Agricultural Land is at 2.75 Km from Municipal Limit as per Google Map: ITAT quashes Capital Gain Addition [Read Order]

The Raipur Bench of the Income Tax Appellate Tribunal ( ITAT ) has quashed a long-term capital gains addition after holding that the land sold by the assessee was a rural agricultural land situated beyond the prescribed municipal limit. The tribunal relied on Google Map distance and Patwari certification.

The Tribunal, in the matter of Anish Vishnoi ruled that where the land is located 2.75 kilometres away from the municipal boundary, it does not fall within the definition of a “capital asset” under Section 2(14) of the Income-tax Act, and therefore, no capital gains tax can be levied on its sale.

The assessee had sold three parcels of agricultural land during the relevant assessment year, including land situated at Village Magarchaba, Baloda Bazar.

The Assessing Officer reopened the assessment under Section 147 and proposed addition of ₹34.12 lakh as long-term capital gains by treating the Magarchaba land as a capital asset.

The reopening notice, however, did not attach the sale deed or supporting material relied upon. During reassessment proceedings, the assessee submitted bank statements, purchase deeds, and a Patwari certificate certifying that the land was agricultural and situated beyond the notified municipal distance.

Despite this, the AO treated the land as a capital asset and also alleged receipt of on-money.

Before the first appellate authority (NFAC/CIT(A)), the remand report and record showed that the distance of the land from the Baloda Bazar municipal limit was 2.75 km as per Google Map, and this measurement was also confirmed through the Patwari certificate.

The CIT(A) noted that the AO’s allegation regarding distance was incorrect. It said that the officer had violated principles of natural justice by not furnishing the materials relied upon including map measurements and by not granting proper opportunity to rebut the on-money allegation.

The appellate authority acknowledged that the land was agricultural and outside the scope of capital assets. Yet, it sustained taxation by accepting alleged on-money and enhanced sale consideration for LTCG purposes, noted the second appellate authority.

The bench of Partha Sarathi Chaudhary (Judicial member) found this approach internally contradictory and legally unsustainable.

It was observed that “once it has been decided that the nature of land is an agricultural land, for which, question does not arise for LTCG, when the entire transaction pertains to agricultural land which is outside the purview of taxation, in such scenario, the issue of receiving ‘on money’ itself becomes academic and ceases relevance.”

Therefore, finding the CIT(A)’s order perverse, the tribunal directed the AO to delete addition.

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