO UMESH AND S. SANT OSH AS COMMISSION IN RESPECT OF THE TRANSACTION. THE AO CALLED UPON THE ASSESSEE TO PRODUCE ITA NO.679/BANG/2011 PAGE 6 OF 12 THE PERSONS FOR EXAMINATION, BUT THE ASSESSEE COULD NOT PRODUCE THEM AND THEREFORE THE AO DISALLOWED THE CLAIM OF THE ASSESS EE FOR DEDUCTION OF THE AFORESAID SUM. 8. THE AO ULTIMATELY COMPUTED THE LONG TERM CAPITAL GAIN AS FOLLOWS:- A. COMPUTATION OF LONG TERM CAPITAL GAIN SALE CONSIDERATION 2,50,05,000 LESS: INDEXED COST OF ACQUISITION COST OF LAND RS.4,82,500X519 = 5,60,218 RS.2,44,44,782 447 NET LONG TERM CAPITAL GAIN RS.2,44,44,782 9. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED APPEAL BEFORE THE CIT(APPEALS). 10. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE LAND IN QUESTION WAS AN AGRICULTURAL LAND AND THEREFORE OUTSIDE THE PURVIEW OF DEFINITION OF CAPITAL ASSET AS GIVEN IN SECTION 2(14) OF THE ACT. THE FOLLOWING SUBMISSIONS WERE MADE BY THE ASSESSEE IN THIS REGAR D. THE PROPERTY WAS PURCHASED BY THE ASSESSEE ON 04.09.2002 AS AGRICULT URAL LAND AND HAS BEEN USED FOR AGRICULTURAL PURPOSE AND THE INCOME R ECEIVED FROM THE AGRICULTURAL LANDS HAS BEEN CONSIDERED FOR RATE PUR POSES IN HER RETURN OF INCOME. THE ASSESSEE POINTED OUT THAT AGRICULTURAL LAND BEYOND 8 KILOMETERS FROM THE END OF THE NOTIFIED MUNICIPALIT Y IS NOT LIABLE FOR TAX AND CENTRAL GOVERNMENT HAS NOTIFIED BANGALORE AS MUNICI PALITY AND THE PROPERTY IN QUESTION WAS SUBSTANTIALLY FAR AWAY FROM THE LIM IT SPECIFIED, I.E., THE LAND ITA NO.679/BANG/2011 PAGE 7 OF 12 WAS SITUATED MORE THAN 20 KMS FROM BANGALORE. THE LAND WAS SITUATE IN AKKUPETE VILLAGE. THE ASSESSEE POINTED OUT THAT AK KUPETE VILLAGE, KASABA HOBLI COMES UNDER VILLAGE PANCHAYAT AND IN A CCORDANCE WITH PART- 9 OF THE CONSTITUTION PANCHAYAT ARE DIFFERENT FROM MUNICIPALITIES AND ANY LAND COMING WITHIN THE PURVIEW OF THE PANCHAYAT WOU LD NOT BE LIABLE TO BE HELD AS A CAPITAL ASSET. THE ASSESSEE ALSO SUBMITT ED THAT THE POPULATION OF AKKUPETE VILLAGE WAS NOT MORE THAN 10,000. IN SO FA R AS 8 KMS LIMIT WAS CONTEMPLATED UNDER SEC. 2(14)(III)(B) OF THE ACT IS CONCERNED, THE ASSESSEE SUBMITTED THAT THE CONCERNED MUNICIPALITY SHOULD BE NOTIFIED BY THE CENTRAL GOVERNMENT AND THE CENTRAL GOVERNMENT NOTIFICATION DEALS WITH ONLY BANGALORE AND NOT AKKUPETE VILLAGE. HENCE SECTION 2 (14) (III) (B) WOULD NOT APPLY. 11. THE CIT(APPEALS) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE HELD AS UNDER:- 4.2 I HAVE GONE THROUGH THE APPELLANTS ARGUMENTS AND ALSO PERUSED THE ASSESSMENT ORDER FROM WHICH IT TRANSPIR ES THAT THIS ISSUE HAS NOT BEEN RAISED BEFORE THE AO AND, THEREF ORE, HE HAD NO OCCASION TO EXAMINE THE ISSUE, WHICH HAS BEEN RAISE D FOR THE FIRST TIME AT THE APPELLATE STAGE. 4.3 UNDER CLAUSE (III) OF SUB-SECTION (14) OF SECT ION 2, AGRICULTURAL LAND IS DEFINED AS UNDER: [(III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (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 ITA NO.679/BANG/2011 PAGE 8 OF 12 A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDIN G TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIG URES HAVE BEEN PUBLISHED BEFORE THE 1ST DAY OF THE PREVI OUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN EIGHT KILOMETRES FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD T O THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE;] 4.4 THE LAND IN QUESTION BEARING SURVEY NO.54/2 ME ASURING 1 ACRE 35 GUNTAS IS SITUATED AT AKKUPETE VILLAGE, KAS ABA HOBLI, DEVANAHALLI TALUK. AT THE TIME OF APPEAL HEARING, T HE APPELLANT VIDE LETTER DATED 14/5/2009, 24/6/2009 AND 21/10/20 09 REPEATEDLY STATED THAT HER PROPERTY, WHICH WAS SOLD, IS HARDLY LESS THAN HALF KILO METER FROM THE CITY OF DEVANAHALLI. THUS THE A PPELLANT CONTRADICTS HER OWN STATEMENT SAYING THAT IT IS BEY OND 8 KMS FROM THE LOCAL LIMITS OF THE LOCAL BODY. DEVANAHALLI IS NOTIFIED AS TOWN MUNICIPAL COUNCIL BY THE GOVERNMENT OF KARNATAKA AN D ITS POPULATION IS MORE THAN 10,000 ACCORDING TO 2001 CE NSUS. IT IS PERTINENT TO NOTE THAT THE APPELLANT HAS FILED REVI SED RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 22/5/2009 DE CLARING THE TOTAL INCOME AT RS.1,93,89,780/- INCLUDING CAPITAL GAINS OF RS.1,91,19,782/-. THE SAID RETURN WAS NOT ACCEPTED SINCE THE REVISED RETURN WAS FURNISHED BEYOND THE PERMISSIBLE TIME U/S 139(4). HOWEVER, THE SAME WAS TAKEN AS INFORMATION. IN VIEW OF THIS MATTER, THE PROPERTY IN QUESTION IS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. THE AO HAS RIG HTLY COMPUTED AS LONG TERM CAPITAL GAINS THE PROFIT ARIS ING ON SALE OF THE AFORESAID LAND. THEREFORE, THE APPEAL ON THIS G ROUND IS DISMISSED. 12. THE CONCLUSION OF THE CIT(A) IN SHORT IS THAT A KKUPETE VILLAGE FALLS WITHIN DEVANAHALLI MUNICIPALITY.(DEVANAHALLI HAS BE EN NOTIFIED AS MUNICIPALITY BY THE STATE GOVERNMENT). IN RESPECT OF THE ACTION OF THE AO IN DISALLOWING EXPENSES CLAIMED AS DEDUCTION IN COM PUTING THE CAPITAL GAIN, ITA NO.679/BANG/2011 PAGE 9 OF 12 THE CIT(A) CONFIRMED THE ACTION OF THE AO. AS FAR AS THE COMMISSION PAYMENTS MADE BY THE ASSESSEE ARE CONCERNED, THE CI T(A) FOUND THAT IN THE COPY OF ACKNOWLEDGEMENT FILED BY THE RECIPIENT OF COMMISSION, HAVE DISCLOSED THE RECEIPT OF COMMISSION FOR THE RETURNS IN A.Y. 2007-08 AND SUCH RETURNS HAVE BEEN FILED BY THEM IN THE MONTH O F AUGUST, 2009. ACCORDING TO THE CIT(A), RECIPIENTS OF COMMISSION F ILED RETURNS OF INCOME AFTER INITIATION OF ASSESSMENT PROCEEDINGS IN THE C ASE OF THE ASSESSEE AND THEREFORE IT WAS AN AFTER-THOUGHT. HE THEREFORE HE LD THAT THE PAYMENT OF COMMISSION CANNOT BE ALLOWED AS DEDUCTION. 13. WITH REGARD TO THE AMOUNTS PAID TO TENANTS FOR VACATING THE PROPERTY, THE CIT(A) FOUND THAT THE AMOUNTS WERE PAID TO 11 P ERSONS AGGREGATING TO A SUM OF RS.29.75 LAKHS AND THOSE PAYMENTS HAD BEEN MADE IN THE MONTHS OF JANUARY & FEBRUARY, 2008, WHICH ARE DATES RELEVANT TO AND FALLING WITHIN THE A.Y. 2008-09. THE CIT(A) THEREF ORE HELD THAT THE DEDUCTION CLAIMED CANNOT BE ALLOWED IN A.Y. 2007-08 . 14. ANOTHER CLAIM MADE BY THE ASSESSEE WAS FOR DEDU CTION U/S. 54F OF THE ACT. THE DEDUCTION WAS DISALLOWED BY THE AO AN D CONFIRMED BY THE CIT(A) FOR THE REASON THAT THAT PROPER DOCUMENTS EV IDENCING PURCHASE OF SITE AND CONSTRUCTION OF BUILDING WHICH COULD BE LE GALLY ACCEPTED WAS NOT PRODUCED BY THE ASSESSEE. 15. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO.679/BANG/2011 PAGE 10 OF 12 16. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE WITH REGARD TO THE ASSUMPTION OF JURISDICTION U/S. 148 OF THE ACT WAS THAT IN THE COURSE OF SURVEY, THOUGH EVIDENCE REGARDING THE SALE OF PROPE RTY WAS FOUND, BUT THE FACT THAT THE LAND WAS NOT AGRICULTURAL LAND DID NO T EMANATE FROM ANY OF THE DOCUMENTS FOUND IN THE COURSE OF SURVEY. ACCORDING TO HIM, THE AGREEMENT CLEARLY RECITED THE FACT THAT THE PROPERTY IN QUEST ION WAS AN AGRICULTURAL LAND. IN SUCH CIRCUMSTANCES, ACCORDING TO HIM, THE AO COULD NOT HAVE FORMED A BELIEF REGARDING ESCAPEMENT OF INCOME CHAR GEABLE TO TAX. IN OUR VIEW, THIS SUBMISSION CANNOT BE ACCEPTED FOR THE RE ASON THAT AT THE STAGE OF INITIATION OF REASSESSMENT PROCEEDINGS, IT WAS ONLY A PRIMA FACIE VIEW THAT HAS TO BE LOOKED INTO. THE FACT THAT THERE WAS SALE OF PROPERTY AND A CLAIM MADE IN THE RETURN OF INCOME FILED ORIGINALLY THAT THE SAID PROPERTY WAS AGRICULTURAL LAND WHICH WAS EXEMPT FROM INCOME TAX WAS BY ITSELF SUFFICIENT TO FORM A BELIEF REGARDING ESCAPEMENT OF INCOME CHA RGEABLE TO TAX. THE ORIGINAL RETURN OF INCOME HAD BEEN PROCESSED U/S. 1 43(1) OF THE ACT AND NO FURTHER PROCEEDINGS WERE INITIATED ON THE SAID RETU RN OF INCOME. IN SUCH CIRCUMSTANCES, IT WAS LEGITIMATE ON THE PART OF THE AO TO HAVE FORMED BELIEF REGARDING ESCAPEMENT OF INCOME AND TO HAVE I SSUED A NOTICE U/S. 148 OF THE ACT. CONSEQUENTLY, THE GROUNDS OF APPEA L REGARDING REOPENING OF ASSESSMENT U/S. 148 OF THE ACT ARE DISMISSED. 17. THE NEXT CLAIM OF THE ASSESSEE WAS THAT THE PRO PERTY IN QUESTION WAS LOCATED IN AKKUPETE VILLAGE, WHICH HAS A POPULA TION OF LESS THAN 10,000 AND IS A VILLAGE PANCHAYAT AND THEREFORE NO T A CAPITAL ASSET WITHIN ITA NO.679/BANG/2011 PAGE 11 OF 12 THE MEANING OF SECTION 2(14) OF THE ACT. THE FURTH ER SUBMISSION OF THE ASSESSEE WAS THAT THE VILLAGE IN QUESTION IS WITHIN 8 KMS. FROM THE LOCAL LIMITS OF DEVANAHALLI WHICH IS A NOTIFIED TOWN MUNI CIPAL COUNCIL BY THE GOVT. OF KARNATAKA, WHEREAS TO ATTRACT THE PROVISIO NS OF SECTION 2(14)(III)(B) OF THE ACT, THE NOTIFICATION HAS TO BE BY THE CENTR AL GOVT. 18. ON THIS ISSUE, WE HAVE ALREADY SEEN THAT BEFORE THE AO, THE ASSESSEE DID NOT RAISE THE ISSUE THAT THE PROPERTY IN QUESTION IS NOT A CAPITAL ASSET AND WAS AN AGRICULTURAL LAND. BEFORE THE CIT(A), THE CONTENTION WAS RAISED FOR THE FIRST TIME. THE AO W AS NOT AFFORDED AN OPPORTUNITY REGARDING THE CLAIM OF THE ASSESSEE BEF ORE THE CIT(A). THE CIT(A) HAS PROCEEDED ON THE BASIS OF SECTION 2(14)( III)(A) OF THE ACT VIZ., THE VILLAGE AKKUPETE BEING WITHIN THE JURISDICTION OF DEVANAHALLI TOWN MUNICIPAL COUNCIL. AS FAR AS SECTION 2(14)(III)(B) IS CONCERNED, THE MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) HAD TO BE NOTIFIED BY THE CENTRAL GOVT. IT, THUS, APPEARS THAT THE AP PLICABILITY OF CLAUSES (A) AND (B) OF SECTION 2(14)(III) HAD NOT APPRECIATED P ROPERLY BY THE CIT(A). WE ARE ALSO OF THE VIEW THAT THE AO SHOULD BE AFFOR DED AN OPPORTUNITY IN THIS REGARD. IN THESE CIRCUMSTANCES, WE DEEM IT FI T AND APPROPRIATE TO SET ASIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE A ND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION. 19. AS FAR AS THE DEDUCTION ON ACCOUNT OF EXPENDITU RE INCURRED IN CONNECTION WITH TRANSFER VIZ., PAYMENT TO TENANTS A ND COMMISSION AS WELL ITA NO.679/BANG/2011 PAGE 12 OF 12 AS DEDUCTION U/S. 54F OF THE ACT, WE ARE OF THE VIE W THAT THE ASSESSEE SHOULD BE AFFORDED AN OPPORTUNITY TO PRODUCE BETTER EVIDENCE TO SUBSTANTIATE HIS CASE AND THEREFORE, WE SET ASIDE T HE ORDER OF THE CIT(A) ON THESE ISSUES ALSO. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. 20. FOR STATISTICAL PURPOSES, THE APPEAL IS TREATED AS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF JANUARY, 2014 . SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 09 TH JANUARY, 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.