2023 (4) TMI 132 - AT - Income Tax

Exemption to Long Term Capital Gains as per section 2(14) - Nature of land sold - distance measured from the municipal limits - assesses claim of the impugned land qualifying as not being a capital asset in terms of section 2(14) - HELD THAT - Assessee furnished certificate from Gandhinagar Municipal corporation stating distance of the land being more than 6 kms from it and a certificate from Gandhinagar Urban development Authority showing the distance of the said land being 9.53 kms from the municipal limits of Ahmedabad. He also furnished evidence of growing agricultural crop of Jawar on the said land, furnished Revenue record in Form No12 reflecting the said fact. No infirmity in the order of the Ld.CIT(A) upholding the AO s rejection of the documents submitted by the assessee evidencing his land to qualify as not being a capital asset as per section 2(14) of the Act. We find that the assessee did submit distance certificates of the land both from Gandhinagar and Ahmedabad municipal limits ,issued by the Gandhinagar municipal corporation and GUDA stating the land to be at a distance of 6Kms and 9.53 Kms respectively from the two municipalities. The Ld.CIT(A) has not dealt with these certificates submitted by the assessee. The assessee also contended that the land was used for growing Sorghum (Jawar) and furnished copies of Form No.12 evidencing the fact of the land being cultivated since 2007-08. The Ld.CIT(A) has not addressed this aspect also. We find that the Ld.CIT(A) has confirmed the addition made without dealing with the contentions and evidences filed by the assessee. The issue clearly needs reconsideration. Since the matter for determination is the factual aspect of whether the land sold by the assessee fulfilled the criteria of section 2(14) of the Act to qualify as not being a capital asset, it would serve the interest of justice by restoring the issue to the AO who may determine the same by making all necessary inquiries and taking note of the evidences filed by the assessee.Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Denial of claim of exemption to Long Term Capital Gains under section 2(14) of the Income Tax Act, 1961.

Analysis:

1. Background and Procedural History:
The appeal was filed by the assessee against the order passed by the ld. Commissioner of Income Tax (Appeals)-3, Ahmedabad, under section 250(6) of the Income Tax Act, 1961, pertaining to the Assessment Year 2012-13. Despite multiple adjournments due to the absence of the assessee, the appeal proceeded ex parte, with only the ld. DR present.

2. Assessee's Grounds of Appeal:
The primary grievance of the assessee was the denial of claim of exemption to Long Term Capital Gains under section 2(14) of the Act.

3. Factual Background:
The case involved the sale of land by the assessee, which was claimed to be exempt from capital gains tax as rural agricultural land. The ld.Pr.CIT, Ahmedabad, set aside the assessment order and directed further inquiry into the land's classification as a capital asset. The AO requested specific documents to verify the land's status.

4. Assessment by AO:
The AO found the documents submitted by the assessee to be vague and lacking in specificity. Subsequently, the AO obtained additional documents under section 133(6) confirming that the land was within municipal limits and not agricultural land. The AO rejected the exemption claim and added the capital gains to the assessee's income.

5. Appeal to CIT(A):
The assessee appealed to the CIT(A), submitting further certificates and evidence to support the claim that the land was beyond municipal limits and used for agricultural purposes. However, the CIT(A) upheld the AO's decision, citing lack of satisfactory evidence.

6. Judgment of CIT(A):
The CIT(A) agreed with the AO's rejection of the documents submitted by the assessee, finding them vague and inconclusive. The CIT(A) noted that specific information obtained under section 133(6) confirmed the land's location within municipal limits.

7. Judicial Review:
The Tribunal observed that the CIT(A) did not address certain certificates submitted by the assessee regarding the land's distance from municipal limits and agricultural use. The Tribunal found that the CIT(A) did not adequately consider these aspects and directed a fresh assessment by the AO to determine the land's classification as a capital asset under section 2(14) of the Act.

8. Conclusion:
The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a thorough examination of the factual aspects regarding the land's status as a capital asset. The matter was remanded to the AO for a comprehensive reassessment, ensuring the assessee's right to a fair hearing.

This detailed analysis outlines the key issues, procedural history, assessments by the AO and CIT(A), and the Tribunal's decision to remand the matter for further inquiry, emphasizing the importance of a comprehensive assessment based on all relevant evidence.