The Pune bench of the ITAT has directed the income tax department to verify the claim regarding the payment of Nazarana to the Govt. of Maharashtra was a precondition to receive a marketable title and for transfer of such land, such payment of Nazarana would constitute the cost of acquisition.
The assessee contended that the land sold by the assessee was sanadi land which was received by his forefathers from Sansthanik as Inam issued by the then Chatrapati. Since the Inam did not have any cost of acquisition, the assessee submitted that the capital gain was not chargeable to tax.
On first appeal, the Commissioner (Appeals) accepted the claim of the assessee and granted relief by holding that such payment would constitute cost of acquisition. Against the order, the department approached the Tribunal.
ITAT Vice President R S Syal observed that the assessee did not take up the issue of Inami land before the AO. It was for the first time that the assessee raised this issue before the ld. CIT(A) contending that in the absence of any cost of acquisition incurred by his forefathers in obtaining the land in Inam, the machinery provisions for computing the capital gains failed. In support of the said contention, the assessee placed before the ld. CIT(A) some documents asserting InamPatrak containing the entry of impugned land which was in torn condition and notlegible. The ld. CIT(A) rejected the assessee‟s contention on the ground that the same was not legible.
While remanding the matter back to the file of AO, the Tribunal held that “The second view canvassed by the assessee that there was no cost of acquisition in view of such property being received as Inam, the ld. CIT(A) observed that payment of Nazarana to the Govt. of Maharashtra was a precondition to receive a marketable title and for transfer of such land, such payment of Nazarana would constitute the cost of acquisition. The ld. AR submitted that there was no such provision in the relevant Statute providing for payment of Nazarana as a precondition for receiving Inam property. A prayer was made that the ld. CIT(A) ought to have examined the assessee‟s claim of Inami land by directing the enquiry to the concerned officials. Considering the entirety of the facts and circumstances of the instant case, I am of the considered opinion that it would be in the fitness of things, if the impugned orders are set aside and the matter is restored to the file of AO. I order accordingly and direct the AO to decide the issue afresh after conducting proper enquiries about the assessee‟s claim of having received the land in question by his forefathers as Inam and further about the Nil cost ofacquisition claim raised by the assessee.”
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