TaxTMI 
TaxTMI 
2022 (5) TMI 1403
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecision taken in this lead case on broad issues may be followed in all the appeals. Therefore, with the consent of the parties this appeal was treated is heard and are adjudicated as lead case. So, now we are adverting to the facts of this case. 2. This appeal by assessee is directed against the order of ld. Commissioner of Income tax (Appeals)-II, hereinafter called "ld CIT(A)" Surat dated17.09.2014for assessment year (AY) 2007- 08, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The assessee has raised following grounds of appeal:- "1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of income Tax (Appeals) has erred in confirming the action of the Assessing Officer in reopening the assessment by issuing notice u/s 148 of the Act and thereby framing assessment u/s 143(3) r.w.s. 147 of the Act. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of income Tax (Appeals) has erred in confirming the action of the Assessing Officer in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....compensation for her land bearing revenue survey No.215/5 on account of compulsory acquisition. On the basis of information from the office of Special Land Acquisition Collector about disbursement of compensation, the Assessing Officer had formed his "reasons to believe" that income to the extent of compensation, chargeable to tax has escaped assessment within the meaning of section 147 of the Act. The Assessing Officer also noted that land of assessee is situated in Hazira Notified Area, which was declared as notified area by Industries & Mines Department, Government of Gujarat No. GHU/97/(3)/GID/1096/866/G-1, dated 30.01.1997,under Chapter XVI-A of the Gujarat Municipalities Act, 1963. The said Notification was published in Government of Gujarat Gazette Extraordinary VOL.XXXXVII of January 30, 1997/Magha 10,1918. On the aforesaid reasons, the case of assessee was re-opened. Notice under section 148 was issued to the assessee on 21.03.2012. In response to notice under section 148 the assessee filed her return of income on 12.09.2012 declaring income of Rs.1,96,690/- which consists of agricultural income of Rs. 5000/-. The Assessing Officer after serving statutory notice under sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Officer issued show cause notice dated 27.02.2013, as to why the consideration (compensation) of land of Rs.7.00 lakh against the value of land should not be treated as Long Term Capital Gains (LTCG) and Rs.13.00 lakhs received on account of other receipt should not be taxed as "income from other sources". In the first notice itself, the Assessing Officer made endorsement of final opportunity (para-3, para-6 of assessment order).The Assessing Officer recorded that none attended the hearing on 06.03.2013 and the Assessing Officer completed the assessment on the basis of record available with him. 4. The Assessing Officer held that land of assessee bearing Revenue Survey No.215/5 situated at village Hazira Taluka- Choryasi, District Surat was compulsory acquired by special land acquisition officer for Essar Steel Ltd. The land is situated in Hazira Notified Area as per Notification of the Industries & Mines Department, Government of Gujarat and thus falls under the ambit of 'capital asset'. The Assessing Officer by referring the definition of capital asset defined under section 2(14) held that assessee received compensation of Rs.7.00 lakh on account of transferring of land sit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me of Rs.5,000/- in her return of income. The Assessing Officer took his view that during assessment, the assessee has not produced any supportive evidence of her agricultural activities, therefore, Rs.5,000/- was treated as "income from undisclosed sources" while passing the assessment order on 07.03.2013. 7. Aggrieved by the additions, and reopening the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A), the assessee challenged the validity of re-opening, treatment of agriculture land as 'capital asset', exemption under section 10(37), treatment of additional compensation of Rs.13.00 lakh as "income from other sources", adopting the cost of acquisition at Rs.2.05/- per sq.mt against the cost of Rs.150/- per square meter claimed by assessee and treating agricultural income of Rs. 5000/- "as income from unexplained sources". 8. Before ld CIT(A) the assessee filed detailed written submissions as mentioned in para 6.2 of his order. The Ld. CIT(A) has not recorded the actual contents of (written submissions filed by assessee) on the issue of re-opening. The Ld. CIT(A) after considering the submissions of the assessee took his view that notice under section 148 was issued....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Officer vide his order dated 19.05.2014. The contents of reference is extracted in para-8.2 of Ld. CIT(A)'s order. In the remand order the Ld. CIT(A) recorded that as per the letter dated 16.01.2013 received from Mamlatdar office, population of each of nine villages mentioned in the said letter is less than ten thousand, as per census 2001. However, combined population of all nine villages exceed ten thousand. It was also mentioned that in the certificate issued by Chief Officer Notified Area, Hazira, Surat, the population of Hazira Notified area was 2137. The certificate of Chief Officer Hazira Notified Area was issued to some individual assessee, while letter by Mamlatdar Taluka, Choryasi District Surat was sent to Assessing Officer. The Assessing Officer was also asked to clarify regarding the taxability and quantum of capital gains in respect of land and other asset separately and to clarify the population of which area is to be considered for the purpose under section 2(14)(iii)(a) of the Act. The Assessing Officer was also directed to comment on the distance of acquired land from Municipal limit (may be from Surat Municipal area). The Assessing Officer was asked to furnish....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red for the purpose of section 2(14)(iii)(a) of the Act. The remaining population of the villages will not be considered. If the said population of the said Notified area is less than ten thousand, the land acquired cannot be treated as capital asset, provided it was an agricultural land at the time of acquisition or transfer. As per census data 2001, the population of Hazira Notified area is 2137. However, the ld CIT(A) held that Hazira Notified area is a deemed municipality under the provision of Gujarat Municipality Act, 1963. The only ambiguity created by certificate Mamlatdar relied by Assessing Officer therefore the matter was remanded to the Assessing Officer to ascertain whether all the survey numbers mentioned in the notification dated 30.01.1997 are included in the Hazira Notified Area or not. The Ld. CIT(A) further noted that if all those survey numbers are not included, the population of those survey numbers is only 2137 and not ten thousand or more. The entire population of all the nine villages cannot be aggregated / combined unless the entire area of the villages falls in the Notified area. Accordingly, Ld. CIT(A) took his view that subject to the verification by Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oses. Thus, the conditions of section 10(37) are not fulfilled. As per information from Land Revenue Authority, the land in the Notified area has no irrigation facilities and most of the land is unsuitable for agricultural purposes and only natural grass grown in the said land. Thus, the Ld. CIT(A) also denied exemption under section 10(37) of the Act. 14. On the other ground which relates to treatment of part of compensation of Rs.13.00 lakh as income from 'other sources', the ld. CIT(A) held that this component of compensation is given for constructed property on the land consisting of pucca house, pucca wall etc., apart from natural grown grass. The assessee claimed that compensation in respect of aforesaid aspect is actually the compensation in respect of land only and not assessable under the head "other sources" and reliance was placed on the basis of decision of Tribunal in the case of The Special Land Acquisition vs. ITO-TDS-4, Surat in ITA No.236/AHD/2010, wherein the Ld. CIT(A) observed that the said decision was given in respect of liability of Special Land Acquisition Officer to make TDS under section 194LA for payment of compulsory acquisition of land, wherein it wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... basis of reversed calculation. The Ld. CIT(A) further recorded that section 55A of the Act, which is applicable from 01.07.2012 empower the Assessing Officer to refer the capital asset for valuation to the Valuation Officer for determination for fair market value, if the estimates made by Registered valuer is at variance with the fair market value in the opinion of Assessing Officer. This provision was introduced with effect from 01.07.2012 and is applicable for all assessment proceedings finalized after that date as the amendment is of procedural in nature. Therefore, it is not obligatory for the Assessing Officer to refer all the cases for valuation and the assessee has to make out a prima facie for the reference and rejected the plea of assessee and dismissed the corresponding grounds. Further aggrieved, assessee has filed present appeal before the Tribunal. 17. We have heard the submission of Shri Saurabh Soparkar, learned Senior Advocate (hereinafter referred to as ' learned Senior Advocate') assisted by Ms. Urvashi Shodhan Advocate. As this case was treated as "lead case", therefore the submission of Shri Rasesh Shah, C.A, Shri Rajesh Upadhyay, Shri Hiren Vepari, CA, Shri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tle would vests in the Government under section11 (2) of Land Acquisition Act after award, when the possession is taken over before the date of award then on the date of award. To support of this ratio, the learned Senior Counsel for the assessee relied on the decision of Hon'ble Supreme Court in the case of Raj Pal Singh (427 ITR 1-SC). The learned Senior Counsel for assessee submits that under these circumstances, the compensation would be taxable, if at all under the first award on the date of award because possession was already taken over prior to date of award, which is on 31.07.2007 and therefore AY 2007-08. So far as case of assessee is covered second award dated 21.01.2008 are concerned, there also position would be same. The vesting day being 21.01.2008, the year of taxability if at all would be AY 2008-09 only. So the taxing capital gains in any other year would be invalid. Accordingly, the re-opening of assessment of other year would be invalid and illegal. 20. On the second issue, which relates taxability of capital gains in relation to land, the learned Senior Counsel for the assessee submits that assessees have pleaded two alternative cases for claiming that a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... lands were not fertile or incapable of carrying out any agricultural operation is contrary to the record. To support his submission, the learned Senior Counsel for the assessee relied upon the decision of Hon'ble Delhi High Court in the case of Hindustan Industrial Resources Ltd. vs. ACIT (2011) 335 ITR 77 (Del). 21. The learned Senior Counsel further submits that in the Revenue record, the land is shown as agricultural land. There is no material on record that nature of land was changed from agricultural to non-agricultural before vesting the land either with the State Government or before transfer to the Esser Steel Ltd, on behalf of which said land was acquired. The learned Senior Counsel for the assessee submits that mere entry in the Revenue record is not conclusive and all other surrounding circumstances has to be assessed for determining the nature of land as agricultural land. The Hon'ble jurisdictional High Court in the case of CIT Vs Sidharth J Desai (1983) 139 ITR 628 (Guj) held that several facts are relevant and are weighted against each other while determining the true nature and character of the land. The Hon'ble jurisdictional High Court has laid dow....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the land as sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield; and m. whether the land was sold on yardage or on acreage basis 22. To support his contention, the learned Senior Counsel for the assessee also relied on the decision of Hon'ble jurisdictional High Court in the case of CIT Vs Special Land Acquisition Officer 72 taxman.com 255 (Guj) (which relates to same part of land). The learned Senior Counsel for the assessee further submits that Revenue has led no evidence to rebut the presumption that land under dispute are not agricultural land as held by Hon'ble jurisdictional High Court in Special Land Acquisition Officer. The learned Senior Counsel for the assessee submits that one of the objection was taken by lower authorities that the land owners have not shown any agricultural income in any of the earlier year. The assessee and other land owners having no other income except the agricultural income and therefore they were under no obligation to file return of income. To support his submission, the learned Senior Counsel relied upon the decision of Hon'ble Bombay ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act which may be applied to a notified area, the person or committee appointed for such area under section 264B shall be deemed to be a "Municipality" under the said Act. The fiction is an unlimited fiction. Firstly, the fiction is only in relation to those sections of the said Act which are applied to the notified area and even the second part of the fiction of deeming the notified area to be a "municipality" is only for the purpose of the said Act. It does not convert notified area into a "Municipality" in any way. The learned Senior Counsel for the assessee submits that the aforesaid aspects, is clarified by Hon'ble Supreme Court in the case of Saij Gram Panchayat Vs State of Gujarat {(1999) (2) SCC 366}. By refereeing various paragraphs of the decision in Saji Gram Panchayat Vs State of Gujarat, the learned Senior Counsel for assessee accordingly retreated that Hazira Notified Area is not Municipality. 24. The learned Senior Counsel for the assessee submits that Section 16 of the Gujarat Industrial Development Act, 1962 is power to the State Government to issue Notification under which it can declare an industrial area as define in the said Act, would be deemed notified....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing of Hazira Notified area was thirty eight thousand (38000). Before Ld. CIT(A), the assessee pointed out that this certificate dated 16.01.2013 is factually incorrect because it does not correctly recorded the area of Hazira Notified area. The boundary have been wrongly taken for that purpose, actual Notification establishing Hazira Notified area was placed on record where some of the villages were not included and that even where a village might have been included, all survey numbers of the villages were not included, the copy of which placed on record. In this leading case (Ambaben Patel ITA No.3021/AHD/2014). The Ld. CIT(A) rightly pursued this inquiry and called remand report to examine this issue. The Ld. CIT(A) expressly held that entire population of all the villages cannot be totalled up and the Assessing Officer should ascertain whether all survey numbers are included in the Hazira Notified area. The Assessing Officer never responded on the queries of Ld. CIT(A). The learned Senior Counsel for the assessee submits that an appropriate adverse inference be drawn against the Revenue for not being able to answer the pertinent question raised by Ld. CIT(A) and the fact that p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITR 1 (SC) a consent award which has followed all steps of compulsory acquisition has to be regarded as an award of compulsory acquisition. So far as second award is concerned, it is undisputedly an award of compulsory acquisition. For fourth condition, about income arisen on compensation, the learned Senior Counsel for the assessee submits that there is no dispute on this condition. The learned Senior Counsel for assessee submits that even on alternative ground, the transaction of compulsory transaction of land should be regarded as exemption from levy of any capital gains tax. 27. In other alternative submission, the learned Senior Counsel for the assessee submits that even if any of the submission of assessee is not even acceptable that compensation in relation to land is not exempt under any of the alternate submission, the question of computing capital gains would arise. According to assessee, the cost of acquisition which is deemed market value as on 01.04.1981 as determined by lower authorities at Rs.2.05 per square meter is highly inadequate. The assessee has already placed on record, the valuation report to justify the value at Rs.150/- per square meter. The learned Sen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Government for the purpose of expansion of the steel plant of M/s Essar Steel Ltd. under the compulsory acquisition. The assessee and her family members were awarded compensation of Rs.1,75,00,000/- on account of compulsory acquisition of the land. The total consideration of Rs.1,75,00,000/- was bifurcated in two parts viz. (i) Rs. 65,50,000/- as compensation for land and (ii) Rs. 1,09,50,000/- as compensation for trees, construction etc. Accordingly, the assessee was entitled to receive total consideration of Rs.25,00,000/- for both components. During the assessment year under consideration, the assessee received Rs.7,00,000/- as compensation for land and Rs.13,00,000/- as compensation for other items as her share. The ld Sr.AR for the assessee submits that the case of the assessee was reopened under section 147 on 27.03.2012. Notice under section 148 was issued on 21.03.2012. In the reasons recorded, the Assessing Officer recorded information received from Special Land Acquisition Officer, Surat, that the assessee has received compensation of Rs.26,25,000/- for surrender and transferring of ownership rights in the land on account of compulsory acquisition by the Special Land A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated in said two villages were included in the Notified Area. Only certain Survey Numbers were included. On the specific contentions of the assessee, the learned CIT(A) therefore, remanded the matter to the Assessing Officer vide his order dated 19.05.2014, requiring the assessing officer to clarify in the remand report, the population of the Notified Area. The learned CIT(A) in para 8.3 of his order mentioned that the remand report was not received by him, but he passed the appellate order without waiting for the remand report. The learned CIT(A), although did not make any final conclusion regarding population of the Notified Area, but prima facie concluded that the population of the Notified Area is less than 10000 as per his findings in Para 8.6 to 8.9 of his order. Anyway, the assessing officer has not referred the census of Notified Area in the reasons recorded. 30. On the basis of the above submissions, the ld Sr.AR for the assessee submits that the Assessing Officer has wrongly invoked the provisions of section 2(14)(iii)(a) without considering the census of the population. The matter was not clarified at the assessment stage and the appellate stage so even the prima faci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elief that income chargeable to tax under section 45, has escaped assessment merely for reason that assessee received sums on transfer of capital asset unless he indicates prima facie working of such escapement of capital gain in the reason recorded. It is submitted that the income from LTGC results into loss if the fair market value as on 01.04.1981 is taken at Rs.100 per sq. mt. or more. The assessee has claimed fair market value as on 01.04.1981 at Rs. 150/- per sq.mt. Even otherwise, in this case, as explained above, the Assessing Officer did not consider the relevant and definite material to form a belief that the land was capital asset so as to fall under clause (iii) (a) of section 2(14) of the Act. On the third ground of reasons recorded, the Assessing Officer has wrongly mentioned that the assessee has not filed the return of income in the reasons recorded although the return was filed by the assessee on 30.11.2007 vide acknowledgment/ receipt No 030208603. Even the assessing officer in the assessment order observed that assessee filed original return of income declaring total income of Rs.1,91,690/-. Thus, under such circumstances, the assessment is required to be quashed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law which is equally applied in the present case is that reopening of the assessment would not be permitted for fishing or roving inquiry. This can, as well be seen as part of the first requirement of the Assessing Officer, having reason to believe that income chargeable to tax has escaped assessment. In other words, notice of reopening which is issued barely for making fishing inquiry, would not satisfy this requirement. To support this submission the ld AR relied in case of PCIT Vs. Manzil D. Shah [95 taxmann.com 96 (Gujarat HC). It was submitted that the reasons are to be examined only on the basis of reasons as recorded. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly, at the stage of recording the reasons for reopening the assessment, all that is necessary is the formation of prima facie belief that an income has escaped assessment and it is not necessary that the facts of income having escaped assessme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (Guj)(HC), • Sunrise Education Trust V/s. ITO [2018] [92 Taxman 74 (Gujarat) 33. On the issue that agricultural land is not a capital asset, the ld AR for the assessee adopted the submissions of learned Senior Counsel Sh Saurabh Soparkar. However, Mr Rasesh Shah, ld AR for assessee submits that to strengthen the submissions of this issue the following case laws may also be looked in to it. • Smt. Sarifabibi Mohmed Ibrahim &Ors V/s. CIT - 204 ITR 631 (SC) • Hindustan Industrial Resources Ltd. V/s. ACIT - 335 ITR 77 (Del) • CIT V/s. VajubhaiChunilal (HUF) - 120 ITR 21 (Guj) • CWT V/s. Shashiben - 288 ITR 319 (Guj) • CIT V/s. Madhabhai H. Patel - 208 ITR 638 (Guj) • Dr. Motibhai D. Patel V/s. CIT - 127 ITR 671 (Guj) • GordhanbhaiKahanbhaiDalwadi V/s. CIT - [127 IRT 664 (Guj) • Sercon (P) Ltd. V/s. CIT [IT Reference No 149 of 1976 (Guj) • CIT V/s. Special Land Acquisition Officer [72 taxmann.com 255 (Guj) • Combined Industries (P) Ltd. V/s. CIT - 115 ITR 358 (Mad) • M.S. SrinivasaNaicker V/s. ITO - 292 ITR 481 (Mad) â€....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any compensation for loss of fruit bearing trees must necessarily be part of the compensation for agricultural land". Further in the case of ITO Vs. G.S. Lenkha [(2019) 106 taxmann.com 198 (Cochin-Trib) (TM)] also held that "where trees standing on an agricultural land are transferred along with the land as its integral part in one transaction, they would be regarded as "agricultural land" and not a separate capital asset until they are cut and removed, form an integral part of the land and such land has to be regarded as agricultural land. The initial burden to prove that land in question was being used for agricultural purpose at the relevant time is on the assessee. The assessee has produced evidence to prove that land was agricultural land in the form of extract of 7/12, the department has to lead evidence to controvert it. Further, when land is classified as agricultural land in revenue records and agricultural operations are found to have been carried on the date of transfer, there is a presumption that land is an agricultural land and the burden is then on the department to rebut it. 36. In without prejudice submissions, the ld AR for the assessee submits that compensati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cost of construction or improvement should be given as building is a depreciable asset. The compensation cannot be more than the cost of the building so it results in to a loss as the compensation of building should be less than the cost of acquisition of the building. Anyway, the loss arising out of the transfer of agriculture land by adopting lowest fair market value as on 01.04.1981 at 150/- per square meter should be adjusted against capital gain that may be estimated for transfer of building. 40. On the issue of valuation of land as on 01.04.1981 (Fifth ground of appeal), the ld AR for the assessee submits that the assessing officer allowed deduction on account of cost of acquisition of land by adopting fair market value as on 01.04.1981 at Rs. 2.05 per sq. Meter as against the cost of acquisition claimed by the assessee at Rs. 150 Per square meter. The assessee placed reliance on the valuation report of Approved Valuer in support of the rate of Rs. 150 per square meter, whereas the assessing officer adopted the rate of Rs. 2.05/- per square meter on the basis of information furnished by the Sub-Registrar, Athwa, Surat. The Registered Valuer has narrated the following poin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der cultivation at that time having good fertility value and the agriculturists of these areas used to grow vegetables and fruits in their fields and supply the same to the population of Surat city. In the year 1981, there was no concept of Jantri value or the circle rate and therefore, the sale deeds were executed as per free will and convenience of the purchaser and seller. Moreover, in those days, the rate of stamp duty was also much higher to the tune of 14.20% and the registration fee was 2% and therefore, there was a duty of 16.20% of the registered value. Due to such high level of duties, there was a general human tendency for the buyer and seller to register the sale deed at a lower rate. Moreover, the maximum marginal rate of income tax in financial year (F.Y.) 1981, was as high as 60% and the basic exemption limit was around Rs.8,000/- which was at prohibitively high level for any person to avoid such heavy tax duty which had resulted in declaration of lower sale value while executing the sale deed. Thus, the actual market rate of property in those days was not as low as reflected in the record of the Registrar of Properties. The ld AR for the assessee submits that now a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ining Rs.225/- per square feet as the fair market value of the property by producing the relevant material, including valuation report of a registered valuer, which all have been ignored while arriving at the price of Rs.84/- per square feet. The Assessing Officer assessed the value of the property as on 01.04.1981 on the basis of sale deeds of some nearby properties registered for such price in the year 1981 and thus arrived at the figure." The learned CIT(A) has also erred in not accepting the theory of reverse calculation. The ld AR for the assessee submits that Ahmedabad Tribunal in case of Madhusudan P. Patel V/s. ITO [ITA No 2579/Ahd/2010 dated 05.04.2013] accepted the theory of reverse calculation by discounting at 10%. Accordingly, the report of the registered valuer adopting reverse calculation method is fair and reasonable and should be accepted. 43. On the next issue which relates to treatment of agriculture income of Rs. 5000/-, offered by the assessee and by Assessing Officer as unexplained cash credit under section 68 of the Act. The ld Sr.AR for the assessee submits that the Assessing Officer treated the said receipt as unexplained credit on the ground that assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../01/2013 issued by the Mamlatdar Office, Taluka Choryasi • Notification of Industries and Mines Department, Government of Gujarat dated 30.01.1997 • Valuation report regarding value of land as on 01.04.1981 • Notification of Industries and Mines Department dated 30.01.1997 passed under Chapter XVI-A of Gujarat Municipalities Act, 1963 extending provisions of Notified Area to Hazira Industrial area. • Notification published under Land Acquisition Act, 1984, on 06.01.2006 declaring further land to be acquired for expansion of Essar Steel Ltd., and appointing Special Land Acquisition Officer for the same. • Consent Award dated 31.07.2007 under section 11(2) of the Land Acquisition Act, 1984 originally in Gujarati • True English translation of the Consent Award • Regular Award dated 21.01.2008 under section 11(1) of the Land Acquisition Act, 1984 originally in Gujarati • Free English translation of Regular Award. 44. The copy of the following decisions are also placed on record; • Commissioner of Wealth Tax vs. Shashiben (207) 288 ITR 319 (Guj)(HC) • ITO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... quite far-fetched to say that provisions of section 45(5) will not be applicable. 46. In without prejudice, submission of learned Senior DR for the Revenue submits that a compensation was received in multiple tranches (i) by way of consent award under section 11(2) dated 31.07.2007, then by regular award by Special Land Acquisition Act, 1894 dated 21.01.2008 and payment through mediation centre. The learned Senior DR for the Revenue by referring decision of Gujarat High Court in Dhaniben Vs. State (Special Leave Application 784 of 2010) dated 08.02.2010 and submits when payment was received by land owners, in multiple tranches, the provisions of section45(5) are applicable. On the submission of learned Senior Counsel for assessee regarding the year of taxability i.e., in the year of award that Hon'ble Supreme Court in the case of Raj Pal Singh (supra) held that year of taxability has to be in the year in which award was announced, learned Senior DR for the Revenue submits that the case law relied by Ld. Senior counsel for the assessee is distinct on the fact that as in that case, the property was under possession of assessee even prior to date of first Notification, Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ior Counsel for assessee while making his submissions invited attentions on various parts of award passed by Special Land Acquisition Officer and contended that land in question was agricultural land and therefore compensation was granted on the rate applicable to agricultural land. The learned Senior DR for the Revenue submits that during the course of assessment proceedings, the District Agricultural Officer submitted his report to the Assessing Officer that most of the land is rocky, having no irrigation facilities has high tide from the sea, and therefore non-cultivable. The learned Senior DR for the Revenue by referring various contents of award, has shown us, that according to letter dated 16.06.2004 issued by District Agricultural Officer, Surat has referred about growing of various agricultural produce rooted trees and also mentioned that there is no possibility of agricultural produce and only kharif season is taken from the land. It is also mentioned that some parts of the land have been surrounded by the water, some of part of land are having ditches and heaps, and some land is found to be pasture. There is a very small proportion of land where one can get higher yield f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent constituted under Article 243Q. The learned Senior Counsel for the assessee also contended that Hazira Notified area was not constituted under the Gujarat Municipalities Act, 1963rather the same was constituted under Gujarat Industrial Development Act 1962, therefore only limited section of Gujarat Municipalities Act, 1963 (Guj.34 of 1964). The learned Senior DR invited our attention to the Notification issued by Industries and Mines Development dated. 30.01.1997 and after reading the contents of Notification learned Senior DR submits that by above Notification, Government of Gujarat made ample clear that all provision of the municipality shall apply within Hazira Notified Area. 51. On the submission of learned Senior Counsel of assessee that if intend was to treat in Hazira Notified area as a municipality as required under the provision of Income Tax Act, the Central Government by way of Notification should have clearly provided for it. The learned Senior DR for the Revenue submits that local government is a State Government subject as provided under the Eight Schedule of Constitution of India. Moreover, Income Tax Act creates the fiction for treatment of a notified area as....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee that the population of Hazira Notified area was not more than ten thousand as per last census 2001 and that Hazira Notified area is a much bigger area comprising of nine villages and for the purpose of determination of population, in which population of the villages where land was acquired has to be considered and not that of the entire area. The learned DR for the Revenue submits that on the perusal section 2(14)(iii)(a) clearly provides for consideration of the population of the entire municipality or a notified area or a cantonment board as the case may be and it would be erroneous to consider only the population of a few villages. To support her contention, the learned DR for the revenue relied upon the decision of Hon'ble Supreme Court in the case of G. M. Omer Khan reported in 196 ITR 269 (SC), wherein the Hon'ble Apex Court held that population of the entire area is to be considered for the purposes of section 2(14)(iii)(a) and not the population of any single village in that area. 54. On the aspect of exemption under section 10(37), the learned DR for the revenue submits that assessee claims exemption under section 10(37) of the Act, for which impor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidence of any crops have been found on the various parcels of land from the report 1999 to 2012. It was further contended that report of NRSC, Hyderabad was not available when majority of appeal(s) were decided by ld CIT(A) and only in ten cases, the report was considered. The report of NRSC, Hyderabad is relevant to the issue involved in all the appeal(s) and needs to be considered for fair and judicious adjudication. The revenue prayed for admission of such additional evidence that consideration of additional evidence would be decisive in determining the controversy in just and equitable manner. Along with application for admission of additional evidence, the Revenue filed a copy of report of NRSC, Hyderabad along with various satellite images. 57. The learned DR for the Revenue submits that the additional evidence furnished by the Revenue is vital evidence and is relevant to determine the controversy in the issues with regard to nature of land, and the agricultural activities undertaken by land owners / agriculturists to ascertain whether land was used for agricultural purposes, in the immediate preceding assessment years from the date of award / transfer of ownership to M/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it is mentioned that results have to be interpreter and corroborative in association with the ground observation, available, if any. Thus, the report itself contents vague observation and cannot be used as evidence or conclusive or expert report based of any scientific evidence. Even otherwise, the court is fully empowered to assess or re-assess the veracity of such report. The assessee(s) during the appellate stage were not given any opportunity to comment on such report obtained at their back. It is settled law that no evidence or report can be relied which is collected at the back of the parties. 59. The learned Senior counsel reiterated that though the revenue is not entitled to file additional evidence even otherwise, if the Bench is of the considered view and deems may in its discretion may looked into it, the so-called report is of no use and does not give any desirable result to assess or determine the nature of land or any evidence to negate the fact that the land was not used by agricultural purposes. 60. In the short rejoinder, the learned DR for the Revenue submits that report of NRSC, Hyderabad was obtained by Ld. CIT(A) by exercising his statutory power under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce satellite data, with implication on accuracies of location area. And in absence in absence of adequate number of GCPs, rubber sheeting technique carried out also did not yield the desirable results. After careful consideration of the contention of the party, and going through the language employed in Rule 29, we are of the view that the revenue has no vested right to seek the admissions of additional documents. However, keeping in view the peculiarity of the facts that the report of NRSC was taken into consideration by ld CIT(A) while adjudicating about 10 appeals, therefore, to take a uniform approach, the application for admission of additional evidence filed by the revenue is allowed and the documents are taken or record for appreciation of the issues. 63. Now adverting to the main grounds of appeal raised by the assessee. We find that the assessee has raised multiple grounds of appeal. However, first we shall take up the issue, which goes to the root cause of the dispute between assessee and the assessing officer, as raised in ground No. 2 & 3 of grounds of appeals. To make it more simple we reframed these grounds as to whether the land acquired by the Special Land Acqui....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessing Officer to give his report to clarify regarding the population as to which area is to be considered for the purpose of section 2(14)(ii)(a). The assessing officer was also directed to comment on the distance of acquired land from municipal limit (Surat Municipality). The said remand report was required by Ld. CIT(A) by observing that office of the Mamlatdar vide their letter dated 16/01/2013 mentioned that population of each of nine villages (Hazira notified area) mentioned in the letter is less than 10000 as per census 2001 but combined population of nine villages exceed 10000. However, in the certificate issued by Chief Officer of notified area Hazira, the population of Hazira notified area was 2137. The ld. CIT(A) recorded that despite sending reminder letter to the Assessing Officer. We find that CIT(A) proceeded to decide the issue on the basis of material before him and identified the issue that this ground involved three issues viz; (i) if the land acquired is capital asset under section 2(14), (ii) if the land acquired by Special Land Acquisition officer falls in the definition of "capital asset" under section 2(14)(iii)(a) or not and (iii) whether if it is capit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d is an agriculture land or nor, the ld. CIT(A) held that the assessee was required to establish that land was used for agriculture purpose only. The District Agriculture Officer confirmed that most of the land is rocky, affected from Sea water and no irrigation facility. Thus, the contention of assessee cannot be accepted that land was used for agriculture purpose or capable of operation. No evidence of agriculture income was furnished. The ld. CIT(A) held that the assessee failed to establish that land was used for agriculture purpose. Thus the conditions of Section 10(37) are not fulfilled. 66. Before us, the ld. Senior Counsel for assessee vehemently submitted that compensation received on acquisition would not be subject to capital gain, as the agriculture land is not a capital asset as not being situated in an area which comprised within the jurisdiction of any municipality having population of not less than 10000 as per last census. If the land is not a capital asset, question of paying tax on its acquisition would not arise. The assessee has to satisfy two conditions (i) the land is agriculture land and (ii) to claim exemption that agriculture land is not situated within....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the submission of learned Senior counsel for the assessee that under section 264B of the said Act, the State Government has a power to apply any section of the said Act or part thereof, or the Rules in force as maybe applied to a municipal borough to such notified area. Section 264C would create a fiction that for the purposes of any section of the said Act which may be applied to a notified area, the person or committee appointed for such area under section 264B shall be deemed to be a "Municipality" under the said Act. The fiction is an unlimited fiction. Firstly, the fiction is only in relation to those sections of the said Act which are applied to the notified area and even the second part of the fiction of deeming the notified area to be a "municipality" is only for the purpose of the said Act. It does not convert notified area into a "Municipality" in any way. 68. The Hon'ble Supreme Court in the case of Saij Gram Panchayat Vs State of Gujarat (supra) while considering the scope of section 16 of GIDA and Section 264A inserted in Gujarat Municipalities Act, in view of insertion of Part IXA in the Constitution held that industrial area under the GIDA would be a notified....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Municipal corporation, it provides that a municipality under clause (1) may not be constituted under certain circumstances. In respect of any three types of areas, set out in clause (1) of Article 243-Q, having regard to the size of area, the municipal services being provided or proposed to be provided by the industrial establishment in that area and such other factor as the Governor will deem fit to consider, he may by public notification, specifies such area to be an industrial township. 69. Further Hon'ble Supreme Court in Solapur MIDC Industries Association Etc. Vs State of Maharashtra & Ors., JT (1996) 7 SCC 14 held that Municipal Corporation Act and an Industrial Development Act have distinct fields of operation and there is no inter se conflict between the two. 70. So far as reliance on the case law in G.M Omer Khan Vs Add CIT (supra) relied by ld CIT(A) as well as by ld DR for the revenue is concern, we find that the facts of that case are entirely different. In the said case the land of the assessee was situated in a village within the Municipality. The assessee in that case contended that his laid was in an area which in terms meant a 'Village' and the popu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of Section 2; (ii) such land during the period of two immediately preceding the date of transfer, was being used for agricultural purpose by such Hindu Undivided Family (HUF) or individual or a parent of assessee; (iii) such transfer is by way of compulsory acquisition under any law or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India and (iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. 74. We have already held the land is not situated within a municipal area, thus, first condition is satisfied. So far as second condition, is concerned, we find it is certified by District Agricultural Officer, Surat vide his letter dated 16.06.2014 that the agricultural operation are carried in the land. Further the award was passed in financial year 2007-08, in the award the Special land Acquisition Collector on a number of stances mentioned that the land under acquisition is used for the agriculture purpose, this prove beyond doubt the la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent authority. The assessee claimed that the surplus realised by him on the sale of land was not liable to be taxed as capital gains as the land in question was agricultural land. The ITO held that since no agricultural operations were carried on immediately before the sale of the land, the land could not be treated as agricultural on the date of its sale and, therefore, the surplus realised by the assessee was liable to be taxed as capital gains. On appeal, the AAC reversed the decision of the ITO. On further appeal, the Tribunal affirmed the decision of the AAC. On reference before High Court held that having regard to the facts and findings recorded by the Tribunal, it was obvious that not only the physical characteristics of land, in the instant case, but the user also was agricultural. Even though the land was not actually put to agricultural use since about one year prior to the sale, there was no evidence to establish that it was converted to any other use. The fact that permission under section 63 of the Bombay Tenancy and Agricultural Lands Act was obtained by the assessee to sell the lands to the society for residential purposes would not, militate against the land contin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd merit in the submissions of the ld DR, as disclaimer, attach to the said report, NRSC, itself reported the shape file provided by CIT(A) did not match with field boundaries of the reference satellite data, with implication on accuracies of location area. Further, in absence in absence of adequate number of GCPs, rubber sheeting technique carried out also did not yield the desirable results. And that concurrent ground truth was not available for thus study and interpretation is exclusively based on the manifestation of features and experience of the interpreter, which could be subjective. It is also mention in the last para in the disclaimer that results have to be corroborative in association with the ground observation, available, if any. Thus, the report itself contents vague observation and cannot be used as evidence or conclusive or expert report based of any scientific evidence against the assessee. Moreover, said report was not provided to the assessee. Thus, by applying of such test we find that the land of the assessee acquired by Special Land acquisition officer is agriculture land. In the result, the assessee is also succeeded on this issue/ ground as well. 78. Cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entions of both the side, we are of the view that at the stage of reopening the assessing officer has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material was not a thing to be considered at this stage. We find that Hon'ble Supreme Court in Raymond Woollen Mills Ltd Vs CIT (supra) while considering the technical objection of sufficiency of reasons had not strike down the reopening of the case. And it was held that it would be open to the assessee to prove that assumption in the notice was erroneous. Thus, in view of the aforesaid factual and legal discussion, we do not find merit in the grounds in challenging the validity of re-opening, thus, the corresponding grounds of appeal is dis missed. 80. Next ground of appeal relates to partly confirming the action of assessing officer in taxing Rs. 6,50,000/- as capital gain and not treating the same as part of compensation. The assessing officer treated part of compensation of Rs.13.00 lakh as income from 'other sources'. On appeal, the ld. CIT(A) held that this component of compensation is given for constructed property on th....