2024 (10) TMI 420 - AT - Income Tax

LTCG on sale of land - nature of land sold - finding recorded by the AO that agricultural land sold by the appellant during the year is a capital asset and not an agricultural land within meaning of sec. 2(14)(iii) - HELD THAT - AO without finding any shortcomings in the said certificate, issued a notice under section 133(6) of the Act, 1961 to verify the claim of the assessee to Tehsildar Sanganer. In reply to the said notice, the Tehsildar Sanganer stated that the aerial distance of the said agricultural land is beyond 7 km from Municipal Limits of Jaipur. Thus the Tehsildar has issued two different distances one is in the form of certificate and another in response to notice u/s 133(6) in the form of letter for same agricultural land. AO should have examined the Tehsildar thereon and should also make enquiry from him that how the distances were measured while issuing two different distances for the same land. AO did not make any enquiry to verify the correctness of position. AO only on the ground that the certificate filed by the appellant is in photo copy and not in original, held that the certificate furnished by the appellant cannot be relied on. Thus, prima facie it appears that Tehsildar Sanganer has issued certificates on his whims without verifying the actual distance only on estimates as per dictate which cannot be relied. The distance is to be measured aerially as per law in force for A.Y. 2014-15 which can only be done scientifically by putting aerial line on khasra maps from municipal limit and should have attached with certificate so as to rely any certificate of distance. Thus reliance placed by AO on certificate issued by Tehsildar, Sanganer is disregard of the certificate produced by assessee of the same Tehsildar, is without any basis and is wrong and bad in law. Regarding land sold at village Rampura, Tehsil Chaksu, the assessee claimed that said agricultural land is beyond 2 Km from Chaksu Municipality which has population of more than ten thousand but less than one lac. The said land of assessee s husband is agricultural land within the meaning of section 2 (14) and as it is not falling in exceptions given in Section 2 (14) (iii) (b) of I. T. Act, 1961 and therefore is not a capital asset. Similar is the position in the case of assessee. Therefore, in the case of assessee before us, on the same identical facts that agricultural land of the assessee being adjoining to the agricultural land of the assessee s husband, the certificate issued by the Director, RGDC, Survey of India being authentic/reliable, correct and scientifically acceptable, is equally applicable. Therefore, relying on the certificate issued by the Survey of India, Government of India, we are of the considered opinion that the land being agricultural land in the case of assessee, situated at village Rampura, Chaksu is beyond 2 km of Municipal limit of Chaksu Tehsil and accordingly not a capital asset as per law. Hence no capital gain tax is leviable thereon u/s 45 - The long term capital gain tax levied by A.O. on the sale of said agricultural land is wrong and unjustified. We find no justification to sustain the addition. Thus the additions made by the AO and sustained by the CIT (A) in respect of both the agricultural lands are deleted. Grant of deduction u/s 54B and 54F - AO denied the claim of the assessee on the ground that the assessee has not claimed the deduction in return filed under section 139(1) nor filed a revised return claiming the said deduction - HELD THAT - The power of the Appellate Authorities to consider claims made based on material already on record is co-terminus with the power of the AO. The failure to advert to the claim in the original return or the revised return cannot denude the appellate authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise tenable in law. Any other view will set at naught the plenary powers of appellate authorities. It is well settled that even if a claim made by the assessee does not form part of the original return or even the revised return, it can still be considered, if, the relevant material is available on record, either by the Appellate Authorities, which includes both the Commissioner (A) and the Tribunal by themselves or on remand, by the AO. We are of the view that the assessee is entitled to benefit of exemption/deduction u/s 54B and 54F in respect of investments made in purchase of agricultural land and residential house purchased by the assessee. Assessee appeal allowed.

Summary

Issues Involved:

1. Classification of agricultural land as a capital asset under Section 2(14)(iii) of the Income Tax Act, 1961.
2. Denial of exemption under Sections 54B and 54F of the Income Tax Act, 1961 for investments made in new agricultural land and residential house.

Detailed Analysis:

Issue 1: Classification of Agricultural Land as Capital Asset

The primary issue was whether the lands sold by the assessee were agricultural lands or capital assets under Section 2(14)(iii) of the Income Tax Act, 1961. The assessee argued that the lands sold were agricultural and hence not capital assets, thereby exempt from capital gains tax. For the land at Manpur Nangalia, the assessee provided a certificate from the Tehsildar stating it was beyond 8 km from Jaipur Municipal limits. However, the AO, relying on a different certificate from the same Tehsildar obtained under Section 133(6), stated the land was beyond 7 km. The Tribunal found fault with the AO's reliance on the second certificate without verifying the discrepancies between the two certificates. It was held that the distance should be measured aerially, and the AO's reliance on the certificate disregarding the original one was incorrect.

For the land at Rampura, the AO relied on a certificate stating the land was approximately 2 km from Chaksu Municipality, interpreting it as within the limit. The Tribunal noted that in a related case involving the assessee's husband, a report from the Survey of India confirmed the land was beyond the municipal limits, thus not a capital asset. The Tribunal found this report reliable and applicable to the assessee's case, concluding that the land was agricultural and not subject to capital gains tax.

Issue 2: Denial of Exemption under Sections 54B and 54F

The assessee claimed exemptions under Sections 54B and 54F for investments made in new agricultural land and a residential house, which the AO denied on procedural grounds, citing the Goetze (India) Ltd. decision. The Tribunal, however, emphasized that appellate authorities have the power to consider claims not made in the original or revised returns if the relevant material is on record. It cited several judgments supporting the view that legitimate claims made during assessment proceedings should not be denied merely for procedural lapses. The Tribunal concluded that the assessee was entitled to the exemptions claimed, as the investments were made and supported by documentary evidence.

Conclusion:

The Tribunal allowed the appeal, ruling that both lands were agricultural and not capital assets, thus exempt from capital gains tax. It also granted the exemptions under Sections 54B and 54F, recognizing the investments made by the assessee. The order emphasized the importance of substantive justice over procedural technicalities.