TMI Blog2017 (5) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... e attracted. Exclusion provided u/s 2(14)(iii) does not apply to agricultural land situated within the Panchayat limits. The impugned land sold by the assessee not attract the capital gains tax and no capital gain can be taxed. We also observed that the assessing officer has not at all examined before passing the order u/s 143(3) of the Act whether the capital gain attracts or not. After survey proceedings, assessee filed the return and same is accepted without making any enquiry. It is the duty of the A.O. to conduct an enquiry before assessing particular income has to be taxed or not. In this case, such enquiry was not made by the A.O. In view of the above, we are of the opinion that the A.O. is not correct in taxing exempt income as a capital gain. We find that the Ld. CIT(A) without considering the facts of the case and without examining whether the impugned land is an agricultural land or not, the ground raised by the assessee is dismissed. Thus, we reverse the order passed by the CIT(A) and the ground raised by the assessee is allowed. - I.T.A.No.187/Vizag/2014, I.T.A.No.26/Vizag/2012, I.T.A.No.135/Vizag/2015, I.T.A.No.27/Vizag/2012. & S.P. No.18/Vizag/2014 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- was also disallowed. The A.O. also noted that the expenditure claimed of ₹ 25 lakhs towards construction of compound wall was not proved. 4. The assessee carried the matter in appeal against the order passed by the A.O. u/s 143(3) r.w.s. 263 of the Act dated 29.5.2012. 5. During the course of the appellate proceedings, the assessee has raised following additional grounds before the Ld. CIT(A), Visakhapatnam. For the sake of convenience, the same are extracted as under: 1. On the facts and in the circumstances of the case the learned Commissioner erred in law and facts of the case in treating the impugned agricultural land as capital asset within the meaning of Section 2(14)(iii) of the Income-tax Act, 1961. On the facts and in the circumstances of the case the learned Commissioner ought to have held the same is not a capital asset in view of the provisions of Section 2(14)(iii)(b) of the Act. 2. The reasons for raising the additional ground was stated as under: It is most respectfully submitted that the assessee is not an educated person living on agriculture and dairy farming i.e., rearing cows and buffalos. The appellant is not at all aware of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situated within the 8 kms. of Anakapalle Municipality, it would not fall within the purview of capital asset as Anakapalle municipality as it is not notified municipality for the purpose of section 2(14)(iii)(b) of the Act. The Counsel for the assessee has referred notification no.SO77(E) dated 6.2.1973 superseded to show it Anakapalle was not a notified Municipality. It was also submitted that the population of Thummapala hamlet is not a relevant criteria to decide whether the land is capital asset or not. 9. The Ld. CIT(A) after considering the report submitted by the A.O. dated 4.3.2014 and also detailed submission made by the assessee dated 23.3.2014, the plea raised by assessee s counsel has been rejected and the view expressed by the A.O. is confirmed. The relevant portion of the order is extracted as under: I have considered the submissions made. The subject land is admittedly situate in Thummappala village which is 3 kms. from Anakapalle. The AO has not filed any credible evidence to show that the land is not situate in the Anakapalle municipality. Further, there was no indication in the records to show that agricultural activity was carried on in the impugned land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and facts of the case in holding that there was no indication in the records to show that agricultural activity was carried on in the impugned land so as to constitute 'agricultural land' for the purpose of Section 2(14). 6. On the facts and in the circumstances of the case the learned Commissioner of Income Tax (Appeals) erred in law and facts of the case in stating that the AR has not raised any plea in regard to the other grounds of appeals which are connected with the mistaken basis of framing the assessment, issue as to affording an opportunity of being heard while passing the impugned order; the question as to natural opportunity of being heard and fair hearing; the grounds being self explanatory, the Commissioner (Appeals) ought to have adjudicated the same. 7. The Appellant crave leave to add to/alter/substitute/ delete/modify all or any of the above grounds. 11. Though the assessee has raised as many as grounds, the main contention of the assessee is that the land sold by assessee is an agricultural land, therefore, capital gains cannot be taxed. Ld. A.R. has submitted that Anakapalle Municipality is not a notified municipality, and therefore, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities below. The assessee has sold the landed property to the extent of 1 acre 2 cents in survey nos.613/1, 663/1 670/1 for a consideration of ₹ 3,57,96,000/-. Subsequently, a survey was conducted in the case of assessee on 7.8.2008. Consequent to the survey conducted by the department, the assessee had filed a return of income on 25.8.2008 by claiming certain expenditure in connection with the land. The assessing officer has passed the assessment u/s 143(3) of the Act allowing certain expenditure claimed by the assessee. Subsequently, the Ld. Commissioner by exercising the power u/s 263 of the Act, directed the A.O. to re-do the assessment. Consequent to the directions issued by the Ld. Commissioner u/s 263 of the Act, the A.O. has passed an assessment order u/s 143(3) r.w.s. 263 of the Act by order dated 29.5.2012. Before the Ld. CIT(A), the assessee has raised a legal issue that the land sold by the assessee is an agricultural land and no capital gains can be taxed . The Ld. CIT(A) has admitted the additional ground raised by the assessee and also called the report from the A.O. in respect of the distance and nature of the land. The Ld. CIT(A) after considering the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of 0.53 cents of Thummapala hamlet, Anakapalle Mandal are classified as Jirayiti dry as per settlement of fair adangal. As per adangal/pahani (paper book pg.41), survey no.663/1, 670/1, 613/1, the land is classified as a dry land and cultivatable land. We find from the above, as per the revenue records, the impugned land is a dry cultivatable jirayiti land. The impugned land is not converted from agricultural to non-agricultural land. It is also clear from the certificate issued by the office of Zonal Commissioner, Anakapalle zone that the land situated in Thummapala hamlet of Kottavaru village, Anakapalle, Visakhapatnam Dist., is not covered by GVMC limits. 19. Under the above factual backgrounds, it has to be examined whether capital gain tax attracts to the land sold by the assessee or not? The provisions of section 2(14)(iii)(a) or (b) of the Act, prescribed certain conditions for treating the land as capital asset. For the sake of convenience, the relevant provisions are extracted as under: [2(14)(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 mun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agricultural operations, the agricultural land cannot be treated as a non agricultural land. This aspect was considered by Hon ble Madras High Court in the case of Sakunthala Vedachalam Vs. Vanitha Manickavasagam (supra), wherein the Hon ble Madras High Court has held as follows: 15. To get exemption, the assessee has to satisfy the conditions laid down in Section 2(14) of the Income Tax Act, which reads as follows: 2(14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession (ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him: Explanation--For the purposes of this sub- clause, jewellery includes - (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi- precious stone, and whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have purchased the land sold by the assessee for pursuing any agricultural activity is based on mere conjectures and surmises. 18. The plea of the learned standing counsel appearing for the Revenue that there was no agricultural operations prior to the date of sale is of no avail as the definition under Section 2 (14) of the Income Tax Act has the answer to such a plea raised. Further more, it is also on record that the lands are agricultural lands classified as dry lands, for which kist has been paid. 19. The view of the assessee is fortified by the decision reported in (1937) 32 ITR 466 (Commissioner of Income-tax V. Raja Benoy Kumar Sahas Roy), wherein, it is held as follows: There was authority for the proposition that the expression agricultural land' mentioned in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, should be interpreted in its wider significance as including lands which are used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry (See Sarojinidevi v. Shri Krishna Anjanneya Subrahmanyam and other(1) and Megh Raj v. Allah Rakhia (2)).' 20. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, the lands held by the assessee are classified as agricultural lands in the revenue records and also suitable for agricultural operations. Therefore, impugned lands cannot be held as non-agricultural lands, just because the assessee has not carried out any agricultural operations. Once, the lands are classified as agricultural lands in the revenue records and suitable for agricultural operations, whether or not agricultural operations carried out by the assessee, the characteristics of land does not change from agricultural land to non-agricultural lands. Therefore, we are of the view that the lower authorities were erred in holding the impugned lands are non agricultural lands. 25. In the case of CIT Vs. P.J. Thomas (1995) 211 ITR 0897, the Hon ble Madras High Court has held that Sec. 2(14)(iii) refers to the exclusion as capital asset of agricultural lands situate in an area which is comprised within the jurisdiction of a municipality (whether known as municipality or municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment, which has a population of not less than 10,000 according to the last preceding ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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