VAGHUBHA DANUBHA ZALA,WANKANER V. ASSESSMENT UNIT/ THE ITO, WARD-1, WANKANER

ITA 396/RJT/2023

AI Insights

The case involves Vaghubha Danubha Zala, a farmer, who appealed against the order of the National Faceless Appeal Centre (NFAC) which upheld an assessment order by the Income Tax Officer (ITO) under section 143(3) of the Income Tax Act, 1961. The ITO had added a long-term capital gain of Rs. 3,32,40,000 to the assessee's income, considering the land sold was a capital asset and not exempt under section 2(14) of the Act as claimed by the assessee. The CIT(A) upheld this addition, leading to the current appeal. The Tribunal noted procedural lapses in the CIT(A)'s handling of the case, particularly the lack of a proper hearing for the assessee, and thus remitted the case back for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473464 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PUNGLIA; LD
• Assessee Lawyers: KAMAL BHAMBHANI; LD
• Keywords: Set aside; Capital asset; Opportunity of being heard; Principle of natural justice
• Section: 147; 148; 143(3); 142(1); 2(14)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपीलसं./ITA No.396/RJT/2023 Assessment Year: (2018-19) (Hybrid Hearing) Vaghubha Danubha Zala Juna Dhuva, Wankaner – 363621 Gujarat Vs. The Assessment Unit, Income Tax Department The ITO, Ward – 1, Morbi - èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ABFPZ1646K (Appellant) (Respondent) Appellant by : Shri Kamal Bhambhani, Ld. A.R. Respondent by : Shri Sanjay Punglia, Ld. CIT(DR) Date of Hearing : 04/02/2025 Date of Pronouncement : 14/02/2025 आदेश / O R D E R PER DINESH MOHAN SINHA, JM: Captioned appeal filed by the assessee is directed against the order passed by the National Faceless Appeal Centre [(in short “NFAC/Ld. CIT(A)”] vide order dated 21.09.2023, which in turn assessment order passed by Assessment Unit, Income Tax Department / Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short “the Act”), vide order dated 02.03.2023. 2. Grounds of appeal raised by the assessee are as follows: 1) The Commissioner of Income Tax(Appeals) (hereinafter referred to as the “Ld. CIT(A)”] erred on facts as also in law by not providing proper opportunity of being heard to the appellant. ITA No.396/RJT/2023 (A.Y. 2018-19) Vaghubha Danubha Zala v. AU 2 2) Ld. CIT(A) erred on facts as also in law in holding that the appellant did not furnish any specific information and documents in support of his claim that the land sold was a rural agricultural land and not a capital asset within the meaning of section 2(14) of the Act and hereby retaining the addition of Rs. 3,32,40,000/- by considering stamp duty paid for land of Rs. 16,62,000/- at 4.9% which was the prevailing market/jantri rate for purchase of property. The order of Ld. CIT(A) is baseless and totally unwarranted under the circumstances and facts of the appellant’s case and deserves to be quashed and therefore may kindly be quashed. 3. Facts of the case are that the assessee is farmer and having agricultural income being the primary source of income during the year under consideration. No return of income has been filed as there is no other income except agricultural income and the same is exempt from tax u/s. 10(1) of the Income Tax Act, 1961. Agricultural land for Rs. 72,07,000/- situated at Dhruva Village owned by the assessee was sold during the year. That land situated 6 to 12 km away from the Wankaner Muncipality, and the population of the village as certified by Dhuva Gram Panchayat is about 3037 only. Therefore, the land sold was a rural agricultural land which as per section 2(14)(iii) of the Act is not a capital asset. In this regard, the appellant had submitted copy of the sale deed and certificate of Dhuva Gram Panchayat during the assessment proceedings. That the case of the appellant had been re-opened and notice u/s. 148 of the Income tax Act, 1961 (hereinafter referred to as the Act) had been issued electronically on 27.03.2022. in response to the same, appellant had filed its return of income on 12.12.2022 vide acknowledgement No. 843365130121222. Notices were served u/s. 142(1) on 20.10.2022, 12.12.2022 and 15.02.2023. the appellant furnished the replies on 12.12.2022, 19.12.2022 and 17.02.2023 alongwith computation of income, sale deed and certificate of Gram Panchayat. Ld. AO has made the addition by stating that the land in question is not a capital asset within the meaning of section 2(14) of the Act because the land was ITA No.396/RJT/2023 (A.Y. 2018-19) Vaghubha Danubha Zala v. AU 3 converted into non-agricultural land before the sale deed registered. LD. AO has worked out addition of Rs. 3,32,40,000/- by considering stamp duty paid for land of Rs. 16,62,000/- at 4.9 Percent which was the prevailing market/jantri rate of purchase of property. Ld. AO completed the assessment u/s. 147 vide order dated 02.03.2023 by assessing total income at Rs. 3,33,22,920/- (Returned Income Rs. 82,920/- + Long Term Capital Gain of Rs. 3,32,40,000/-) 4. The assessee filed an appeal before the CIT(A). Ld. CIT(A) issued notices for hearing on 05.09.2023, 12.09.2023. That the assessee failed to provide the specified documents and information as asked for from it to substantiate its claim, by this appellate authority. Hence, this appeal is being decided on the materials and documents available on record. 5. Aggrieved by the order passed by the Ld. CIT(A) the assessee is in appeal before us. 6. Ld. AR of the assessee submitted that the assessee could not comply with the notice issued by the Ld. CIT(A) and due to illiterate and prays that one more opportunity to represent the case before lower authority may kindly be granted, in interest of justice. 7. Ld. DR pointed out that distance certificate can not accepted, as it was not issued by proper authority, whether agricultural land was used for agricultural ITA No.396/RJT/2023 (A.Y. 2018-19) Vaghubha Danubha Zala v. AU 4 purposes prior to sale the same, has not be perused by the assessee. The Ld. DR further pointed out that at the time of selling such land, the status of this land was industrial. The permission for industrial use was granted to the assessee on 31.03.2017, whereas land was sold on 23.06.2017. hence, by no search of imagination the land should be treated as agricultural land. Besides at the time of selling the land, the assessee has paid commercial stamp duty, hence the land sold, should be capital asset. Therefore, addition made by the Ld. AO may be confirmed. 8. In rejoinder, the Ld. Counsel for the assessee submitted that for verification of above issue raised by Ld. DR. the matter may be remitted back to the file of Ld. CIT(A). 9. We have heard both the parties and perused the material available on record. We note that the Ld. CIT(A) has issued notice to the assessee, but the order is directed about the service of notice on the assessee. we note that assessee was not given due opportunity of being heard and could not plead his case successfully before the ld. CIT(A). We also note that assessee has appeared before the Ld. AO and furnished all the documents. We remit this issue back to the file of the Ld. CIT(A) to deal with the objection raised by the Ld. DR for the revenue, which we have noted in Para No. 7 of this order. It is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, in the interest of justice, we restore the matter back to the file of Ld. CIT(A) for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee, who in turn, is also directed to contest his stand ITA No.396/RJT/2023 (A.Y. 2018-19) Vaghubha Danubha Zala v. AU 5 forthwith. Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. In the result, the appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 14/02/2025 Sd/- Sd/- (Dr. A. L. SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot िदनांक/ Date: 14/02/2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By order Assistant Registrar/Sr. PS/PS ITAT, Rajkot "