2016 (4) TMI 80 - AT - Income Tax

Nature of land - whether land sold by the assessee is within 8 kms. from Rajahmundry municipal limits or beyond 8 kms? - Held that - There is a confusion that the Inspector proceeded by four wheeler along side of the approach road of the lay out to some extent. It is not clear that from that extent to land sold by the assessee, what is the distance? That the inspector travelled only to some extent and stopped their vehicle and the meter is showing 7.7 kms. Therefore, it cannot be said that the distance from Rajahmundry municipal limits to the land sold by the assessee is exactly 7.7 kms., for the reason that the inspector by measuring the distance, they reached approach road. Through, they tried to reach the assessee s lands, they stopped without reaching the assessee s lands. So based on the speedometer, they came to a conclusion that the distance would be 7.7 kms. without reaching assessee s land. Thus it cannot be concluded that the land sold by the assessee is within 8 kms. of Rajahmundry municipal limits. The Hon ble Punjab & Haryana High Court in the case of CIT Vs. Lalsingh and others (2009 (11) TMI 63 - PUNJAB AND HARYANA HIGH COURT ) has considered the issue of who is competent to measure the distance and observed that Tahsildar working under the State Government is more competent than the Inspector of the department . It is further observed that without the help of revenue officials, it is difficult for a person to identify the land and then to measure the distance of said land with municipal limits. Keeping in view of the above judgement of the Punjab & Haryana High Court, we are of the opinion that the certificate issued by the department of R&B, Government of Andhra Pradesh should be given more weightage. The certificate issued by the department of Roads & Buildings is very clear about the distance of the land from Rajahmundry municipality to assessee s lands. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the land sold by the assessee is within 8 kilometers from the Rajahmundry municipal limits and thus constitutes a 'capital asset' under section 2(14) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Facts and Initial Proceedings:
The assessee, along with four others, sold land in Palacherla village but did not file a return of income. A survey under section 133A of the Income Tax Act, 1961, revealed the sale. Consequently, a notice under section 142(1) was issued, followed by summons under section 131. The assessee eventually filed a return of income, claiming the land sale proceeds were exempt since the land was beyond 8 kilometers from Rajahmundry municipal limits.

2. Assessment by the Assessing Officer (A.O.):
The A.O. processed the return under section 143(1) and later issued a notice under section 148. The A.O. referenced a Government Order (G.O. Ms No.159MA) indicating that Palacherla panchayat was included in the Rajahmundry Municipal Corporation. The A.O. also relied on a report from the Inspector, which measured the distance to be less than 8 kilometers, concluding the land was a 'capital asset' and taxable under section 45.

3. Appeal to CIT(A):
The assessee appealed, presenting another G.O. (Ms No.389) which excluded Palacherla village from Rajahmundry Municipal Corporation. The CIT(A) accepted this, ruling out section 2(14)(iii)(a). However, for section 2(14)(iii)(b), the CIT(A) relied on the Inspector's report, which measured the distance as 7.7 kilometers, confirming the land as a 'capital asset'.

4. Appeal to the Tribunal:
The assessee argued that the certificate from the R&B Department, stating the land was beyond 8 kilometers, should be given more weight. The Tribunal examined the conflicting distance measurements: the Inspector's report (7.7 kilometers) and the R&B certificate (9 kilometers). The Tribunal noted inconsistencies in the Inspector's report and emphasized the reliability of the R&B certificate, referencing a Punjab & Haryana High Court judgment favoring government-issued distance certificates over departmental inquiries.

5. Tribunal's Conclusion:
The Tribunal found the R&B certificate more credible, establishing the land was beyond 8 kilometers from the Rajahmundry municipal limits. Consequently, the land did not qualify as a 'capital asset' under section 2(14), and the gains from its sale were not taxable.

6. Outcome for Similar Appeals:
The Tribunal applied the same reasoning to similar appeals (ITA Nos.280/Vizag/2012, 281/Vizag/2012, 283/Vizag/2012 & 284/Vizag/2012), allowing all appeals.

Final Judgment:
The appeals filed by the assessees were allowed, concluding the land sold was not a 'capital asset' within the meaning of section 2(14) of the Income Tax Act, 1961, and thus, the gains from its sale were not taxable.