TaxTMI 
TaxTMI 
2026 (9) TMI 434
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.... lead to a formation of belief that income chargeable to tax has escaped assessment. (ii)That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in maintaining the legality of reopening of the case of the assessee merely on the basis of borrowed opinion of the DDIT(Inv)-2, Indore and without independent application of mind. (iii)That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in maintaining the legality of reopening of the case of the assessee even when there was no taxable income in the hands of the assessee since the only source of income of the assessee was from agricultural activities and he had sold rural agricultural lands in light of Notification No. 9447 dated 06-01-1994. (iv).That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in maintaining the addition of Rs. 66,56,650/- out of total addition of Rs. 92,37,650/- made to the total income of the assessee on account of cash paid towards purchase of agricultural lands by treating it as unexplained investment under section 69 of the Act without properly appreciating the facts of the case and submi....
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....d, the assessee has earned capital gain, but he has not offered the same for taxation. Further, it was found that assessee have made investment in purchase of immovable property of Rs. 2,09,06,150/-, whereas from his bank accounts he has withdrawn only Rs. 1,48,03,000/-. The assessee, during the statement recording u/s 131(1A) of the Act was confronted with the fact, but he could not explain the source of balance fund, and merely submitted that he has made remaining cash payment in F.Y. 2012-13, but assessee has failed to make further submission. Thus, sources of investment were unexplained. Further, as per record it was found that assessee has not filed its return of income for the assessment year (A.Y.) 2011-12. In view of the above facts, case was selected for scrutiny assessment, after recording the reason and obtaining approval from the concerned competent authorities within the meaning of section 147 of the I.T. Act. Accordingly, notice u/s 148 dated 28.03.2018 was issued and served to the assessee. Further letters dated 07.08.2018, 14.09.2018, 08.10.2018 was issued to the assessee regarding filing of income tax return. In response to the same assessee has filed its return of....
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.... assessee and treated the said amount as unexplained investment u/s 69. 5. Moreover, the Assessing Officer made an enquiry with the Municipal Commissioner of Indore recording the distance of the land sold by the assessee from the Municipal boundary of City of Indore. The said Municipal Commissioner through letter dated 26.12.2018 confirmed that the said distance was Rs. 5.7 kms. from the Municipal limit of City of Indore. Therefore, the Assessing Officer held that the sold land cannot be treated as an agricultural land as per exception clause given in section 2(14) and therefore, he computed taxable, capital gain on the said land adopting section 50C of the Act and by giving benefit of index cost of acquisition of the land. Such capital gain was calculated for Rs. 7,06,36,000/- and therefore, assessing officer made addition for the same. 6. In such assessment order two specific additions were made by the assessing officer: (i) Unexplained cash investment for Rs. 92,37,650/- (ii) Unexplained capital gains income for Rs. 7,06,36,000/-. 7. Aggrieved, by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who h....
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....nts made through banking channel but the assessee had actually meant the total payment made to the sellers which included both cash and through banking channel. In a detailed written submission, the assessee furnished as follows: (i) Actual "on money" paid for purchase of the land was Rs. 70,85,150/- and not Rs. 2,09,16,150/-, as considered by the Assessing Officer. (ii) The cash expenditure during registry was only Rs. 78,000/- and not Rs. 10,78,000/- as calculated by the Assessing Officer. (iii) The cash payment for registration purpose was actually Rs. 13,43,500/-, which was the same amount as mentioned in the assessment order. Therefore, the assessee agreed that there had been cash payment of Rs. 85,06,650/- and claimed that the said sum was well below the sum of Rs. 1,41,00,000/-, as mentioned in the assessment order as withdrawn from the bank account. However, ld.CIT(A) noticed that the impugned purchases were completed through registrations, and completed on 11.01.2011 and 30.03.2011 respectively. The ld.CIT(A) found that the cash withdrawals, as narrated in the assessment order started from 01.10.2011 to 08.11.2012. Therefore, the ld.CIT(A) not....
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....ction 50C of the Act, took the said sale consideration for Rs. 7,34,80,000/- ( Rs. 4,04,80,000 + Rs. 3,30,00,000). However, the assessee, during appellate stage, claimed that the valuation should have been referred to the Departmental Valuation Officer( DVO), as the sale agreement in respect of such lands where agreements prior to the actual registration of the land. However, the ld.CIT(A) observed that the assessee had not submitted any documentary evidence of having any fixation of sale price or payment thereof prior to Financial Year 2010-11. The ld.CIT(A) noticed that the payments were received during Financial Year 2010-11, in respect of the land which was sold for Rs. 3,30,00,000/-. For the other land, which was sold for Rs. 2,11,00,000/-, the assessee claimed to have received the sale proceeds during Financial Year 2011-12. However, since the land was registered within Financial Year 2010-11, therefore, ld.CIT(A) noted that the action of the Assessing Officer to be proper in invocation of Section 50C of the Act. 11. The ld.CIT(A) further noticed that the sold land was an agricultural land and only after the sale, it was converted into non-agricultural land at the request ....
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....00/-, and directed the assessing officer to allow index cost of acquisition for Rs. 28,48,000/-, as narrated at page 20 of the assessment order and allow benefit u/s 54B for Rs. 2,01,50,700/-. 13. Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before this Tribunal. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. The Ld. Counsel for the assessee submitted the written submission, and argued challenging the addition of Rs. 92,37,650/- made to the total income of the assessee on account of cash paid towards purchase of agriculture. During the course of re-assessment proceedings, statement of the assessee was recorded before the DDIT(Inv)-2, Indore wherein the assessee has stated that he has made payment towards purchase of new Agricultural land in his name and in the name of his family members. He has explained that payment was made through account payee cheques and also in cash. In his statement, the assessee himself state....
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....9, 262,263,270,272/2, 278/3 and Survey Nos 274,279, 280,281 85,60,650 Less: Amount of purchase consideration as per registry 70,82,000 On Money paid 14,78,650 2. Actual purchase consideration of land at Gram Sokravasa, Survey Nos 5, 6 & 11 1,23,45,500 Less Amount of purchase consideration as per registry 67,39,000 On Money paid 56,06,500 Total on money paid by the appellant 70,85,150 On perusal of the above, it is evident that the total amount of "on money" paid by the assessee, was only of Rs. 70,85,150/-. However, the assessing officer by twisting the entire facts stated that the assessee has paid additional amount of Rs. 85,60,650/- and Rs. 1,23,45,500/-, in addition to the purchase consideration, as mentioned in the purchase registry. The said calculation as done by the assessing officer was wrong and was merely done by twisting the facts of the case. The correct amount of on money paid of Rs. 70,85,150/- as calculated, the source of the same were also explained by the assessee stating that the assessing officer, considered the a....
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....e assessee was having cash of Rs. 1,41,00,000/- available with him on account of cash withdrawn from bank accounts the said fact is also accepted by the assessing officer, Henceforth, the source of cash payment of Rs. 85,06,650/- as made by the assessee stands duly explained. 15. On this issue, learned DR for the revenue, relied on the findings of the assessing officer. 16. We have considered submissions of both the parties and noted that assessing officer merely twisted the wording of statement of the assessee, as recorded by the Investigation wing and concluded that assessee has paid additional amount of Rs. 85,60,650/- and Rs. 1,23,45,500/- in addition to the purchase consideration, as mentioned in the purchase registry. However, the assessee during the course of recording of statement was asked to provide the total cost of purchase of agriculture lands. The assessee probably was trying to communicate that the total cost of one set of land was Rs. 85,60,650/- and total cost of another set of land was Rs. 1,23,45,500/-, out of which, certain amount were paid through account payee cheques and balance amount was paid in cash which interlia also includes amount mentioned in th....
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....tners of the assessee and according to the AO that the assessee could prove nothing in favour of the assessee that no cash payment is made. The assessee made rebuttal to the cross-examination of the said Shri Bapu Vithal Parande and that the said Shri Bapu Vithal Parande expressed his inability of those persons present during the alleged search. We note that the alleged cash was withdrawn from the accounts of Shri Bapu Vithal Parande, Shri Sandeep Parande and two others. The said person expressed his inability bring Shri Sandeep Parande and two others from whose accounts amounts have been withdrawn as witnesses to the alleged cash payment who are none of them his own family members. We note that the AO in its order at Para No. 5 clearly observed that certain documents were seized which are related to Dighi property which resulted in making addition in the hands of assessee. The CIT(A) also affirmed the said observation at Para No. 6.13 of the impugned order but no such documentary evidence brought on record before this Tribunal showing that the assessee received the alleged cash payment. We find the case of ld. DR is that Shri Bapu Vithal Parande made statement that the cash paymen....
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.... Transfer expenses Date of purchase/ date of FMV Purchase cost/ FMV. Indexed cost Long-term capital gain 1. Survey Nos. 7, 8/1 and 3/1/2, Gram Talawali Chanda, Indore (M.P] - 2.024 hectare [5 Acres] 30-09-2010 3,30,00,000 32,65,270 01-04-1981 35,66,719 2,53,59,375 76,40,625 2. Survey Nos 3/1/2 Gram Talawali Chanda, Indore [M.P] - 2.024 hectare [5 Acres] 31-03-2011 2,11,00,000 - 01-04-1981 35,66,719 2,53,59,375 (42,59,375) Total 5,41,00,000 32,65,270 71,33,439 5,07,18,751 33,81,250 "calculated using reverse indexation method The assessee submitted copy of registry, executed between the assessee and the purchaser in respect of sale of the aforesaid agricultural land before the lower authorities. The ld.Counsel submitted that above agricultural land as sold by the assessee situated at Gram Talawali Chanda, Indore [M.P] is not a capital asset, as per provisions of section 2(14) of the Act. Hence, the capital gain arising on the sale of agricultural land is not chargeable to tax. However, the assessing officer while passing the assessment order, taxed the long-te....
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....ore of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;] (iii) Agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;" In view of the e....
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....er the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. S.O. 91(E), dated February 8, 1991, for specifying certain areas for the purposes of the said clauses and objections and suggestions were invited from the public within a period of 45 days from the date the copies of the Gazette of India containing such notification became available to the public; And whereas copies of the said Gazette were made available to the public on February 13, 1991; And whereas the objections and suggestions received from the public on the said draft notification have been considered by the Central Government; Now, therefore, in exercise of the powers conferred by item (B) of clause (ii) of the proviso to subclause (c) of clause (1A) and item (b) of sub-clause (iii) of clause (14) of section 2 of the Incometax Act, 1961 (43 of 1961), and in supersession of the notification of the Government of India in the erstwhile Ministry of Finance (Department of Revenue and Insurance) No. S.O. 77(E), dated February 6, 1973, the Central Government having regard to the extent of, and scope for urbanisation of the areas concerned and other relev....
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....re. Gram Talawali Chanda, Indore [M.P] is situated beyond 8 kms from the municipal limits of Indore prevailing during the Year 1994. Henceforth, clause (b) of section 2(14)(iii) of the Act was also not applicable in the assessee's case in hand and therefore, the said land was not a capital asset as per the provisions of section 2(14) of the Act and any capital gain on sale of such land was exempt from tax. 23. However, we note that Assessing Officer while passing the assessment order concluded that the said land was a capital asset as defined under section 2(14) of the Act, on the basis of information received from the office of Municipal Corporation vide letter dated 26-12-2018, wherein it was written that the road distance of the said land from Indore was approx 5.7 km from the municipal limits of Indore, prevailing at the time of sale. Screenshot of relevant para of assessment order dated 29-12-2018 is reproduced hereunder for ready reference: 4.3.2 During the course of assessment proceedings, information was called u/s 133(6) of the I.T. Act from the Municipal Commissioner Indore regarding distance of land situated at (i) Revenue survey number 7, 8/1. 3/1/1, Talawal....
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....king the municipal limits during the year 2010-2011, that is, year of sale. However, as explained above, as per the Notification No. [SO 9447] (File No. 164/3/87-ITA.I)] dated 06-01-1994, the municipal limits for the purpose of calculation of the distance of 8 km is required to be taken based on the municipal limits prevailing as on the date of notification i.e 06-01-1994 and not as on the date of sale. Therefore, the said land was situated beyond 8 kms from the municipal limits prevailing at the time of year of sale also. We note that the said calculation as adopted by the assessing officer was not correct. 24. Therefore, we note that Assessing Officer merely by borrowing the information from the letter dated 26-12-2018, as issued by Municipal corporation held that the said land was situated at 5.7 km from Indore by taking the municipal limits of Indore during year 2010-11, more so, it is evident that as per the aforesaid notification, the municipal limits was required to be taken as prevailing as on 06-011994 and henceforth, the said measurement as made by Municipal Corporation of 5.7 km taking municipal limits of year 2010-11 was clearly not applicable to the present case of ....
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....CIT we allow this ground of the assessee's appeal. " The Department has preferred an appeal before the Hon'ble High Court of Rajasthan against the above order of Hon'ble ITAT. The Hon'ble High Court of Rajasthan vide its order dt 11-09-2017 has dismissed the appeal as filed by the Department. (ii) The Hon'ble ITAT "Jaipur" Bench in the case of Smt. (Dr.) Subha Tripathi Vs. DCIT, Circle-6, Jaipur reported in 34 taxmann.com 286 held as under: 44 "IT: If agricultural land fell beyond 8 kms of municipal limits on date of publication of relevant CBDT notification but fell within 8 kms on date of sale of land, it would still fall outside term 'capital asset." The Hon'ble ITAT "Jaipur" Bench in the case of Dinesh Kumar Jain Vs. ITO, Ward 6(1), Jaipur TA No 372/JP/2015] dated 01-12-2016 reported in 78 taxmann.com 53 held as under: "6.7 In light of above, the position in law is clear that section 2(14)(iii)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfillment of t....
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.... account the extent of, and scope for urbanization of that area and other relevant considerations. The reckoning of urbanization as a factor for prescribing the distance is of significant which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane. If principle of measurement of distance is considered straight line distance on horizontal plane or as per crow's flight then it would have no relationship with the statutory requirement of keeping in view the extent of urbanization. Such a course would be illusory. It is in pursuance of the aforesaid provision that Notification No. 9447, dated 6-1-1994 has been issued by the Central Government. In respect of the State of Punjab, at item No. 18, the SubDivision, Khanna has been listed at serial No. 19. It has, inter alia, been specified that area up to 2 kms. From the municipal limits in all directions has to be regarded other than agricultural land. Once the statutory guidance of taking into account the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue t....
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....ble ITAT "Kolkata" Bench in the case of DCIT Vs Arijit Mitra [ITA No.1679/Kol/2010] dated 29-06-2010 for the Assessment Year 2007-08 has held that: "6. It is a fact that this land does not fall in any area which is comprised within the jurisdiction of Municipality or a Cantonment Board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the 1st day of previous year. That means the land does not fall in sub-clause (a) of section 2(14)(iii) of the Act as this land is out of Municipal limit of Rajarhat Municipality and moreover it is 2.5 km from the outer limits of Rajarhat Municipality as certified by B.L & L.R.O, Rajarhat North 24 Parganas. Now, we have to see whether this land falls in clause (b) of section 2(14)(iii) of the Act as this section prescribes that any area within such distance, not being more than 8 km, from the local limits of any Municipality or Cantonment Board as referred to in sub-clause (a) of section 2(14)(iii) of the Act, as the central government may having regard to the extent of, and scope for, urbanization of that area and other relevant considerati....
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....ification, as amended latest by Notification No. 11186 dated 28.12.1999 clearly clarifies that agricultural land situation in rural areas, areas outside the Municipality or cantonment board etc., having a population of not less than 10,000 and also beyond the distance notified by Central Government from local limits i.e. the outer limits of any such municipality or cantonment board etc., still continues to be excluded from the definition of 'capital asset. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Rajarhat Municipality and that also 2.5 KM away from the outer limits of the said Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this lan....
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....of section 2(14) of the Act applicable at the time of Assessment Year 2011-12. The said agriculture land is situated at Gram Talawali Chanda which is not a municipality. As stated above, as per the Notification No. [SO 9447] (File No. 164/3/87-ITA.I)] dated 06-01-1994, the municipal limits for the purpose of determination of distance is required to be taken as prevailing as on the date of notification and not as on the date of sale. 27. We note that the assessee had agreed to sale his Agricultural land situated at Gram Talawali chanda admeasuring 4.048 Hectare of land [10 Acres of land] at a consideration of Rs 5,41,00,000/-. Detail of the same is as under: The assessee has duly proved that the said agriculture land is not a capital asset as per the provisions of section 2(14) of the Act. The said agriculture land situated at Gram Talawali chanda admeasuring 4.048 Hectare of land (10 Acres of land] was used for agriculture purposes for many years. It is evident that the said land was used by the assessee for agriculture activities during the year under consideration. The assessee, during the Financial Year 2010-11 relevant to Assessment Year 2011-12 agreed to sale his Agricul....
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....nly at the request of buyer for making the sale effective. The said land was diverted for the said intention only and M/s Sarthak Builders and Developers has also confirmed the said facts. The assessee has duly offered agriculture income of Rs. 8,61,550/- in the income-tax return as filed for Assessment Year 2011-12, which is also accepted by the Assessing Officer as there was no disturbance on this count in the assessment order. Therefore, it is evident that the said land was used by the assessee for agriculture purposes and the income as earned in respect of the same is duly offered in the income-tax return. That even, though the assessee has diverted the land at the request of buyer, the assessee continued doing agriculture activities till the date of registry. This clearly shows that the diversion was done, only for the sake of sale, with the request of buyer and the said land was agriculture land only till the date of registry for the assessee, therefore, we allow ground Nos. 5 and 6 raised by the assessee, on merit and delete the addition sustained by the Ld. CIT(A). 29. As, we have allowed the appeal of the assessee on merit, therefore, all other issues on technical groun....
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....00 10,80,600 Total- B 67,39,000 5,98,110 73,37,110 Additional amount of Rs 1,23,45,500/- was alledged to be paid towards purchase of the above said land in addition to cheques issued to the above seller parties 3.1 Deepak 8/o Laxminarayan Land at Gram Lasudia 251/1 11-11-2011 0.12 93,000 5,820 98,820 3.2 Laxminarayan 8/o Jagannath Choudhary Land at Gram Lasudia 271/1 11-05-2012 0.25 2,50,000 15,630 2,65,630 3.3 Laxminarayan 8/o Jagannath Choudhary Shop No 2, Basement, Harshal Manglik Bhawan at Dewas Ward No 18 Shop No 2 Basement 22-11-2011 120 84 Fts 4,50,000 31,650 4,81,650 3.4 Deepak 8/0 Laxminarayan Land at Gram Sarpati 262/2 15-04-2011 0.41 3,17,000 19,820 3,36,820 3.5 Laxminarayan 8/o Jagannath Choudhary Land at Gram Lasúdia 278/1/1 26-03-2012 0.25 1,93,000 12,070 2,05,070 3.6 Deepak 8/o Laxminarayan Land at Gram Lasudin 278/1 28-04-2011 0.25 1,93,000 12,070 2,05,070 3.7 Deepak 8/0 Laxminarayan Land at Gram Lasudia 297 08-07-2011 0.55 4,25,000 26,570 4,51,570 3.8 Deepak 8/6 Laxminarayan Land at Uram Lasudin 243 02-06-2011 0.25 1,13,500 7,100 1,20,600 3.9 Deepak 3/0 Laxminarayan Land at Gram Lasudia 278/2 04-11-2011 0.50 2,84,000 17,750 3,01,750 3.10 Dee....