TMI Blog1977 (7) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... In all the wealth-tax assessments right upto 1972-73, the WTO accepted the lands as agricultural. During the accounting year relevant for the asst. yr. 1972-73, the assessee sold these lands which were 20 acres in extent, to Indian Airlines Corporation. The sale took place on 27th Aug., 1971. The assessee did not disclose any capital gain on the sale on the ground that the lands were agricultural in nature and, therefore, did not come under the definition of "capital asset" for the purposes of assessment of capital gain. The CIT, however, issued notice to the assessee under s. 263 calling upon him to show cause why the assessment made by the ITO should not be set aside as being erroneous an prejudicial to the interests of revenue and capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued by Central Government only 6th Feb., 1973 while the land was sold to Indian Airlines on 27th Aug., 1971 and, therefore, the lands do not come under the amended definition and as such the capital gain was exempt from tax. The CIT negatived this contention observing as under: "The Ministry of Finance, Department of Revenue and Insurance, issued a notification No. 287/F. No. 131 (36)/70/TPL (PT VI) dt. 6th Feb., 1973 in pursuance of time (b) of sub-cl. (iii) of cl. (14) of s. 2 of the IT Act. it is seen from the said notification that areas upto a distance of 8 KM in all directions from the Hyderabad Corporation limits are to be treated as falling within the ambit of s. 2(14)(ii)(b) of the IT Act. In this case it is admitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only from the date of issue, i.e., 6th Feb., 1973, in which case the lands cannot be hit by the amended provisions of s. 2(14)(iii)(b) as they were sold to Indian Airlines on 27th Aug., 1971, i.e., long before the notification; and (iii) that the lands were agricultural in nature as is evident from the wealth-tax assessments of the assessee from all the earlier years. He has also submitted that is the case of the assessee s brother, the decision of the ITO was not accepted and the matter is pending in appeal before the AAC. In this connection; he has relied on the Supreme Court decision in the case of ITO, Alleppey vs. M.C. Ponnooe and Ors. 75 ITR 174 (SC) for his proposition that the notification cannot have retrospective effect. 4. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that position was accepted by the WTO cannot prevent the CIT from directing the ITO to make proper investigation into the nature of the lands and arrive at a proper decision for the purpose of assessing capital gain if he is satisfied that such an enquiry was not made during the wealth-tax proceedings. The CIT has every reason to be satisfied that on account of the ITO not making proper enquiries into the nature of the lands, there was prejudice caused to the Revenue in view of the fact that the ITO while making the assessment for the same year on the assessee s brother, came to the conclusion after due enquiries and examining the Patwari concerned, that the lands in question were not agricultural at the material time. 6. At the same tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were as follows. Sec. 4 of the Finance Act, 1963, substituted a new definition of "TRO" in s. 2(44) of the IT Act, 1961, and also provided that the new definition shall be and shall be deemed always to have been substituted. Clause (ii) of s. 2(44) as so amended empowered the Stage Government to authorise by notification certain lands Revenue officers to exercise the powers of a TRO. The Kerala Government issued under s. 2(44)(ii) a notification dt. 14th Aug., 1963, which was published in the Kerala Gazette dt. 20th Aug., 1963, and authorised various Revenue officials mentioned therein including the Taluk Tahsildar to exercise the powers of a TRO. It was stated in the notification that it shall be deemed to have come into force on 1st Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing capital gain. The only question, therefore, that has to be looked into is whether at the material time the lands were agricultural or not. To this extent, the direction of the CIT is valid. We, therefore, hold that the CIT was not correct in his view that the amended provisions of s. 2(14)(iii)(b) are applicable to the lands in question and we accordingly modify his order to that extent while we uphold the decision setting aside the assessment and directing the ITO to redo the same after examining the question whether the lands were agricultural or not. In other words, the ITO should copies his only to the question whether the lands were agricultural or not and if he comes to the conclusion that the lands were agricultural, the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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