2016 (9) TMI 918 - AT - Income Tax

Agricultural land sale gain not taxable beyond 8KM; F&O trading loss remanded for fresh investigation

The Tribunal upheld the CIT(A)'s decision that the gain from the sale of agricultural land was not taxable as it was situated beyond 8 KMs of the ... Gain arisen on account of sale of agriculture land - distance of geographical situation of the assessee’s land - Held that:- The distance is to be measured by roads in this accounting year. The land sold by the assessee is situated beyond 8 KMs. of the municipal limit. Perusal of sub-clause (b) of section 2(14)(iii) would indicate that the municipal limit is to be taken from the area which has been notified by the Central Government in its gazette notification. Central Government has notified the area on 6.1.1994, and from that notification, the agriculture land of the assessee was situated beyond a distance of 8KMs. This aspect has been lucidly considered by the ld.CIT(A) in the finding extracted supra. We do not see any reason to interfere in this finding. In view of the above discussion, we do not find any merit in the appeal of the Revenue. It is dismissed. - Decided in favour of assessee Disallowance of loss claimed - Held that:- For rejecting the claim of the assessee, both the Revenue authorities have primarily relied upon the alleged information collected from the National Stock Exchange. The ld.CIT(A) has made reference to the letter of Additional CIT, Range-I, Ahmedabad dated 27.7.2012. According to the ld.CIT(A), in this letter the Addl.CIT has brought to his notice that Goldstar Finvest P.Ltd. was not registered as member of the Stock exchange. The contract notes are fictitious, SEBI registration of Goldstar Finvest P.Ltd. is IN241146233 and the SEBI has canceled the registration on January, 20, 2005. On the other hand, case of the assessee is that it has made payments through account payee cheque. It has received payment through account payee cheque. Broker has issued contract notes. The assessee has produced copy of the ledger account maintained by him as well by the broker. The assessee has produced all details exhibiting number of shares, date of purchase and date of sale. The AO has not collected any information from the broker. If the AO has made any error in reference of particulars or details about the broker or the assessee, then the NSE will not be in position to give complete details. We find that SEBI registration quoted by the assessee in contract note of the broker is 230932431/23-10777. The PAN of the said broker is AABCA 6683 M. These very numbers have been communicated by the assessee to the AO. In the letter of ACIT dated 27.7.2012, which is a development after the assessment order, the SEBI registration of Goldstar Finvest P.Ltd. is mentioned as INB241146233. It is a different number. Information is that it was canceled in January 20, 2005. What is the status in the accounting year 2009-10 has not been referred to. The AO ought to have verified from the broker also whether broker had carried out transactions of the assessee or not. The broker should have been confronted with the information collected from the NSE, only then, clear picture would come out. It should have been collected whether the broker has carried out the transactions with help of some other broker or this is some paper transactions. Considering all these aspects, we are of the view that the issue deserves to be re-investigated at the level of the AO, because, the ld.AO has not cross-verified the details with the National Stock Exchange as well as broker, through whom the assessee alleged to have carried out its transaction. It is quite difficult for the assessee to comment on the nature of the evidence collected from the NSE, because according to the assessee it has carried out the transactions through broker. Now, if some ambiguity has come on the record, such ambiguity could be explained by the broker. Therefore, we allow the appeal of the assessee for statistical purpose, and set aside this issue to the file of the AO for fresh adjudication - Decided in favour of assessee for statistical purpose. Issues Involved:1. Taxability of gain on sale of agricultural land.2. Distance measurement for determining agricultural land status.3. Municipal limits for computing distance.4. Disallowance of loss claimed by the assessee in F&O trading.5. Delay in filing the appeal by the assessee.Issue-wise Detailed Analysis:1. Taxability of Gain on Sale of Agricultural Land:The primary issue was whether the land sold by the assessee was agricultural land situated beyond 8 KMs of the municipal limit, making the gain non-taxable under Section 2(14) of the Income Tax Act, 1961. The Revenue argued that the land was within the municipal limits and thus taxable. The CIT(A) examined the details and held that the gain from the sale of agricultural land was not taxable, as it was situated beyond 8 KMs of the municipal limit.2. Distance Measurement for Determining Agricultural Land Status:The dispute centered on whether the distance should be measured by road or aerially. The CIT(A) and various judicial decisions, including those of the Punjab & Haryana High Court and the Bombay High Court, held that the distance should be measured by road. The CBDT Circular No. 17/2015 also supported this view, clarifying that for periods prior to AY 2014-15, the distance should be measured by road.3. Municipal Limits for Computing Distance:The CIT(A) determined that the municipal limits as on the date of the Central Government's notification (6.1.1994) should be considered for computing the distance. The AO's contention that the municipal limits expanded in 2006 should be considered was rejected. The CIT(A) directed the AO to compute the road distance from the municipal limits as on 6.1.1994.4. Disallowance of Loss Claimed by the Assessee in F&O Trading:The assessee claimed a loss of Rs. 77,64,387/- from F&O trading, which the AO disallowed, citing that no transactions were recorded on the NSE and the broker was not registered. The CIT(A) upheld the AO's decision, noting that the broker's contract notes were fictitious. However, the Tribunal found that the AO had not cross-verified details with the broker and NSE properly. The Tribunal remanded the issue back to the AO for fresh adjudication, allowing the assessee to present additional evidence.5. Delay in Filing the Appeal by the Assessee:The assessee's appeal was delayed by nine days. The Tribunal condoned the delay, accepting the assessee's explanation of human negligence and lack of deliberate intent to delay.Conclusion:The Tribunal upheld the CIT(A)'s decision on the taxability of the gain from the sale of agricultural land, dismissing the Revenue's appeal. It remanded the issue of the disallowed F&O trading loss back to the AO for fresh investigation, allowing the assessee's appeal for statistical purposes. The Tribunal emphasized that the AO should verify the details with the broker and NSE to resolve the ambiguity.