Additional evidence and agricultural land status excluded capital gains where public records showed the land lay beyond municipal limits.

Additional evidence may be admitted at the appellate stage under Rule 29 where public records such as a sale deed, municipal certificate, tehsildar certificate and girdawari are relevant to the core dispute, their authenticity is not in doubt and no prejudice is caused to the Revenue. Applying those materials, land at village Machhwa was treated as agricultural land because it was shown to be beyond 8 kilometres from Jaipur municipal limits and supported by revenue records, census material and prior coordinate bench decisions. On that basis, the land fell outside the definition of capital asset under Section 2(14), and the capital gains addition was deleted.

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Issues: (i) Whether additional evidence could be admitted at the appellate stage under Rule 29 of the Income Tax Appellate Rules, 1963. (ii) Whether the land sold by the assessee was agricultural land outside the scope of capital asset under Section 2(14) of the Income-tax Act, 1961, so that the sale consideration was not liable to capital gains tax.

Issue (i): Whether additional evidence could be admitted at the appellate stage under Rule 29 of the Income Tax Appellate Rules, 1963.

Analysis: The documents sought to be produced were public records such as the registered sale deed, municipal certificate, tehsildar certificate, and girdawari record. The appellate authority accepted that the documents went to the root of the controversy, there was no objection to their authenticity, and no prejudice would be caused to the Revenue by their admission. The documents were treated as relevant material for a complete adjudication of the dispute.

Conclusion: The additional evidence was admitted in favour of the assessee.

Issue (ii): Whether the land sold by the assessee was agricultural land outside the scope of capital asset under Section 2(14) of the Income-tax Act, 1961, so that the sale consideration was not liable to capital gains tax.

Analysis: The land was found to be situated at village Machhwa, and the record showed that it was beyond 8 kilometres from the municipal limits of Jaipur with reference to the relevant notification. The authority relied on earlier coordinate bench decisions concerning the same village, the public documents now produced, census material, and the sale deed showing agricultural character and use. The revenue records and other evidence also supported agricultural operations on the land. On that basis, the land was held to fall outside the statutory definition of capital asset.

Conclusion: The land was held to be agricultural land outside the scope of capital asset, and the capital gains addition was not sustainable, in favour of the assessee.

Final Conclusion: The appellate additions relating to long-term capital gains were deleted after accepting the additional evidence and holding that the land was not a capital asset under the Act.

Ratio Decidendi: Agricultural land situated beyond the prescribed distance from municipal limits, as established by reliable public records and supporting revenue evidence, does not constitute a capital asset for capital gains purposes.

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