Income Tax Appellate Tribunal - Chennai
R.Mohamed Yahiya, Pondicherry vs Department Of Income Tax on 6 August, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
CHENNAI BENCH 'C' : CHENNAI
[BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND
SHRI HARI OM MARATHA, JUDICIAL MEMBER]
I.T.A No.1544/Mds/2010
Assessment year : 2007-08
The ITO vs Shri R.Mohamed Yahiya
Ward I(1) No.28, Kamaraj Street
Puducherry Senthamarai Nagar,
Muthialpet
Pondicherry 605 003
[PAN - ABTPY9580H]
(Appellant) (Respondent)
Appellant by : Shri Tapas Kumar Dutta
Respondent by : Shri Philip George
ORDER
PER HARI OM MARATHA, JUDICIAL MEMBER:
This appeal of the Revenue, for assessment year 2007-08, is directed against the order of the ld. CIT(A)-XII, Chennai, dated 6.8.2010.
2. The assessee is the owner of a Kalyana Mandapam and is having commission income. For assessment year 2007-08, he filed return of income declaring total income of ` 1,42,690/-. Assessment was completed u/s 143(3) of the Act at a total income of `34,10,112/- . The main addition was made on account of capital gains arising out :- 2 -: ITA 1544/10 of sale of land which, according to the assessee is agricultural land and on the sale thereof no income-tax is exigible. The assessee, alongwith three others sold 22 acres and 58 cents of land vide sale deed dated 22.12.2006 for a consideration of ` 96 lakhs. Since the assessee claimed that the land sold was agricultural land, the Assessing Officer made necessary enquiries. As per the record of the Village Administrative Officer(VAO), Alathur Village, Tindivanam Taluk, Villupuram District, the land sold was 'arable' (Karambu in Tamil) i.e the land is not fit for agricultural purposes. On the basis of this report, the Assessing Officer sought further explanation from the assessee vide letter dated 24.12.2009. The ld.AR vide letter dated 28.12.2009 informed that the assessee was out of station on account of business exigencies and that he was not in possession of any proof to show that agricultural operations were carried on in the land sold. The land in question was ancestral property of the assessee. From the report of the VAO, the Assessing Officer gathered that the land was not fit for agricultural purposes nor the assessee had furnished any evidence for carrying on any agricultural activities. So, he has held that sale of this land would not qualify for exemption not being the sale of agricultural land. The Assessing Officer ascertained the cost of land as on 1.4.1981 from the office of Sub-Registrar, Marakkanam, vide letter :- 3 -: ITA 1544/10 dated 30.12.2009. The details of the land sold and its guideline value was ascertained by the Assessing Officer as under:
Old Survey No. New Survey Extent· Guideline No. Value Acres-Cents
1. 207/1 .221/1 2500 0.56 22, 900
2. 207/2 221/1 & 221/2 4.58
3. 208/6 222/76 23, 200 2.32 375
4. 206/2 220/4 0.75 2.500
5. 209/8 225/56 0.25 800
6. 209/9 225/56 0.08 23, 050
7. 187 218 4.61 18, 000
8. 186/2 218 3.6 20, 900
9. 188 218 4.18 3,900
10. 186/1 218 0.78 4,350
11. 206/5 220/5 0.87 The total extent of land sold is 22.58 acres Total sale value ` 96.00 lakhs The assessee's share in sale value - ` 35 lakhs Assessee's share in percentage 36.50% Indexation cost of ` 1,22,775 x 519/100 = ` 6,37,202/-
Assessee's share in cost - 36.5% = ` 2,32,578/-
Sale value - assessee's share = ` 35,00,000/-
Less: Cost of land for assessee's share = ` 2,32,578/- Capital gains of the assessee = ` 32,67,422/-
3. In this way, the Assessing Officer computed capital gains at `32,67,422/-. During first appeal, the ld. CIT(A) called for the remand report of the Assessing Officer. The averments of the remand report dated 15.6.2010, verbatim are as under:
"The main issue was sale of land for ` 35 lacs for which the assessee has claimed exemption as agricultural lands. During the course of assessment proceedings, enquiries were made with the VAO, Alathur Vii/age, Tindivanam Taluk, Villupuram District. The VAO has given certificate to :- 4 -: ITA 1544/10 the effect that these lands were only 'Karambu' which means non-arable and not fit for agricultural purposes: As such, the assessee's claim that the said lands were agricultural in nature was not true. Secondly, even if it is assumed for theoretical purposes that these lands were agricultural in nature, the assessee, in spite of ample opportunities given, has not produced any evidence for the agricultural activities undertaken by him. The assessee has failed to produce evidences/details like nature of crops raised, sowing of seeds, irrigation, employment of labour, marketing of produce etc. in support of his claim.
Thirdly, as per the provisions of s. 54B, the assessee, in the two years immediately preceding the date on which the transfer took place, should have used the lands for agricultural purposes. As per the records, the assessee has not admitted any agricultural income from the said lands for the AYs 2005-06 and 2006-07. The attested copies of the statements of income for the AYs 2006-07 and 2005-06 are enclosed for the ready reference of the learned CIT(A).
It is, therefore, submitted that the lands owned by the assessee were not only not agriculture in nature but also the assessee has not used the lands for agricultural purposes. "
When a specific query was asked for regarding the exact location of the appellant's lands which were sold, the Assessing Officer had submitted two reports dt. 02.08.10 and 03.08. :La, in which the Assessing Officer had commented as under :-
"It is submitted that as per the enquiries made by the Inspector of this Office, it is ascertained that the said lands in survey Nos.218, 220, 221, 222 & 225, previously held by the above assessee, are situated 32 kms. and 36 kms. away from the limits of Tindivanam and Pondicherry Municipality respectively.
In continuation to this Office letter under reference(2), it is submitted that the said lands belonging to the above assessee are situated within 5 kms. from Marakkanam, which is a town Panchayat, with a population of around 19,570, as per census taken in 2001. This is for the kind information of the CIT(A)".:- 5 -: ITA 1544/10
4. To counter the above report, the assessee has submitted, vide letter dated 4.8.2010, as under:
"1. The Assessing Officer has not appreciated that Sec. 2(14)(iii)(a) of the Income-tax Act, 1961 clearly provides 'not being land situate 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 a population of not less than 10000 according to the last preceding census
2. The language employed in Sec. 2(14) makes it clear that the intention of the legislature is to tax a land situated within a Municipality, Corporation, Notified Area Committee, Town Committee or Cantonment Board. Parliament did not want to tax a land situated either in a Village or a Panchayat. Thus the observation of the Assessing Officer that the lands are situated within 5 Kms. from Marakkanam Town Panchayat has no application to the present case.
3. Further, it is clear that the lands situated in Kanthadu Village falls in Kanthadu Viliage Panchayat and not on Marakkanam Town Panchayat. Kanthadu Village Panchayat is forming part of Tindivanam Taluk of Villupuram District, wherein the population is about 4000 only. A certificate dt. 02.08.10 issued by the Village Administrative Officer of Kanthadu Village; East, abundantly makes it' Clear that various survey nos. of punsai (dry)lands' at Kanthadu Village falls under Kanthadu Village Panchayat and NOT on Marakkanam Town Panchayat.
4. Further these lands are situated 32 kms. away from Tindivanam Taluk. Hence, the lands is NOT a Capital Asset as prescribed under Sec.2(14)(iii) of the Income-tax 'Act and therefore not liable to Capital Gains Tax.
5. It is further clear from the Revenue Records namely Land Patta dt. 06.04.10 issued' by the Revenue Department, Villupuram District of the Government' of Tamil Nadu, that the lands situated at Kanthadu East Village of Tindivanam Taluk.
This Revenue record does not mention anything about
Marakkanam Town Panchayat. I
6. Similarly, Adangal (village ledger extract) records maintained by the Divisional Deputy Thashildar, Thashildar Office, Tindivanam also maintain the records as Kanthadu East Village of Tindivanam Taluk. This Revenue Record does not mention' anything about Marakkanam Town Panchayat.:- 6 -: ITA 1544/10
7. Further the Sale Deed registered by the appellant in favour of the purchasers also describes that the lands situated at Kanthadu Village, Tindivanam Taluk of Vizhupuram District.
8. Therefore, the letter dt. 03.08.10 issued by the 'Assessing Officer is without appreciating valid Revenue records and liable to be rejected. It is the self same officer held in the assessment order that the lands are 'arable' not fit for agricultural purposes and therefore liable for capital gains. However, in the Enquiry Report furnished by his own Inspector that the lands are dry (nansai) lands (which are reflected in Revenue Records).'
9. All the above details makes abundantly clear that the assessment was framed without application of mind and the provisions of the Income-tax Act, but only to harass the appellant."
5. After considering the above submissions, the ld. CIT(A) has concluded that the land in question was ''Karambu'' and being situated beyond the radius of 8 kms from the Municipality as defined u/s 2(14 r.w.s 2(14)(iii) (a) and 2(14)(iii)(b) of the Act , the land in question cannot be treated as capital asset and the sale proceeds in the hands of the assessee have to be treated as exempt from tax. Now the Revenue is aggrieved and has raised the following grounds:
1. Order of the Commissioner of Income tax (Appeal) is erroneous both on facts and Law.
2. The Commissioner of Income tax (Appeal) has erred in interpreting sec.2(14)(iii) in such a way that all lands beyond 8 KM from the local limits of municipality are not capital assets, whereas only agricultural lands that are· beyond 8 KM from a Municipality do not fall under the definition of 'capital asset'.
3. Even though there is no definition for 'agricultural lands' in the IT act 1961, the explanation given in Sec. 54B(i) for treating a land as agricultural land viz :- 7 -: ITA 1544/10 land should have been used for agricultural purpose in the two years immediately preceding the date of transfer, should be taken as definition for 'agricultural land' and the Commissioner of Income tax (Appeal) has erred in not holding that the land transferred is not an agricultural land.
4. Commissioner of Income tax (Appeal) should have realized that there is no pump set I water sources for the lands in question and therefore the lands in question can not be treated as 'agricultural land'.
5. Commissioner of Income tax (Appeal) should have realized that the assessee has not returned any agricultural income in the returns filed for any of the earlier years and therefore the lands in question can not be treated as 'agricultural land'.
6. Any other ground that may be taken at the time of hearing."
6. We have considered the rival submissions and have carefully perused the evidence available on record. The undisputed facts which we could cull from the records are as under:
(i) In the remand report, the land sold was marked as 'arable'.
(ii) The land in question was not cultivated for many years because the land being 'not fit' for cultivation.
(iii) The assessee did not file any proof in support of having done any agricultural activities on this land.
(iv) The assessee has never shown agricultural income from this land previously.
(v) The Assessing Officer has sought report from a different village.:- 8 -: ITA 1544/10
(vi) From the assessment order it is evidence that the Assessing Officer gave one opportunity to the assessee on which date he could not be present because he had gone out of town due to certain business exigencies.
In the totality of the facts and circumstances of the case, we deem it fit to give one more opportunity to the assessee to prove that the land which was sold was 'agricultural land' on the date of sale. It would be unjust to hold without giving opportunity to the assessee to show that the land sold was not agricultural land as it was not fit for agricultural operations particularly when the report of VAO pertained to some other village. Consequently, we restore the entire issue to the file of the Assessing Officer to examine the same, afresh, after giving due opportunity of hearing to the assessee.
7. In the result, the appeal of the Revenue stands allowed for statistical purposes.
8. Order pronounced in the open court on 29.4.2011 Sd/- Sd/-
(DR. O.K. NARAYANAN) (HARI OM MARATHA)
VICE-PRESIDENT JUDICIAL MEMBER
Dated: 29th April, 2011
RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR