short overview  : In a proceeding under section 153C, no addition can be made in the absence of any incriminating material.

A search was carried out at the premises of assessee’s son and document relating to the assessee was found from his premises. Accordingly, assessment proceedings under section 153C was initiated against the assessee. During assessment proceedings, AO noticed that on the basis of information received, a person named ‘H’ debited commission expenses being commission paid to the assessee. To the show cause notice, the assessee explained that the commission receipt was duly reflected in the books of account and offered for taxation. However, the AO did not accept such explanation of the assessee and made addition of the same. Further, CIT(A) deleted the said addition.

it is held : Assessee explained that impugned commission was reflected in his books of account and included in the commission receipt and offered to tax. Further, such aspect was considered by CIT(A) on the basis of explanation and bank statements furnished during the course of assessment proceedings and found that the addition was being made without any evidence, and therefore, unjustified. In a proceeding under section 153C, no addition can be made in the absence of any incriminating material. Undisputedly, there was no material evidence with the AO to make the impugned addition and hence, the said addition was deleted.

Decision: In assessee’s favour

 

Income Tax Act, 1961, Section 45

Capital gains—Chargeability—Sale of agricultural land situated beyond 8 kms from local limit of any municipal or cantonment area

short overview: Where land sold by assessee was an agricultural land situated beyond 8 kms from local limit of any municipal or cantonment area, whose population was more than 10 lakhs, the same would not fall within the ambit of definition ‘capital asset’ and hence, no long-term capital gain tax would be assessable in the hands of the assessee.

AO found that assessee sold a land whose sale value was Rs. 21,51,000 and stamp duty paid on such land was at Rs. 13,80,500. Further, the AO found that stamp duty was found at the rate of 5%, and therefore, corresponding sale value as per section 50C worked out to Rs. 2,76,10,000 as against Rs. 21,51,000 shown by the assessee. He, therefore, worked out long-term capital gain on the basis of section 50C and made addition on account of capital gain. Assessee contended that the land sold by him was an agricultural land and it was situated beyond 8 kms. of municipal limit. Thus, it was not a capital asset and no long-term capital gain tax would be assessable in his hands.

it is hald : Since land sold by assessee was an agricultural land situated beyond 8 kms. from local limit of any municipal or cantonment area, whose population was more than 10 lakhs, the same would not fall within the ambit of definition ‘capital asset’ and hence, no long-term capital gain tax would be assessable in the hands of the assessee.

Decision: In assessee’s favour

 

IN THE ITAT, AHMEDABAD BENCH

RAJPAL YADAV, J.M. & AMARJIT SINGH, A.M.

Dy. CIT v. Ravjibhai Manibhai Patel

IT(SS)A Nos. 132, 133/Ahd/2018 with CO Nos.111, 112/Ahd/2019

8 January, 2020

Assessee by: Karan shah & Nupur Shah

Revenue by: Samir Tekriwal, CIT-DR

Rajpal Yadav, J.M.

The learned Commissioner (Appeals) has decided the appeals of Shri Ravjibhai Manilal Patel and Shri Tushar Ravjibhai Patel for the assessment year 2013-14 vide separate Orders dated 6-3-2018. Both these orders have been challenged by Revenue vide IT(SS)A No. 132/Ahd/2018 and 133/Ahd/2018. On receipt of notice, both the respondents have filed cross objection Bearing No. 111/Ahd/2019 and 112/Ahd/2019.

2. Appeals and the COs were listed for hearing on 3-10-2019 wherein it was pointed by the learned counsel for the assessee that appeal in the case of Shri Tushar Ravjibhai Patel is not maintainable because tax effect by virtue of relief given by the learned Commissioner (Appeals) involved in this appeal is less than Rs. 50 lakhs, and as far as CO filed by him was not pressed. Similarly, in the case of Shri Ravjibhai Manilal Patel, cross objection was not pressed by the assessee. All these appeals were heard and orders were reserved for pronouncements. However, on account of inadvertent mistake, appeal of Shri Ravjibhai Manilal Patel i.e. IT(SS)A.No.132/Ahd/2018 was treated as not maintainable on account of low tax effect, whereas tax effect involved in this appeal was more than the prescribed limit, and it was duly maintainable. On receipt of order in this appeal, the assessee has filed an application vide which they have pointed out error crept in order of the Tribunal dated 3-10-2019 vide which IT(SS)A.No.132/Ahd/2018 along with CO No.111/Ahd/2019 was allowed to be dismissed. On receipt of this application, the Tribunal has re-fixed all these appeals for hearing vide Order dated 10-12-2019 observing as under :–

“10-12-2019, IT(SS)A.No.132/Ahd/2018 is directed at the instance of the Revenue against the order of the learned Commissioner (Appeals) dated 6-3-2018 in the case of Ravjibhai M. Patel. On receipt of notice, the assessee has filed CO bearing No.111/Ahd/2019. Similarly, IT(SS)A.No.133/Ahd/2018 is directed at the instance of Revenue against the order of the learned Commissioner (Appeals) dated 6-3-2018 for the assessment year 2013-13 in the case of Tushar Ravjibhai Patel.

On receipt of notice, the assessee has filed CO bearing No.112/Ahd/2019. All these four appeals were heard together by the Tribunal on 3-10-2019.

2. The tax effect in the appeal of Shri Tushar Ravjibhai Patel was less than Rs. 50 lakhs, and the learned counsel for the assessee did not press the CO. Therefore, this appeal along with CO was to be dismissed on account of low tax effect involved in it. However, while drafting the order, an apparent typographical error was crept in the cause title of the order in the case of Ravjibhai M. Patel in IT(SS)A.No.132/Ahd/2018 along with CO No.111/Ahd/2019 has been noted. This appeal along with CO has been dismissed on account of low tax effect in it. In fact the tax effect in this appeal is more than the monetary limit, and ought not to have been dismissed by applying CBDT Instruction No.17 of 2019. This fact has been brought to our notice by the learned counsel for the assessee vide letter dated 22-10-2019. It has been prayed that corrigendum be issued whereby title in place of “Shri Ravjibhai Manibhai Patel”, Tushar Ravjibhai Patel be incorporated. Similarly, appeal number viz. IT(SS)A.No.132/Ahd/2018 has been sought to be replaced with IT(SS)A.No.133/Ahd/2018.

3. Registry has placed a record before us along with the application. We find that an apparent error has crept in.

Appeal which has been dismissed on account of low tax effect ought not to have been dismissed, and deserves to be decided on merit. The appeal i.e. IT(SS)A.No.133/Ahd/2018 and CO No.112/Ahd/2019 pending adjudication on merit deserves to be dismissed on account of low tax effect. Considering this discrepancy, we deem it appropriate to issue notice to the Revenue and list all these appeals for clarification on 7-1-2020. Registry is directed to inform both the parties, and supply copy of this order to both the parties, including the assessing officer.

Sd                                                                                                          Sd

(AM)                                                                                                        (JM)”

3. After hearing the parties, and due consideration of the facts and circumstances, we are of the view that while disposing of the IT(SS)A.No.132/Ahd/2018 along with CO NO.111/Ahd/2019, the Tribunal has committed apparent error. It has disposed of the appeal by treating it as if tax effect involved in this appeal is less than Rs. 50 laksh, whereas tax effect is more than Rs. 50 lakhs. Therefore, we recall order of the Tribunal dated 3-10-2019 and restore this appeal as well as CO to their respective original numbers, and proceed to decide both these appeals as well as cross objection afresh.

4. IT(SS)A No.133/Ahd/2018 and CO No.112/Ahd/2019.

5. In this appeal, Revenue is aggrieved by action of the learned Commissioner (Appeals) in deleting the addition of Rs. 55.00 lakhs made on account of unexplained investment.

6. Admittedly, tax effect involved in this appeal is less than Rs. 50 lakhs. Recently, CBDT Circular No.17 of 2019 dated 8-8-2019 has directed the Department not to file appeal before the Tribunal where tax effect is below Rs. 50 lakhs. This instruction is applicable to the pending cases also.

Therefore, the present appeal of the Revenue is liable to be dismissed at the threshold. The learned DR did not dispute applicability of the recent CBDT circular and left to the Tribunal to pass appropriate order in the matter.

7. After hearing both the sides and after perusal of the above CBDT Instruction, we are of the view that the present appeal of the Revenue falls within the purview of the CBDT Instruction cited (supra). It is not disputed by the Revenue that tax effect on the total disputed addition is more than Rs. 50 lakhs, and therefore, keeping in view the above CBDT circular and provisions of section 268A of the Income Tax Act, we are of the view that the present appeal of the Revenue deserves to be dismissed. It is dismissed.

8. However, it is observed that in case on re-verification at the end of the assessing officer it can be demonstrated that the tax effect is more, or Revenue’s case falls within the ambit of exceptions provided in the Circular, then the Department will be at liberty to approach the Tribunal for recall of this order. Such application should be filed within the time period prescribed in the Act. In view of the above, the appeal of the Revenue is dismissed due to low tax effect.

9. Now we take IT(SS)A.No.132/Ahd/2018 with CO No.111/Ahd/2019 in the case of Shri Ravjibhai Manilal Patel.

10. In the first ground of appeal, the Revenue is challenging deletion of addition of Rs. 10.00 made by the assessing officer on account of alleged brokerage income.

11. Brief facts in this regard are that a search under section 132 of the Income Tax Act was carried out at the premises of Shri Tusharbhai Ravjibhai Patel (son of the assessee), and document relating to the assessee was found from his premises. Accordingly, assessment proceeding under section 153C was initiated against the assessee. After issuance of notices, assessee filed return of income electronically showing income at Rs. 14,21,630. During the assessment proceedings, it was noticed by the assessing officer that on the basis of information received, one Shri Hemantkumar Umedbhai Patel had debited commission expenses to the tune of Rs. 10 lacs being commission paid to the assessee. However, the same was reflected in the books of the assessee. To the show cause notice, the assessee explained that the commission receipt was duly reflected in the books of the accounts and offered for taxation. The learned assessing officer did not accept this explanation of the assessee and made the impugned addition. However, the same deleted by the learned Commissioner (Appeals). The learned Commissioner (Appeals) while deleting the addition has observed that addition made by the assessing officer was on the basis of information received at the time of assessment proceedings, which was not supported by any evidence. He also observed that the explanation of the assessee was verifiable and the details of bank statements were also filed during the assessment to support the claim of the assessee.

12. Before us, both the parties have supported respective orders of the Revenue authorities.

13. We have considered rival submissions and gone through the record carefully. We find that the impugned addition of Rs. 10.00 lakhs being the alleged brokerage commission, was made by the assessing officer on the basis of information received during the course of assessment proceedings. The assessee has explained that this commission was reflected in the books of accounts and included in the commission receipt by the assessee and offered to tax. This aspect has been considered by the learned Commissioner (Appeals) on the basis of explanation and bank statements furnished during the course of assessment proceedings and found that the addition was being made without any evidence, and therefore, unjustified. Before us also, there is no material to justify action of the assessing officer for making the impugned addition. In a proceeding under section 153C, no addition can be made in the absence of any incriminating material. Undisputedly, there is no material evidence with the assessing officer to make the impugned addition. Therefore, we do not find any infirmity in the order of the learned Commissioner (Appeals) on this issue. It is confirmed.

14. In ground no.2 and 3, Revenue has pleaded that the learned Commissioner (Appeals) has erred in deleting the addition of Rs. 2,54,59,000 which was added by the assessing officer with aid of section 50C. According to the Revenue, the learned Commissioner (Appeals) has erred in admitting additional evidence under rule 46A and deleting the above addition.

15. Brief facts of the case are that during the course of search in the case of Tusharbhai Ravjibhai Patel (son of the assessee) who resides along with the assessee, one annexure inventorised as “A/1” containing 122 pages was found and seized. As per the noting available at page nos. 27 to 48 it revealed to the assessing officer that land at Amiyapur was sold whose sale value was Rs. 21,51,000. The stamp duty paid on this land was at Rs. 13,80,500. The assessing officer further found that stamp duty was found at the rate of 5%, and therefore, corresponding sale value as per section 50C of the Act worked out to Rs. 2,76,10,000 as against Rs. 21,51,000 shown by the assessee. He therefore worked out long term capital gain on the basis of section 50C at Rs. 2,62,15,832, after debiting the long term capital gain shown by the assessee at Rs. 7,56,832. The learned assessing officer confronted the assessee to explain as to why an addition on account of capital gain at Rs. 2,54,59,000 be not made.

After hearing the assessee, the learned assessing officer has made addition of the above amount. Dissatisfied with the above, the assessee carried the matter in appeal before the learned Commissioner (Appeals). He contended that the land sold was an agriculture land, and it was situated beyond 8 kms. of municipal limit. Thus, it was not a capital asset and no long term capital gain tax is assessable in his hand. Submissions made by the assessee have been duly been noted by the learned Commissioner (Appeals), and thereafter, the learned Commissioner (Appeals) accepted the contentions of the assessee by observing as under :–

“5.2. The submission of the appellant along with supporting evidences, facts of the case and assessment order have been considered carefully and in totality.

The assessing officer made the addition on the basis of Page No. 27 to 48 of Annexure A/1 found in the case of son of the appellant Shri Tushar Patel which shows the sale of agricultural land at Village Amiapur, Dist – Sub. Dist. Gandhinagar and the location of the land has been clearly stated in the sale deed. Once the agricultural land at Village Arniapur, Dist – Sub. Dist. Gandhinagar is situated beyond 8 Kms from Gandhingart and the population of Village Amiyapur is 1799 which is less than 10,000 and therefore, the agricultural land situated at Village Amiyapur which has been sold by appellant, which is the issue under consideration, does not fall in the definition of the capital assets as per provisions of section 2(14)(iii) of the IT. Act, 1961 and as per the CBDT Notification No. 9447 dated 06-1-1994. On the basis of the facts available before me, I am in agreement with the contention of the appellant that the agricultural land situated at Amiyapur Village, which is not a capital assets as per provisions of section 2(14)(iii) of the Act and hence, as per provisions of section 2(14)(iii) of the Act, the sale of agricultural land at Village Amiyapur by the appellant being not a capital asset is not subject to capital gain tax and therefore, invocation of provisions of section 50C of the IT. Act by the assessing officer is bad in law. The appellant has also taken an alternative arguments that in the case of appellant the proceedings were carried out under section 153C’of the Act, which is a special provision incorporated in the Act to determine the undisclosed income on the basis of any incriminating material found and seized during the course of search proceedings. The assessing officer in the assessment order has not identified any incriminating material as regards to any sales consideration being received over and above the sales consideration stated in the sale deed for sale of agricultural land at Village Amiyapur, Dist. Sub. Dist Gandhingar. In the present case as the agricultural land at Village Amiyapur, Dist. Sub.DistGandhingar is not a capital assets as per provisions of section 2(14)(iii) of the Act and hence, sale of such agricultural land is not subject to capital gain tax, therefore, the addition made by the assessing officer by invoking the deeming provision of section 50C of the Act on account of capital gain of Rs. 2,54,59,000 in the hands of the appellant is not tenable on facts and as per law as well as on the basis of judicial pronouncements relied upon by the appellant and thereby deleted. Thus, this ground of appeal is allowed.”

16. With the assistance of the learned representatives, we have gone through the record carefully. Section 2(14) of the Income Tax Act, provides definition of expression “capital asset”. The relevant clause for the controversy in hand is sub-clause (iii) of sub-section (14) of section 2. This clause defines the meaning of agriculture land, whether it is to be included in the definition of capital asset or not. This definition reads as under

 

(iii) agricultural land in India, not being land situate :–

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand ; or

(b) in any area within the distance, measured aerially :–

(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation-For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

17. The above clause would indicate that if an agriculture land is situated beyond 8 kms. from the local limit of any municipal or cantonment area, whose population is more than Rs. 10 lakhs, then that would not fall within the ambit of definition ‘capital assets. This demarcation of the geographical situation of the land is to be seen from the boundary notified by the CBDT in its gazette notification. It was brought to the notice of the learned Commissioner (Appeals) that the CBDT has notified boundary from where it is to be measured vide Notification no. 9447 dated 6-1-1994. Thereafter, it has not been revised, and from that boundary limit, geographical situation of the mainland was beyond 8 kms.

Hence, it was not a capital asset. As far as admission of additional evidence is concerned, if the learned Commissioner (Appeals) has entertained the notification no.9447 for determining the geographical situation of the land of the assessee, then to our mind, this type of material can be considered by the learned Commissioner (Appeals) under Rule sub-rule (4) of Rule 46A, and there cannot be any violation at the end of the learned Commissioner (Appeals). Considering all these aspects, we are of the view that the learned Commissioner (Appeals) has considered the issue analytically and recorded a categorical finding that the land in dispute was situated beyond 8 kms. and it was not a capital asset on whose transfer capital gain can be assessed in the hands of the assessee.

We do not find any error in the order of the learned Commissioner (Appeals). Accordingly, the appeal of the Revenue is dismissed.

18. In the result, both appeals of the Revenue and COs of the assessee are dismissed.