2014 (3) TMI 687 - AT - Income Tax

Nature of land Agricultural land or not as per section 2(14)(iii)(b) of the Act - Sale of piece of land Whether the agricultural land is situated within 8 kms from the limits of Municipality Held that - The CIT(A) by invoking his powers u/s. 250(4) of the Act asked the assessee to furnish certain details - the assessee has filed this certificate thus, it cannot be termed as violation of Rule 46A - even if there are no express provisions which could suggest that the CIT(A) is bound to give an opportunity to the AO in respect of the evidence gathered by virtue of Sec. 250(4) of the Act - the principles of natural justice demand that nothing should be used against a person which has been collected behind the back of that person - the certificate of Dy. Hydraulic Engineer (Operations) need to be confronted to the AO for this limited purpose of whether the approach road taken by the AO is a private road or public road thus, the matter is remitted back to the AO for verification of the genuineness of the letter - If the AO is satisfied with the genuineness of the letter, the land shall be treated as an agricultural land exempt from capital gain tax Decided in favour of Revenue.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) regarding "Long Term Capital Gain" on the sale of land.
2. Determination of whether the land sold is agricultural land and exempt from tax.
3. Measurement of the distance of the land from the municipal limits of Bhiwandi Nizampur Municipal Corporation (BNMC).
4. Admissibility of additional evidence under Rule 46A.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by AO:
The Revenue's grievance revolves around the deletion of an addition amounting to Rs. 1,80,43,695/- by the CIT(A), which was made by the AO by assessing the "Long Term Capital Gain" in the hands of the assessee. The AO contended that the land sold by the assessee should be treated as a capital asset and liable for taxation under the head 'capital gain'. The CIT(A) deleted this addition, leading to the Revenue's appeal.

2. Determination of Agricultural Land:
The core issue is whether the land sold by the assessee qualifies as agricultural land and is therefore exempt from tax under Section 10(37)(i) and Section 2(14)(iii) of the Income Tax Act. The assessee claimed the land to be agricultural and beyond 8 kilometers from the municipal limits of BNMC, thus exempt from capital gains tax. The AO, however, argued that no agricultural activity was carried out on the land, and no agricultural income was declared by the assessee in preceding years.

3. Measurement of Distance from Municipal Limits:
The dispute over the land's classification as agricultural hinges on its distance from the BNMC municipal limits. The AO relied on a certificate from the Dy. Superintendent of Land Records, which stated the land was only 1600 to 1700 meters from the municipal limits. In contrast, the assessee provided certificates and maps indicating the land was more than 8 kilometers away. The AO personally verified the distance and concluded it was only 5.5 kilometers. The CIT(A) later accepted the assessee's contention that a private road used by the AO for measurement should not be considered, and thus the land was beyond 8 kilometers from the municipal limits.

4. Admissibility of Additional Evidence:
The Revenue argued that the CIT(A) violated Rule 46A by accepting additional evidence (a certificate from the Dy. Hydraulic Engineer) without giving the AO an opportunity to examine it. The assessee countered that the evidence was requested by the CIT(A) under Section 250(4) of the Act, which allows the CIT(A) to gather additional details. The Tribunal agreed with the assessee, stating that while Rule 46A was not violated, principles of natural justice require the AO to be given an opportunity to verify the evidence.

Conclusion:
The Tribunal decided to restore the matter back to the AO for the limited purpose of verifying the genuineness of the certificate from the Dy. Hydraulic Engineer, which stated that the road used by the AO for measuring the distance was a private road and not open to the public. If the AO finds the certificate genuine, the land will be treated as agricultural and exempt from capital gains tax. The appeals filed by the Revenue were allowed for statistical purposes, and the order was pronounced in the open court on 7th March 2014.