ITAT Rajkot Reinstates Appeal After 935-Day Delay: Agricultural Land Capital Gains Dispute Sent Back for Fresh Hearing
Case Overview
Case: Babubhai Jesangbhai Marand Vs Jurisdiction AO – ITO (ITAT Rajkot)
Assessment Year: 2012–13
Relevant Provisions: Section 144, Section 147, Section 148, Section 249(3), Section 250, Section 271(1)(c), Section 2(14), Section 234A, Section 234B of the Income Tax Act, 1961
Background of the Dispute
This case before the Income Tax Appellate Tribunal (ITAT), Rajkot Bench, revolves around an individual assessee engaged in agricultural activities who found himself at the receiving end of an ex parte assessment order — one he was not even aware of until penalty and recovery proceedings knocked at his door.
The core issue before the Tribunal was two-fold:
- Whether the 935-day delay in filing the appeal before the Commissioner of Income-tax (Appeals) [CIT(A)] ought to have been condoned
- Whether the addition of Rs. 54,72,453 on account of alleged capital gains from the sale of agricultural land was justified in law
The Tribunal ultimately condoned the delay and remanded the matter back to the Assessing Officer (AO) for fresh adjudication — a decision that carries significant implications for similarly placed assessees who are unfamiliar with tax law procedures.
Facts of the Case
The Assessee's Position
The assessee, an individual deriving income from agricultural activities, had not filed a return of income for Assessment Year 2012–13. His reasoning was straightforward — he believed that agricultural income being exempt from tax under Indian law, there was no obligation to file a return. During the relevant year, he sold a piece of agricultural land admeasuring 2.51.92 hectares for a total consideration of Rs. 60,46,000.
The assessee had been specifically advised that since the land was situated in a mofussil area beyond municipal limits, it would not qualify as a "capital asset" under Section 2(14) of the Income Tax Act, 1961, and consequently no capital gains tax liability would arise. Acting on this understanding, he neither filed a return nor made any disclosure of the sale proceeds.
AO's Action: Reopening Under Section 148
The AO received information about the land transaction through Annual Information Return (AIR) data. Based on this, the case was reopened by issuing a notice under Section 148 on 23.03.2019. Multiple statutory notices followed, but the assessee — unfamiliar with income tax procedures and still under the genuine belief that his income was non-taxable — did not respond to any of them.
When no response was received, the AO issued a show cause notice under Section 144 on 18.11.2019, directing the assessee to explain why the sale consideration of Rs. 60,46,000 should not be added to his income. The assessee was required to reply by 22.11.2019. Once again, no reply was filed.
Ex Parte Assessment Under Section 144
Proceeding ex parte, the AO completed the assessment under Section 144 read with Section 147 on 28.11.2019. The AO computed taxable capital gains at Rs. 54,72,453, arrived at after deducting indexed cost of Rs. 5,73,547 from the sale consideration of Rs. 60,46,000. A tax demand was consequently raised against the assessee.
Additionally, interest under Section 234A amounting to Rs. 9,48,474 and under Section 234B amounting to Rs. 10,02,984 was also levied.