2024 (5) TMI 693 - AT - Income Tax

Nature of land sold - capital gain on sale of land or exempt as agricultural land - distance between two physical points on the surface of earth from local limits of the Municipality - as per assessee distance of the subject land from the local limits of the Angamally Municipality to be more than 2 kms, and which had formed the basis of his regarding it as agricultural land HELD THAT - The land mass stretching over an area, and the limits of the Municipality being not being linear, the distance would have to be worked from multiple points as even if one distance falls within the limit of 2 km., it would oust the assessee s case. Distance measured w.r.t. the longitude and latitude coordinates of the subject land, as well as the extant local limits of the Angamally Municipality, would only be regarded as valid. If the land is contiguous, as appears to be the case, and the share of the assessee and his daughter therein are not demarcated, it shall, as observed earlier, be on the basis of the boundary that the distance shall be taken into account. Where, though unlikely, the subject land is not contiguous, but segregated, each part would have to be reckoned separately, so that it may well be that a part of it is found agricultural, and a part not. AO shall, after hearing the assessee in the matter, forward the coordinates of the said land, identified by survey numbers, as well as of the local limits of the Municipality as on 16.02.2015, to KSREC, which shall report thereto, based on which he shall decide the matter. The burden to provide the primary information is on the assessee, which though the AO has the right to verify, and be satisfied with. Where not, he shall, state his reasons for the same, i.e., for not agreeing with that advanced by the assessee, forward both the set of coordinates, along with reasons, to KSREC, seeking it s opinion in the matter, and shall decide on the basis of it s report, unless of course the AO effectively rebuts it with an expert opinion, duly confronting the assessee therewith. As afore-noted, the matter warrants and, in fact, admits of a precise measurement, and the scope for an opinion in the matter is extremely limited. The AO s right to take a different view, which though cannot, inasmuch as he is to abide by law, be excluded, is to, for it to be judicially sustainable, be reasoned and supported by credible evidence. Revenue s appeal is allowed.

Summary

Issues involved:
The judgment involves the assessment of agricultural income under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2015-16.

Assessment of agricultural income:
The appellant's agricultural income, derived from the sale of land, was contested due to discrepancies in the distance of the land from the local limits of the Municipality. The appellant claimed the land was over 2 kms away, while the Assessing Officer found it to be 1.8 kms away, classifying the land as a capital asset. The appellant submitted evidence from an accredited agency showing the distance to be less than 2 kms, leading to the allowance of the appeal by the Commissioner of Income Tax (Appeals).

Admission of additional evidence:
The Revenue challenged the admission of additional evidence by the Commissioner of Income Tax (Appeals) beyond the prescribed rules. The Tribunal found that the appellant was not given adequate opportunity to furnish evidence during the assessment proceedings, leading to a denial of natural justice. As a result, the admission of additional evidence was deemed valid, and the Revenue's objection regarding the violation of rules was dismissed.

Merits of the case:
While the Tribunal acknowledged the validity of the additional evidence, it found the adjudication by the Commissioner of Income Tax (Appeals) lacking. The Tribunal noted discrepancies in the distance measurements provided by the appellant and the Revenue, emphasizing the need for a precise measurement. The Tribunal highlighted the importance of determining the distance based on the local limits of the Municipality as of the transfer date and directed the Assessing Officer to obtain expert opinions for a judicial determination.

Remand of the matter:
The Tribunal set aside the Commissioner of Income Tax (Appeals) order and remanded the case back to the Assessing Officer for further examination. The Assessing Officer was instructed to obtain coordinates of the land and local limits of the Municipality, seek expert opinions, and make a decision based on credible evidence. The Tribunal emphasized the need for a precise measurement and a reasoned decision supported by credible evidence.

Conclusion:
The Tribunal allowed the Revenue's appeal on the terms outlined in the judgment, emphasizing the importance of a thorough and precise determination of the agricultural income assessment based on accurate measurements and expert opinions.