2019 (12) TMI 1620 - AT - Income Tax

Nature of land sold - agricultural land as exempted u/s 2(14)(iii)(b) despite the fact that the said land was falling within 8 kms of the municipal limit - HELD THAT - As remanded the matter for considering the distance from the Municipal limits to the land in question as on 06.01.1994. The adjudication of the issue requires a proper verification and supporting evidence which has not been provided by the parties before us. Accordingly, we cannot decide this issue conclusively in the absence of the necessary evidence on this point. Hence this matter is set aside to the record of the AO to conduct a proper enquiry and also consider the evidence, if any, to be filed by the assessee in support of his claim that the distance from the Municipal limits to the area in which the land is situated is less than 8 kms as on 06.01.1994. When the land in question is treated as capital asset and not as agricultural land excluded from the definition of capital asset as per the provisions of section 2(14)(iii)(b) - Once the main issue involved in the assessee s appeal is set aside to the record of the AO, this issue is also consequently set aside to the record of the AO for deciding afresh after giving an opportunity of hearing to the assessee. We may clarify that the Hon ble High Court has specifically made it clear that no opinion has been expressed on the merits of the case and it is open for the Tribunal to consider the same and take an independent view after taking into account new facts after verification and it will not being influenced by the decision of the High Court. AO is also directed to decide the issue afresh as per the law and facts emerging from the investigation and enquiry to be conducted on this point. Appeals are allowed for statistical purposes.

Summary

Issues:
1. Reversal of finding on agricultural land exemption under Section 2(14)(iii)(b) of the IT Act.
2. Deletion of expenditure disallowance without supporting documents.

Analysis:
1. The High Court remanded the matter to the Tribunal to verify the distance of the land from the Municipal limits of Jaipur City in accordance with the Notification dated 6th January, 1994. The AO's report indicating the distance was challenged by the assessee, highlighting inconsistencies in the Inspector's reports. The assessee argued that if the distance was 7 kms as per the report, it would exceed 8 kms as on the date of the Notification. The Tribunal could not conclusively decide the issue due to the lack of necessary evidence and remanded the matter to the AO for proper enquiry and consideration of evidence supporting the claim regarding the distance.

2. The second issue arose as a consequence of the first issue, as it depended on whether the land in question was treated as a capital asset or an agricultural land exempted from the definition of capital asset. Since the main issue was remanded for further investigation, this issue was also set aside for fresh adjudication by the AO after providing an opportunity of hearing to the assessee. The High Court clarified that no opinion had been expressed on the merits of the case, allowing the Tribunal to take an independent view based on new facts emerging from the verification process.

Conclusion:
Both appeals, one by the assessee and the other by the revenue, were allowed for statistical purposes. The Tribunal directed the AO to conduct a fresh adjudication on both issues, considering the evidence and facts emerging from the investigation without being influenced by the previous decisions. The High Court's remand emphasized the importance of verifying the distance of the land from the Municipal limits to determine its classification under the IT Act, highlighting the need for proper evidence and enquiry in such matters.