2019 (7) TMI 656 - AT - Income Tax

Appeal Dismissed: Land Classification & Indexation Benefit Upheld

The Tribunal dismissed the appeal, ruling that the additional evidence was inadmissible, confirming the land's classification as a capital asset, and ... Admission of additional evidence - Capital gain - Capital asset or agricultural land - the ‘certificate from the Tehsildar’, sought to be admitted as additional evidence is both unreliable and ambiguous. Indeed it does not qualify as a certificate from the tehsildar. - Rule 46A of IT Rules - Rule 29 of Appellate Tribunal Rules - said evidence is liable to be admitted in the facts and circumstances of the case, or not so - HELD THAT:- Where therefore the appellate court considers that such an additional evidence would be necessary for proper adjudication of the matter, i.e., where it cannot, in the absence of the said evidence, pronounce a judgment satisfactorily, it is to invoke its’ discretion even if the evidence being furnished before it is for the first time, and there has been no denial of opportunity by the authority below (i.e., before whom it ought to have been furnished) for adducing the said evidence. This, then, explains the law in the matter. It is, in view of the fore-going, not considered necessary for pronouncing the judgment satisfactorily to admit the ‘certificate from the Tehsildar’, sought to be admitted as additional evidence. The said certificate is both unreliable and ambiguous. Indeed it does not qualify as a certificate from the tehsildar. There is nothing on record, or sought to be admitted, that the prescribed distance applicable in this case is 2 km., with the applicability of a higher distance failing the assessee’s case. Even if falling outside the said limit, it will not by itself imply that the said land, forming part of one, contiguous land sold by the assessee, which is not an agricultural land by definition and, thus, a capital asset u/s. 2(14)(iii), is an agricultural land. It is the entirety of the facts that are to be seen, which suggest the subject land to be not an agricultural land and, in any case, not sold as an agricultural land. In fact, given the area of the land under consideration (16K, 1.5 M), the said limit, where so, would be breached by some metres, hardly impacting the nature of the land. Indeed, the ld. CIT(A), who has also decided the issue on merits, only considered the sale document, registered with the office of the subregistrar, specifying the subject land to be within the municipal limits of Goraya, as itself sufficient for the purpose. In fact, the municipal limits itself keep changing with time, so that that is another aspect of the matter, and which would therefore require to be determined before placing reliance on the said certificate, even as we have examined the issue even from the stand point of the truth of its contents, finding it to be of no consequence. In our view, therefore, the assessment stands satisfactorily concluded on the basis of the material on record and, accordingly, the assessee’s plea for admission of additional evidence is liable to be rejected. We decide accordingly. - the assessee’s appeal is dismissed Non-grant of indexation benefit u/s. 48 in computing the impugned long-term capital gain - HELD THAT:- As perusal of the assessment order, however, reveals an indexation benefit of 5.82 as having been applied by the AO in arriving at the long-term capital gain, inflating thus the cost (of acquisition) by the said factor. The charge therefore is incorrect. Any mistake in applying the correct index, if so, could be addressed by moving a rectification application. We have accordingly no reason to interfere. We decide accordingly. Assessee’s appeal is dismissed. Issues Involved:1. Admissibility of additional evidence at the appellate stage.2. Classification of the land as a capital asset or agricultural land under Section 2(14) of the Income Tax Act.3. Non-grant of indexation benefit under Section 48 in computing long-term capital gain.Issue-wise Detailed Analysis:1. Admissibility of Additional Evidence:The primary issue was whether the additional evidence, specifically a report from the Tehsildar, should be admitted at the appellate stage. The assessee argued that this evidence was crucial for determining whether part of the land sold fell outside the municipal limits of Goraya and thus should not be considered a capital asset under Section 2(14) of the Income Tax Act. However, the Tribunal noted that the Tehsildar’s report was dated after the order from the first appellate authority and was not part of the original evidence. Furthermore, the certificate from the Naib-Tehsildar presented earlier was not included in the paper-book, indicating the assessee’s dissatisfaction with its contents. The Tribunal emphasized that the additional evidence did not meet the requirements of Rule 46A of the Income Tax Rules, which mandates that such evidence can only be admitted if the assessee was prevented by sufficient cause from producing it earlier. The Tribunal also highlighted procedural deficiencies in the Tehsildar’s report, such as the absence of a signature and official stamp, making it unreliable and ambiguous.2. Classification of the Land as a Capital Asset:The Tribunal examined whether the land sold by the assessee should be classified as a capital asset or agricultural land. The land was sold to a real estate company for a substantial consideration, and the sale deed explicitly mentioned that the land fell within the municipal limits of Goraya. The Tribunal noted that the sale deed, a registered document, indicated the land's urban nature, as the sale price matched the collector rate for urban land. Additionally, the stamp duty was paid at the rate applicable to urban land, further supporting this classification. The Tribunal also considered the purpose of the land sale, which was for real estate development, not agricultural use. The Tribunal concluded that even if part of the land fell outside the 2 km limit from the municipal boundaries, it would still be considered a capital asset due to the nature of the transaction and the intended use of the land.3. Non-Grant of Indexation Benefit:The assessee also raised an issue regarding the non-grant of indexation benefit under Section 48 in computing the long-term capital gain. However, this ground was not pressed during the hearing. The Tribunal reviewed the assessment order and found that the Assessing Officer had applied an indexation benefit of 5.82, inflating the cost of acquisition accordingly. The Tribunal concluded that the charge of non-grant of indexation benefit was incorrect and suggested that any mistake in applying the correct index could be addressed through a rectification application.Conclusion:The Tribunal dismissed the assessee's appeal, concluding that the additional evidence was not admissible, the land was correctly classified as a capital asset, and the indexation benefit had been appropriately applied. The Tribunal emphasized the importance of procedural compliance and the substantive nature of the evidence in determining the outcome of the case. The decision was pronounced in the open court on June 24, 2019.