2018 (12) TMI 1555 - AT - Income Tax

Reopening of assessment - reason to believe with AO of escaping the assessment at the time of issuing of the notice - addition on sale of agriculture land - whether land sold by the assessee is not a capital asset as it is an agricultural land? - Held that - For holding whether the impugned land is a capital asset or not the distance of this land has to be measured only from municipal limit of Ghaziabad and not from Loni. As it has been stated by the learned commissioner appeals that the distance from the Ghaziabad Ministry per limit of the impugned land is 17.5 km and therefore it is not a capital asset and capital gain is not chargeable on sale of this agricultural land. In the remand report, also it is apparent that the impugned land is situated beyond 8 km from Ghaziabad Nagar Nigam. Ide - impugned land sold by the assessee is not a capital asset as it is situated beyond 8 km from the outer limit of the Ghaziabad Nagar Nigam. Hence, no capital gain is chargeable in the hands of the assessee on sale of the impugned agricultural land. - Decided in favour of assessee. For reopening of assessment assessing officer is correctly initiated the reopening of the assessment because the assessee has sold a impugned land and no return of income has been filed. In view of this the learned assessing officer has reasonable believe that income of the assessee has escaped the assessment. - decided against assessee.

Summary

Issues:
1. Validity of initiating proceedings u/s 147 of the Income Tax Act, 1961.
2. Addition of ?34,00,000 on sale of agricultural land under Section 2(14)(iii) of the Income Tax Act.
3. Measurement of distance of impugned land from the outer limit of 'Loni' Nagar Palika.

Analysis:

Issue 1:
The assessee challenged the initiation of proceedings u/s 147, claiming it lacked a valid reason to believe in the escapement of assessment. The Tribunal dismissed this ground, holding that as the assessee had sold the impugned land without filing a return of income, the assessing officer had reasonable cause to believe income had escaped assessment.

Issue 2:
Regarding the addition of ?34,00,000 on the sale of agricultural land, the CIT(A) upheld the chargeability of capital gains tax, considering the land as a capital asset. The Tribunal, however, disagreed. It noted that the impugned land was beyond 8 km from the outer limit of Ghaziabad Nagar Nigam, making it rural agricultural land not subject to taxation. Relying on a previous decision, the Tribunal ruled in favor of the assessee, directing the deletion of the addition.

Issue 3:
The disagreement arose over measuring the distance of the impugned land from the outer limit of 'Loni' Nagar Palika. The CIT(A) considered the distance from both 'Loni' and Ghaziabad Nagar Nigam, concluding the land was a capital asset. The Tribunal, however, emphasized that as per the notification, the distance should only be measured from Ghaziabad. By following precedent and considering the actual distance, the Tribunal ruled in favor of the assessee, allowing the appeal on this ground.

In conclusion, the Tribunal partly allowed the assessee's appeal, dismissing the validity of initiating proceedings under section 147 but ruling in favor of the assessee on the addition of capital gains tax on the sale of agricultural land. The Tribunal emphasized the correct measurement of distance from the municipal limit of Ghaziabad, leading to the deletion of the addition.