ITO, New Delhi V. Sh. Narender Verma, New Delhi

ITA 795/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3418 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA SENIOR
• Assessee Lawyers: RANO JAIN CAS
• Keywords: Capital asset
• Section: 2(14); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.795/DEL./2011 (ASSESSMENT YEAR : 2006-07) ITO, WARD 12 (4), VS. SHRI NARENDER VERMA, NEW DELHI. E 8/2, VASANT VIHAR, NEW DELHI. (PAN : AAGPV8257N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & MS. RANO JAIN, CAS REVENUE BY : SHRI A.K. MONGA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER OF THE CIT (APPEALS)-XXX, NEW DELHI DATED 06.12.2010 FOR THE A SSESSMENT YEAR 2006- 07. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE REA D AS UNDER :- 1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN TREATING THE RECEIPT OF RS.1,10 ,63,437/- AS EXEMPT AS PER PROVISION OF SECTION 2 OF THE ACT AS THE ASSESSEE HAS NEVER SHOWN THE AGRICULTURAL INCOME IN ITS RETU RN OF INCOME CLEARLY PROVES THE POINT THAT THE ASSESSEE HAS NEVE R DONE AGRICULTURAL ACTIVITIES ON THE LAND. THIS INFECT IS IN CONTRAVENTION OF SETTLED PRINCIPAL OF LAW ENUNCIATED BY THE HON'B LE SUPREME COURT IN THE CASE OF C.W.T. VS OFFICER-IN-CHARGE WH ERE IN IT IS HELD THAT' TO BE AGRICULTURAL LAND, THE LAND MUST B E ONE WHICH COULD BE SAID TO BE EITHER ACTUALLY USED OR ORDINAR ILY USED OR MEANT TO BE USED FOR AGRICULTURAL PURPOSES. IN OTHE R WORDS, IT ITA NO.795/DEL./2011 2 MUST HAVE 'A CONNECTION WITH AN AGRICULTURAL USER O R PURPOSE. IT WILL NOT SUFFICE MERELY TO SHOW THAT LAND IS CAPABL E OF BEING USED FOR AGRICULTURAL. WHAT IS NECESSARY IS CREDIBL E EVIDENCE OF AT LEAST APPROPRIATION OR SETTING APART OF THE LAND FOR A PURPOSE WHICH COULD BE REGARDED AS AGRICULTURAL AND FOR WHI CH THE LAND UNDER CONSIDERATION COULD REASONABLY USED WITHOUT A N ALTERATION OF ITS CHARACTER,' 2) 'THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2. THE ASSESSEE IS AN INDIVIDUAL FILED THE RETURN O F INCOME OF RS.17,65,264/- ON 30.07.2006. THE ASSESSEE PURCHAS ED THE AGRICULTURAL LAND IN 1995 ALONG WITH OTHER PERSONS AND SOLD THE SAME JOINTLY WITH OTHER PERSONS DURING THE PERIOD. THE ASSESSING OFFICER MADE AN A DDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN OF RS.93,56,239/-. THE CIT (A) DELETED THE ADDITION BY HOLDING AS UNDER :- 9. I HAVE CONSIDERED THE ORDER OF THE AO AND THE W RITTEN SUBMISSIONS FILED BY THE APPELLANT IN DETAIL. THE A R'S CONTENTION IS THAT AS THE LAND WAS AGRICULTURAL LAND, NO CAPIT AL GAINS TAX IS EXIGIBLE, AS IT IS OUTSIDE THE PURVIEW OF SECTION 2 (14) OF I.T. ACT IS FOUND TO BE CORRECT. THE LAND WAS SOLD TO RELIAN CE INDUSTRIES LTD. FOR WHICH CAPITAL GAINS TAX WAS IMPOSED BY THE AO. THE ACTION OF THE AO IS ON ASSUMPTION BASIS BECAUSE THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THAT THE LAND IS IN RE VENUE RECORD, WAS CLASSIFIED AS AGRICULTURAL LAND. I FIND FORCE I N THE ARGUMENTS OF THE APPELLANT THAT THE LAND IS OUTSIDE THE MUNIC IPAL LIMIT THEREFORE PROFIT ON SALE OF AGRICULTURAL LAND EXEMP T U/S 2(14) OF THE I.T. ACT. IN SUPPORT OF THIS THE APPELLANT RELI ED ON THE JUDGEMENT OF THE HINDUSTAN INDUSTRIAL RESOURCES LTD . VS. CIT(2009) J 80 TAXMAN 114(DELHI) IN WHICH THE COURT HELD THAT, 'AT THE POINT OF TIME WHEN THE ASSESSEE PURCHASE TH E SAID LAND, IT WAS AGRICULTURAL LAND. THUS, ON DATE OF PURCHASE, THE LAND IN QUESTION AS AGRICULTURAL LAND AND ON THE DATE OF ACQUISITION, THE CHARACTER OF TH E ITA NO.795/DEL./2011 3 LAND CONTINUED TO BE AGRICULTURAL. WHEN THESE TWO CLEAR FINDING HAVE BEEN RETURNED, IT IS APPARENT TH AT IN THE TRANSITIONAL PERIOD, THAT IS, BETWEEN PURCHA SE AND ACQUISITION, THE NATURE AND CHARACTER OF THE LA ND DID NOT CHANGE. THE FACT THAT THE APPELLATE/ ASSESS EE INTENDED TO US THE LAND FOR INDUSTRIAL PURPOSE DID NOT IN ANY WAY ALTER THE NATURE AND CHARACTER OF TH E LAND. THE FURTHER FACT THAT THE APPELLANT/ ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATIONS DID N OT ALSO RESULT IN ANY CONVERSION OF THE AGRICULTURAL L AND INTO AN INDUSTRIAL LAND. THE MERE FACT THAT THE APPELLANT/ ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATION DID NOT ALTER THE NATURE AND CHARACTER OF THE LAND. THE PIECE OF LAND IS 30 KMS FROM RAWARI TOWN, 32 KM S FROM RAJIV CHOWK OF GURUGAON, AND THERE IS NO MUNCIPLITY /NAC OR TOWN WITH IN 10 KM RADIUS OF THIS PIECE OF LAND. TH IS IS CONFIRMED FROM AR BY A PIECE OF MAP (NOT TO SCALE). THE ASSESSING OFFICER SHOULD VERIFY THE LOCATION OF LAN D AS PER SECTION 2(L4)(III)(A)&(B) OF I.T. ACT, TO DECIDE IT AS CAPITAL ASSET OR NOT. SINCE THE ABOVE LAND IS IN THE EXCLUSION C LAUSE OF SUB CLAUSES (A)&(B) OF SECTION 2(14)(III) OF I.T. ACT, THE CAPITAL GAINS TAX CHARGED ON SALE OF LAND DOES NOT ARISE. THE EXP LANATIONS OF THE AR AND OTHER EVIDENCES OF STATE GOVT. AUTHORITY ARE IN FAVOUR OF ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE CASE LAWS CITED BY THE APPELLANT AND THE LEGAL POSITION OF THE CASE, I AM OF THE OPINION THAT THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.93,56,239/- IS NOT SUSTAINA BLE, HENCE DELETED. 3. IN THE GROUND OF APPEAL, THE ISSUE IS REGARDING THE DELETION OF ADDITION OF RS.1,10,63,437/- AS TREATING THE SAME AS EXEMPTE D U/S 2 OF THE INCOME-TAX ACT. THE REVENUE HAS SUBMITTED THAT THE ASSESSEE H AS NEVER SHOWN THE AGRICULTURAL INCOME IN ITS RETURN OF INCOME WHICH P ROVES THAT NO AGRICULTURAL ACTIVITY WAS CARRIED ON THE LAND AND IT IS SUBMITTE D THAT THE AGRICULTURAL LAND ITA NO.795/DEL./2011 4 MUST BE ONE WHICH COULD BE SAID TO BE EITHER ACTUAL LY USED OR ORDINARILY USED OR MEANT TO BE USED FOR AGRICULTURAL PURPOSES. THU S, THERE MUST HAVE BEEN AGRICULTURAL USER OR PURPOSES. ONLY MERELY TO SHOW THAT THE LAND IS CAPABLE OF BEING USED FOR AGRICULTURAL, IS NOT SUFFICIENT AND CREDIBLE EVIDENCE. IT MUST BE ESTABLISHED THAT THE LAND HAS BEEN USED FOR THE AGR ICULTURAL PURPOSE. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. LEARNED AR SUBMITTED THAT THE LAND WAS PURCHASED IN AUGUST 1995 WITH OTHERS AND THIS LAND WAS SITUATED OUTSIDE THE MUNICIPALITY LIMITS. THEREFORE, PROFIT ON THE SALE OF THE AGRICULTURAL L AND IS EXEMPTED AS THE AGRICULTURAL LAND WAS NOT COVERED BY THE DEFINITION OF CAPITAL ASSET AS PROVIDED U/S 2(14) OF THE INCOME-TAX ACT. HE SUBMITTED THAT THIS WAS THE LAND SITUATED MORE THAN 8 KMS. FROM ANY MUNICIPALITY. THIS LAND IS ALSO NOT SITUATED IN THE AREA COMPRISED WITHIN THE JURISDICTION OF ANY MUNIC IPALITY AS PROVIDED IN SECTION 2(14)(III). THE LAND WAS AGRICULTURAL IN T HE LAND REVENUE RECORDS. THE PURCHASE DEED AND SALE DEED OF THE LAND SHOW THAT I T WAS AGRICULTURAL LAND. COPY OF THE JAMABANDI FOR THE PERIOD 1997-98 TO 200 5-06 WAS ALSO SUBMITTED. IT IS SUBMITTED THAT THE AGRICULTURE WAS CARRIED OU T WITH THE HELP OF LOCAL PEOPLE AND THE PERSONS WERE PRODUCED BEFORE THE ASS ESSING OFFICER. THE PATWARI HAS ALSO ISSUED A LETTER STATING THAT IT WA S AN AGRICULTURAL LAND. 5. WE HAVE HEARD BOTH THE SIDES AND AFTER HEARING, WE FIND THAT THE LAND WAS BEING USED AS AGRICULTURE WHICH IS EVIDENT FROM THE COPY OF KHASARA ITA NO.795/DEL./2011 5 GRIDWARI WHICH IS A PRIMARY RECORD MAINTAINED BY TH E AREA PATWARI IN RESPECT OF THE CROPS GROWN IN DIFFERENT SEASONS LIKE JAWAR AND HADI. THE AREA PATWARI HAS ALSO CONFIRMED THAT THE LAND WAS AGRICULTURAL L AND. THE SALE DEED AT THE TIME OF PURCHASE AS WELL AS SALE DEED ALSO SHOWS TH AT THE LAND WAS AGRICULTURAL LAND. THE LAND WAS SITUATED OUTSIDE THE MUNICIPALI TY LIMITS OF THE NEAREST MUNICIPALITY LIMITS WHICH WERE MORE THAN 10 KMS. I N SUCH A SITUATION, WE HOLD THAT THE LAND WAS NOT A CAPITAL ASSET. THEREF ORE, WE SUSTAIN THE ORDER OF THE CIT (A) DELETING THE ADDITION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF JULY, 2011. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 22 ND DAY OF JULY, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.