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TMI Blog2016 (8) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... of agricultural land to be assessed u/s 45 of the Income Tax Act, 1961 under a new source and further erred in applying section 50C of the Income Tax Act, 1961, after deleting the addition u/s 68 of the Income Tax Act, 1961 as assessed by the Learned Assessing Officer. 2. The Learned CIT (A) erred in law, facts and circumstances of the case by directing the sale of agricultural land to be assessed u/s 45 of the Income Tax Act, 1961 and further erred applying section 50C of the Income Tax Act, 1961 under the pretext of enhancement u/s 251(1)(a) r.w.s. 251(2) of the Income Tax Act, 1961 where in fact there was a reduction in tax liability rendering such enhancement notice and the direction bad in law. Without prejudice to Ground no. 1 & 2: 3. The Learned CIT (Appeals) has erred in law, facts and in circumstances of the case by treating the sale of Agricultural land at village Kunenama, Pune as sale of Capital Asset [non- agricultural land] and directing the Learned Assessing Officer to tax the same as Long Term Capital Gains. 4. The Learned CIT (Appeals) has erred in law, facts and circumstances by directing the Learned Assessing Officer to adopt the Sale Value at Rs. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Pune was not in the assessee's name but it was his mother's name and hence the assessee was asked to explain as to why the income claimed exempt as profit on sale of agricultural land should not be taxed u/s 68 of the Act. The assessee submitted that the assessee had purchase the said land along with three others and at the time of purchase, the assessee was only fifteen years of age and since he has not attained contractual age, the assessee's mother acted as his natural guardian. The asset was purchased in the year 1987 and has been consistently reflected in the balance sheet by the assessee and it was never reflected in the balance sheet of assessee's mother. The copies of the Balance Sheets and the purchase documents were brought on record. Scrutiny assessments were also framed by Revenue u/s 143(3) of the Act in the case of the assessee for the assessment years 2006-07, 2007-08, and 2008-09 , and in the case of assessee's mother for the assessment years 2006-07, 2007-08 and 2009-10. The assessee submitted that the sale of agricultural land and the exempt capital gain was correctly reflected in the tax return of the assessee. The A.O., however, rejected the contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions whatever were made before the A.O. with regard to his claim that the lands belongs to the assessee , it was an agricultural land and later it was declared as forest land and the land is not within the limits of any municipal town. The A.O. sent the DVO report dated 27th September, 2012 to the ld. CIT(A) , wherein the ld. CIT(A) observed that the alleged land was within a radius of 2 kms of Lonavala Municipality , the DVO had reported that it is not an agricultural land and the DVO valued the said land at Rs. 2,09,28,000/-. Thus, the ld. CIT(A) observed that the long term capital gain of Rs. 28,26,651/- is to be brought to tax as income under the head capital gains as against the addition of Rs. 23,98,500/- made by the AO u/s 68 of the Act. The learned CIT(A) issued enhancement notice to the assessee . The assessee submitted in response to the enhancement notice issued by the learned CIT(A) that the total sale consideration was Rs. 72 lacs and the assessee's share being 13.5417% comes to Rs. 9,75,000/-. The stamp duty authority had valued the property at Rs. 1,77,12,000/-. The assessee's share works out to be Rs. 23,98,500/- @13.5417%. The assessee submitted before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were actually carried out in the land. The ld. CIT(A) accordingly held that the land is not an agricultural land and is a capital asset u/s 2(14) of the Act. The DVO valued the cost of land at Rs. 2,09,28,000/- and the assessee's share comes to Rs. 28,33,651/- and the ld. CIT(A) directed the A.O. to take Rs. 28,33,651/- as the full value of consideration for transfer of land in view of provisions of Section 50C(3) of the Act. The A.O. was also directed to take Rs. 7000/- as cost of acquisition on 15h December, 1987 and compute the indexed cost of acquisition and compute the capital gain accordingly as per provisions of section 48 of the Act to compute capital gains under the head income from capital gains and the addition made u/s 68 of the Act was directed by the learned CIT(A) to be deleted vide appellate orders dated 03-12-2012 passed by the learned CIT(A). 6. Aggrieved by the appellate order dated 03-12-2012 by the learned CIT(A), the assessee is in second appeal before the Tribunal. 7. The ld. Counsel for the assessee reiterated its submissions as were made before the authorities below. The learned counsel for the assessee submitted that during the relevant previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Sheet as at 31st March, 2006 and 31st March 2008 of the assessee whereby the said land was duly reflected which is placed at page 50 and 51 of paper book. He also drew our attention to the Balance Sheet of the mother of the assessee as at 31st March 2005, which is placed at paper book page 49 whereby the said land is not being reflected as an asset in her Balance Sheet. The learned counsel for the assessee drew our attention to the assessments made u/s 143(3) for the earlier years in the case of the assessee whereby the agriculture income declared by the assessee was accepted by the Revenue in scrutiny assessments. The assessment orders for assessment years 2005-06, 2006- 07, 2007-08 & 2008-09 in respect of the assessee and for the assessment year 2005-06 and 2006-07 in the case of the mother of the assessee are placed on record vide paper book page No. 52 to 72. The ld counsel for the assessee submitted that the A.O. applied section 68 of the Act by holding the same as cash credit not being satisfactorily explained by the assessee , while the ld. CIT(A) applied section 45 of the Act to bring to tax long term capital gain on sale of the said land. It was submitted that the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVO has given a clear finding on the distance that the said land is only 2 kms from Lonavala municipality and hence the land in question is a capital asset u/s 2(14) of the Act chargeable to tax on gains arising at the time of transfer. The ld. DR submitted that no new source have been brought to tax by the ld. CIT(A) as it is the same gains from sale of land which is subjected to tax while in the case of Sardari Lal and Company(supra) relied upon by the assessee, altogether different source of income was brought to tax by learned CIT(A). In the instant case no new source of income has been discovered by learned CIT(A) and it is the same source of gains from sale of land which is subjected to tax by learned CIT(A) as long term capital gains while the AO assessed the same u/s 68 of the Act . The ld DR drew our attention of explanation to Section 251 of the Act whereby the learned CIT(A) is empowered while disposing of an appeal to consider and decide any matter arising out of the proceedings in which the order appealed against was passed . The power of ld. CIT(A) is co-terminus with the power of the A.O. and hence the Ld DR supported the orders of the learned CIT(A). The ld DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral income in the earlier years in the return of income filed with the Revenue which is accepted by the Revenue in scrutiny assessment while what is relevant is that at the time of transfer of the land, the land was agricultural land to get exemption from being treated as capital asset u/s 2(14) of the Act and consequentially entitled for exemption from tax under the provisions of the Act , while the fact is that the land is forest land on the date of its sale by the assessee . The assessee is also not able to demonstrate that it holds permission from State and Central government to carry on agricultural operations on the said land on the date of its transfer by sale executed by the assessee and that the agricultural operations were in-fact actually carried on by the assessee in pursuance of the government approvals on the said land when the land was sold. Merely because in the preceding years, the assessee has declared agricultural income which was accepted by the Revenue is not sufficient to declare the land as agricultural land on the date of its transfer by way of sale executed by the assessee to take out of ambit of being capital asset under Section 2(14) of the Act more-so th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of full bench of Hon'ble Delhi High Court in the case of Sardari Lal and Company(supra) is not applicable in the instant case as facts are clearly different in the instant case under appeal. Further, we have also noted that before enhancing the assessment , the learned CIT(A) duly issued notice of enhancement vide letter dated 23.10.2012 whereby detailed reasons proposing to enhance the assessment was duly given to the assessee and principles of natural justice as enshrined in the doctrine of audi alteram partem was duly complied with by the learned CIT(A) by putting the assessee to notice about proposed enhancement. The power of learned CIT(A) is coterminus with the powers of the AO as mandated u/s 251(1)(a) of the Act read with Section 251(2) of the Act and in our considered view, we donot find any infirmity in the action of the learned CIT(A) in proposing enhancing the assessment so far as his powers under the statute are concerned and compliance of principles of natural justice in exercise of the said powers in the instant case. However, as per section 50C of the Act, where the actual sale consideration received or receivable in respect of transfer of land or buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile on the other hand the actual sale consideration is Rs. 72,00,000/- . The assessee's share in the land is 13.5417% and hence full value of consideration will work out to Rs. 23,98,500/- which for the purposes of Section 48 of the Act shall be adopted as full value of consideration of sale of land as per provisions of Section 50C of the Act for computing long term capital gains chargeable to tax. This disposes of ground no 1 to 5 raised by the assessee in revised and consolidated grounds filed with the Tribunal. We order accordingly.
10. The next ground being ground no. 6 raised by the assessee is with respect to the chargeability of interest u/s 234A , 234B and 234C of the Act which is consequential in nature and does not require separate adjudication by us.
11. The last ground being ground no 7 is with respect to initiation of penalty u/s 271(1)(c) of the Act by Revenue against the assessee which is pre-mature at this stage and hence is dismissed as such.
12. In the result, the appeal filed by the assessee in ITA N0. 1180/Mum/2013 for the assessment year 2009-10 is partly allowed as indicated above.
Order pronounced in the open court on 28th July , 2016. X X X X Extracts X X X X X X X X Extracts X X X X
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