M. Abdul Basheer vs Income-Tax Officer on 24 February, 1995

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Income Tax Appellate Tribunal – Hyderabad
M. Abdul Basheer vs Income-Tax Officer on 24 February, 1995
Equivalent citations: 1995 54 ITD 336 Hyd
Bench: R Garg, M Ramakrishna


ORDER

M. Ramakrishna, Judicial Member

1. This appeal by the assessee, directed against the order of the AAC, Anantapur, dated 20-5-1987, for the assessment year 1978-79, was originally disposed of by the order of this Tribunal dated 30-11-1993 which was passed ex parte in the absence of any representation on behalf of the assessee. By the order dated as 11-7-1994, passed in Misc. Petn. No. 20/Hyd/94 in ITA No. 1661 /Hyd/ 87 preferred by the assessee, the earlier ex parte order dismissing the assessee’s appeal, was recalled, for considering this appeal afresh after giving the assessee fresh opportunity of being heard.

2. Brief facts that gave rise to the filing of this appeal are as follows :

(a) Assessee is an individual. For the assessment year 1978-79 for which the previous year ended on 31-3-1978, assessee filed income-tax return on 29-2-1980, disclosing an income of Rs. 203. By the assessment order dated 17-6-1980, passed under Section 143(3), the Assessing Officer, determined capital gains taxable in the hands of the assessee at Rs. 53,486, and completed the assessment on a total income of Rs. 56,770. The said capital gains were determined on the compensation received by the assessee on acquisition of 1.90 acres of land belonging to the assessee, and situated at Kallur. In the income-tax return, assessee offered no capital gains for taxation, on the plea that the land acquired was an agricultural land, which cannot be treated as a capital asset within the meaning of Clause (b) of Section 2(14)(iii) of the Income-tax Act. He also pleaded that capital gains arising in the hands of his wife should not be included as the provisions of Section 64 have no application in the instant case.

(b) Assessee was gifted 7 acres 80 cents of land in Survey No. 399A of Kallur Village under registered deed dated 24-8-1964, which is registered as document No. 2037 of 1964 in Sub-Registrar’s office, Kurnool. The gifted extent of 7.80 acres is part of the total extent of 22.30 acres in Survey No. 399A1 and A2 and the land is called as ‘Jargipette’. Out of the said extent, an extent of 1 acre 90 cents was acquired by the Government under the provisions of the Land Acquisition Act for extension of market yard premises. Section 4(1) notification was approved in G.O.Rt. No. 13 62(72A) dated 18-8-1975 and it was published in A.P. Gazette dated 11-9-1975. A copy of the said notification is available in record. Under the said notification, the extent of 1 acre 90 cents of the assessee, besides the lands of others, totalling to 16 acres 12 cents were acquired by the Government for extension of market yard at Kurnool. In that notification an extent of 2 acres and 19 cents in all situated in Survey No. 399A1 and A2 belonging to Shri M. Abdul Basheer, Smt. Kulsum Bi, Smt. Rabie Bi, Smt. Rahmat Bi and Shri M. Abdul Samad were acquired. In G.O.Rt. No. 389, Food and Agriculture-(Agri-II), dated 8th March, 1977 – Section, this notification was issued and it was published in A.P. Gazette dated 24-3-1977. A photostat copy of the A.P. Government Gazette dated 24-3-1977 is also available on record. Under the said notification, the RDO Kurnool was appointed to perform the functions of the Collector under the Land Acquisition Act and it was also stated that under Section 17(1), possession of the lands may be taken on expiry of 15 days from the date of publication of the notice mentioned in Section 3(1) of the Land Acquisition Act. It is also stated that the following extents of land were acquired in Survey No. 399/A1, A2 which are shown against each of the four following persons :

   (1) B.A. Basheer             1.25 acres
(2) Kulsum Bi                 9ft cents
(3) Rahmat Bi                 9ft cents
(4) Abdul Samad                10 cents

 
 

Subsequently, an award was passed by the Land Acquisition Officer on 25-7-1977. In the Award Enquiry, it is stated that out of the extent of2acres 19 cents in Survey No. 399/A1.A2 which is acquired land, the assessee had gifted 9ft cents to Smt. Kulsum Bi, w/o Abdul Gafoor and another 9 1/2 cents to Smt. Rabie Bi, w/o Mohammada of Kurnool and 9ft cents was again gifted to Smt. Rahmat Bi, w/o Ahmed Hussain, Kurnool under registration deeds. A portion of 10 cents was under the enjoyment of Shri M. Abdul Samad who is also brother of Shri M. Abdul Basheer. The assessee is stated to have given a statement before the Land Acquisition Officer that he has got enjoyment of 1 acre 90 cents in this survey number. All the five persons agreed to the respective extents and they were said to be in enjoyment of the same. The assessee was granted Rs. 68,970 towards compensation and Rs. 10,345.50 towards solatium. Other four persons also were given compensation with which we are not concerned in this appeal. It is enough if we note that the total compensation received by the assessee was Rs. 79,315.50. In the assessment proceedings, it is the contention of the assessee that he had gifted 10 cents to his brother, Shri Abdul Samad, 9ft cents to Kulsum Bi and Rabie Bi jointly on 20-12-1969 through registered deed. In addition to the above, he claimed that as per the promises made to his father he made oral gifts on 10-4-1970 to the following five persons:

 (1) M.Abdul Samad                      0.20 cents
 (2) Zaheera Bi                         0.9 1/2 cents
 (3) Jaithum Bi                         0.40 cents
 (4) Jubeda Bi                          0.40 cents
 (5) Mehrunnisa Begum                   0.40 cents
  
 

It was submitted that on that ground, the whole of the compensation received should not be considered in his hands, but should be considered in the hands of the above five persons to whom oral gifts were made.
 

(c) For the reasons exhaustively given in the assessment order, the ITO did not believe the oral gifts said to have been made by the assessee or the genuineness of those gifts. Ultimately, he held that the assessee is the full owner of 1 acre 90 cents as admitted by him before the Revenue Divisional Officer, Kurnool, and rejected the theory of oral gifts alleged to have been made on 10-4-1970 for want of evidence, and held that the entire compensation amount received from the Government belongs to the assessee, and he alone is liable to pay capital gains tax under Section 45 of the Income-tax Act. As on 1-4-1964, the value of the acquired land was estimated at Rs. 3,000 and after giving basic exemption and also 25% exemption, the capital gains was worked out at Rs. 56,486.

(d) Aggrieved by the assessment order dated 17-6-1980, assessee went in appeal before the AAC, Anantapur, contending, inter alia, that the oral gifts on 10-4-1970 should have been accepted. One of the persons to whom the said oral gift was made was Smt. Mehrunnisa Begum, wife of the assessee to whom it was alleged that 40% of land was gifted orally out of 1 acre 90 cents. Generally, all the oral gifts, according to the assessee should have been accepted since a Muslim according to his personal law is entitled to make gifts orally. In support of that proposition, reliance was placed on the decision of A.P. High Court in Chota Uddanudu Saheb v. Mastan Bi AIR 1975 AP 271. The first appellate authority has not believed the oral gifts except the gift in favour of the assessee’s wife. The AAC had accepted the oral gifts dated 10-4-1970. The assessee also claimed that the acquired land was agricultural land and as such no capital gains arose out of its acquisition. This contention was however not accepted by the AAC, who held that the compensation received by the assessee as well as by the wife of the assessee should be considered in the hands of the assessee by virtue of Section 64(1)(iv) of the Income-tax Act. Therefore, the AAC held in his order dated 20-5-1987 that proportionate compensation received by the assessee and his wife (40 + 40.5 cents = 80.5 cents) should be considered as the compensation received by the assessee and the capital gains arising therefrom only should be considered in his hands.

(e) Aggrieved by the order of the AAC, assessee preferred this second appeal before us.

3. In the grounds of appeal Nos. 1 to 3 and 5 of this appeal, it is the contention of the assessee that the acquired land is agricultural land and the capital gains assessable on acquisition of such land would be nil, in the light of the decision of the Bombay High Court in the case of Health Colonies & Constructions (P.) Ltd. v. A. C. Chandra, ITO[ 1980] 4 Taxman 381. It is submitted by the learned counsel for the assessee that the Gazette notification dated 11 -9-1975 itself speaks clearly that the land which was acquired was “arable” which means cultivable land. In that view of the matter, it was contended that the AAC erred in coming to the conclusion that the land in question was not an agricultural land on the ground that the assessee did not get any compensation for loss of income. It was also the contention of the assessee that the land revenue was paid as an agricultural land, but ever since the Gazette notification was published on 15-12-1970, that is, earlier notifications, the Revenue department people were asking him not to use the land, since the land was subject-matter of acquisition, the land was not put to use for agricultural purpose after 1970.

4. It is also contended in ground No. 2 that the acquisition proceedings in fact commenced with effect from 15-12-1970 by G.O.Rt. No. 1765 (EDA) and the same was affirmed by its publication in the Gazette dated 11-2-1971, and since the award was passed in 1977 probably no compensation was paid for loss of agricultural income since after 1970 the assessee could not put the land to use for agricultural purpose. It is contended in ground No. 4 that the AAC erred in not appreciating the facts that the acquisition proceedings commenced from 15-12-1970 by G.O. Rt. No. 1765 (EDA) and the same was affirmed by its publication in Gazette dated 11-2-1971, and it cannot be said that these notifications were not part of the acquisition proceedings, and the date of payment of compensation alone cannot be read in isolation without reference to the original proceedings. It is therefore, the contention of the assessee that the date of acquisition should be the date of G.O.Rt. No. 1765 (EDA) dated 15-12-1970, and as such the AAC should have held that the proceedings before the ITO were barred by limitation and even on that ground the capital gains cannot be brought to tax in the assessment year 1978-79. He also contended that the acquisition proceedings in respect of the land in question having commenced on 15-12-1970 by G.O.Rt. No. 1765 (EDA), the receipt of compensation by the assessee cannot be viewed in isolation for bringing the capital gains in question to tax in the assessment year 1978-79, and for the Governmental delays, assessee cannot be held to ransom. In support of this proposition, the learned counsel for the assessee placed reliance on the decision of the Andhra Pradesh High Court in Singareni Colleries Co. Ltd. v. Satyanarayanamurthy [1983] (2) (HC) APLJ 405.

5. It is further contended in ground No. 5 that the assessee has not approached the A.P. High Court for staying/quashing the acquisition proceedings that commenced on 15-12-1970 by the G.O.Rt. No. 1765 and as such, any delay in finalising the acquisition is not attributable to the assessee, and the assessee cannot be made to suffer the consequences arising out of the delays in acquisition proceedings on account of litigation. It is therefore pleaded that the possession of the land should be deemed to have been given to the Government in pursuance of the original notification dated 11-2-1971 itself.

6. The learned counsel for the assessee has filed two separate representations, one titled ‘Written Submissions’ and the other making certain further submissions in continuation. In the written submissions dated 22-9-1994, it was submitted that in the original order of this Tribunal dated 30-11-1993 it was held that the relevant notification was published in A.P. Official Gazette on 24-3-1977, and therefore, the capital gains are assessable for the assessment year 1977-78. Since the Tribunal ultimately dismissed the appeal of the assessee by its order dated 30-11-1993, it was requested that the Tribunal’s order dated 30-11-1993 may be amended to the effect that the capital gains are assessable for assessment year 1977-78 instead of 1978-79 and the assessee’s appeal for the assessment year 1978-79 be allowed. In the additional submissions made by the other representation dated 22-9-1994 filed by the learned counsel for the assessee, after extracting certain portions of the Tribunal’s order dated 30-11 -1993 disposing of this appeal originally, from pages 6 and 7 thereof, it was submitted that the relevant assessment year for taxing the capital gains is 1977-78 and not 1978-79, and as such the capital gains were wrongly assessed in the assessment year 1978-79, which is the year under appeal.

7. The learned counsel for the assessee has also placed reliance on the decision of the Supreme Court in the case of State of U.P. v. Smt. Pista Devi AIR 1966 SC 2025, a copy of which is filed before us. He has also filed before us a copy of the Land Acquisition Act, 1984, as amended by Act 68 of 1984 with A.P. Act 9 of 1983.

8. On the other hand, the learned Departmental Representative strongly supported the orders of the lower authorities, and placing reliance on the decision of the Supreme Court in the case of G.M. Omer Khan v. CIT(Addl.) [1992] 196 ITR 269, he submitted that since Kollur village is situated within 8 kms. of the periphery of Kurnool Municipality, the compensation received by the assessee on acquisition of the land in question was rightly brought to tax.

9. We have considered the rival submissions and perused the material on record. Considering the contention of the assessee that the land acquired was an agricultural land and as such no capital gains tax was exigible on the transfer of the said land, the ITO noted the following criteria for determining the nature of the land in question :

(a) Classification and assessment of land to land revenue;

(b) Whether agricultural operations are carried on;

(c) Intention of the owner; and

(d) Character of adjoining lands.

Applying the said criteria, the ITO noted that it is an admitted fact that no land revenue was paid and no agricultural operations were carried on. He also noted that the adjoining lands have already been converted into plots and they have also been registered in the names of plot owners, who have also received compensation on acquisition, from the State Government. Since the assessee himself has not cultivated the land, and his intention was also very clear the ITO concluded that it cannot be said that the assessee’s lands are agricultural lands. This reasoning given by the ITO with regard to non-agricultural nature of the lands in question is perfectly in order, and we find no merit in the contentions of the assessee that the land in question is agriculture in nature and as such the compensation received by the assessee on acquisition of such lands is exempt from levy of capital gains tax. Further, since Kallur village is within eight kms. of periphery of Kurnool municipality, in view of the ratio laid down by the Supreme Court in the case of G.M. Omer Khan (supra), we have to hold that the acquired land is a capital asset, on the acquisition of which, the compensation received by the assessee from the State Government is subject to capital gains tax.

10. As regards the contention of the learned counsel for the assessee that the date of acquisition should be the date of G.O.Rt. No. 1765 dated 15-12-1970, with which the acquisition proceedings in question commenced, we are unable to accept the said contention, because the said draft notification published under Section 4(1) was quashed by the Hon’ble High Court, with a direction to the Government to follow the requisite procedure contemplated under the provisions of the Land Acquisition Act. Thereafter, in pursuance of the directions of the High Court, by the term notification published under Section 4(1) of the Land Acquisition Act, which was published in the A.P. Gazette dated 11-9-1975, Section 5(a) enquiry was conducted on 26-12-1975 and Draft Declaration under Section 6 of the Land Acquisition Act was approved on 8-3-1977, which was published on 24-3-1977. Under the said notification, the R.D.O./LAO-Kurnool was appointed to conduct the award proceedings, who after conducting the necessary proceedings, passed the award dated 25-7-1977. On this factual background, assessee cannot now contend that the acquisition of his land was the result of the continuous proceedings commencing with the G.O.Rt. No. 1765 of 15-12-1970 and the actual date of acquisition should be taken as that in accordance with the said G.O.Rt. No. 1765, and consequently assessment of capital gains in the assessment year 1978-79 is barred by limitation. We do not find any merit in these contentions of the assessee. The said G.O.Rt. 1765 of 15-12-1970 having been quashed by the Hon’ble Andhra Pradesh High Court in the writ petitions filed, questioning the validity of the said G.O.Rt., the said notification cannot be taken cognizance of and it remains non est in the eye of law. Even if the assessee was not a party to the writ petitions filed questioning the action of the State Government with regard to these acquisition proceedings, still the decision of the High Court binds and covers the land of the assessee which was part of the land proposed to be acquired by the State Government under G.O.Rt. No. 1765 of 15-12-1970 because by its decision in the said writ petitions, the Hon’ble High Court has not approved the action of the State Government in invoking the urgency clause, and setting aside the G.O.Rt. No. 1765 of 15-12-1970, directed the Government to follow the procedure and conduct the enquiry under Section 5(a). Since the G.O.Rt. No. 1765 dated 15-12-1970 itself was quashed by the Hon’ble High Court in its decision on the writ petitions filed against the said notification, the assessee cannot claim that the acquisition of his land should be treated as having been made under that notification merely because he was not a party to the said writ petitions. When the notification itself was quashed, no cognizance thereof can be made. Hence, we are unable to appreciate the contention of the assessee in this behalf. On the other hand, in our considered opinion, if the assessee is aggrieved by the notification published in the Gazette on 24-3-1977 or the award proceedings, he should have challenged the same, by having recourse to law by filing independent writ petitions. By virtue of the draft notification that was published in the A.P. Gazette on 11-9-1975 under Section 4(1), and the enquiry made under Section 5 A, the draft declaration under Section 6 of the Land Acquisition Act, which was published in the A.P. Gazette dated 24-3-1977 governed the matter. Under it, the necessary award proceedings were conducted, which culminated in the passing of the award by the RDO/LAO-Kurnool dated 25-7-1977.

11. In the case of Vista Devi AIR 1986 SC 2025 relied upon by the learned counsel for the assessee, the question before the Supreme Court relates to dispensing 5 A enquiry by invoking the provisions of Section 17(1) at the time of publication of a notification under Section 4(1). In our considered opinion, the said decision has no application to the facts of the case on hand, since in this case, the Hon’ble High Court in the writ petition referred to above, quashed the G.O. dispensing with enquiry under Section 5A. In these circumstances, the Government has no option but to issue fresh notification and to conduct the enquiry under Section 5A.

12. Similarly, in the case of Singareni Collieries Co. Ltd. (supra), the question that was considered by their Lordships of the Division Bench was about the inordinate delay in determining the compensation and paying the compensation to the claimants may be fatal. The said decision is also of no help to the assessee in this case, as we have already held, it is only the draft declaration under Section 6 of the Land Acquisition Act, which was published in the A.P. Gazette dated 24-3-1977, by virtue of the draft notification that was published in the A.P. Gazette on 11-9-1975 under Section 4(1) and the enquiry conducted under Section 5A, that governed the matter in this case and the assessee cannot take the benefit of G.O.Rt. No. 1765 of 15-12-1970, to claim relief on account of delay in proceedings.

13. Even the Land Acquisition (Andhra Pradesh Amendment and Validation) Act, 1983, a copy of which is filed before us, is of no relevance to the point at issue. As stated in the statement of Objects and Reasons in the said Act, considering the Full Bench decision of the A.P. High Court in W.P. No. 5722 of 1981, etc., wherein the writ petitions challenging the land acquisition proceedings issued in various notifications under the Land Acquisition Act, 1894 on the ground that there was no simultaneous causing of the public notice in the local area by the Collector with the publication of the notification under Sub-section (1) of Section 4 and that there was long delay between the date of dispensing with the provisions of Section 5A and taking possession of the land and the publication of the declaration under Section 6 wherever urgency clause of the Act was invoked, in order to rectify the lacunae, the Government came out with the Amendment under the said Act, inter alia, under Sections 5 and 17 retrospectively. The said Amendment Act has no application whatsoever to the point at issue in the appeal before us.

14. In view of the above discussion, we reject the contention of the learned counsel for the assessee that the assessment of capital gains in the assessment year 1978-79 is barred by limitation.

15. Now, considering the written submissions made by the learned representative for the assessee by two separate representations both dated 22-9-1994, we may note that the learned counsel for the assessee, relying on the observations of the Tribunal while originally disposing of this appeal in its order dated 30-11-1993, contends that the capital gains received by the assessee are assessable for the assessment year 1977-78 and not 1978-79, and in one of these two representations seek amendment to the order of the Tribunal dated 30-11-1993 to the above effect. Firstly, the original order of the Tribunal dated 30-11-1993, was recalled by the subsequent order of the Tribunal dated 11-7-1994 in M.P. No. 20/Hyd/94 preferred by the assessee, and it is only thereafter that this appeal came up for fresh consideration before us. When the order dated 30-11-1993 itself was recalled, no cognizance thereof can be taken and as such no amendment or rectification thereto can be made. Secondly,… such a contention with regard to the assess ability of capital gains in the assessment year 1977-78 and not in the assessment year 1978-79 is taken for the first time before us, that too at this belated stage of hearing the appeal for a second time. Such a plea having not been taken before the lower authorities earlier, and having been taken for the first time before us, the same cannot be entertained in view of the decision of Full Bench of A.P. High Court in CIT v. Begum Noor Banu Alladin[1993] 204 ITR 166. Even assuming for argument sake that such a plea is tenable, we fail to see any merit in the said argument of the assessee because, it is seen from the award, a copy of which is available on record before us, that compensation amount was paid to the assessee on 30-7-1977, whereas the accounting period of the assessee relevant for the assessment year 1978-79 ended on 31 -3-1978. The said date of receipt of compensation by the assessee, viz, 30-7-1977, being within the accounting year relevant for the assessment year 1978-79, the capital gains are assessable in the assessment year 1978-79 and not 1977-78. In any view of the matter, the written submissions made by the learned counsel for the assessee in the two petitions dated 22-9-1994 are liable to be rejected. We reject the same accordingly.

16. In this view of the matter, we find no merit in the contentions of the assessee in this appeal. We, accordingly, uphold the order of the first appellate authority and reject the grounds of the assessee in this appeal.

17. In the result, assessee’s appeal is dismissed.

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