The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the assessee has purchased agricultural land, which is outside the definition of a capital asset; therefore, the deeming provision under Section 56(2)(x) of the Income Tax Act cannot be invoked.
Mr. Ramnarayan, the assessee filed its return of income, declaring total income. On limited scrutiny assessment, it was found that for the reason of investment in immovable property, the purchase value of the property was less than the value as per stamp authority. Notices under sections 143(2) and 142(1) were issued and served on the assessee.
The assessing officer ( AO )observed that the assessee purchased a property for Rs. 20,00,000, while the stamp value of the property was Rs. 44,54,000. Notices under Section 142(1) were duly issued and served on the assessee to provide details of the land purchase along with the bank statement and explain the difference in purchase value and stamp value.
The assessee submitted that the land purchased by the assessee is agricultural land and is situated outside the municipal area. The assessee was asked to provide documentary proof of the above-mentioned agricultural land.
However, the Assessing Officer did not receive any documentary evidence, and he proceeded to adopt the purchase value of Rs. 44,54,000. The difference of Rs. 24,54,000 was treated as income through other sources, and the same was added to the total income of the assessee under Section 56(2)(x) of the Income Tax Act.
On appeal, the CIT (A) observed that the assessee had submitted a handwritten declaration on plain paper by Lekhpal. The assessee has not fulfilled the conditions laid down in Section 56(2)(x).
The assessee submitted that he has purchased agricultural land, which is not a capital asset as per Section 2(14) of the Income Tax Act and is agricultural land, deeming the provision of Section 56(2)(x) not applicable. The transaction entered by the assessee is the arm’s length price, and there is no relationship with the seller.
The two-member bench of Sudhir Pareek ( Judicial Member ) and S.Rifaur Rahman ( Accountant Member ) has observed that the assessee purchased agricultural land and paid a sum of Rs. 20,00,000 as purchase consideration. The assessee also filed the relevant information before the assessing officer.
As per section 2(14) of the Income Tax Act, the capital asset includes property of any kind, movable or immovable, tangible or intangible, held by the assessee for any purpose.
While allowing the appeal, the ITAT held that since the assessee has purchased agricultural land, it is outside the definition of a capital asset, the deeming provision under Section 56(2)(x) cannot be invoked. The Tribunal deleted the addition made by the assessing officer.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
