Agricultural land escapes capital asset definition under section 2(14), section 56(2)(viib) provisions ruled inapplicable despite valid reassessment proceedings

Dipti Garg Versus Income Tax Officer, Ward-TONK

Dipti Garg Versus Income Tax Officer, Ward-TONK - TMI Issues Involved:
1. Validity of reopening proceedings u/s 148 of the Income Tax Act.
2. Addition of Rs. 38,25,073/- made u/s 56(2)(viib) of the Income Tax Act.
3. Nature of the agricultural land as a capital asset.

Summary:

1. Validity of Reopening Proceedings u/s 148:
The assessee challenged the legality of the reopening proceedings. However, the Tribunal found that the Assessing Officer (AO) had relevant information indicating escapement of income and was within his jurisdiction to issue notice u/s 148 and carry out the reassessment proceedings. Thus, the legal issue raised in ground nos. 1 and 2 were dismissed.

2. Addition of Rs. 38,25,073/- u/s 56(2)(viib):
The main grievance was against the addition of Rs. 38,25,073/- made u/s 56(2)(viib) of the Act. The AO invoked this section due to the difference between the consideration as per the stamp value authority and the sale consideration disclosed by the assessee. The Tribunal noted that the assessee provided additional evidence indicating that the land sold was agricultural and not a capital asset. The Tribunal admitted this additional evidence and found that the agricultural land did not fall under the definition of a capital asset as per section 2(14) of the Act. Consequently, section 56(2)(viib) was not applicable, and the addition was deleted.

3. Nature of Agricultural Land as Capital Asset:
The Tribunal examined the definition of a capital asset u/s 2(14) and found that the agricultural land in question did not fall within this category. The Tribunal relied on various decisions, including those of the ITAT Jaipur and Bangalore benches, which supported the view that agricultural land not falling within the municipal limits and specified distances is not a capital asset. Therefore, section 56(2)(viib) could not be invoked.

Conclusion:
The Tribunal dismissed the legal grounds challenging the validity of the reopening proceedings. However, it allowed the appeal concerning the addition made u/s 56(2)(viib), concluding that the agricultural land in question was not a capital asset and thus not subject to the provisions of section 56(2)(viib). The appeal was partly allowed.