2019 (11) TMI 855 - AT - Income Tax

Reopening of assessment u/s 147 - issuing notice u/s 148 without obtaining proper sanction u/s 151 - addition of LTCG - HELD THAT - Prima facie the reasons recorded by the AO led to the formation of belief that the income assessable to tax in the shape of capital gains has escaped assessment. This is not a case of formation of belief on assumption of facts but the AO has conducted a proper enquiry to form the belief that the land in question does not fall in the exclusion clause of section 2(14) being capital asset. Therefore, at the stage of recording the reasons, the AO is not required to establish the sufficiency and correctness of the reasons to believe that the income has escaped assessment. It is only a prima facie reasonable belief based on the reasons recorded that the income assessable to tax has escaped assessment. Once the belief of the AO is based on some facts recorded in the reasons and these facts are not in dispute, then the issue whether the land in question is capital asset or not cannot be finally determined in the reasons recorded but it is a subject matter of assessment. Accordingly, I do not find any substance and merit in ground no. 1(a) of the assessee s appeal to challenge the validity of reopening. The same is rejected. Addition being long term capital gain on sale of land - HELD THAT - Undisputedly the land was sold by the assessee to M/s. Manglam Developers who has developed the entire township and plotting scheme on this land. The land was transferred for non agricultural purpose and, therefore, it was no more an agricultural land even at the time of transfer when the intention of the parties was undisputedly to use the land for non agricultural purpose. Secondly, as per the provisions of section 2(14)(iii)(b) it is clear that the distance has to be measured from Municipal limits to the area in which the land is situated and not to a particular piece of land sold by the assessee. Once the area is within 8 kms from the Municipal limits, then even if the particular land is beyond that distance of 8 kms, it will not be excluded from the definition of capital asset being an agricultural land. Therefore, all these contentions of the assessee are only with respect to the particular land in question and no such dispute has been raised that the area in which the land is situated is beyond 8 kms from the Municipal limits. - Decided against assessee

Summary

Issues:
1. Validity of reopening the assessment under section 147 of the Income Tax Act, 1961.
2. Addition of long term capital gain on sale of agricultural land.
3. Consideration of reports for assessing the location of the agricultural land.

Issue 1: Validity of Reopening Assessment:
The appeal challenged the action of the Assessing Officer (AO) in reopening the assessment under section 147 of the Income Tax Act, 1961. The Assessee argued that the AO's belief that the agricultural land sold was within 5 KM from the boundary of Nagar Nigam, Jaipur was incorrect as evidence showed it was beyond 8 KM. The Assessee contended that the reopening lacked tangible material and proper verification. However, the Department argued that the reasons for reopening were based on factual sale of land and due verification. The Tribunal held that the AO conducted proper enquiry and formed a reasonable belief that income had escaped assessment. The Tribunal rejected the appeal challenging the validity of reopening.

Issue 2: Addition of Long Term Capital Gain:
The appeal contested the addition of long term capital gain on the sale of agricultural land. The Assessee argued that the land was beyond 8 KM from the municipal limits, thus not a capital asset. However, the Tribunal noted that the land was transferred for non-agricultural purpose and fell within the 8 KM limit from municipal limits as per legal provisions. The Tribunal found no merit in the Assessee's contentions regarding the distance measurement and upheld the addition of long term capital gain. Consequently, the appeal on this issue was dismissed.

Issue 3: Consideration of Reports for Assessing Land Location:
The appeal raised concerns regarding the consideration of reports for assessing the location of the agricultural land. The Assessee provided detailed submissions and evidence regarding the access and development of the land, emphasizing the distance measurement from the municipal limits. However, the Tribunal held that the focus should be on the area's distance from the municipal limits, not just the specific piece of land sold. As the area was within 8 KM from the municipal limits, the land was not excluded from the definition of a capital asset. The Tribunal dismissed the appeal challenging the assessment based on the reports' consideration.

In conclusion, the Tribunal upheld the assessment and dismissed the Assessee's appeal on all grounds, including the validity of reopening the assessment, addition of long term capital gain, and consideration of reports for assessing the location of the agricultural land.