9911796707
TMI Blog2022 (5) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... ea under the provisions of Clause-(1) of Article 243Q of the Constitution of India. Essar Steel Ltd., is located in the said Notified area. The composition of Gujarat Panchayat Act, 1993 ceased to apply in respect of Notified area from the date of Notification. Further, as per section 264B of the said Act a person or committee appointed for assessment / recovery of taxes of such area shall be deemed to be the Municipal Borough . On the basis of such reasons, the Ld. CIT(A) held the re-opening as valid. Agricultural land OR capital asset - whether the land is a capital asset under section 2(14) r.w.s. 2(14)(iii)(a)? - HELD THAT:- As satellite images shows that no agriculture activities were carried on the land. DR also submitted that report of NRSC is scientific report and conclusive proof. We do not find merit in the submissions of the ld DR, as disclaimer, attach to the said report, NRSC, itself reported the shape file provided by CIT(A) did not match with field boundaries of the reference satellite data, with implication on accuracies of location area. Further, in absence in absence of adequate number of GCPs, rubber sheeting technique carried out also did not yield the desirable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, therefore, the income offered by assessee as agriculture is also allowed and the assessing officer is directed to delete this addition. In the result, the corresponding ground of appeal is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... red in confirming the action of assessing officer in treating agricultural income of Rs.5,000/- ass unexplained credit u/s 68 of the I.T. Act, 1961. 7. It is therefore prayed that the assessment framed u/s 143(3) r.w.s.147 may please be quashed and/or the above additions/disallowance made by Assessing Officer and confirmed by learned Commissioner of Income-tax (Appeals) may please be deleted." 3. Brief facts of the case as gathered from the order of lower authorities are that the assessee filed her return of income for AY 2007-08 declaring total income of Rs.1,91,690/-. Subsequently, case of assessee was re-opened on 21.03.2012 under section 147of the Act on the basis of information that assessee has received compensation on account of compulsory acquisition of her land by Special Land Acquisition Officer, Hazira for M/s Essar Steel Ltd. The land of assessee falls in Survey No. 215/5 situated at village Hazira, Taluka Choryasi, District Surat, was acquired by Special Land Acquisition Officer. As per information received from Special Land Acquisition officer that assessee has received Rs.20 lakh as compensation for her land bearing revenue survey No.215/5 on account of compulsory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and these cannot be treated separately. The compensation was paid for trees; shrubs, bore well and pucca house, which were consideration for agricultural land. The assessee in other submission also stated if capital gains is calculated it will be nil. The assessee furnished the working of capital gains. The assessee requested for dropping the proceedings under sections 147 read with section (r.w.s) 148 of the Act. The explanation / reply furnished by assessee was not accepted by Assessing Officer. The Assessing Officer held that assessee has not produced any evidence that agricultural activities were carried out on the said land. In absence of any documentary evidence, the contention of assessee that vegetable were grown on the land was not accepted by Assessing Officer. The Assessing Officer further noted that he gathered information from Esser Steel Ltd., vide letter dated 20.11.2012 that assessee received compensation of Rs.7.00 lakh against the value of land and Rs.13 lakh received for pukka huts, pukka house, water tank. On the basis of information received from M/s Esser Steel Ltd. The Assessing Officer issued show cause notice dated 27.02.2013, as to why the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural activities in this area is nil. 5. The Assessing Officer on the basis of information collected from the office of Sub Registrar Athwa, Surat-1; regarding cost of acquisition of the land for the year 1981 treated the cost of acquisition of land in 1981 at Rs.2.05/- per sq.mt. The valuation report dated 28.01.2013 of the Government approved valuer furnished by the assessee, who suggested the rate of at Rs.150/- per sq.mt as on 01.04.1981, was not accepted by assessing officer. It was held that in adopting this rate, as per the submissions of assessee capital gains working is nil. The Assessing Officer adopted the value on the basis of information from office of Sub-Registrar Athwalines Surat at Rs.2.05/- per square metres on 01.04.1981 and computed the cost of acquisition on the share of assessee at Rs.40,289/- and worked out LTCG of Rs.6,59,711/-. 6. For other part of compensation of Rs. 13.00 lakh, which was classified by Assessing Officer against the pucca hut used was treated as "income from other sources". Further the Assessing Officer held that the assessee has shown agricultural income of Rs.5,000/- in her return of income. The Assessing Officer took his view that durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". On the basis of such reasons, the Ld. CIT(A) held the re-opening as valid. 9. On issue No.2 which relates to agricultural land not a 'capital asset'. The Ld. CIT(A) observed that Mamlatdar, Taluka, Choryasi, District Surat vide his letter dated 16.01.2013 mentioned that population of the nine villages falling within the Notified area as per census of 2001 was more than ten thousand. The Assessing Officer already held that Notified area comprises of land situated in these nine villages and therefore, population of these nine villages are to be considered for the purpose of Section 2(14)(iii)(a). The assessee claimed that her land is situated in village Hazira and its population is only 2137, which alone should be considered for the purpose of this section. The assessee in her alternative and without prejudice submissions claimed the benefit of Section 10(37) by claiming that even if the land acquired was a 'capital asset' no capital gains is leviable, as the land was acquired under compulsory acquisition. On such contention of assessee, the Ld. CIT(A) remanded the matter back to Assessing Officer vide his order dated 19.05.2014. The contents of reference is extracted in para-8.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t kilometre within Municipal Corporation. Thus, issue No.3 as framed in para-8.4 by Ld. CIT(A) was decided in favour of assessee. So far as part first issue is concerned, which relates to section 2(14)(iii)(a) of the Act, the ld. CIT(A) observes that as per Notification dated 30.01.1997 (Notified area of Hazira) in assessment order, nine villages were included in the said Notified area. The assessee claimed that as per the certificate of Chief Officer Notified area, the population of Notified area is only 2137, and that such information is available on Net/ website. However, Assessing Officer relied on the certificate issued by Mamlatdar in which individual population of each village included in the Hazira Notified area and total population exceed ten thousand. The Ld. CIT(A) further recorded that examining this issue, he found that several survey numbers falling in nine villages were notified by Notification dated 30.01.1997. If the said notified area is considered as a unit, the population of only those Survey numbers which have been included in the said Notification, has to be considered for the purpose of section 2(14)(iii)(a) of the Act. The remaining population of the village ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes and only when it classified as agricultural land. The District Agricultural Officer has confirmed that most of the land is rocky, affected by sea water, no irrigation facilities and only grass is grown and unsuitable for irrigation. Thus, it cannot be accepted that land was used for agricultural operation or was capable for operation. No evidence of agricultural income or activities in recent past has been furnished. Somehow Notified area were acquired in past is a part of Surat Urban Development Authority. On the basis of his observation, Ld. CIT(A) held that the land acquired was not agricultural land and is a capital asset within the definition under section 2(14) of the Act. Once the land is held as capital asset, the issue of applicability or sub-clause (a) or (b) or section 2(14)(iii) do not arise in such cases and profit on transfer of such land is assessable under the head of "capital gain". 13. On the other part of ground No.2 regarding deduction under section 10(37), the Ld. CIT(A) held that the assessee failed to establish that land was used for agricultural purposes. Thus, the conditions of section 10(37) are not fulfilled. As per information from Land Revenue A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable under the head "capital gains" only. The Ld. CIT(A) further observed that the assessee either at the assessment stage or appellate stage has not furnished any evidence or details of cost of acquisition, so he estimated @ 50% of Rs.13.00 lakh as cost of acquisition. Therefore, the addition was reduced to Rs.6,50,000/- and directed the assessing officer to assess under the head "capital gain" in place of income under the head "other sources". 16. On the remaining issue which relates to cost of acquisition of land, as has been taken at Rs.2.50/- per square meter by Assessing Officer and Rs.150/- per square meter by assessee, the Ld. CIT(A) held that this ground is relevant only if the population of Notified area is more than ten thousand. Since the Assessing Officer has considered the cost of acquisition at Rs.2.05/- per square meter on the basis of information collected by issuing notice under section 133(6) from office of Sub-Registrar, Surat. The Assessing Officer rejected the valuation report furnished by assessee on the ground that valuation has been done on the basis of reversed calculation. The Ld. CIT(A) further recorded that section 55A of the Act, which is applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award dated 21.01.2008 passed by Special Land Acquisition Officer, copy of which is placed also on record in its translation. Both awards can be regarded as compulsory award, but even then the provision of section 45(5) has no application to invoke this provision. In order to invoke this provision, it is necessary that assessee must receive compensation in two parts, firstly, under award and secondly, by way of enhancement. To support his submission, the learned Senior Counsel for the assessee relied on the decision of Hon'ble Kerala High Court in the case of CPL Lonappan& Sons 265 ITR 101 (Ker). In the present case, the whole group of matters, there is no enhancement at all, the amount is paid once and for all. If there be situation, the provision of sub-section (5) of Section 45 cannot be invoked then the case would fall only under sub-section (1) of section 45. If the case falls under sub-section (1) of section 45 then the capital gains on compulsory acquisition of land can be taxed only in the year in which the title in the land vested in the Government. The title would vests in the Government under section11 (2) of Land Acquisition Act after award, when the possession is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural operation was carried out and valued at Rs.300/- per square meter. In the second award the fact that agricultural operation are carried out is also certified by District Agricultural Officer, Surat vide his letter dated 16.06.2014 as record in the second award. Where the lands are fallow or were incapable of being cultivated compensation is awarded at a token rate of Rs.1.00/- per square meter. The learned Senior Counsel for assessee submits that so far as first award is concerned, no much discussion about agriculture activities, because it was a consent award. However, the fact that agriculturists were paid compensation @ Rs.247/- per square meter much closure to the compensation of Rs.300/- per square meter under the second award clearly shows that these lands are also agricultural land. The awards were passed by officers of State Government. The correctness of the statement made therein cannot be doubted. In the award, the Special Land Acquisition Officer has clearly recorded the nature of land as agricultural land. The observation of Assessing Officer that lands were not fertile or incapable of carrying out any agricultural operation is contrary to the record. To suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or temporary nature; g. whether the land, though entered in revenue record, had never been actually used for agriculture; whether the owner meant or intended to use it for agricultural purposes; h. whether the land was situated in a developed area; whether its physical characteristics, surrounding situation and use of the lands in the adjoining area where such as would indicate that the land was agricultural; i. whether the land itself was developed by plotting and providing roads and other facilities; j. whether there were any previous sales of portions of the land for non-agricultural use; k. whether permission under section 63 of the Bombay Tenancy and Agricultural lands Act, was obtained because the sale or intended sale was in favour of a non-agriculturist; if so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user. l. whether an agriculturist would purchase the land for agricultural purposes at the price at which the land as sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield; and m. whether the land was sold on yardage or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be an industrial township. This would mean in a simple meaning that industrial township set-up under this proviso would not be "Municipality". As a matter of fact, it cannot be municipality. As such, Hazira Notified area is such an industrial township, therefore, not a municipality. The learned Senior Counsel for assessee submits that on the issuance of the Notification under Section 16(1) of Gujarat Industrial Development Act, 1962, Hazira Notified area become a Notified area. Thereupon the provisions of Chapter-XVI-A Gujarat Municipalities Act, 1963 (Guj.35 of 1964) would apply. Hazira Notified area would then be an 'Industrial Township' area under Section 264A of the said Act. Under section 264B of the said Act, the State Government has a power to apply any section of the said Act or part thereof, or the Rules in force as maybe applied to a municipal borough to such notified area. Section 264C would create a fiction that for the purposes of any section of the said Act which may be applied to a notified area, the person or committee appointed for such area under section 264B shall be deemed to be a "Municipality" under the said Act. The fiction is an unlimited fiction. Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d area under new Section 264A of Gujarat Municipalities Act, 1963 (Guj.35 of 1964) and would mean an Industrial Township area under proviso to clause-(i) of Article 243Q of the Constitution of India. On the basis of aforesaid legal position, Ld. Sr. counsel for the assessee submits that Hazira Notified area is not a 'municipality'. 25. In second submission, the learned Senior Counsel for the assessee submits that Hazira Notified area did not have population of more than ten thousand as per last census in 2001.The assessee have placed on record a certificate of Mamlatdar which clearly established that population as per last census 2001 data was only 2137. The Assessing Officer did not accept the contention on the premise that Hazira Notified area is a much bigger area in which as many as nine villages comprised in. For that purpose, Assessing Officer relied on the certificate of Mamlatdar dated 16.01.2013 according to which the total population of nine villages comprising of Hazira Notified area was thirty eight thousand (38000). Before Ld. CIT(A), the assessee pointed out that this certificate dated 16.01.2013 is factually incorrect because it does not correctly recorded the area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. The learned Senior Counsel for the assessee submits that if a view is taken that land are not situated within a municipal area under the first submission. This condition automatically stands satisfied. For second condition, the learned Senior Counsel for the assessee submits that the agricultural operation are carried out is also noted and is certified by District Agricultural Officer, Surat vide his letter dated 16.06.2014. The awards are passed in financial year 2007-08, obviously, this would prove beyond doubt the land was being used for agricultural purposes, not only on date of acquisition but till the date of acquisition all throughout, but in any case for more than two years. For third condition, it was explained that admittedly first award is by consent; however, as held by Hon'ble Supreme Court in the case of Ghanashyam (HUF) 315 ITR 1 (SC) a consent award which has followed all steps of compulsory acquisition has to be regarded as an award of compulsory acquisition. So far as second award is concerned, it is undisputedly an award of compulsory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o filed his detailed written submission on the validity of re-opening, on the issue that agricultural land is not capital asset, on the rejection of claim of exemption 10(37) and on the issue of valuation of built up house (pucca structure) and valuation of land as on 01.04.1981 and addition of Rs.5,000/- by treating the agricultural land as unexplained credit under section 68 of the Act. The Ld. AR for the assessee submits that reasons recorded by assessing officer also can be summarized in three parts i.e., (a) land situated within Notified area is capital asset; (b) it is a case of transfer of capital asset by way of compulsory acquisition and Section 45(5) is applicable and that assessee had not filed return of income. The ld AR for the assessee submits that the assessee was the co-owner of 1/7 share in agriculture land at Block No 215/5 of survey no. 37 situated at Village Hazira, Taluka Choryasi, District. The said agriculture land was acquired by the State Government for the purpose of expansion of the steel plant of M/s Essar Steel Ltd. under the compulsory acquisition. The assessee and her family members were awarded compensation of Rs.1,75,00,000/- on account of compulsor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such prima facie statement regarding the population was made in the reasons recorded. The assessing officer has not referred the census of the notified area in the reasons recorded. As per the decision of the Hon'ble Supreme Court in G.M. Omer Khan Vs. ACIT (196 ITR 269), it has been held that the population of the entire notified areas is to be considered for the purpose of section 2(14)(iii) (a). Even in the assessment order, the assessing officer has not indicated the census of the Notified Area. The Assessing Officer has referred the census of nine villages that were included in the Notified Area as per the certificate of Mamlatdar dated 16.01.2013. The total of the population of these nine villages comes to 38,000. In fact, only two villages viz. Hazira and Suvali were included in the Hazira Notified Area. The other seven villages were described as boundaries in the Notification. Further, it is to be noted that not all the Survey Numbers of the land situated in said two villages were included in the Notified Area. Only certain Survey Numbers were included. On the specific contentions of the assessee, the learned CIT(A) therefore, remanded the matter to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment on the basis that the assessee had received Rs.26,25,000/- as compensation for surrender and transfer of her ownership rights in land on account of compulsory acquisition. The assessee in fact, received Rs.20,00,000/- and not Rs.26,25,000/- during the year under consideration. Further, the amount mentioned as of Rs.26,25,000/- is also wrong as the assessee was entitled to receive Rs.25,00,000/- at 1/7th share. It is to be noted that in the reasons recorded, the Assessing Officer formed a belief that Rs.26,25,000/- has escaped assessment without application of mind. This is because, the receipts may result in loss and he has worked out the escapement of income only on the basis of the gross receipts, without giving any deduction for indexed cost of acquisition and improvement. 31. The Assessing Officer was not in possession of information about period and cost of acquisition of the land that was acquired. The Assessing Officer cannot form belief that income chargeable to tax under section 45, has escaped assessment merely for reason that assessee received sums on transfer of capital asset unless he indicates prima facie working of such escapement of capital gain in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee did not show income from capital gains in the original return of income filed by the assessee as in her version, the land was not a capital asset and even otherwise, the deduction u/s. 10(37) was available. It is well settled that even in case, where the original assessment is made without scrutiny, the requirement of the Assessing Officer forming the belief that income chargeable to tax has escaped assessment would apply. To support his submissions the ld Sr.AR for the assessee relied on the decision in case of Inductotherm (India) P. Ltd. Vs. M. Gopalan, DCIT, reported in 356 ITR 481 (Guj) (2013).The ld AR for the assessee also submitted that it is well settled that the notice of reopening can be supported on the basis of reasons recorded by the assessing officer, the assessing officer cannot supplement such reasons as has been held by Hon'ble Bombay High Court in the case of Hindustan Lever ltd. [(2004) 268 ITR 332]. The third principle of law which is equally applied in the present case is that reopening of the assessment would not be permitted for fishing or roving inquiry. This can, as well be seen as part of the first requirement of the Assessing Officer, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITO Vs. LakhmaniMewal Das [103 ITR 147-SC].The ld AR for the assessee submits that Hon'ble Supreme Court in Ganga Saran & Sons Vs. ITO [130 ITR 1] held that "reasons to believe" is stronger than the expression "is satisfied". It was also observed that the belief entertained by the assessing officer should not be irrational or arbitrary. In other words, it must be reasonable and must be based on reasons which are material". The reliance is also placed on the following decisions; * BawaAbai Singh V/s. DCIT [253 ITR 83 (Del)]., * SheoNath Sing vs. Appellate Assistant C.I.T. [82 ITR 147 (SC)], * Balkrishna H. Wani V/s. ITO [321 ITR 519 (Bom)], * PCIT V/s. Rajesh D. Nandu (HUF) (2019) 261 Taxman 110 (Bom)(HC), * CIT Vs. Paramjit Kaur[311 ITR 38 P& H], * Sagar Enterprises Vs. ACIT (2002) 257 ITR 335 (Guj) (HC), * Mumtaz Haji MohmadMemon V/s. ITO (2018) - 408 ITR 268 (Guj)(HC), * Sunrise Education Trust V/s. ITO [2018] [92 Taxman 74 (Gujarat) 33. On the issue that agricultural land is not a capital asset, the ld AR for the assessee adopted the submissions of learned Senior Counsel Sh Saurabh Soparkar. However, Mr Rasesh Shah, ld AR for assessee submits that to strengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation for trees and well as per Form No "G" of the Award. No bifurcation was furnished in the Award or by the Essar Steel Ltd. So no addition for LTCG for transfer of the building can be made by assuming it at Rs. 13,00,000/-. 35. The ld AR for the assessee submits that Hon'ble Gujarat High Court in the case of CIT Vs. The Special Land Acquisition Officer (supra) while hearing appeal against the order passed under section 201/201A, against the Special Land Acquisition officer for not making TDS on payment of compensations in respect of the impugned land (which is under dispute in the present appeal) held that " any compensation for loss of fruit bearing trees must necessarily be part of the compensation for agricultural land". Further in the case of ITO Vs. G.S. Lenkha [(2019) 106 taxmann.com 198 (Cochin-Trib) (TM)] also held that "where trees standing on an agricultural land are transferred along with the land as its integral part in one transaction, they would be regarded as "agricultural land" and not a separate capital asset until they are cut and removed, form an integral part of the land and such land has to be regarded as agricultural land. The initial burden to prove that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o estimate should be made for acquisition of the building and compensation of Rs.13,00,000/- should be considered as part of land component. Accordingly, the ld AR for the assessee submits that it is transfer of agriculture land not falling under clause (iii)(a) or (iii)(b) of section 2(14) of the Act. Otherwise the exemption under section 10(37) should be allowed on the basis of submissions of learned Senior Counsel (supra). 39. The ld AR for the assessee further submits that even if part of the amount of Rs.13,00,000/- is considered as compensation for acquisition of the building, the deduction for the cost of construction or improvement should be given as building is a depreciable asset. The compensation cannot be more than the cost of the building so it results in to a loss as the compensation of building should be less than the cost of acquisition of the building. Anyway, the loss arising out of the transfer of agriculture land by adopting lowest fair market value as on 01.04.1981 at 150/- per square meter should be adjusted against capital gain that may be estimated for transfer of building. 40. On the issue of valuation of land as on 01.04.1981 (Fifth ground of appeal), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial areas as on date. The ldSr.AR for the assessee submits that the valuation given by the Government Approved Valuer was correct considering the location of the property, the proximity of main Surat City in those days, the fertility of the land and the approach of the impugned land from the main road etc. The location of the land was near to the old Surat City and situated in industrial zone, therefore, there was a very high potentiality of future growth. Moreover, the said land was under cultivation at that time having good fertility value and the agriculturists of these areas used to grow vegetables and fruits in their fields and supply the same to the population of Surat city. In the year 1981, there was no concept of Jantri value or the circle rate and therefore, the sale deeds were executed as per free will and convenience of the purchaser and seller. Moreover, in those days, the rate of stamp duty was also much higher to the tune of 14.20% and the registration fee was 2% and therefore, there was a duty of 16.20% of the registered value. Due to such high level of duties, there was a general human tendency for the buyer and seller to register the sale deed at a lower ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the report of the Agriculture Officer is of general nature and the award did segregate the Kharbada land for which compensation at a much lower rate of Re.1.00/- per acre was paid as against the Jirayat land which was compensated at the rate of Rs. 300 per square meter. The reliance is placed on the decision of the Hon'ble Karnataka High Court in the case of M. Govindaraju Vs ITO & AMR [(2015) 377 ITR 0243 (Kar) wherein it was held that "Assessee had provided the reasons for determining Rs.225/- per square feet as the fair market value of the property by producing the relevant material, including valuation report of a registered valuer, which all have been ignored while arriving at the price of Rs.84/- per square feet. The Assessing Officer assessed the value of the property as on 01.04.1981 on the basis of sale deeds of some nearby properties registered for such price in the year 1981 and thus arrived at the figure." The learned CIT(A) has also erred in not accepting the theory of reverse calculation. The ld AR for the assessee submits that Ahmedabad Tribunal in case of Madhusudan P. Patel V/s. ITO [ITA No 2579/Ahd/2010 dated 05.04.2013] accepted the theory of reverse ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under section 148 * Notice under section 148 of the I.T. Act dated 21.03.2012 * Form 8-A and proof of revenue records of agricultural land holding in Form No.7/12 * Certificate of the Chief Officer, Notified Area Office - Hazira certifying the population of Hazira Notified Areas as 2137 as per census record 2001 * Details of population in Hazira as per last censes 2001 * Certificate dated 15/01/2013 issued by the Mamlatdar Office, Taluka Choryasi * Notification of Industries and Mines Department, Government of Gujarat dated 30.01.1997 * Valuation report regarding value of land as on 01.04.1981 * Notification of Industries and Mines Department dated 30.01.1997 passed under Chapter XVI-A of Gujarat Municipalities Act, 1963 extending provisions of Notified Area to Hazira Industrial area. * Notification published under Land Acquisition Act, 1984, on 06.01.2006 declaring further land to be acquired for expansion of Essar Steel Ltd., and appointing Special Land Acquisition Officer for the same. * Consent Award dated 31.07.2007 under section 11(2) of the Land Acquisition Act, 1984 originally in Gujarati * True English translation of the Consent Award * Regular Aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). For determination of land compensation sub-clause (a) provides for compensation received before enhancement and sub-clause (b) provides for adding the amount of enhanced compensation. If there is no enhancement compensation, in the cases of compulsory acquisition, it will be quite far-fetched to say that provisions of section 45(5) will not be applicable. 46. In without prejudice, submission of learned Senior DR for the Revenue submits that a compensation was received in multiple tranches (i) by way of consent award under section 11(2) dated 31.07.2007, then by regular award by Special Land Acquisition Act, 1894 dated 21.01.2008 and payment through mediation centre. The learned Senior DR for the Revenue by referring decision of Gujarat High Court in Dhaniben Vs. State (Special Leave Application 784 of 2010) dated 08.02.2010 and submits when payment was received by land owners, in multiple tranches, the provisions of section45(5) are applicable. On the submission of learned Senior Counsel for assessee regarding the year of taxability i.e., in the year of award that Hon'ble Supreme Court in the case of Raj Pal Singh (supra) held that year of taxability has to be in the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corresponding grounds of appeals, where so ever has raised in the group appeals of several assessee(s). 48. On the second issue, where land in question was agricultural land, and if so, it is not a capital asset, the learned Senior DR for the Revenue submits that Ld. Senior Counsel for assessee while making his submissions invited attentions on various parts of award passed by Special Land Acquisition Officer and contended that land in question was agricultural land and therefore compensation was granted on the rate applicable to agricultural land. The learned Senior DR for the Revenue submits that during the course of assessment proceedings, the District Agricultural Officer submitted his report to the Assessing Officer that most of the land is rocky, having no irrigation facilities has high tide from the sea, and therefore non-cultivable. The learned Senior DR for the Revenue by referring various contents of award, has shown us, that according to letter dated 16.06.2004 issued by District Agricultural Officer, Surat has referred about growing of various agricultural produce rooted trees and also mentioned that there is no possibility of agricultural produce and only kharif se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified area committee has to be given the same treatment as 'municipality'. The word 'municipality' has not define anywhere in the Income Tax Act. Part IX-A of the Constitution of India, Article 243P(e) defines 'Municipality; which means an institution of self-government constituted under Article 243Q. The learned Senior Counsel for the assessee also contended that Hazira Notified area was not constituted under the Gujarat Municipalities Act, 1963rather the same was constituted under Gujarat Industrial Development Act 1962, therefore only limited section of Gujarat Municipalities Act, 1963 (Guj.34 of 1964). The learned Senior DR invited our attention to the Notification issued by Industries and Mines Development dated. 30.01.1997 and after reading the contents of Notification learned Senior DR submits that by above Notification, Government of Gujarat made ample clear that all provision of the municipality shall apply within Hazira Notified Area. 51. On the submission of learned Senior Counsel of assessee that if intend was to treat in Hazira Notified area as a municipality as required under the provision of Income Tax Act, the Central Government by way of Notification should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the basis of aforesaid submission, The learned DR submits that Hazira Notified area is a 'deemed municipality' under Income tax Act and very much comes under the purview of section 2(14)(iii)(a) of the Act. 53. On the submissions of learned Senior Counsel for the assessee that the population of Hazira Notified area was not more than ten thousand as per last census 2001 and that Hazira Notified area is a much bigger area comprising of nine villages and for the purpose of determination of population, in which population of the villages where land was acquired has to be considered and not that of the entire area. The learned DR for the Revenue submits that on the perusal section 2(14)(iii)(a) clearly provides for consideration of the population of the entire municipality or a notified area or a cantonment board as the case may be and it would be erroneous to consider only the population of a few villages. To support her contention, the learned DR for the revenue relied upon the decision of Hon'ble Supreme Court in the case of G. M. Omer Khan reported in 196 ITR 269 (SC), wherein the Hon'ble Apex Court held that population of the entire area is to be considered for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference of Ld. CIT(A), NRSC furnished a comprehensive report, based on remote sensing visuals and other data taken from satellites. The report of NRSC, Hyderabad received in September, 2016. In the report, it was found that no agricultural activities or evidence of any crops have been found on the various parcels of land from the report 1999 to 2012. It was further contended that report of NRSC, Hyderabad was not available when majority of appeal(s) were decided by ld CIT(A) and only in ten cases, the report was considered. The report of NRSC, Hyderabad is relevant to the issue involved in all the appeal(s) and needs to be considered for fair and judicious adjudication. The revenue prayed for admission of such additional evidence that consideration of additional evidence would be decisive in determining the controversy in just and equitable manner. Along with application for admission of additional evidence, the Revenue filed a copy of report of NRSC, Hyderabad along with various satellite images. 57. The learned DR for the Revenue submits that the additional evidence furnished by the Revenue is vital evidence and is relevant to determine the controversy in the issues with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble results. Concurrent ground truth was not available for thus study and hence, interpretation is exclusively based on the manifestation of features and experience of the interpreter, which could be subjective. In the last observation in the disclaimer it is mentioned that results have to be interpreter and corroborative in association with the ground observation, available, if any. Thus, the report itself contents vague observation and cannot be used as evidence or conclusive or expert report based of any scientific evidence. Even otherwise, the court is fully empowered to assess or re-assess the veracity of such report. The assessee(s) during the appellate stage were not given any opportunity to comment on such report obtained at their back. It is settled law that no evidence or report can be relied which is collected at the back of the parties. 59. The learned Senior counsel reiterated that though the revenue is not entitled to file additional evidence even otherwise, if the Bench is of the considered view and deems may in its discretion may looked into it, the so-called report is of no use and does not give any desirable result to assess or determine the nature of land or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referring various paragraphs of reports, the learned Senior Counsel also submitted that in the disclaimer, attached to the said report, NRSC, Hyderabad reported the shape file provided by CIT(A) did not match with field boundaries of the reference satellite data, with implication on accuracies of location area. And in absence in absence of adequate number of GCPs, rubber sheeting technique carried out also did not yield the desirable results. After careful consideration of the contention of the party, and going through the language employed in Rule 29, we are of the view that the revenue has no vested right to seek the admissions of additional documents. However, keeping in view the peculiarity of the facts that the report of NRSC was taken into consideration by ld CIT(A) while adjudicating about 10 appeals, therefore, to take a uniform approach, the application for admission of additional evidence filed by the revenue is allowed and the documents are taken or record for appreciation of the issues. 63. Now adverting to the main grounds of appeal raised by the assessee. We find that the assessee has raised multiple grounds of appeal. However, first we shall take up the issue, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n notified area as per census of 2001 was more than 10000 and that Hazira is a deemed municipality. On the alternative plea about the claim of assessee on the benefit of exemption under section 10(37), the ld. CIT(A) remanded the matter to the Assessing Officer to give his report to clarify regarding the population as to which area is to be considered for the purpose of section 2(14)(ii)(a). The assessing officer was also directed to comment on the distance of acquired land from municipal limit (Surat Municipality). The said remand report was required by Ld. CIT(A) by observing that office of the Mamlatdar vide their letter dated 16/01/2013 mentioned that population of each of nine villages (Hazira notified area) mentioned in the letter is less than 10000 as per census 2001 but combined population of nine villages exceed 10000. However, in the certificate issued by Chief Officer of notified area Hazira, the population of Hazira notified area was 2137. The ld. CIT(A) recorded that despite sending reminder letter to the Assessing Officer. We find that CIT(A) proceeded to decide the issue on the basis of material before him and identified the issue that this ground involved three issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of G.M. Omer Khan Vs Addl.CIT (Supra) wherein it was held that population of entire notified is to be considered for the purpose of Section 2(14)(ii)(a) and not the population of any single village. 65. On the issue whether the land is an agriculture land or nor, the ld. CIT(A) held that the assessee was required to establish that land was used for agriculture purpose only. The District Agriculture Officer confirmed that most of the land is rocky, affected from Sea water and no irrigation facility. Thus, the contention of assessee cannot be accepted that land was used for agriculture purpose or capable of operation. No evidence of agriculture income was furnished. The ld. CIT(A) held that the assessee failed to establish that land was used for agriculture purpose. Thus the conditions of Section 10(37) are not fulfilled. 66. Before us, the ld. Senior Counsel for assessee vehemently submitted that compensation received on acquisition would not be subject to capital gain, as the agriculture land is not a capital asset as not being situated in an area which comprised within the jurisdiction of any municipality having population of not less than 10000 as per last census. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea become a Notified area, thereupon the provisions of Chapter-XVI-A Gujarat Municipalities Act, would apply. Hazira Notified area would then be an 'Industrial Township' area under Section 264A of the said Act. We are in agreement with the submission of learned Senior counsel for the assessee that under section 264B of the said Act, the State Government has a power to apply any section of the said Act or part thereof, or the Rules in force as maybe applied to a municipal borough to such notified area. Section 264C would create a fiction that for the purposes of any section of the said Act which may be applied to a notified area, the person or committee appointed for such area under section 264B shall be deemed to be a "Municipality" under the said Act. The fiction is an unlimited fiction. Firstly, the fiction is only in relation to those sections of the said Act which are applied to the notified area and even the second part of the fiction of deeming the notified area to be a "municipality" is only for the purpose of the said Act. It does not convert notified area into a "Municipality" in any way. 68. The Hon'ble Supreme Court in the case of Saij Gram Panchayat Vs State of Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualifies with the criteria prescribed under Article 243- Q of Constitution of India cannot be at par with municipality. Article 243-Q constitute three types of municipalities viz (i) Nagar Panchayat (ii) a Municipal council and (iii) Municipal corporation, it provides that a municipality under clause (1) may not be constituted under certain circumstances. In respect of any three types of areas, set out in clause (1) of Article 243-Q, having regard to the size of area, the municipal services being provided or proposed to be provided by the industrial establishment in that area and such other factor as the Governor will deem fit to consider, he may by public notification, specifies such area to be an industrial township. 69. Further Hon'ble Supreme Court in Solapur MIDC Industries Association Etc. Vs State of Maharashtra & Ors., JT (1996) 7 SCC 14 held that Municipal Corporation Act and an Industrial Development Act have distinct fields of operation and there is no inter se conflict between the two. 70. So far as reliance on the case law in G.M Omer Khan Vs Add CIT (supra) relied by ld CIT(A) as well as by ld DR for the revenue is concern, we find that the facts of that case are en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73. Before, us the learned Senior Counsel for the assessee vehemently argued that for seeking eligibility under section 10(37), the assessee has fulfilled the four conditions of this subsection, viz., (i) such land is situated in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of Section 2; (ii) such land during the period of two immediately preceding the date of transfer, was being used for agricultural purpose by such Hindu Undivided Family (HUF) or individual or a parent of assessee; (iii) such transfer is by way of compulsory acquisition under any law or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India and (iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. 74. We have already held the land is not situated within a municipal area, thus, first condition is satisfied. So far as second condition, is concerned, we find it is certified by District Agricultural Officer, Surat vide his letter dated 16.06.2014 that the agricultural operation are carried in the land. Further the award w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. On 1-2-1969, the assessee sold the land to the society. On 5-2- 1969, the society obtained the permission for non-agriculture use of the land, under section 65 of the Bombay Land Revenue Code, 1869, from the competent authority. The assessee claimed that the surplus realised by him on the sale of land was not liable to be taxed as capital gains as the land in question was agricultural land. The ITO held that since no agricultural operations were carried on immediately before the sale of the land, the land could not be treated as agricultural on the date of its sale and, therefore, the surplus realised by the assessee was liable to be taxed as capital gains. On appeal, the AAC reversed the decision of the ITO. On further appeal, the Tribunal affirmed the decision of the AAC. On reference before High Court held that having regard to the facts and findings recorded by the Tribunal, it was obvious that not only the physical characteristics of land, in the instant case, but the user also was agricultural. Even though the land was not actually put to agricultural use since about one year prior to the sale, there was no evidence to establish that it was converted to any other use. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of the parcels of land. Further the satellite images shows that no agriculture activities were carried on the land. The ld DR also submitted that report of NRSC is scientific report and conclusive proof. We do not find merit in the submissions of the ld DR, as disclaimer, attach to the said report, NRSC, itself reported the shape file provided by CIT(A) did not match with field boundaries of the reference satellite data, with implication on accuracies of location area. Further, in absence in absence of adequate number of GCPs, rubber sheeting technique carried out also did not yield the desirable results. And that concurrent ground truth was not available for thus study and interpretation is exclusively based on the manifestation of features and experience of the interpreter, which could be subjective. It is also mention in the last para in the disclaimer that results have to be corroborative in association with the ground observation, available, if any. Thus, the report itself contents vague observation and cannot be used as evidence or conclusive or expert report based of any scientific evidence against the assessee. Moreover, said report was not provided to the assessee. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue strongly objected against the objections of reopening and the validity of the assessment order and relied on the decision of Supreme Court in Raymond Woollen Mills Ltd Vs CIT (supra). Considering the contentions of both the side, we are of the view that at the stage of reopening the assessing officer has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material was not a thing to be considered at this stage. We find that Hon'ble Supreme Court in Raymond Woollen Mills Ltd Vs CIT (supra) while considering the technical objection of sufficiency of reasons had not strike down the reopening of the case. And it was held that it would be open to the assessee to prove that assumption in the notice was erroneous. Thus, in view of the aforesaid factual and legal discussion, we do not find merit in the grounds in challenging the validity of re-opening, thus, the corresponding grounds of appeal is dis missed. 80. Next ground of appeal relates to partly confirming the action of assessing officer in taxing Rs. 6,50,000/- as capital gain and not treating the same as part of compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up units/ pucca structure @ 50% of the cost awarded for such built-up / pucca structure in the award. Considering the area where in the such built-up unit or pucca house is situated, it our view, the estimation of it's cost of acquisition is on lower side, therefore we deem it fit and proper to increase it to 60%, would be reasonable and fair. Therefore, we direct the Assessing officer to treat the cost of acquisition @ 60% of Rs. 13.00 lacs as cost of acquisition. In the result, the corresponding ground of appeal is partly allowed. 81. Next ground relates to treating the agriculture income of Rs. 5,000/- as unexplained cash credit. Considering the facts that we have already held that the land of assessee was agriculture and was being used as such, therefore, the income offered by assessee as agriculture is also allowed and the assessing officer is directed to delete this addition. In the result, the corresponding ground of appeal is allowed. 82. Before, summing up, we appreciate the submissions , of ld senior DR for the revenue in representing and defending the orders of lower authorities and in assisting the bench in disposal in this bunch of appeals. 83. As recorded in initia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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