Jaipal Vs ITO (ITAT Delhi)
Agricultural Land within Municipal Limits Treated as Capital Asset for LTCG Purposes: ITAT Delhi
Facts of the Case
The reassessment proceedings under sections 147/148 were initiated on account of unexplained cash deposits of ₹18,00,000 in the assessee’s bank account. During the reassessment, the Assessing Officer (AO) noticed a separate credit of ₹98,87,500 arising from the sale of land, which had not been offered to tax.
Issues for Consideration
1. Scope of Reassessment – Power to Make New Additions
The assessee contended that since no addition was ultimately made on the original reason for reopening (cash deposits), the AO lacked jurisdiction to tax income from the land sale.
The Tribunal rejected this argument and held that once reassessment proceedings are validly initiated, the AO is empowered to assess any income that has escaped assessment and comes to notice during such proceedings, even if it is unrelated to the original reason recorded.
2. Nature of Land – Agricultural Land vs Capital Asset
The assessee claimed that the land sold was agricultural in nature and hence not a capital asset.
The AO established that the land was situated within 6 kilometres of the municipal limits of Gurgaon, thereby falling within the definition of “capital asset” under section 2(14). Accordingly, the profit was held taxable as Long-Term Capital Gains (LTCG).
3. Allowability of Deductions under Sections 54B and 54F
