2018 (9) TMI 275 - AT - Income Tax

Sale of land - nature of land - agricultural land - Conversion of land before the Appropriate Authority initiated by purchaser M/s Uttar Development Pvt. Ltd. - Held that - Though the AO and the CIT(A) take note of the fact that there were other co-owners alongwith the assessee. However, for reasons best known to the tax authorities these issues are left unaddressed. As noted no doubt res judicata does not apply strictly to the tax proceedings. The fact that the legitimate expectation of being treated similarly in identically placed facts by coowners at the same point of time cannot be out rightly ignored. The authority of the state rests on the assumption and the presumption that the state acts for the welfare of the individual. No doubt when the benefits of the individual are pitted against the benefits of the society the individual benefit has to yield to the greater good of the society. No stretch of imagination the greater good of the society can be presumed to be served when identically placed individuals are meted with separate codes and actions. There is presumption of legitimate expectation embedded in the social democratic frame work where individual can be presumed to have an inherent right of expecting similar treatment in the eyes of law for similar conduct. The doctrine of resjudicata cannot be picked up and abused to shelter any and every wrong doing of the state. To condone such an action would lead to eroding the trust and faith in the state action and clothe state functionaries as an alien exploitive machinery which lets loose unchecked the personal whims and fancies of the state functionaries - set aside the impugned order in toto and restore the issue back to the file of the CIT(Appeals) with the direction to denovo pass a speaking order in accordance with law in the light of the aforesaid directions

Summary

Issues Involved:
1. Legality of action initiated under sections 147/148 of the Income Tax Act, 1961.
2. Determination of the date of transfer of land under section 2(47)(v) and (vi).
3. Conversion of agricultural land to non-agricultural land.
4. Classification of land as agricultural or non-agricultural at the time of sale.
5. Applicability of capital gains tax on the land under section 2(14).
6. Consistency in tax treatment among co-owners.
7. Consideration of stamp value versus fair market value for sale consideration.
8. Allowability of deductions under sections 54B and 54F.

Detailed Analysis:

1. Legality of Action Initiated under Sections 147/148:
The assessee contested the initiation of proceedings under sections 147/148, arguing that the action was erroneous both in law and on facts. The tribunal noted that these sections pertain to the reassessment of income that has escaped assessment.

2. Determination of the Date of Transfer of Land:
The assessee argued that the transfer of land occurred on 29.12.2006, the date of the agreement to sell, as per section 2(47)(v) and (vi). The tribunal observed that the agreement allowed the vendee to survey and demarcate the land, thus indicating that the transfer was effective from the date of the agreement.

3. Conversion of Agricultural Land to Non-Agricultural Land:
The CIT(A) held that the land's character was converted from agricultural to non-agricultural by an order dated 10.10.2007 under section 143 of the Jamindari Abolition and Land Reform Act. The tribunal noted that this conversion was a critical factor in determining the nature of the land at the time of sale.

4. Classification of Land as Agricultural or Non-Agricultural:
The assessee maintained that the land remained agricultural as per revenue records until the final registry on 18.09.2008. The tribunal found that the land's classification at the time of sale was pivotal, and any agricultural activity or lack thereof needed thorough examination.

5. Applicability of Capital Gains Tax:
The assessee claimed that the land did not qualify as a capital asset under section 2(14) and thus was not liable for capital gains tax. The tribunal considered the consistent treatment of similar cases, particularly the co-owners, to determine the applicability of capital gains tax.

6. Consistency in Tax Treatment Among Co-Owners:
The assessee argued that similar transactions by co-owners were not subjected to capital gains tax, and thus, the denial of similar treatment was arbitrary. The tribunal emphasized the principle of fairness, equality, and consistency, noting that the tax authorities failed to justify the differential treatment.

7. Consideration of Stamp Value Versus Fair Market Value:
The assessee contended that the AO erred in taking the stamp value for the registry as the sale consideration instead of the fair market value. The tribunal acknowledged this argument but focused more on the consistency and fairness of the tax treatment.

8. Allowability of Deductions under Sections 54B and 54F:
The assessee argued that deductions under sections 54B and 54F for investments in agricultural land and residential house construction, respectively, were not allowed. The tribunal did not delve deeply into this issue, as the primary focus was on the consistency and fairness of the tax treatment.

Conclusion:
The tribunal set aside the impugned order and remanded the case back to the CIT(A) for a de novo consideration, emphasizing the need for a consistent and fair approach in line with the treatment given to co-owners. The tribunal highlighted the importance of legitimate expectation and the principle of consistency in tax matters, directing the CIT(A) to pass a speaking order in accordance with law. The appeal was allowed for statistical purposes.