2019 (4) TMI 809 - AT - Income Tax

Reopening of assessment - nature of land sold - Addition under the head Long Term Capital Gains as the agricultural land sold by the appellant is not a capital asset u/s 2(14) of the I.T. Act, 1961 being beyond the notified limits - HELD THAT - In the facts of the present case, the evidence of exact location of the land and the value thereof based on a Valuation Report admittedly was relevant and crucial for deciding the issue and knowing its relevance, the assessee ideally should have been advised to come by way of a proper application. The fact that the assessee was a farmer agriculturist and thus, may not have had the benefit of a proper legal advice at the assessment stage cannot be ruled out. In a fair exercise of power, the said opportunity should have been given by the CIT(A). In the eventuality the value based on the Valuation Report was to be upset, the matter should have been referred to the DVO and not arbitrarily decided. Accordingly, the evidence is directed to be admitted and in case it is found to be insufficient or incomplete, the CIT(A), it is directed shall call for further evidences if so deemed necessary and confront these to the assessee before passing an order in accordance with law. With the above directions/observations, the impugned order is set aside on the issues agitated in ground Nos. 3 to 5 back to the file of the ld. CIT(A) directing him to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. Said order was pronounced in the Open Court at the time of hearing itself.- Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Correctness of the order dated 22.12.2016 of CIT(A)-2, Chandigarh for the 2009-10 assessment year.
2. Validity of re-assessment framed u/s 147 r.w.s. 148 of the I.T. Act, 1961.
3. Addition of ?30,62,489 under Long Term Capital Gains for selling agricultural land.
4. Discrepancy in fair market value of land as on 01-04-1981.
5. Ignoring the value of old building constructed on the agricultural land sold.

Issue 1 - Correctness of CIT(A) Order:
The appeal challenges the order of CIT(A)-2, Chandigarh for the 2009-10 assessment year. The appellant raised grounds questioning the correctness of the order, validity of re-assessment, and additions made under Long Term Capital Gains.

Issue 2 - Validity of Re-assessment:
The re-assessment was initiated by the Assessing Officer under section 147 of the Act due to undisclosed capital gains from the sale of land. The AO calculated long term capital gain based on sales deeds and added ?30,62,489 to the appellant's income. The appellant contended that the AO ignored relevant valuation reports and construction values.

Issue 3 - Addition of Long Term Capital Gains:
The appellant argued that the agricultural land sold was not a capital asset under section 2(14) of the I.T. Act, 1961. The CIT(A) dismissed the claim, stating the evidence provided was unreliable and inadmissible without proper application.

Issue 4 - Fair Market Value Discrepancy:
The AO used his fair market value of the land as on 01-04-1981 instead of the value from the appellant's valuation report. The appellant claimed the AO overlooked the value of construction on the land, which was certified by a Government Approved Qualified Valuer.

Issue 5 - Ignored Building Value:
The CIT(A) upheld the AO's decision to ignore the value of the old building constructed on the agricultural land during assessment proceedings. The appellant argued that the evidence supporting the construction was not considered properly.

In the judgment, the Tribunal found that the CIT(A) should have admitted the relevant evidence and given the appellant a fair opportunity to present their case. The Tribunal directed the CIT(A) to reconsider the issues raised in grounds 3 to 5, pass a speaking order, and provide the appellant with a reasonable opportunity to be heard. As a result, the appeal of the assessee was allowed for statistical purposes.