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2020 (5) TMI 652 - AT - Income TaxReopening of assessment u/s 147 - proper sanction u/s 151 - unexplained deposited cash in his savings bank account - whether the sanction of reopening given by the learned approving authority is proper or not? - HELD THAT - As decided in SONIA GANDHI, OSCAR FERNANDES, RAHUL GANDHI 2018 (9) TMI 720 - DELHI HIGH COURT for the purpose of Section 151(1) of the Act, what the Court should be satisfied about is that the Additional CIT has recorded his satisfaction on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice . In the present case, the Court is satisfied that by recording in his own writing the words Yes, I am satisfied , the mandate of Section 151(1) of the Act as far as the approval of the Additional CIT was concerned, stood fulfilled - we dismiss the argument of the assessee that there is no proper sanction recorded by the approving authority while sanctioning the action of the learned assessing officer under section 147. AO reopened the case of the assessee for the purpose of verification of the cash deposited in the savings bank account as income escaped - Cash deposit and consequent assessment of sale of agricultural land through which cash has been generated by the assessee is not an independent and unconnected issue. Therefore, respectfully following the ratio laid down by RANBAXY LABORATORIES LIMITED 2011 (6) TMI 4 - DELHI HIGH COURT , we do not find any infirmity in the reopening of the assessment by the learned assessing officer. Therefore, this argument of the learned authorized representative is rejected. In view of this we do not find any infirmity in the action of the Ao in reopening of the case as well as the action of approving authority in granting approval u/s 151 (1) of the act. - Decided against assessee. Capital gain - nature of land sold - capital asset v/s agricultural land - whether the agricultural land sold by the assessee or his HUF is a capital asset ? - Before us, the assessee has submitted a certificate of the tehsildar of village Bhapra dated 29th of December 2017 which certifies that the impugned land sold by the assessee is situated approximately 5.5 km from the municipal limits of Samalkha. The above certificate produced by the assessee before the lower authorities have been rejected for the reason that the tehsildar has mentioned the distance in approximation and further there is difference in signature. This issue if examined on verification of the certificate issued by that particular authority, they have stated that the distance is approximately 5.5 km. Definitely the property is not situated within 5 km of the municipality limits of that particular region. Otherwise, that authority would not have certified so - merely because the authority has mentioned approximately , that does not mean that property is situated within the 5 km of the municipal limits of that particular municipality. It may be possible that distance is higher than 5.5 km. there is no reason to presume that as the distance is certifying in approximation it is definitely within 5 Km of Municipal limits. It is one of the ways of certifying the distance because same is not measured up to last meter. Therefore for this reason rejection of the above certificate is devoid of any merit. Why the certificate is rejected is that the signature on the first page and on the second page are not similar as held by the learned CIT Appeal - On the first page there was no signature of Tehsildar, naturally but only intials. On the second page, Tehsildar has signed and certified approximate distance of the impugned land from the municipal limit of Samalkha. On the second page of the certificate, there is a stamp of Tashdique Shuda which means issued . Therefore, doubting the veracity of the certificate was not proper by the learned CIT Appeal. In fact, if he has any doubt about that he should issue direction to the ld AO to ascertain veracity of the same. We hold that the impugned property is situated beyond 5.5 km of the municipal limit of Samlakha ( Dist. Panipat), therefore the impugned property is not a capital asset. The sale of such land will not make any capital gain liable to be taxed in the hands of the assessee. Therefore on this reason itself, we reverse the orders of the lower authorities and direct the assessing officer to delete the addition. - Decided in favour of assessee partly.
Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act. 2. Validity of the sanction granted under Section 151. 3. Treatment of the sold agricultural land as a 'capital asset'. 4. Taxability of the capital gain in the hands of the individual versus the Hindu Undivided Family (HUF). 5. Eligibility for exemption under Section 54B of the Income Tax Act. 6. Admission of additional grounds of appeal. Detailed Analysis: 1. Validity of the Reopening of Assessment: The assessee argued that the reopening of the assessment was invalid as the reason for reopening was the cash deposit in the bank account, but the addition was made on account of long-term capital gain from the sale of agricultural land. The Tribunal found that the source of the cash deposit was the sale of agricultural land, thus establishing a direct nexus between the reason for reopening and the addition made. The Tribunal cited the Delhi High Court's decision in Ranbaxy Laboratories Ltd. to support the validity of the reopening, stating that the AO's action was justified as the issues were interconnected. 2. Validity of the Sanction Granted Under Section 151: The assessee contended that the sanction granted by the approving authority was mechanical and lacked proper application of mind. The Tribunal referred to the Delhi High Court's ruling in Sonia Gandhi v. ACIT, which upheld that a simple "Yes, I am satisfied" by the approving authority was sufficient to meet the legal requirements. Therefore, the Tribunal dismissed the assessee's argument, finding the sanction valid. 3. Treatment of the Sold Agricultural Land as a 'Capital Asset': The assessee provided a Tehsildar's certificate stating that the land was situated 5.5 km from the municipal limits of Samalkha, thus not qualifying as a 'capital asset' under the Income Tax Act. The lower authorities had rejected the certificate due to discrepancies in signatures and the use of the term "approximately." The Tribunal found these rejections unjustified, stating that the certificate clearly indicated the land was beyond the specified distance, thus not a capital asset. Consequently, the Tribunal directed the AO to delete the addition, as the sale of such land did not result in taxable capital gain. 4. Taxability of Capital Gain in the Hands of Individual vs. HUF: The assessee argued that the land belonged to the HUF and not to him individually. The AO had assessed the capital gain in the individual's hands, relying on a Supreme Court decision. The Tribunal, however, did not address this issue in detail, as it became irrelevant after determining that the land was not a capital asset. 5. Eligibility for Exemption Under Section 54B: The assessee claimed exemption under Section 54B, stating that the capital gain was invested in purchasing new agricultural land. The AO denied this exemption, arguing that the land was purchased in the names of the assessee's sons. The Tribunal did not delve into this issue, as the primary finding that the land was not a capital asset rendered this point moot. 6. Admission of Additional Grounds of Appeal: The assessee sought to introduce additional grounds challenging the jurisdiction of the AO under Section 147 and the validity of the sanction under Section 151. The Tribunal admitted these additional grounds, considering them legal and going to the root of the matter. The Tribunal cited Supreme Court decisions allowing the admission of new legal grounds at any stage of the proceedings. Conclusion: The Tribunal upheld the reopening of the assessment and the validity of the sanction granted under Section 151. However, it found that the agricultural land sold was not a capital asset, thus reversing the lower authorities' orders and directing the AO to delete the addition. The appeals were partly allowed, with the primary issue of the land's status as a capital asset being decisive. The Tribunal did not address the taxability in the hands of the individual versus the HUF or the eligibility for exemption under Section 54B, as these issues became irrelevant.
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