By TIOL News Service

AHMEDABAD, APRIL 13, 2017: THE ISSUE IS - Whether the AO can deny the notified exemption on capital gains derived from the sale of agricultural lands, when the certificate produced by Municipal Corporation clearly showed that the subject land was situated at distance of more than 8 kilometers from the municipal area. NO is the answer.

Facts of the case:

The assessees are individual. As as per deed of rectification registered in the office of sub-registrar, Daman, Smt. Meenaben Devjibhai Tandel, Shri Ramabhai Jogibhai Tandel and Smt. Diwaliben Rambhai Tandel were joint purchaser of the land with Shri Devijibhai Dojibhai Tandel. The AO stated that the sale consideration of this land would attract capital gain as ¼th share pertained to the assessee which was not offered for taxation. Therefore, reopening proceeding was initiated in this case by issuing of notice u/s. 148. During the course of assessment, the AO observed that assessee had sold agricultural land total area admeasuring 70,800 sq. meter situated at village Jani Vanka, Nani Daman which was purchased from Shri Bhagwanbhai Madhavbhai Machhi for Rs. 15,55,640/-. The AO also stated that a number of notices were issued to the assessee during the assessment proceedings to which assessee had not responded. The AO mentioned that the total sale consideration of the land was Rs. 70,80,000/- made in the name of M/s. Khemani Distilleries Pvt. Ltd. The AO further stated that on verification of the sale deed document it was seen that the above mentioned land situated at Jani Vankad which was near about 04 kilometers from the Daman Municipal limits. The AO also stated that income tax exemption on capital gain was allowable only on those properties which was situated at a distance of more than 8 kilometers from the Municipal limits and not covered under the above notification schedule. Therefore, the AO made addition of Rs. 13,81,099/- as short term capital gain on the sale of above mentioned land. On appeal, the CIT(A) sustained the additions made by AO.

On appeal, the ITAT held that,

++ it is noticed that the sold land was situated at village Jani Vankad, Nani Daman. It is further noticed that Jani Vankad and Nani Vankad were not the same village and both the villages were distinct from each other belonging to greater area called Nani Daman. It is also noticed that the certificate produced before the AO by the asssessee from the Daman Municipal Corporation stating that above referred agriculture land situated in village Jani Vankad was at distance of more than 8 kilometers from the municipal area of Daman Municipal Council and population of village Jani vankad was less than 10,000 persons. These facts and evidences were not disproved by the AO and the CIT(A) made his decision on the basis that the AO made analysis on the basis of information mainly pertaining to the the Sarpanch of Bhimpore Group Gram Panchayat, Bhimpore, Nani Daman stating that Jani Vankad was a revenue Village and the Moti Vankad and Nani Vankad was a villages under the said Saja(revenue circle). We find that Sarpanch of Bhimpore Group Gram Panchayat, Bhimpore, Nani Daman has not stated that jani Vankad and Nani Vankad were the same village but they stated that Jani Vankad was a revenue village and the Moti Vankad and Nani Vankad was a villages under the said Saja (revenue circle). In view of the above mentioned facts and findings, we considered that the AO has not substantiated his findings with concrete evidences. Therefore, the decision of CIT(A) is not justified to sustain the addition made by AO.

(See 2017-TIOL-476-ITAT-AHM)