Malini Satish Parekh Vs ITO (ITAT Surat)
Same Land, Different Tax Treatment: ₹44.50 Lakh Addition Deleted
Department’s Own Findings Supported the Assessee
The Surat Bench of the Income Tax Appellate Tribunal deleted a ₹44,50,255 capital-gains addition, finding that the Revenue had already accepted, in other co-owners’ assessments, that the same agricultural land was situated beyond the relevant municipal limits.
The assessee also relied on official certificates recording a distance of 8.2 kilometres from Surat Municipal Corporation and a village population of 1,650. The Tribunal held that these documents supported her case and had been ignored by the CIT(A).
The decision demonstrates the importance of examining evidence relating to the property itself, especially where the Department has already considered that evidence in assessments arising from the very same transaction.
Sale Consideration Replaced by Stamp-Duty Value
The dispute concerned agricultural land bearing Block No. 78-B at Village Kosmada, Taluka Kamrej, District Surat, sold through a registered deed dated 8 February 2013.
The stated consideration was ₹3.30 crore, whereas the stamp-duty valuation was ₹7,12,04,081.
The AO treated the assessee as one of sixteen co-owners. Since she had not filed a return or furnished what the AO considered a satisfactory explanation, he completed an assessment under section 144 read with section 147.
Applying section 50C, the AO attributed one-sixteenth of the stamp-duty value to her and added ₹44,50,255 under the head “Capital Gains”. The CIT(A) sustained the addition. viewOrder-1
The Assessee Disputed Ownership and Receipt of Consideration
Before the Tribunal, the assessee contended that she had signed the sale deed only to clear the buyers’ title and prevent possible future claims, without receiving any consideration.
She explained that the original land had been divided into Blocks 78-A and 78-B pursuant to a Deputy Collector’s order dated 19 June 1986.
Her father, Sumanbhai Chhaganbhai, had relinquished his rights in Block 78-B, as recorded through a mutation entry dated 11 September 1986. According to her, she therefore inherited no rights in the land sold during the relevant year.
The buyers nevertheless included her in the sale deed to avoid potential claims by the legal heirs concerning the earlier relinquishment.
This was an independent factual defence. However, the Tribunal’s ultimate reasoning focused on the rural agricultural character of the land and the supporting evidence, rather than separately deciding the ownership contention.
Distance and Population Certificates Were Produced
The assessee maintained that the land was situated 8.2 kilometres from the then local limits of Surat Municipal Corporation and was therefore outside the relevant scope of section 2(14)(iii)(b).
She relied on a certificate issued by the Deputy Executive Engineer, Kamrej, supporting the distance.
A further certificate from the Talati of Kosmada-Chedcha Group Gram Panchayat recorded the village population at 1,650 as per the 2011 Census.
The assessee submitted that these documents had already been considered in proceedings concerning another owner of the same land. She also produced assessment orders relating to Bharatiben Ganeshbhai Parekh and Minakshiben Bipinchnadra Parekh, in whose cases the Department had accepted that the property was beyond the eight-kilometre municipal limit. viewOrder-1
Revenue Maintained That the Land Was a Capital Asset
The Revenue argued that the property fell within eight kilometres of Surat Municipal Corporation and was consequently a capital asset on the transfer date.
It defended the use of the stamp-duty value under section 50C because that value exceeded the stated consideration.
The Revenue also contended that the assessee had failed to substantiate the cost of acquisition and sale expenses. On that basis, it supported the addition of her attributed share of ₹44,50,255.
The central disagreement was therefore whether the land fell within the statutory definition of a capital asset at all.
Tribunal Rejected the Inconsistent Treatment
The Tribunal noted that the Department had taken the position in the other co-owners’ cases that the same property was situated beyond eight kilometres from the municipal limits.
It also examined the certificates supporting the distance of 8.2 kilometres and population of 1,650. These documents supported the assessee’s position, but the CIT(A) had ignored them.
In those circumstances, the Tribunal held that the addition made by the AO and confirmed by the CIT(A) was unjustifiable. It allowed the appeal and deleted the addition. viewOrder-1
Author’s Comments
The strength of this decision lies in the combination of official evidence and the Department’s findings concerning the identical property. Where the physical location of land is common to all sellers, conflicting treatment requires a reasoned factual explanation.
The case also shows why section 50C should not become the starting and ending point of the enquiry. The character of the property under section 2(14) must first be established before the capital-gains computation can proceed.
However, the population of a village should not be extracted from this order as a universal, standalone exemption test. The Tribunal considered it alongside the distance certificate and the findings in the co-owners’ assessments.
Similarly, the assessee’s contention that she merely signed to clear title was recorded, but was not separately resolved through a detailed finding. The ruling is strongest when cited for its actual basis: the supporting location evidence and the Department’s acceptance of that evidence for other sellers of the same land.
Cases Discussed:
FULL TEXT OF THE ORDER OF ITAT SURAT
The appeal filed by the assessee is against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 07.08.2024 for the Assessment Year (in short “AY”) 2013-14.
2. The assessee has raised the following grounds of appeal:
“1. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the order u/s. 144 r.w.s. 147 of the Act without adequate verification of facts available in the case of actual owners as well as on the web-side of Government of Gujarat. The order under section 144 r.w.s. 147 of the Act be set-aside and quashed.
2. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the order u/s. 144 r.w.s. 147 of the Act without serving of notices on the appellant. The order passed without service of notice be set-aside and quashed.
3. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the addition of Rs. 44,50,255/- without appreciating the facts that the agriculture land sold by actual owners is situated at a distance of 8.2 Kms. from the then local limits of Surat Municipal Corporation and hence is not a capital assets within a meaning of Section 2(14)(iii)(b)of the Act. The addition of Rs. 44,50,255/- made by the CIT(A) should therefore be deleted.
4. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the addition of Rs. 44,50,255/- without appreciating the facts that agriculture land sold by actual owners is situated in a village having population of 1650 as per 2011 Census and is not a capital assets without the meaning of Section 2(14)(iii)(a) of the Act. The addition of Rs. 44,50,255/- should therefore, be deleted.
5. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the addition of Rs. 44,50,255/- without appreciating the facts that the father of appellant having rights in land had relinquished rights at the time of block division by order dtd. 19.06.1986 passed by Dy. Collector, Olpad Province without any consideration and thereby conferring no rights on appellant. Appellant impleaded and signed the sale deed to avoid future claim of non-receipt of consideration on land which would otherwise create defects in title in favour of buyers. In the absence of receipt of any consideration, the addition of Rs. 44,50,255/- should therefore be deleted.
The appellant reserves the right to add, alter, modify, amend or withdraw any of the grounds of appeal before hearing.”
3. The assessee is an individual and did not file any return of income for the year under consideration despite selling an immovable property for consideration of Rs.3,30,00,000/- whereas the stamp duty value of the said property was Rs.7,12,04,081/-. Therefore, the case was reopened u/s 147 of the Act and notice u/s 148 of the Income Tax Act,1961 (in short “the Act”) was issued to the assessee. During the assessment proceedings, the Assessing Officer (in short “the AO”) provided many opportunities to the assessee. But the assessee neither filed return of income nor furnished any satisfactory submission/explanation. It was noted that the assessee sold the impugned property along with 15 other co-owners. Therefore the AO passed the assessment order u/s 144 r.w.s. 147 of the Act by making addition of capital gain of Rs.44,50,255/- thereby applying provisions of section 50C of the Act.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the assessee is an Individual engaged in the activity of Agriculture and deriving Interest Income from Bank Deposits. During the A.Y. 2013-14 the agriculture land bearing block No.78/B of Village Kosmada, Tal. Kamrej, District Surat was sold by owners excluding the assessee who signed a Registered Sale Deed executed on 08.02.2013 as the party rejoinder for clearing the title of land without consideration. As per the land Revenue Records the assessee had no rights in sales consideration. The agriculture land was sold for consideration of Rs.3,30,00,000/- by actual owners of land. However, the Fair Market Value determined by State Stamp Duty Valuation Authorities for the land is Rs.7,12,04,081/- and accordingly the AO has determined the sales consideration attributable to assessee at Rs.44,50,255/-, the AO had issued 3 notices. The assessee had furnished reply to Notice dated 03.02.2023 stating that she had not received any consideration on sale of land as she was not the actual owner and hence the Capital Gain was not taxable in the case of assessee. The Show Cause Notice u/s. 144 dated 05.05.2023 was not served on assessee as the assessee had left the house and therefore, notices could not be complied. The AO passed the order under section 144 r.w.s. 147 of the Act. While determining the Long Term Capital Gain by passing the Order u/s. 144 of the Act, the AO has failed to take care and due diligence in as much as the AO has not deducted the Indexed cost of acquisition. The land was originally allotted Block No. 78 and the process of Block Division was carried out and the Dy. Collector and Olpad Province by order dated 19.06.1986 in Order No. 789/86 sub-divided the land in Block No. 78-B and 78-A. The impugned land sold is land bearing Block No. 78-B. Land bearing Block No. 78-A was not sold during the year. The father of assessee Shri Sumanbhai Chhaganbhai relinquished his rights in land bearing Block No. 78-B by Mutation Entry No. 2332 dated 11.09.1986. The assessee is a daughter of Sumanbhai Chhaganbhai and therefore, has no Rights of inheritance in land bearing Block No. 78-B sold during the year. Shri Shri Sumanbhai Chhaganbhai had relinquished his rights in land bearing Block No. 78-B by permission of Dy. Collector by a deed, Application which is the consent without consideration. Therefore, the legal heir of Sumanbhai Chhaganbhai may raise the plea of no consideration received by their father. In order to clear the title and avoid all possibilities of claim of no consideration in release right by Sumanbhai Chhaganbhhai by his legal heirs in future, the buyers impleaded the appellant as a selling party. However, the assessee has not received any consideration as she has no right to consideration due to release of rights by her father. The AO had in his possession the copy of Registered Sale Deed. The perusal of Registered Sale Deed reveals that the land is situated at Village Kosmada, Tal. Kamrej, District Surat. The case of actual owners were also examined by the Jurisdictional AO and they have, after considering the evidences, submitted by the other actual owners arrived at the conclusion that the land is situated beyond 8 KMs. from the local limits of the Municipal Corporation, Municipality or Cantonment Board and hence in terms of Provisions of Section – 2(14)(iii) (b) of the Act is outside the purview of the definition of the capital assets u/s. 2(14) of the Act. Since the impugned land is not the Capital Assets within the meaning of Section 2(14) of the Act, the resultant Capital Gain is not chargeable to tax. The AO failed to appreciate all these basis facts which goes to the route of determining the issue of taxation of Long Term Capital Gain and therefore, the order passed u/s. 144 of the Act is not only erroneous in law but also perverse and detrimental to the Interest of the Small Agriculturist Living in a Remote Village. Apart from the issue of distance u/s. 2(14) of the Act, the land is situated at Kosmada Village which has a population of 1650 as per 2011 census. As per the Provisions of Section 2(14)(iii)(a) of the Act agriculture land shall not be considered as Capital Assets if it situated in an area which has a population of not less than ten thousand. While passing the ex-parte order, the AO failed to address this issue which was easily discernible from the online Census data on the Web side of the Government of Gujarat, the verification per se of this issue would have proved that the agriculture land is situated in a area having population of 1650 and thereby is outside the definition of capital assets. The Certificate from Talati, Kosmada-Chedcha Group Gram-panchayat certifying the population of 1650 as per 2011 census and the certificate from Dy. Executive Engineer, Kamrej certifying distance of 8.2 KM were submitted before the National Faceless Assessment Centre in the case of one of the owner Kantilal Natvarlal Parekh and the land was treated as Rural Agricultural land situated in India not chargeable to Capital Gain. The Ld. AR further submitted that in the co-owners case the AO/department has held that the very said immovable property is an agricultural land as the same is situated beyond 8 kms from the local limits of municipal corporation. The Ld. AR submitted the assessment order of the co-owner in case of Bharatiben Ganeshbhai Parekh and Minakshiben Bipinchnadra Parekh. The Ld. AR also submitted the decision of the Tribunal in case of Vinod Nihalchand Jain Ltd. vs. ITO in ITA No.6156/Mum/2024 order dated 12.03.2025.
6. The Ld. Departmental Representative (in short “Ld. DR”) submitted that on perusal of the sale deed, it was noticed that the impugned immovable property was situated in the area of Kosmada, which was falling within 8Km from the limit of Surat Municipality Corporation and hence the impugned land was a capital asset within the meaning of section 2(14) of the Act on the date of transfer of the said property. The impugned land was sold for a consideration of Rs.3,30,00,000/- whereas the stamp duty value of the impugned land was Rs.7,12,04,081/- thereby attracting the provisions of section 50C of the Act. The assessee also failed to furnish supporting document in relation to cost of acquisition & expenses for sale. Therefore, the AO concluded that the assessee received amount of Rs.44,50,255/- (16th share of total sale consideration of Rs.7,12,04,081/-) and correctly added it under the head Capital Gains for the year under consideration.
7. We have heard both the parties and perused all the relevant materials available on record. The Revenue has taken a stand in assessee’s co-owner’s case that the said immovable property is situated beyond 8 kms from the local limits of municipal corporation in case of Bharatiben Ganeshbhai Parekh and Minakshiben Bipinchnadra Parekh. Once the department itself is taking a stand that the immovable property where the assessee is also a co-owner is situated beyond the 8 kms limit of Surat Municipal Corporation in assessee’s case the Department has also produced the certificate related to the population as per last sentences which categorically states that the immovable property is having the population of 1650 as well as the certificate from Dy. Executive Engineer categorically mentions that the said property is situated beyond the limits of 8.2 kms of Surat Municipal Corporation. These documents support the case of the assessee which was totally ignored by the CIT(A). Therefore, the additions made by the AO and confirmed by the CIT(A) are not justifiable. Hence, the appeal of the assessee is allowed.
8. In result, the appeal of the assessee is allowed.
Order pronounced in the open court on 01.10.2026
