2015 (5) TMI 971 - AT - Income Tax

Assessability of capital gains in the hands of assessee on sale of land - Held that - In the absence of the assessee having established its case of the land sold by him was agricultural land, we uphold the order of CIT(A) in assessing the income under the head income from capital gains at ₹ 96 lakh. In the absence of assessee having failed to furnish any evidence vis-a-vis its claim of deduction under section 54 of the Act, the same is also rejected. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the assessee. - Decided against assessee

Issues Involved
1. Assessment of total income higher than returned income.
2. Addition on account of capital gains.
3. Denial of exemption from tax on income from the sale of agricultural land.
4. Alleged violation of principles of natural justice in the assessment order.
5. Legality of the assessment order under section 143(3) r.w.s. 153A of the Income Tax Act, 1961.
6. Other grounds for appeal.

Detailed Analysis

1. Assessment of Total Income Higher than Returned Income
The assessee initially filed a return declaring a total income of Rs. 12,46,968/-. However, the Assessing Officer (AO) assessed the total income at Rs. 1,08,74,396/-, which was confirmed by the Commissioner of Income Tax (CIT). The discrepancy arose due to the AO's addition of Rs. 96,27,428/- as capital gains from the sale of land, which the assessee claimed as exempt.

2. Addition on Account of Capital Gains
The AO noted that the assessee sold land for Rs. 1,01,00,000/- and claimed deductions under various sections, resulting in a computed capital gain of Nil. The AO challenged the agricultural status of the land, based on the land being barren and not used for cultivation, as per the Inspector's report and land records (7/12 extract). The AO relied on several judicial precedents, including the Supreme Court's decision in Smt. Sarifabibi Mohmed Ibrahim v. CIT, to conclude that the land was not agricultural, thus making the capital gains taxable.

3. Denial of Exemption from Tax on Income from Sale of Agricultural Land
The CIT(A) upheld the AO's decision, emphasizing that the land must be agricultural and meet certain criteria under section 2(14) of the Act. The CIT(A) referred to various judicial tests to determine the agricultural status, including actual use for agriculture, proximity to urban areas, and the nature of the land. The CIT(A) found no evidence of agricultural use and noted the land was barren, thus denying the exemption.

4. Alleged Violation of Principles of Natural Justice
The assessee contended that the assessment order violated principles of natural justice. However, the tribunal found that the AO had provided sufficient opportunities for the assessee to present evidence, which the assessee failed to do. Thus, this ground was dismissed.

5. Legality of the Assessment Order under Section 143(3) r.w.s. 153A
The assessee argued that the assessment order was bad in law. However, the tribunal upheld the order, noting that the AO had followed due process and relied on substantial evidence, including the Inspector's report and land records, to determine the nature of the land and assess the capital gains.

6. Other Grounds for Appeal
The assessee raised additional grounds, including the right to add, amend, or alter any grounds of appeal. However, these were not specifically addressed as the primary issues were comprehensively adjudicated.

Conclusion
The tribunal upheld the CIT(A)'s decision, confirming the AO's assessment of capital gains and denial of exemption on the sale of land. The assessee's appeals were dismissed on all grounds, with the tribunal emphasizing the lack of evidence to support the claim that the land was agricultural. The tribunal also noted the binding nature of jurisdictional High Court decisions over those of other High Courts.

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