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2016 (7) TMI 849 - ITAT BANGALORE

2016 (7) TMI 849 - ITAT BANGALORE - TMI - Capital gain tax on sale of agricultural land or deduction u/s 54B - fixing the limit of Municipality u/s 2(14)(111)(b) - Held that:- The claim for exemption from capital gains or deduction u/s 54B of the Act, in respect of which there were no claims in the original return of income, cannot be allowed in the re-assessment proceedings - Decided against assessee - ITA No.459/Bang/2016 - Dated:- 13-7-2016 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER and SHRI .....

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se and under the provisions of the law, the authorities below erred in levying the capital gain tax on sale of agricultural land, though there was no notification from the Central Government for fixing the limit of Municipality u/s 2(14)(111)(b) of this Income Tax Act 1961 and even though the appellant is offered the income wrongly which is against the provisions of the law. 3. On the fact and circumstances of the case, the CIT (Appeal) erred in not following the principle of natural justice, wi .....

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ourse of hearings. 3. Briefly facts of the case are that the assessee is an individual and filed return of income on 05/10/2012. Admittedly, there was no scrutiny assessment against the original return. Subsequently, notice u/s 148 of the Income-tax Act, 1961 [ the Act for short] dated 18/12/2012 was issued requiring the assessee to file return of income. In response to the same, assessee submitted that that the return submitted may be treated as return filed in response to notice u/s 148 of the .....

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t of 27 guntas and survey No.17/2 to the extent of 37 guntas on 20/12/2003 for a total consideration of ₹ 8 lakhs. The same was sold during the previous year relevant to assessment year under consideration i.e. on 27/06.2007 for a consideration of ₹ 80 lakhs. In the return of income filed, the same was offered to tax under the head capital gains . However, during the course of assessment proceedings, the said gain arising out of sale was claimed exempt from capital gains as, accordin .....

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8 KMs of city/municipal corporation, in the absence of notification by the Central Government under the provisions of sec.2(14)(iii)(b) of the Act, the same cannot be treated as a capital asset. Rejecting this, the AO brought to tax capital gains arising out of sale of property addition of a sum of ₹ 63,60,870/- was made. 4. Being aggrieved, an appeal was filed before the CIT(A). The CIT(A) had confirmed the addition vide paras.10 and 11 as under: 10. It is noted that the appellant had not .....

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e has failed to explain whether reinvestment was made during stipulated period. Even during appellate proceedings the appellant failed to produce any evidence to substantiate his claim. Therefore the claim of appellant u/s 54B which was disallowed by AG is justifiable and hence sustained. 11. It is seen that during assessment proceedings the appellant was unable to produce evidence that agricultural activity was carried out on the land acquired by him during financial year 2003-04 and sold durin .....

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nt has failed to file any evidence to prove that agricultural activities were carried out on the said land, the action of AO is found to be in order and no interference is called for. The appellant s ground claiming the land to be agricultural in nature is hereby dismissed. From reading of the above order, it is clear that the CIT(A) had confirmed the action of the AO on the ground that the assessee had failed to produce evidence in support of the contention that agricultural activity was carrie .....

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ernment notifying Yelahanka Hobli. Learned AR of the assessee further contended that agricultural activity was carried on the said property and therefore no capital gains tax is exigible on the surplus arising out of sale of the said property. In support of this contention, he relied on the decision of the jurisdictional High Court in the case of CIT vs. Madhukar N HUF(208 Taxman 394), and ITAT, Jaiur Bench decision in the case of Dr.Subha Tripathi vs. DCIT. 5.2 On the other hand, learned Depart .....

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Central Government, by notification dated 6/1/1994 notified that the land situated within radius of 8 KMs, BBMP are capital asset . The said notification reads as under: INCOME-TAX ACT, 1961: NOTIFICATION UNDER SECTION 2(1A)©, PROVISO, CLAUSE (II)(B) AND SECTION 2(14)(III)(B) : URBANISATION OF AREAS Notification No. ISO 94471 (File No. 164/3/87-ITA.I)J, dated. 6-1-1994 Whereas a draft notification was published by the Central Government in exercise of the powers conferred by item (B) of cl .....

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tions were invited from the public within a period of 45 days from the date the copies of the Gazette of India containing such notification became available to the public; And whereas copies of the said Gazette were made available to the public on February 13, 1991 And whereas the objections and suggestions received from the public on the said draft notification have been considered by the Central Government Now, therefore, in exercise of the powers conferred by item (B) of clause (ii) of the pr .....

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lumn (4) of the schedule hereto annexed and falling outside the local limits of municipality or cantonment board, as the case may be, shown in the corresponding entry in column (3) thereof and against the State or Union Territory shown in column (2) thereof for the purposes of the above mentioned provision of the Income-tax Act, 1961 (43 of 1961). Schedule Sl. No. Name of the State or Union Territory Name of the municipality or Cantonment Board falling in the State/Union Territory mentioned unde .....

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P applies equally to land situated in Yelahanka Hobli also. No separate notification is required to be issued in respect of Yelahanka Hobli area. Therefore, the contention that there is no notification in respect of Yelahanka Hobli by the Central Government cannot be accepted. It is not the contention of the assessee that the lands were situated beyond 8 KMs radius from the end of the limits of BBMP. Further, the ratio laid down by the Hon ble jurisdictional High Court in the case of Madhukar(su .....

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ue concluded in original assessment proceedings cannot be re-agitated in the re-assessment proceeding as held by the Hon ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd.(1992)(198 ITR 297). The relevant part of the judgment is as under: "Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of the ite .....

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n cases where the claims of the assessee during the course of reassessment proceedings relating on the escaped assessment are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The income for purposes of 'reassessment' cannot be reduced beyond the income originally assessed." The ratio laid down by the Hon ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd.(supra) was followed by the .....

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t case, we find that reassessment proceedings were initiated in respect of escaped assessment, i.e., the claim made towards sale proceeds convertible foreign exchange which had not been received. Now, the contention of the assessee that the entire deduction claimed under section 80HHC was exempted under section 10B. Even if it were be so, we are not inclined to accept such submission in view of the judgment of CIT Vs. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 as enumerated in paragraph 27 .....

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the first time that the entire income is outside the purview of taxability in view of section 10B of the Act. At the most, the assessee can claim exemption in respect of that part of income derived under section 80HHC by pressing into service section 10B of the Act which is sought to be revised and not on the entire income. In view of the above discussion, we have to hold question No. 1 formulated hereinabove partly in favour of the Revenue since the said question is concluded which encompasses .....

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inst the assessee to the extent hereinabove. In so far as question No. 2 is concerned, having perused the judgment of the hon'ble Supreme Court in Sun Engineering Works P. Ltd. case [1992] 198 ITR 297 we have no hesitation to hold that in a reassessment proceedings which relate to the income which has escaped assessment where the assessee would be entitled to put forward the claims for deduction of any expenditure in respect of that income (that income which is referable to escaped income) a .....

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