Judgment:
1. These cross-appeals--one of the assessee and another by the Revenue have been filed against the order of CIT(A), Jalandhar, for the asst.
yr. 1999-2000. Since the issues involved in the cross-appeals are identical and are inter-related, both were heard together and are being disposed of by this consolidated order for the sake of convenience.
(i) That the CIT(A), Jalandhar has erred in not allowing application under Rule 46A for production of additional evidence.
(ii) That on the facts and law of the case the learned CIT(A) has erred by taking compensation amount of land at Rs. 54,48,390 instead of Rs. 27,24,195 as determined by Addl. District Judge vide orders dt. 16th Sept., 2003.
3. The relevant facts of the case are that the assessee owned agricultural land at village Mansoorwala Dona. The said land was acquired by the Punjab Urban Development Authority (In short 'PUDA') and assessee was awarded compensation. Since the agricultural land acquired by the PUDA was situated within the municipal limits of Kapurthala, the compensation of Rs. 54,48,390 was liable to long-term capital gains. As the assessee had not filed the return, the AO initiated the proceedings Under Section 147 by issue of notice Under Section 148 on 16th March, 2006. In response to the said notice, the assessee had stated that a return of income already filed on 26th May, 2005 with ITO-II(2), Kapurthala, may be treated to have been filed in response to notice issued Under Section 148. In the said return, the assessee had declared income of Rs. 1,13,200. But the capital gains on acquisition of the land by PUDA had not been declared. There was no dispute about the fact that the land acquired by the PUDA was a capital asset and, therefore, the compensations received on its acquisition were liable to long-term capital gains.
4. Further, the dispute related to the fair market value of the land as on 1st April, 1981 for the purpose of computation of long-term capital gains. The AO observed that on the basis of 26 sale instances of agricultural land of village Mansoorwal Dona, the fair market value of the land as on 1st April, 1981 worked out to Rs. 114 per Maria for which the indexed cost worked out to Rs. 400 per Maria. This was confronted to the assessee. There was no compliance with the notices issued under Sections 143(2) and 142(1) by the AO. Therefore, completed the assessment Under Section 144 and computed the long-term capital gains at Rs. 52,16,642 by taking the indexed cost as on 1st April, 1981 at Rs. 400 per Maria.
5. Being aggrieved, the assessee filed an appeal before the CIT(A).
During the course of appeal proceedings, a request was made for admission of fresh evidence under Rule 46A in the form of a copy of order dt. ,16th Sept., 2003 of the Addl. District Judge, Kapurthala, stating therein that the assessee had only 1/6th share in the compensation received and the amount of compensation given to the assessee was at Rs. 27,24,195. The assessee also submitted that the said order of the Addl. District Judge, Kapurthala, has been upheld by the Hon'ble Punjab & Haryana High Court. Thus, it was pleaded that the amount of compensation be taken at Rs. 27,24,195 instead of Rs. 54,48,390 taken by the AO.6. It was submitted before the CIT(A) that the assessment was completed under Section 144 and the assessee was never assessed to income-tax.
The only source of his income was from agriculture. Therefore, the assessee was not well versed with the provisions of the IT Act.
Accordingly, it was stated before the CIT(A) that the additional evidence now submitted could not be produced before the AO during the course of assessment proceedings resulting in completion of assessment Under Section 144 of the Act. The assessee pleaded for admission of additional evidence. However, the learned CIT(A) declined to admit the fresh evidence on the ground that the assessee had not specified the relevant sub-clause of Rule 46A under which such request was made. The assessee has now come up in appeal before this Bench.
7. The learned Counsel for the assessee submitted that the assessee was an agriculturist and did not have any other source of income. He was 75 years of age and suffering from many diseases. He was never assessed to tax and was not aware of the provisions of the Act resulting in noncompliance with the notices issued by the AO. This resulted in completion of assessment Under Section 144 of the Act. Under these circumstances, a request was made for admission of fresh evidence under Rule 46A which went to the very root of the quantum addition. He submitted that as per order dt. 16th Sept., 2003 of the Addl. District Judge, Kapaurthala, the assessee had only received compensation of Rs. 27,24,195 being 1/6th share in the land acquired by the PUDA. He submitted that this order of the Addl. District Judge, Kapurthala was also upheld by the Hon'ble Punjab & Haryana High Court. He further submitted that the written submissions filed along with the request for admission of additional evidence was referred to the AO for his remand report.
8. The remand report submitted by the AO has been referred by the CIT(A) at p. 5 of the impugned order. In the said remand report, the AO had merely mentioned that it was not clear whether the assessee had accepted the judgment of the Addl. District Judge and of the High Court or the matter was still pending with the Supreme Court. Thus, having obtained the remand report, the learned CIT(A) was not justified in declining to admit fresh evidence. The learned Counsel for the assessee submitted that the order of the CIT(A) may be set aside and the AO should be directed to compute the long-term capital gains by taking the amount of compensation at Rs. 27,24,195. The learned Departmental Representative, on the other hand, heavily relied on the orders of the authorities below.
9. We have heard both the parties and carefully considered the rival contentions, examined the facts, evidence and material placed on record. There is no dispute about the fact that the assessment in this case was completed ex parte Under Section 144 of the Act. There is also no dispute about the fact that the assessee is an agriculturist. His major source of income for the assessment year under reference was long-term capital gains on the amount of compensation received from PUDA for acquisition of his agricultural land. As per provisions of the Act, capital gain is chargeable to tax in respect of profits arising from the transfer of a capital asset belonging to the assessee. But such profit has to be confined to the extent of compensations received by the assessee. It is true that the assessee had not produced any evidence during the course of assessment proceedings to the effect that the amount of compensation received by the assessee was Rs. 27,24,195.
However, the assessee did make an application for admission of fresh evidence during the course of appeal proceedings.
10. The learned CIT(A) rejected the request of the assessee merely on the ground that the relevant clause of Rule 46A was not mentioned in the application for admission of additional evidence. This approach of the CIT(A) did not appear to be correct for the reason that the assessee is an agriculturist. He was not assessed to tax in the past.
Therefore, he was not well versed with the provisions of the Act.
Therefore, in the interest of substantial justice, the learned CIT(A) ought to have admitted the fresh evidence moreso when the same was referred to the AO and his remand report was obtained. The interest of substantial justice should not be allowed to suffer merely on mere technicalities of the matter. It is precisely for these reasons that powers are vested with the CIT(A) for admission of fresh evidence under Rule 46A of the IT Rules, 1962. The powers of CIT(A) are co-terminus with that of AO. Thus, this was a fit case for exercise of such power moreso when the learned CIT(A) had already obtained the remand report.
It is highly unjust and unfair to tax the assessee on compensation of Rs. 54,48,390 when the evidence adduced before the CIT(A) showed that he had received only compensation of Rs. 27,24,195. The objection raised by the AO that it was not known whether the assessee had filed any appeal against the order of the High Court was not really relevant because of the provisions of Section 45(5) of the Act, which take care of any subsequent increase/decrease in the amount of compensation.
11. Thus, having regard to these facts and circumstances of the case, we are of the considered opinion that this is a fit case for admission of fresh evidence. Since such evidence had not been acted upon by the CIT(A), we consider it fair and appropriate to set aside the order of the CIT(A) and restore this issue to his file with a direction to redecide the matter as per law keeping in view the fresh evidence furnished by the assessee after allowing reasonable opportunity to both the parties. We order accordingly. These two grounds of appeal are treated as allowed for statistical purposes.
12. The next ground of appeal of the assessee relates to direction given by the CIT(A) for computation of long-term capital gains by taking fair market value of the land as on 1st April, 1981 at Rs. 2,000 per Maria. Corresponding to this is the ground of appeal of the Revenue that the CIT(A) was not justified in directing the AO to compute the long-term capital gains by taking cost of acquisition at Rs. 2,000 per Maria as on 1st April, 1981.
13. Briefly stated, the facts of the case are that at the time of completing the ex parte assessment, the AO computed the long-term capital gains by taking fair market value of the land at Rs. 114 per Maria as on 1st April, 1981. On appeal, the learned CIT(A) by relying on his order dt. 31st Oct., 2006 in another case held that the long-term capital gains may be computed by taking the cost of acquisition as on 1st April, 1981 at Rs. 2,000 per Maria. Both the Revenue and the assessee are aggrieved with the order of the CIT(A).
Hence, these cross-appeals before this Bench.
14. Both the learned Counsel for the assessee and the learned Departmental Representative were fair enough to concede that this issue is covered by Tribunal, Amritsar Bench's order dt. 16th Nov., 2007 in the case of ITO v. Ravinder Singh in ITA No. 13/Asr/2007 for the asst.
yr. 1999-2000.
15. We have heard both the parties and carefully considered the rival submissions with reference to facts, evidence and material placed on record. We find that similar issue came up before the Tribunal in the case of Sh. Ravinder Kumar, (supra), where it was held as under: 9. We have heard both the parties and given our thoughtful consideration to the rival contentions, examined the facts, evidence and material placed on record. We find that similar matter came up before the Tribunal (SMC), Amritsar Bench, in the case of Sh.
Sukhdev Singh Sidhu v. ITO in ITA No. 282/Asr/2001 for the asst. yr.
1990-91 (a copy placed at pp. 87 to 90 of the paper book). We find that the land in question is situated in the same village, where the land of Sh. Sukhdev Singh Sidhu was located. Both the lands fell within the municipal limits of Kapurthala city. Therefore, it was mentioned that the land was situated in Kapurthala city. While deciding the appeal, the Tribunal took into account the fact that the AO had himself adopted the cost at Rs. 2,000 per Maria as on 1st April, 1981 in the cases of two brothers of Sh. Sukhdev Singh Sidhu for the purpose of computing the long-term capital gain. Thus, the Tribunal observed that there was no justification whatsoever for adopting different rate in the case of Sh. Sukhdev Singh Sidhu. The relevant findings recorded by the Tribunal in para 5 of the order are as under: 5. I have heard both the parties and considered the rival submissions with reference to facts, evidence and material on record. From the facts discussed above, it is obvious that the land in question was jointly purchased along with other two brothers in 1966. In both the cases, the Revenue has accepted the cost at Rs. 2000 per Maria for the purpose of computing long-term capital gains.
The facts of the present case are absolutely identical to the facts of the cases of other two owners. Therefore, there is absolutely no justification in adopting different cost for the purpose of computing long-term capital gains in the case of the assessee. The judgment of the Hon'ble Supreme Court in the case of Berger Paints Ltd. v. CIT (supra) also supports this view. Moreover, the assessee has produced necessary evidence in the form of certificate from the Patwari in support of his claim. In fact, Patwari was also produced before the AO who deposed in favour of the assessee. Besides, the assessee had also cited several other sale instances. In any case such evidence has been accepted in other cases. Therefore, there was no basis for the Revenue to adopt different cost than what has been adopted and accepted in other cases. Having regard to these facts and circumstances of the case, I am of the considered opinion that the learned CIT(A) was not justified in holding that the cost as on 1st April, 1974 was Rs. 80 per Maria. Accordingly, the order of the learned CIT(A) is set aside and the AO is directed to recompute the capital gain by taking cost as on 1st April, 1974 at Rs. 2,000 per Marla. All the grounds of appeal are allowed.
16. The facte of this case are identical to the facts of the case of Sh. Ravinder Singh (supra). Therefore, the aforesaid decision is squarely applicable to the facts of the present case. Respectfully following the same, we uphold the order of the CIT(A) and reject the respective grounds of appeal of the assessee and the Revenue on this issue.
17. In the result, the appeal of the assessee is partly allowed for statistical purposes and that of the Revenue is dismissed.