Case Law Details
Smt. Nagappan Suganthi Vs ACIT (ITAT Chennai)
Introduction: A recent appeal case, Smt. Nagappan Suganthi Vs ACIT, before the Income Tax Appellate Tribunal (ITAT) Chennai involved issues related to the non-consideration of evidence regarding a deduction claim under Section 54B and the capital gains exemption on the sale of agricultural land. The ITAT’s decision resulted in remanding the matter to the Assessing Officer (AO) for a fresh assessment with all issues left open for consideration.
Detailed Analysis:
1. Background: The appeal, filed by the assessee, pertains to the Assessment Year (AY) 2014-15. It stems from an assessment order issued by the Assessing Officer (AO) under Section 143(3) read with Section 147 of the Income Tax Act on December 27, 2018. The Revenue also filed cross-objections against the said order, raising concerns about the classification of land as a capital asset based on its proximity to the nearest municipality.
2. Assessee’s Claim: The petitioner, a resident individual, had sold agricultural land for a consideration of Rs. 137.60 lakhs. In the original income tax return, no capital gains were declared. Subsequently, the case was reopened under Section 148 due to the absence of capital gains disclosure. During the assessment proceedings, the petitioner argued that the land should not be considered a capital asset since it had been used for agricultural operations and was situated over 8 kilometers away from the nearest municipality, Tambaram.
3. AO’s Determination: However, the Census Officer’s response, dated November 13, 2018, stated that as per the 2011 census, the population of Tambaram municipality was 1.75 lakhs. According to an amendment to Section 2(14) of the Income Tax Act, land should be situated beyond 6 kilometers, measured aerially from the nearest municipality, to be considered a non-capital asset. A Google Map analysis revealed that the land in question was located within just 5.1 kilometers of the nearest municipality. Consequently, the AO concluded that the land was a capital asset and calculated a capital gain of Rs. 137.18 lakhs.
4. Deduction Claim under Section 54B: The petitioner also claimed a deduction under Section 54B, stating that Rs. 38.88 lakhs of the sale consideration was invested in agricultural land under her son’s name, Shri M. Chittibabu. However, this deduction was denied due to a lack of documentary evidence, and because the land was purchased in her son’s name well before the sale of the land in question.
5. Additional Evidences and Appeal: During the appellate proceedings, the petitioner submitted new evidence to support the argument that the property should not be considered a capital asset. However, the evidence was not admitted as there was no application for its admission under Rule 46A. The CIT(A) also upheld the AO’s decision, taking into account the deduction claim and the TDS deduction under Section 194IA.
Conclusion: The ITAT’s decision in the case of Smt. Nagappan Suganthi Vs ACIT underscores the importance of considering all relevant evidence when determining issues related to capital gains exemptions and deductions. The ITAT remanded the matter back to the AO for a fresh assessment, leaving all issues open for consideration. This decision highlights the significance of adhering to procedural rules when presenting evidence and allows for a more comprehensive examination of the case. It serves as a reminder that all aspects of a taxpayer’s claim must be thoroughly assessed to ensure a fair and accurate determination of tax liability.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 arises out of the order of the learned Commissioner of Income Tax (Appeals)-10, Chennai [CIT(A)] dated 27-01-2020 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w s. 147 of the Act on 27-12-2018. The Ld. Sr. DR submitted that the revenue has also filed cross-objections against the impugned order on 19-05-2023 in which the revenue submit that impugned land is situated within 5.1 Kms. Away from nearest municipality i.e. Tambaram and therefore, the land is capital asset as per amendment to Sec. 2(14) as applicable from AY 2014-15. It has also been submitted that Sholinganallur Town Panchayat has been brought into Chennai Corporation from 09-11-2010 as per Government order. The impugned property is situated in Perumbakkam, Sholinganallur Taluk. Perumbakkam is a well developed residential town and it is just 3 kms. from Sholinganallur town.
2. However, Ld. AR asserted that impugned land as sold by the assessee was agricultural land. In the alternative, the Ld. AR submitted that the assessee claimed deduction u/s.54B which has been denied for want of evidences. Drawing our attention to para 5.2(ii) of the impugned order, the Ld.AR submitted that additional evidences filed by the assessee, in this regard, were not admitted by the first appellate Authority. In the said background, Ld. AR submitted that the assessment may be restored back to Ld. AO keeping all the issues open. The Ld. Sr. DR, on the other hand, drew attention to the cross-objections and made similar prayer. Considering the same, the appeal is disposed-off as under.
3.1 The assessee being resident individual sold certain agricultural land for Rs.137.60 Lacs. However, in original return of income, no capital gains were shown and accordingly, the case was reopened and notice u/s.148 was issued on 08-11-2017. During the course of assessment proceedings, it transpired that the assessee sold vacant land admeasuring 86 cents comprised in survey No.249/1 (As per patta bearing No.3148) situated at 153, Perumbakkam Village, Sholinganallur Taluk, Kanchipuram Dist. for a consideration of Rs.137.60 Lacs. No capital gain was offered on the ground that agricultural operations were carried out on the said land and the land is situated more than 8 kms. away from nearest Tambaram municipality. In other words, the assessee submitted that the said land was agricultural land and it could not be considered as a capital asset.
3.2 However, the Census Officer, vide letter dated 13-11-2018, informed that as per census 2011, population of Tambaram municipality was 1.75 Lacs. As per amendment provisions of Section 2(14) of the Act, the land should be situated beyond 6 kms as measured aerially from nearest municipality. From google map, it was ascertained that land was situated within only 5.1 kms and therefore, Ld. AO held that the land was a capital asset exigible to tax. Accordingly, the Ld.AO computed capital gain of Rs.137.18 Lacs.
3.3 The assessee claimed deduction u/s.54B on the ground that sale consideration to the extent of Rs.38.88 Lacs was invested in agricultural land in the name of her son Shri M. Chittibabu. However, in absence of any documentary evidences and considering the fact that the land was purchased in the name of her son much earlier to the sale of land in question, the said deduction was denied to the assessee.
3.4 During appellate proceedings, the assessee furnished new evidences to support the fact that property was not a capital asset. However, in absence of application for admission of new evidences under Rule 46A, said evidences were not admitted. The Ld. CIT(A) also held that since TDS was deducted on sale consideration u/s.194IA and the assessee claimed credit of TDS, the sale consideration would be taxable in the hands of the assessee. Accordingly, the action of Ld.AO was upheld. Aggrieved, the assessee is in further appeal before us.
Our Adjudication
4. We are of the considered opinion that Ld. CIT(A) erred in not admitting additional evidences since the same would have material bearing on the computation of capital gains in the hands of the assessee. It could also be seen that the assessee has made alternative claim u/s 54B which has not been considered primarily in the absence of sufficient evidences. Considering the prayer made before us in the appeal as well as in the cross-objection, we restore the matter of assessment back to the file of Ld. AO to frame fresh assessment keeping all the issues open.
5. The assessee’s appeal stand allowed for statistical purposes.
Order pronounced on 23rd August, 2023.
