Income Tax Appellate Tribunal - Indore
Shri Dinesh Nigam, Indore vs Income Tax Officer 2 (3), Indore, Indore on 13 May, 2019
[ITA No.457/Ind/2017]
[Mr. Dinesh Nigam, Indore]
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA No.457/Ind/2017
Assessment Year: 2013-14
Dinesh Nigam ITO Ward-
75, Panjon Colony बनाम/ 2(3)
Indore Indore
Vs.
(Appellant) (Revenue )
P.A. No.ACUPN3855C
Appellant by Shri Dilip Kshirsagar &
Shri R.S. Tiwari, Advocates
Respondent by Shri K.G. Goyal, Sr. D.R.
Date of Hearing: 10.04.2019
Date of Pronouncement: 13.05.2019
आदे श / O R D E R
PER KUL BHARAT, J.M:
This appeal by the assessee is directed against order of the CIT(A)-1, Indore dated 18.11.2016 pertaining to the assessment dated 18.11.2016 pertaining to the [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] assessment year 2013-14. The assessee has raised following grounds of appeal:-
1. That in the light of fact that the territorial limit of Indore Municipal Corporation, Indore has been expanded by virtue Notification No.F 1-
3-2012-13-3 dated 4.3.2014 erred in treating the subject land "as capital asset within the meaning of section 2(14)(iii) of Income Tax Act, 1961" and further erred in determining the LTGC to the tune of Rs.41,13,018/- therefore the order passed by the Non applicants is illegal, bad-in-law and levy of LTGC deserves to be deleted.
2. That, the learned ITO and first Appellate Authority ought not to have considered the report of Patwari as one and only evidence, which in itself is an arbitrary and a casual report and is totally based on erroneous facts and mis conception of law. The authorities ought to have invited objections from appellant before using the same against him.
3. That, the subject order suffers from the principle of natural justice, the contents of report were neither shown to the appellant nor any reply was sought to rebut the same, hence the order passed is illegal, bad-in-law and non-est.
4. That, the order is further illegal on the ground that it has been based on the mandate of law which have been declared ultravires to the Constitution. Thus, the impugned order has become ipsofacto null and void.
5. That, the above authorities further erred in not granting the deduction u/s 54 B of the Act in commensurate with the share of investment of the appellant, in purchasing the agricultural land at Village Ghatiya.
6. That, the appellant craves leave to add/alter/amend or plead the other grounds at the time of hearing.
7. That, the appellant has paid the requisite amount of fee as required.
8. That, this appeal has been filed with the application for condonation of delay.
2. The assessee has also raised following additional grounds:
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[ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] "That, the Learned ITO erred in law and on facts in adopting the value determined by the stamp valuation authority at Rs.1,00,60,000/- for the calculation of LTCG while he ought to have adopted the amount actually received by the appellant to the tune of Rs.72,82,000/- to compute the amount of LTCG. The learned authority erred in law in applying Section 50C which is not applicable to the appellant's case in the light of ITAT decision ITO, Ajmer V Raj Kumar Parashar ITA No.11/JP/2016 decided on 28.9.2017 by ITAT Jaipur."
3. The facts giving rise to the present appeal are that case of the assessee was selected for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') was framed vide order dated 9.3.2016. The A.O. observed in the assessment order that the assessee had sold an agricultural land bearing Khasra No.117/3, Patwari halka No.38, village Jakhya, Tehsil Sanwer, Dist. Indore admeasuring 0.614 hectare on 11.2.2013at a sale consideration of Rs.72,82,000/-. The stamp valuation authority had adopted market value of property at Rs.1,00,60,000/-. The A.O. observed that the assessee has claimed cost of improvement as well as the cost of acquisition for the purpose of capital gain. Further, claim u/s 54B of the Act 3 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] was made which was restricted to 1/3rd of the claim on the basis that the new asset was purchased in joint ownership with the other brothers of the assessee. Hence, the A.O. computed taxable capital gain at Rs.41,13,018/- against the income disclosed by the assessee in the return of income at Rs.1,97,440/-. Aggrieved by this, the assessee preferred an appeal before the Ld. CIT(A), who after considering submissions partly allowed the appeal, thereby the claim of improvement of asset was allowed. Hence, the addition of Rs.91,280/- was allowed. The other claim of the assessee related to the land in question being not capital asset and the claim of deduction u/s 54B of the Act on the entire sale consideration was rejected by the Ld. CIT(A). Now the assessee is in the present appeal.
4. It was noticed during the course of hearing that the present appeal filed was barred by 115 days. The assessee had filed an application seeking condonation of delay. The 4 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] Ld. Counsel for the assessee reiterated the submissions as made in the application. The application is duly supported by the affidavit. However, the Ld. D.R. opposed the condonation of delay and submitted that there is no reasonable cause which prevented the assessee for filing the appeal in time. Ld. Counsel for the assessee has taken us through the contents of the application and also submitted that the assessee suffered from Typhoid and Liver infection. Assessee was thus prevented to file the present appeal in time.
5. We have heard both the parties, perused the materials available on record and gone through the contents of the application as well as the affidavit filed in support thereof. The assessee was suffering from disease and was advised for rest. Keeping the fact in view coupled with the fact that revenue has not demonstrated that this was a tool to evade 5 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] tax or take an undue advantage. We therefore, condone the delay and take up the appeal for hearing.
6. Ground Nos.1 to 4 are inter-connected and are against treating the agricultural land as capital asset. Ld. Counsel for the assessee reiterated the submissions as made in the statement of facts. The submission of Ld. Counsel in the statement of facts are as under:
1. "The appellant is basically a farmer, in addition to it, he undertakes the job of electrical fittings. The appellant sold his ancestral agricultural land admesuring 0.614 hectare on 11.2.2013 located at Village JAKHYA, Tehsil Sanwer, Dist. Indore for Rs.72,82,000/- valued for LTCG purposes at Rs.1,00,60,000/-
u/s 50C of the Income Tax Act, 1961. The learned ITO treating the land as capital asset determined Net LTCG to the tune of Rs.41,13,018/- and over ruled the contention of appellant that the subject land is not a capital asset within the meaning of section 2(14)(iii) of the Income Tax Act.
2. Thus, the whole controversy centers round the question, whether in the light of facts, circumstances of the case and section 405 of MP Municipal Corporation Act, 1956 summarised above and below, the subject land is capital asset within the meaning of section 2(14)(iii) of Income Tax Act?
3. Now, in order to substantiate the issue involved, the humble submissions of the appellant are as under:-
(a) That, the Municipal Corporation, Indore in exercise of powers conferred u/s 405 of M.P. Municipal Corporation Act, 1956 got issued two Notifications u/s 405 dated 5.2.2013 and
4.3.2014 through State Government of Madhya Pradesh to expand the territorial limit of Indore Municipal Corporation, Indore. These notifications were quashed by the Hon'ble 6 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] High Court of M.P. on 3.2.2014 and 11.11.2014 respectively. Thus, these notifications lost its efficacy, corollary, therefore, follows that the directives of these notifications cannot be used to measure the distance of subject land, since at the point of time of sale of land, the territorial limit was not extended by way of emerging additional 29 villages as intended in the above notifications. Thus, the only existing notification was dated 12.8.1994 for measurement of territorial limit. It is, therefore, submitted that the distance ought to have been measured from the limit of Indore Municipal, Indore as laid down in the notification dated 12.8.1994. Thus, the crux of submission is that the distance of subject land ought to have been calculated from the limits provided in notification issued on 12.8.1994.
(b) That, however, the ITO got measured the distance of subject land by issuance of a statutory notice to Tehasildar, Sanwer, Dist. Indore whose report reveal, that the distance of subject land is 4 km. This report, on which the entire controversy arose is, prima facie incorrect and illegal. It does not disclose the starting and ending point of measurement of land and also does not disclose the method of measurement. On the contrary, the appellant at his own, measured the distance of land is arrived more than 8 kms from Banganga Railway station, Indore. The appellant sought the help of goodle search engine, which too reports the distance of land is more than 8 kms from the precincts given in notification, 1994 thus, it is crystal clear that the land of appellant is not capital asset within the meaning of section 2(14)(iii) of the Act."
7. Ld. Counsel for the assessee has also taken us through the M.P. Municipal Corporation Act, 1956. The Ld. Counsel has drew our attention to section 405 of the M.P. Municipal Corporation Act. In the light of the provisions of section 405 of the Municipal Corporation Act, 7 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] Ld. Counsel vehemently argued that the notification which has been relied by the Ld. CIT(A) taking the Municipal limit of the Indore Municipality being extended is factually incorrect. Ld. Counsel submitted that the notification dated 5.2.2013 and 4.3.2014 to extend the territorial limit of Indore Municipal Corporation was quashed by the Hon'ble High Court on 3.2.2014 and 11.11.2014. Ld. Counsel has taken us through the judgement of the Hon'ble M.P. High Court to buttress his argument. Ld. Counsel for the assessee further submitted that the Ld. CIT(A) has relied upon the notification dated 17.2.2012. He contended that Ld. CIT(DR) grossly erred in considering the notification dated 17.2.2012 as if this notification was issued u/s 405 sub section (3). In fact this notification issued u/s sub section (1) of the Section 405. He submitted that this notification was made to call for objections from the public at large in respect of extension 8 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] of territory of Municipal Corporation of Indore. Ld. Counsel submitted that there was no notification u/s 405(3) confirming notification u/s 405(1) at the time of sale of the land in question. Therefore, the authorities below grossly misdirected themselves by adopting the distance, which was proposed in the notification issued u/s 405(1) of the Municipal Corporation Act, 1956.
8. On the contrary, Ld. D.R. opposed these submissions and supported the order of the authorities below. He submitted that the Ld. CIT(A) has rightly relied upon the notification issued in the year 2012.
9. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The issue, which requires adjudication is that whether there was a valid notification issued for extension of territory of Indore Municipal Corporation at the time of transfer of land in question? For 9 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] the sake of clarity, provisions of Section 405 of the Municipal Corporation Act which is reproduced as under:
"[405. Power of Governor to include or exclude certain area - (1)the Governor may by notification in the gazette declare the intention to include within or exclude from the limits of the city any specified area.
(2) If the local authority having jurisdiction in the said area or any person resident therein, objects to such declaration such authority or person may submit an objection in writing to the Collector within a prescribed period and the Governor shall take such objection into consideration.
(3) When the said period has expired and the Governor has considered the objection under sub-section (2), the Governor may by notification, include within or exclude from the limits of the city any specified area.
Provided that when an area is excluded from the limits of any municipal area, such area notwithstanding such exclusion shall continue to be within the limits of the municipal area until the area so excluded is included in a duly constituted Panchayat area."
10. From the aforesaid provision, it is clear that Governor is empowered to issue notification to include or exclude from the limits of the city any specified area. For this purpose, 1st notification u/s 405(1) of the Municipal Corporation Act is to be issued notifying the declaration to include or exclude from the limits of city any specified area once it is notified, sub-section (2) of Section 405 entitles 10 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] any person residing therein for objecting to such declaration, such objections are required to be submitted to the Collector within a prescribed period and then the Governor would take such objection into consideration and as per sub-section (3) of section 405, when the prescribed period had expired and the Governor has considered the objection under sub-section (2), the Governor may by notification include within or exclude from the limits of the city any specified area. Now it is to be seen which notification duly notified under section 405(3) of the M.P. Municipal Corporation Act was in vogue at the time of transfer of agricultural land in question. It is to be borne in mind that transfer of agricultural land would not ipso facto be taxable unless it falls under the category of capital asset. For the sake of clarity, section 2(14) of the Act, which defines capital asset is reproduced as under: 11
[ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] "Section 2(14) "Capital asset" means:-
(a) property of any kind held by an assessee, whether or not connected with his business or profession;
(b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992;
but does not include:
(i) any stock-in-trade, other than the securities referred to in sub-clause
(b), consumable stores or raw materials held for the purposes of his business or profession;
(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes:
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
Explanations:
1. For the purposes of this sub-clause, "jewellery" includes:
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more 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.
2. For the purposes of this clause:
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[ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore]
(a) the expression "Foreign Institutional Investor" shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD;
(b) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956;
(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; or
(b) in any area within the distance, measured aerially:
(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.
Explanation: For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.
(iv) 6½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;
(v) Special Bearer Bonds, 1991, issued by the Central Government;
(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Government.
11. Hence, agricultural land is excluded from the category of capital asset subject to its location being beyond the 13 [ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore] distance as prescribed by law. In the given case the agricultural land should be beyond 8 km. from the Indore Municipal Corporation for allowing the claimed deduction.
12. The Ld. CIT(A) rejected the plea of the assessee by observing as under:
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[ITA No.457/Ind/2017] [Mr. Dinesh Nigam, Indore]
13. From the above order, it is clear that Ld. CIT(A) has relied upon notification dated 17.2.2012. As per Ld. CIT(A), this notification had extended the boundary of Indore Municipal Corporation. However, the A.O. in para- 3.1 of the assessment order has observed as under: 15
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