RAMKARAN SINGH,PANCHKULA V. INCOME TAX OFFICER, WARD-3, PANCHKULA, PANCHKULA

ITA 439/CHANDI/2024

AI Insights

The case revolves around an appeal by Ramkaran Singh against the order of the Commissioner of Income Tax (Appeals) which upheld the assessment order treating the gains from the sale of agricultural land as short-term capital gains. The land, sold in 2011, was located in Village Dhamala, Panchkula, Haryana, and was inherited by the assessee. The primary contention was whether the land qualified as a capital asset under the Income Tax Act, particularly focusing on its distance from municipal limits as specified in a 1994 CBDT notification. The Tribunal's decision was influenced by precedents and interpretations of similar cases, leading to the conclusion that the land did not meet the criteria of a capital asset and thus the gains were not subject to tax.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107721 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: Ashish Gupta vs. ITO, Achhelal Yadav vs. ITO, Vijay Gupta vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: TEJMOHAN SINGH; MISTAKE OR
• Keywords: Set aside; Capital asset; Cost of acquisition; Capital Gains; Principle of natural justice; Competent authority; Reason to believe
• Section: 148; 144; 142(1); 54B; 2(14)

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 439/Chd/ 2024 िनधाŊरण वषŊ / Assessment Year : 2012-13 Ramkaran Singh C/o Tejmohan Singh, # 527, Sector 10-D, Chandigarh बनाम The ITO Ward-3, Panchkula ˕ायी लेखा सं./PAN NO: ARHPS5199L अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Tejmohan Singh, Advocate राजˢ की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 04/03/2025 उदघोषणा की तारीख/Date of Pronouncement : 04/03/2025 आदेश/Order PER KRINWANT SAHAY, A.M: This is an appeal field by the Assessee against the order of the Ld. CIT(A)/ NFAC, Delhi dt. 21/03/2024 pertaining to Assessment Year 2012-13. 2. In the present appeal Assessee has raised the following grounds: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the initiation of proceedings under section 148 in as much as there was no escapement of income leading to a reason to belief and as such the re-opening is illegal, arbitrary and unjustified 2. That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that no notice under section 148 was ever served on the assessee and as such the order passed is illegal arbitrary and unjustified. 3. That the Ld. Assessing Officer has erred in law as well as on facts in as much as there has been no | reason to believe that there was an escapement of income in as much as the reasons recorded are based only on borrowed information and as such the assessment order passed is illegal, arbitrary and unjustified. 4. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.89,89,440/- made on account of alleged short term capital gains on sale of rural agricultural land which is arbitrary and unjustified. 2 5. That the Ld. Commissioner of Income Tax (Appeals) has erred in law ns well ns on fiicts in upholding the addition of Rs. 89,89,440/- treating agricultural land sold to be a Capital Asset especially stating that the land was situated beyond the specified municipal limits which is arbitrary and unjustified. 6. That the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the finding that the rural agricultural land sold was short term capital gains and not long term capital gain without considering the date of acquisition, cost of acquisition, distance from the specified MC especially when specifically raised ns a ground of appeal before him and as such the order passed Is arbitrary and unjustified. 7. That the appellant craves leave to add or Amend the grounds of appeal before the appeal Is finally heard or disposed off 8. That the order of Ld. Commissioner of Income Tax (Appeals) Officer is arbitrary, opposed to the facts of the case and thus untenable. 3. Briefly the facts of the case are that the Information received by the AO that assessee sold Immovable property of Rs.1,09,55,880/- during the F.Y. 2011-12 relevant to A.Y. 2012-13. Thereafter the case of the assessee was reopened u/s 148 alter the approval of the Competent Authority. Notice u/s 148 was Issued on 13.03.2019 and served through speed post. But none attended to the same. Notice u/s 142(1) alongwith questionnaire was issued on 04.07.2019 for hearing on 17.07.2019. But on 17.07.2019 none attended before the AO. Another notice u/s 142(1) was Issued by the AO on 06.09.2019, but again none attended. Final opportunity showcause notice o u/s 144 was issued by the AO. But again nobody attended before the AO. On 11.10.2019, the counsel of the assessee appeared and filed POA and part details and was asked to furnish ITR and bank statement. On 22.10.2019, the assessee filed bank statement and was asked to further furnish certificate from tehsildar that land sold is agricultural land and distance from nearest MC. On 22.11.2019, the assessee appeared before the AO and filed reply, but he didn't file his ITR even after various notices being Issued by the AO. 3.1 On perusal of the details available on record, the AO noticed that the assessee had sold land to M/s Muflah Builders and Pvt. Ltd. by executing two sale deeds. In the first sale, the assessee 's share was 1/3rd i.e. Rs.36,51,960/- and in the second sale, the assessee share is 912/4236 l.e. Rs.53,37,480/-. The total capital gain comes to Rs.89,89,440 As per the details available on record, the purchase price of the property could not be determined by the 3 AO and therefore the whole sale price of Rs.89,89,440/- was considered as short term capital gain and added to the total income of the assessee. 4. Aggrieved by the order of the AO the asseessee went in appeal before the Ld. CIT(A) who has since sustained the order of the AO by stating as under: 6. I have considered the submission of the appellant made during the course of appellate proceeding and find no evidentiary value in the submission. Firstly, the submission made by the appellant are only in the nature of narration- and no supporting documents has been filed. Even If the appellant's contention is to be \"accepted, then also it has to file corroborative evidence to support its claim. However, no evidence has been filed by the appellant to prove that this was agricultural rural land where regular farming has been taking place. Also the notification no. 9447 dated 06.01.1994 is by no means exhaustive and one of the preconditions for taxing as a capital asset is that it should be within 4 Kms of Municipal Limits. By appellant's own admission, this has been found to be within city limit of MC Pinjore and is therefore, taxable as a capital asset. A mere narration cannot be taken as proof of the factual position. The appellant has not been able to give any convincing or cogent explanations about the additions made. 6.1 In view of these facts, I am of the opinion that no interference is called for in the AO's order and therefore, the addition made by the AO amounting to Rs.89,89,440/- is sustained and the grounds of appeal are dismissed. 5. At the outset the Ld. AR submitted that the assessee has not pressing Ground No. 1 to 3 of the grounds raised before us and it was submitted that these grounds may kindly be dismissed as not pressed. 6. After considering the submissions of Ld. AR, we dismissed the abovementioned grounds as not pressed. 7. The other ground pertains to addition made by the Ld. AO and confirmed by the Ld. CIT(A), as the assessee had sold his ancestral Rural Agricultural Lands at Village Dhamala, Distt Panchkula (Haryana) on 02.06.2011 and the appellant 1/3d and 912/4236 share in the said agricultural Lands was Rs.36,51,960/- and Rs.53,37,480/-respectively. The above said Ancestral Agricultural lands were situated at Village Dhamala, Distt Panchkula (Haryana). Since the lands sold were Rural Agricultural lands and the assessee had not filed his return of Income. The Ld. AR in the written submission before the Ld. CIT(A) has submitted as under: 4 3. The learned Assessing Authority on dated 22.10.2019 asked the Assessee to file a certificate from Tehsildar that the land sold was Agriculture Land and the distance from the Nearest Municipal Committee (MC). On Jated 22.11.2019,admittedly the assessee had submitted a certificate from the Jurisdictional Tehsildar that the land sold was agricultural Land and the nearest Municipal Committee (MC) is of Pinjore which is 4 Km away from the village where the lands was sold was situated. The assessee further clarifies that the Municipal Committee (MC) Pinjore (Haryana) is not a specified M.C.as per Notification No. 9447 Dated 06.01.1994 of the Income Department (Copy Attached), Hence the agricultural Lands sold were not a Capital Asset, therefore not liable to Capital Gain Tax. Sir, the Ld. AO. had made a grave legal error in considering the Agriculture Land Sold as Capital Assets by ignoring the facts that MC Pinjore under which the Agriculture Lands sold fall is not a specified MC as per the notification no. 9447 dated 06.01.1994 of the Income Tax Department to ascertain the nature of land as Capital Assets. Copy of the Certificate of the Jurisdictional Tehsildar as submitted during the course of Assessment Proceeding and copy of the Notification No. 9447 dated 06.01.1994 is attached for your kind perusal and consideration. In view of the above, the Agricultural Lands sold by the assessee were not \"CAPITAL ASSET\" under section 2(14)(iii) of the Income Tax Act, 1961 being not filling under any specified MC and as such sale thereof is not liable for Capital Gains. That on the date of filing of the certificate from the Tehsildar i.e. 22.11.2019, the learned Assessing Officer passed the order u/s 144 r.w.s.147 of the Income tax Act, 1961 without giving the assessee a reasonable opportunity to explain the date of acquisition, period of holding, cost of Acquisition, investment in the purchase of Agricultural Lands etc after the sale. Sir, as mentioned above the Agriculture Lands sold under consideration were inherited property inherited on 28.05.1994 (copy of jamabandi and intkal ie revenue records of ownership are attached) for your kind perusal and consideration. Hence the Ld. Assessing Officer (AO) lind made the grave error in treating the sale of Rural Agriculture Lands liable for Capital Gain In view of the above the order of the Ld. AO is erroncous, arbitrary. opposed to law and facts of the case and principles of natural justice and is liable to be quashed. 8. It was submitted that the assesee has raised a subject ground of the applicability of the notification issued by the CBDT in the year 1994. Besides that the Ld. CIT(A) has failed to decide and adjudicate the other grounds and had wrongly recorded that the assessee had admitted that the subject matter of land falls within the 4 Km from the Municipal Limits of Pinjore and therefore is an capital asset and has denied the benefit to the assessee. 5 8.1 The subject matter is that the land is not situated within the Municipal Limit of the Kalka, Pinjore as the Municipal Corporation Pinjore was not constituted by that time. It was submitted that since the land is required to be measured from the Municipal Limit as notified by the CBDT in the Year 1994, therefore the findings recorded by the AO and the Ld. CIT(A) in para 5.3 & 6 of his order is contrary in law. 9. Per contra, the Ld DR relied upon the orders passed by the lower authorities. 10. We have heard the rival contention and perused the material available on the record. Admittedly as per the Notification issued by the CBDT on 06/01/1994, the Municipality in Haryana was only refer to Kalka wherein at S.No. 30 it was mentioned that “Areas upto a distance of 5 Kms from the mu municipal limits in all directions” was included for the purposes of determination of the capital asset under section 2(14) of the Act. No separate notification was issued by the CBDR with respect to Pinjore Municipality or the land situated in vicinity thereof. It is the settled proposition as accepted by the various Tribunals, in the absence of specific notification determining the scope of municipality, the land falling in the nearby areas of newly notified municipality cannot be considered as a capital asset. For the abovesaid purposes we may fruitfully rely upon the decision in the case of Ashish Gupta[2024] 163 taxmann.com 739 (Delhi – Trib) wherein in para 8 it was held as under: 8. Upon careful consideration, we find that assessee's arguments have sufficient cogency. It is correct that the distance of 5 kms. from Dasna flyover, Govindpuram confirmed by Inspectors of Income-tax Department and Tehsildar were on the date of their respective inspections i.e. February and March 2016. On the other hand, assessee's plea that the distance of land in question should be reckoned as existed on the date of Notification No.9447 dated 06.01.1994 when the municipal limits were upto Hapur Chungi and from where the distance was 8.7 kms. approx. as per IT Inspector's report. The basis of submission is that for the purpose of exemption u/s 2(14)(iii)(b) of the Act, the notification by Central Government is mandatory and there was no notification after 06.01.1994. Hence, the expansion of municipal limits from Hapur Chungi to Dasna Flyover on 41.08.1994 should be irrelevant in absence of any further notification. Therefore, the land in question at Village Masuri is not a capital asset. The above proposition is duly supported by the case laws relied upon by the ld. counsel for the assessee. Hence, in the background of aforesaid discussion and precedent, we set aside the orders of the authorities below and decide the issue in favour of the assessee. 6 Similarly the Kolkata Tribunal in the case of Achhelal Yadav VS ITO [2024] 158 taxmann.com 507 (Kolkata - Trib.) has held as under: 7. Before us, ld. Counsel for the assessee, took us through the paper book containing 175 pages of which page 158 to 160 provides copy of Notification dated 6th January, 1994 vide Notification No. [SO 9447] (File No. 164/3/97-ITA.I), in order to prove that the land sold during the year is not a capital asset. We have gone through the said notification and also gone through the details of sale deeds as well as certificate issued by Dadpur Gram Panchayat and find merit in the claim of the assessee that the agricultural land sold during the year do not fall within the definition of capital asset provided u/s 2(14)(iii) of the Act and, therefore, the capital gain arising from sale thereto is exempt from tax. So far as the finding of the lower authorities that the assessee did not provide this fact during the course of assessment proceedings, we note that during the course of rectification proceedings, though the same were initiated by the Assessing Officer but once certain facts were placed before the Assessing Officer during the course of such rectification proceedings, then he ought to have taken note of the same and should have dealt with the said contentions. It has been consistently held by the Hon'ble Courts that no tax can be levied or collected except by the authority of law and that if the assessee by mistake or inadvertence or on account of ignorance included in his income any amount which is non-taxable or is not income within the contemplation of law, the assessee may bring the same to the notice of the Assessing Officer to which if the Assessing Officer is satisfied, he may grant the assessee necessary relief and refund the tax paid in excess. We draw support from the judgment of the Hon'ble Delhi High Court in the case of Vijay Gupta v. CIT [2016] 68 taxmann.com 131/238 Taxman 505/386 ITR 643 [WP(C) 1572 of 2013 dt. 23-3-2016] wherein, the Hon'ble Court has held so by referring to Article 265 of the Constitution of India. Similar view was also taken by this Tribunal in the case of Ritum Jain (supra). 8. Under these given facts and circumstances, when the assessee had given sufficient documentary evidence during the course of the rectification proceedings that the agricultural land sold during the year do not fall under the category of capital asset u/s 2(14) of the Act and inadvertently the assessee has shown it as a capital asset in the Income-tax return, therefore, the assessee deserves to succeed and we accordingly hold that the capital gain arising from the sale of agricultural land in question is exempt from tax. Since we have allowed this claim of the assessee that the agricultural land sold during the year is not a capital asset and gain arising from there is exempt from tax, the remaining grounds raised by the assessee becomes merely academic in nature, still we would like to take note of the fact that the assessee also deserves to succeed on the alternative ground that even if the agricultural land is considered as capital asset, even then the assessee who has sold agricultural land and has purchased the agricultural land within a period of two years, after the date of sale for a total purchase consideration of Rs. 97,55,000/-, the assessee is entitled for exemption u/s 54B of the Act for the total sum of Rs. 97,55,000/- or the long term capita gain arising from sale of agricultural land whichever is lower. Thus, the grounds raised by the assessee are allowed. The Notification issued by the CBDT in 1994 provided as under: 11. The Ld. DR had not disputed that any subsequent notification was issued by the CBDT as on 01/04/2013 whereby Pinjore municipality was included in the list of municipalities notified by the CBDT. 7 12. Respectfully following the abovementioned decision of the Coordinate Benches we are of the opinion that the appeal of the assesse is required to be allowed. 13. In the result, the appeal of the assesse is allowed. Order pronounced in the open Court on 04/03/2025 Sd/- Sd/- लिलत क ुमार क ृणवȶ सहाय (LALIET KUMAR) (KRINWANT SAHAY) Ɋाियक सद˟ /JUDICIAL MEMBER लेखा सद˟/ ACCOUNTANT MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 5. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "