2016 (9) TMI 1195 - HC - Income Tax

Reopening of assessment - exemption from the payment of capital gain - agricultural land - nature of land - Held that - There is serious doubt about genuineness of the certificate dated 16.1.2013 of the Executive Engineer certifying that the land in question was situated beyond 8 kms from the outer limit of Vadodara Municipal Corporation, upon which the petitioner heavily relied. Shri K.D. Patel who is supposed to be the author of the certificate has since retired from Government service but has filed an affidavit stating that he has never issued the said certificate and the document does not carry his signature. The Road and Building division contends that a copy of said certificate is not found in their official records. A strong case is built up against the petitioner of having produced a document which was not genuine. For the purpose of this petition, atleast, we must proceed on the basis of declaration of official of Road and Building division that no copy of such document is found on the record and Shri K.D. Patel, retired Executive Engineer, who has gone on oath stating that he had never issued said certificate. If that be so, the very foundation of the petitioner s case of the land being at a distance of more than 8 kms from the outer limit of Vadodara Municipal Corporation fails. This would also match with the present information which Revenue collected after the assessment was over in form of statement of Shri Sohan M. Patel and certificate issued by the Deputy Collector of Vadodara Municipal Corporation, both indicating that the distance between the two limits is much shorter. In fact, the Executive Engineer of Road and Building division also in the latest affidavit has confirmed this aspect. In view of such facts, we are not inclined to quash the notice for reopening. However we clarify that the assessment may be carried out on the basis of evidence that may be brought on record including by the petitioner, unmindful of the observations made hereinabove.

Issues Involved:
1. Reopening of assessment.
2. Disclosure of material facts.
3. Validity of the certificate regarding the distance of land.
4. Consideration of aerial distance.
5. Relevant date for determining municipal boundaries.

Detailed Analysis:

1. Reopening of Assessment:
The petitioner challenged a notice dated 27.3.2015 for reopening the assessment for the assessment year 2008-2009. The petitioner had initially disclosed a sale of agricultural land for ?4.98 lacs and claimed exemption from capital gains tax under section 2(14) of the Income Tax Act. However, the Assessing Officer (AO) later found that the petitioner had deposited ?1.05 crores in his bank account by cash and that the distance between the Vadodara Municipal Corporation limit and the land was much less than 8 kms. Based on this new information, the AO issued a notice to reopen the assessment.

2. Disclosure of Material Facts:
The AO noted that the petitioner did not disclose the full sale consideration of ?1.10 crores, including ?1.05 crores received in cash. The AO believed that the petitioner failed to disclose fully and truly all material facts necessary for assessment. The petitioner raised objections, which were not disposed of by the AO before proceeding with the reassessment.

3. Validity of the Certificate Regarding the Distance of Land:
The petitioner relied on a certificate from Shri K.D. Patel, Executive Engineer, stating that the land was beyond 8 kms from the Vadodara Municipal Corporation limits. However, the AO obtained a statement from Shri Soham N. Patel, Additional Assistant Engineer, who stated that the land was within 2 kms of the municipal limits. The court found serious doubts about the genuineness of the certificate produced by the petitioner, as Shri K.D. Patel denied issuing the certificate and the document was not found in official records.

4. Consideration of Aerial Distance:
The petitioner contended that the authorities were considering the aerial distance, which was not specified in section 2(14) of the Act at the relevant time. The court noted that the AO had obtained a certificate indicating the shortest aerial distance between the land and the municipal limits, which ranged from 0.434 kms to 1.708 kms.

5. Relevant Date for Determining Municipal Boundaries:
The petitioner argued that the outer limit of the Vadodara Municipal Corporation as on the date of the notification (6.1.1994) should be considered, not the expanded boundaries. The court did not accept this contention, stating that the provision does not indicate that the municipal limits should be frozen as on the date of the notification. The court accepted the Revenue's stand that the relevant date for determining the municipal boundaries would be the date of the sale.

Conclusion:
The court dismissed the petition, allowing the reassessment to proceed based on the new evidence. The court emphasized that the assessment should be carried out based on the evidence brought on record, including by the petitioner, without being influenced by the court's observations. The interim relief was vacated.

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