2023 (6) TMI 1422 - AT - Income Tax

LTCG on account of sale of agricultural land - whether the same is taxable or not? - HELD THAT - Since Article 265 of the Constitution of India prohibit tax to be collected without authority of law, assessee s ignorance cannot be a ground to refuse examination of the claim made by the assessee. Even though, inadvertently assessee offered the LTCG on sale of land, he ought to have been allowed to urge the claim before the CIT(A) because there is no estoppel against law and the Article 265 of the Constitution prohibits tax authority to collect tax without authority of law We set aside the impugned order of the CIT(A) and admit this issue in respect of sale of land at Igatpuri on which assessee has offered LTCG which assessee is now claiming to be exempt from taxation being agricultural land. Issue raised before us is a mixed question fact and law which need to be adjudicated on the basis of relevant material/documents as to whether the assessee s asset qualify to be agricultural land to claim the exemption or not. Since this issue has not been examined by the AO and Assessee didn t get an opportunity to make such a claim during assessment stage, we rely on the decision in the case of Tin Box Company 2001 (2) TMI 13 - SUPREME COURT though in the context that if the assessee has not been granted proper opportunity before the AO, then it should be restored back to the AO for denovo assessment. Since we have found in the present case AO didn t examine the issue since assessee himself offered tax (LTCG) on sale of land and the assessment need to be made by AO which matters, therefore this issue is admitted by us and the same is restored back to the AO for the limited purpose of examining the claim of assessee as discussed. Therefore, we set aside the impugned order of the CIT(A) and remand the issue of sale of land at Igatpuri back to the file of the AO and direct the AO to examine this issue de-novo after hearing the assessee in accordance to law. Assessee is at liberty to file documents/material/written submission before the AO to substantiate its claim of agricultural land and exempt income on sale of it and AO to pass order in accordance to law. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Admissibility of plea regarding inadvertent offering of capital gain on sale of agricultural land.
2. Condonation of delay in filing the appeal.
3. Interpretation of tax liability on the sale of agricultural land.
4. Application of Article 265 of the Constitution of India.
5. Judicial precedents on taxation of inadvertently offered income.

Detailed Analysis:
Issue 1: The appeal was filed by the assessee against the Ld. CIT(A)'s decision not to admit the plea regarding the inadvertent offering of capital gain on the sale of agricultural land. The assessee argued that the gain was mistakenly offered for taxation and should be exempt as per tax laws. The Ld. CIT(A) rejected the plea due to a delay of 790 days in filing the appeal and the acceptance of the return by the AO without adverse findings. The ITAT acknowledged additional evidence submitted by the assessee but deemed the appeal not arising from the assessment order. The ITAT set aside the Ld. CIT(A)'s decision and remanded the issue to the AO for de novo examination.

Issue 2: The delay in filing the appeal was a crucial point of contention. The assessee explained the delay by citing new information received in 2015 regarding the tax treatment of agricultural land. The Ld. CIT(A) refused to condone the delay, emphasizing that ignorance of the law is not a valid excuse. However, the ITAT held that the delay was unintentional and allowed the appeal for statistical purposes, directing the AO to reexamine the tax liability on the sale of agricultural land.

Issue 3: The core issue revolved around the tax liability arising from the sale of agricultural land. The assessee initially offered the capital gain for taxation based on a mistaken belief. Subsequently, upon realizing the error, the assessee sought exemption based on the nature of the asset. The ITAT emphasized the importance of examining the claim de novo to determine the correct tax treatment of the sale of agricultural land.

Issue 4: Article 265 of the Constitution of India, prohibiting the levy or collection of taxes without the authority of law, played a significant role in the arguments presented. The assessee's ignorance of the tax implications did not absolve the tax authorities from adhering to legal provisions. The ITAT considered this constitutional provision in directing the AO to reevaluate the tax liability on the sale of agricultural land.

Issue 5: The ITAT referred to judicial precedents, including the decision of the Hon'ble Bombay High Court in a similar case, to support the assessee's contention that inadvertently offering income for taxation does not preclude challenging the tax authority's decision. The ITAT highlighted the principle that tax collection must be in accordance with the law, emphasizing the need to provide the assessee with a fair opportunity to contest the tax assessment.

Overall, the ITAT's decision focused on upholding the principles of tax law, fair treatment of taxpayers, and adherence to constitutional provisions in determining the tax liability on the sale of agricultural land.