9911796707
TMI Blog2006 (2) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 2001 after obtaining approval of the CIT, Jalandhar. The assessee in response thereof filed return of income and filed various replies before the AO. During the year, the assessee received enhanced compensation of Rs. 16,58,155 on various dates i.e. on 14th Feb., 1995, 19th Sept., 1994 and 19th Nov., 1994 in respect of his land situated in village Afghan Patti, which had been acquired by HUDA. The compensation for acquisition of this land was first awarded on 4th Jan., 1988. The assessee claimed this receipt to be exempt from capital gain tax on the ground that the land in question, was situated more than 8 kms. away from the municipal limits of Panipat. To this effect, affidavit was also filed by the assessee in support of his contention during the asst. yr. 1992-93. In later years also, no capital gains tax has been paid by the assessee on the enhanced compensation received by him on the similar grounds. During the appellate proceedings for the asst. yr. 1996-97, the CIT(A) directed to make enquiries to determine the fact about the distance of the land in question, about the municipal limits of Panipat. Accordingly, Shri Vinod Kumar, Inspector was deputed to make the enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept to receive the value/compensation thereof. It was submitted that a certificate dt. 8th June, 2001 duly signed by the Tehsildar, Panipat confirming that the agricultural land of the assessee acquired by the HUDA was outside the municipal limits of Panipat stands furnished before the AO. It was further submitted that from the asst. yr. 1970-71, a new sub-cl. (iii)(a) and (b) of s. 2(14) was substituted bringing within the term "capital asset" agricultural land situated within the limit of any municipality and in exercise under the said section for urbanisation of areas for income-tax. The Instruction was issued vide No. S.O. 77(E), dt. 6th Feb., 1973 available in (1973) 83 ITR (St) 145-160 and the name of Panipat was not included therein. It was pointed out that the said notification was in force till 6th Jan., 1994 when fresh Notification No. 9447, dt. 6th Jan., 1994 available at (1994) 116 CTR (St) 13 : (1994) 205 ITR (St.) 121-163 for extended limit was issued for urbanisation of areas for income-tax purposes under s. 2(14)(iii)(b) of the IT Act. It was further pointed out that prior to second notification the agricultural land situated outside the municipal limits of Panipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the municipal limits and accordingly did not charge capital gains tax. Prior to the notification dt. 6th Jan., 1994, the said lands being within 8 kms. could have represented capital asset but the town of Panipat was not specified in this behalf vide earlier notification in the Official Gazette. The later notification dt. 6th Jan., 1994 became effective after the lands were acquired and the town Panipat was also included therein but the lands were acquired prior to the date from which the later notification became effective. Therefore, the component of enhanced compensation received by the appellant did not get covered by the definition of term 'transfer' as per s. 2(47) of the IT Act and the appellant instead of the compensation amount rightly accounted the interest received on the enhanced compensation amount for taxation. Accordingly, I agree with the appellant that the enhanced amount received later in respect of the same lands were not taxable and find that the judicial pronouncement relied upon in this regard support the case of the appellant. Therefore, the addition of Rs. 16,58,155 made by the AO under the head 'Capital gains' is deleted." 3.4 The learned Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered the rival submissions and material available on record. It is not in dispute that the land in question, was acquired in the year 1987 and 1991. The assessee for the first time received the compensation for acquisition of land on 4th Jan., 1988. The certificate of the Tehsildar, Panipat dt. 8th June, 2001 clearly proved statement of the assessee that his land in village Afghan Patti, Panipat, during the year 1987 and 1991 was outside the municipal limits and even at the time of issue of certificate it was also situated outside the municipal limits. Sec. 45 provides charging of the capital gain on the profits or gains arising from the transfer of a capital asset. Sec. 45(5) deals with transfer of a capital asset being transferred by way of compulsory acquisition under any law and rule as under: "45(5) Notwithstanding anything contained in sub-s. (i), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the RBI. and the compensation or the consideration for such transfer is enhanced or fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was situated outside the municipal limits. The contention of the learned counsel for the assessee had been that since the agricultural land of the assessee was not capital asset within the meaning of s. 2(14) of the IT Act at the time of acquisition, therefore, at the time of receiving enhanced compensation the same land would not fall in the definition of the capital assets. We find force in his submissions. The earlier notification did not specify the town of Panipat in the specified list and even the Tehsildar confirmed this fact that the land of the assessee did not fall within the municipal limit. The capital gains could be charged on the transfer of the capital asset. However, there was no transfer of the capital asset in the year under appeal because it had already been transferred earlier and at the time it did not fall within the definition of capital asset. Therefore, the component of s. 45 r/w s. 45(5) of the IT Act were not specified in this case. The Hon'ble Punjab and Haryana High Court dealing with the identical question in the matter of A.R. Dahiya held as under: "Where the Revenue has accepted the claim that the land in question was agricultural land not falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number and wrong engine number and wrong signatures. On being pointed out the assessee again contacted the broker and made deep probe and came to know that the car was sold to M/s Sumitra Industries, G.T. Road, Bye Pass, Jalandhar. The mistake occurred because the car was purchased by Shri Ashok Kumar, partner of M/s Sumitra Industries and the other receipt earlier produced was also in the name of Shri Ashok Kumar. The letter from M/s Sumitra Industries, was also filed before the AO. The mistake was detected during the course of assessment itself and the assessee vide his letter dt. 16th Dec., 1998 brought the true facts before the AO supported by documentary evidence. It was also submitted that in case there was any doubt with the AO he could have made enquiry from the District Transport Officer (DTO), Jalandhar. It was also submitted that the assessee made an application before the DTO confirming this fact with regard to the transfer of car of the assessee in the name of M/s Sumitra Industries, Jalandhar. It was, therefore, submitted that the aforesaid amount was available to the assessee on sale of old car for the purchase of new car. As such, the addition is unjustified. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive relied upon the orders of the authorities below and submitted that the assessee kept the cash for about 15 months for which no explanation is given and the assessee was withdrawing cash from bank for the purpose but he must have spent the amount for another purpose and cash was not available to the assessee. 4.4 On consideration of the above facts and submissions, we are of the view that the addition is clearly unjustified wherein the ownership of the assessee of old car is not in dispute. Only source of income is agricultural income and others. The assessee has sold the car to M/s Sumitra Industries who have confirmed this fact by giving a certificate before the AO and the same is also available in the file. This fact is supported by the certificate issued by the District Transport Authority. Therefore, the sale of the car is not in dispute in a sum of Rs. 1,50,000. The earlier explanation of the assessee might have some wrong facts that the car was sold through one of the partners of M/s Sumitra Industries and in this regard the assessee might have given some wrong explanation but on making inquiry into the matter all the correct facts were brought to the notice of the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 1-1/2 months. The AO, therefore, was of the view that since new car of 1-1/2 months old purchased by the assessee which bears the cost of new car at Rs. 3 lakhs, therefore, there is no justification for purchase of the car in a sum of Rs. 2,50,000. The assessee submitted before the authorities below that it was second-hand car, therefore, it was purchased at reduced value. However, the submissions of the assessee did not find favour and the AO made the addition of Rs. 50,000. The CIT(A) also confirmed the addition. 5.1 The learned counsel for the assessee submitted that receipt of the seller was filed before the AO along with affidavit, copies of the same are filed in the paper book. He has submitted that no enquiry is made by the AO with regard to the value of the second-hand car. 5.2 On the other hand, the learned Departmental Representative relied upon the orders of the authorities below. 5.3 We have considered the rival submissions and material available on record. The assessee explained before the AO that second-hand car was purchased for a sum of Rs. 2,50,000. The receipt of the owner and affidavit was filed, therefore, the AO should have made certain enquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO in the order appealed against. In support of the contention, he has relied upon CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC), Abdul Wahid Gehlot vs. ITO (2005) 93 TTJ (Jd) 232, CIT vs. Sardari Lal Co. (2001) 170 CTR (Del)(FB) 431 : (2001) 251 ITR 864 (Del)(FB), CIT vs. Chaganlal Kailas Co. (1984) 38 CTR (Mad) 336 : (1984) 148 ITR 7 (Mad) and Pennzol Investment Trading Co. (P) Ltd. vs. Asstt. CIT (1994) 49 TTJ (Hyd) 322 : (1994) 49 ITD 534 (Hyd). 6.1 On the other hand, the learned Departmental Representative submitted that the AO was aware of the receipt of enhanced compensation and as such on the same facts the CIT(A) was justified in enhancing the income by making addition on account of enhanced compensation received by the assessee on account of the acquisition of the property by HUDA. He has further submitted that powers of the CIT(A) are coterminus to that of the AO. Therefore, the CIT(A) rightly made the addition in the matter. He has relied upon CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC), CIT vs. McMillan Co. (1958) 33 ITR 182 (SC) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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