The court upheld that agricultural land classified as New Sarhat land cannot be transferred without mandatory permissions under the Tenancy Act, thereby ruling that no capital gains arose from a cancellation deed.

आदेश/ORDER

PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Revenue as against the appellate order dated 23.09.2020 passed by the Commissioner of Income Tax (Appeals)-6, Ahmedabad arising out of the reassessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2012-13.

2. The registry has noted that there is a delay of 34 days in filing the above appeal. This appeal is filed before the Tribunal on 15.01.2021, this period falls under COVID-19 Pandemic situation. Thus following Hon’ble Supreme Court judgment dated 23.3.2020 in suo moto Writ Petition (Civil) No.3 of 2020, which has extended time limit for filing appeals w.e.f. 15.3.2020. Thus, there is no delay in filing the above appeal by the Department and we take up the appeal for adjudication on merits.

3. The brief facts of the case is that assessee alo ng with other two co-owners purchased agricultural land at RS No.136 (Old RS No. 199) at Vesu, Surat on 28-04-2006 and executed Sale Deed registered as Document No. 6696 dated 01-05-2006. The assessee along with two co-owners paid Rs.12,64,098/- to Mrs. Diwaliben Thakorbhai Patel and Mrs. Savitaben Bhulabhal Patel. Thereafter the assessee along with two co-owners executed a Cancellation Deed dated 19-05-2011 canceling the original Sale Deed dated 01- 05-2006 for the very same consideration of Rs.12,64,096/- and assessee received back his 1/3rd share of Rs.4,21,366/-. However, the Registration Authorities for the Cancellation Deed charged Rs.1,03,78,200/- based upon the JANTRI Value as on 2011, which was paid by the original owners and not the assessee. Therefore, the AO issued show cause notice dated 24-09-2013 wherein assessee was asked to explain why JANTRI value of Rs.7.06 crores being assessee's share should not be considered as undisclosed for payment of capital gain.

4. During the course of assessment proceedings, the assessee claimed that he could not get title cleared in respect of above referred agricultural lands which is evident from 7/12 and 8 extracts, hence he along with two co-owners cancelled Sale Deed dated 01-05-2006 and they were compelled to pay stamp duty of Rs.1.03 crore. The assessee further submitted that he has not actually transferred any property as per provisions of section 45 r.w.s 2(47) of the Act and no new consideration is received by the assessee or other two co-owners, therefore provisions of section 50C does not arise in the transaction. The assessee also submitted that land which is subject matter of dispute is agricultural land and same is established from search report which states that land at Vesu district is situated at 9.4 Kms from Surat and population of village as per census is 1920 only, hence even on this ground, land is not capital assets hence it cannot be subject matter of capital gain.

4.1 The above contention raised by the assessee was not accepted by Ld. AO on the ground that vide notification dated 21-07-2006, VESU was brought within the limits of Surat Municipal Corporation hence as per provisions of section 2(14) of the Act, land situated at VESU area is a Capital Asset liable for capital gains. The next contention of the assessee that he has not acquired the land and only there was Cancellation Deed executed was not accepted by AO on the ground that Page no 12 of Sale Deed clearly states that assessee along with other co-owners have taken possession of the land hence acquired ownership in land. Further the AO has also observed that assessee has failed to produce any FIR, court proceedings or any documents by which it can establish that due to defective title, the original sale deed was cancelled or conveyance deed was void. The assessee has not disputed payment of stamp duty, hen