2019 (11) TMI 649 - AT - Income Tax

Reopening of assessment u/s 147 - denying the exemption u/s 10(37) on the ground that land was not used for agricultural purpose - confirming the addition on account of long term capital gain on compulsory acquisition of agricultural land - HELD THAT - The return of income was processed u/s 143(1) and thereafter, taking into consideration the directions of the Coordinate Bench where it was directed to assess the capital gains in AY 2010-11 and not in AY 2009-10, the AO has issued the notice u/s 148 of the Act. It is therefore a case where there was no disclosure of such transaction in the return of income and secondly, the return of income so filed was processed u/s 143(1) and no regular assessment was made, hence, there is no question of forming of an opinion by the AO prior to issuance of notice u/s 148 of the Act. The contention of the ld AR regarding change of opinion therefore cannot be accepted. The second contention of the ld AR that only where the AO has reason to belief that income has escaped assessment, notice u/s 148 can be issued. Another related contention raised by the ld AR that only where the AO decided the issue of exemption u/s 10(37), it can be said to be a case of escapement of income. As we have stated above, the assessee has received the compensation on compulsory acquisition of land during the year and in absence of disclosure of such transaction in the return of income or any claim of exemption u/s 10(37) in the return of income, it is a clear case where the capital gains on such compulsory acquisition of land in respect of which the compensation has been received during the year has escaped assessment. The matter relating to assessee s eligibility for exemption u/s 10(37) is a matter of detailed examination and so long as prima facie, the AO has formed an opinion that the income received during the year has escaped assessment and such formation of belief is based on tangible and undisputed facts, there is no infirmity in the action of the AO in acquiring jurisdiction u/s 147 of the Act. Assessee in his appeal for AY 2009-10, the assessee has challenged the year of taxability of the compensation and has contended that the same falls in AY 2010-11 and again in AY 2010-11, the assessee is challenging the taxability of the compensation so received inspite of the specific directions of the Coordinate Bench wherein it was specifically directed to assess the capital gains in AY 2010-11 and not in AY 2009-10. In the result, we donot see any infirmity in the action of the AO in acquiring the jurisdiction by issuance of notice u/s 148 and the ground so taken by the assessee is dismissed. Exemption u/s 10(37) - essential and fundamental condition for availing exemption u/s 10(37) has to be construed strictly and in that sense, the phrase such land means the whole of the land being used for agricultural purposes. The same cannot be read and understood as such land or a part thereof where even a part of land is used for agricultural purposes, it may still qualify for exemption. Had that been the intention of the legislature, the same would have been provided appropriately. Therefore, on account of the said reasoning as well, the contention of the ld AR cannot be accepted. We are unable to accede to the contentions so advanced by the ld AR that the assessee qualifies for exemption under section 10(37) of the Act. - Decided against assessee

Summary

Issues Involved:
1. Validity of the order passed by AO under section 147 of the IT Act, 1961.
2. Denial of exemption under section 10(37) of the IT Act on the grounds that the land was not used for agricultural purposes, resulting in the addition of ?69,54,000/- as long-term capital gain.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by AO under Section 147:

The assessee challenged the validity of the order passed by the Assessing Officer (AO) under section 147 of the Income Tax Act, 1961. The AO had issued a notice under section 148 for the Assessment Year (AY) 2010-11 based on the direction of the Tribunal to assess the capital gain in AY 2010-11 instead of AY 2009-10. The assessee argued that the AO did not consider the Tribunal's direction to decide afresh whether the land was used for agricultural purposes in the two years preceding the transfer. The Tribunal had set aside the issue to the AO for fresh examination and to consider the evidence furnished by the assessee.

The AO, in the reassessment proceedings for AY 2009-10, did not discuss the agricultural use of the land and did not make any addition. Subsequently, the AO issued a notice under section 148 for AY 2010-11, observing that the compensation for the land was received on 20.11.2009, falling in AY 2010-11. The assessee filed objections to the reopening, which were rejected by the AO, and the reassessment was completed under section 147.

The Tribunal upheld the reopening of the assessment, stating that the AO had valid reasons to believe that income had escaped assessment. The Tribunal noted that the assessee did not disclose the capital gains in the return of income for AY 2010-11 and did not claim exemption under section 10(37). The Tribunal found no infirmity in the AO's action, as the reopening was based on tangible and undisputed facts, and dismissed the assessee's ground.

2. Denial of Exemption under Section 10(37):

The assessee claimed exemption under section 10(37) for the long-term capital gain on the compulsory acquisition of agricultural land. The AO denied the exemption, stating that the land was not used for agricultural purposes in the two years preceding the transfer. The AO relied on the report of the Sub-Tehsildar, Bagru, and the Khasra Girdawari, which indicated that no agricultural activity was carried out on the land during the relevant period.

The assessee submitted various pieces of evidence, including affidavits, photographs, electricity bills, and statements of individuals involved in agricultural activities on the land. The Tribunal noted that the Khasra Girdawari, a critical government document, clearly stated that no agricultural activities were carried out on the land, and the land was lying vacant for four years. The Tribunal found that the affidavits and other evidence provided by the assessee were self-serving and did not inspire confidence.

The Tribunal also addressed the contention regarding the presence of 50 Amla trees on the land, as reflected in the Khasra Girdawari for Vikram Samvat 2065. The Tribunal noted that the Khasra Girdawari for Vikram Samvat 2065 showed the name of JDA, indicating that the land was already transferred to JDA. The Tribunal found that the presence of a few trees did not qualify the entire land as being used for agricultural purposes.

The Tribunal emphasized that the exemption under section 10(37) requires the whole land to be used for agricultural purposes in the two years preceding the transfer. The Tribunal concluded that the assessee did not fulfill this condition and dismissed the ground of appeal, upholding the AO's denial of exemption under section 10(37).

Conclusion:

The Tribunal dismissed the appeal of the assessee, upholding the validity of the order passed by the AO under section 147 and the denial of exemption under section 10(37) of the Income Tax Act, 1961. The Tribunal found that the AO had valid reasons to reopen the assessment and that the assessee did not meet the conditions for claiming exemption under section 10(37).