Sale of Land Taxed as Capital Gains; Gram Panchayat Certificate Insufficient to Prove Distance from Municipality

Issue

Whether a certificate issued by a Gram Panchayat is sufficient evidence to prove that agricultural land is situated beyond 8 kms from municipal limits (and thus exempt from Capital Gains Tax), or if a certificate from a competent revenue authority (like a Tehsildar) is mandatory when the Assessing Officer’s inspector reports a conflicting distance.

Facts

Assessment Year: 2012-13.
The Transaction: The assessee sold a property and claimed exemption from Capital Gains Tax, arguing that the land was agricultural land situated more than 8 kms away from the municipal limits (thus not a “Capital Asset” under Section 2(14)(iii)).
The Evidence: The assessee relied on a certificate from the Gram Panchayat, which stated the land was 15 kms away.
The Rebuttal: The Assessing Officer (AO) deputed an Inspector to verify the claim. The Inspector reported that the land was actually situated approximately 7 kms from the municipal limits. Based on this, the AO treated the land as a Capital Asset and reopened the assessment.
Missing Documents:
- The purchase deed showed the land was outside limits at the time of purchase, but the sale deed was not produced to confirm the status at the time of sale.
- The Gram Panchayat certificate was vague and did not specify the exact distance or the method of measurement.

Decision

Competent Authority: The Tribunal held that for ascertaining whether land falls within or outside 8 kms of a municipality, the competent authorities are Revenue officials (like the Tehsildar) or Municipal authorities (Revenue Wing). A Gram Panchayat does not possess the statutory competence or technical means to certify such precise distances for tax purposes.
Burden of Proof: The burden was on the assessee to produce clinching evidence (a certificate from the Tehsildar). Since the assessee failed to furnish a certificate from a competent statutory authority and the Inspector’s report contradicted the claim, the exemption was denied.
Ruling: The addition of Capital Gains tax was upheld.

Key Takeaways

The “Tehsildar Certificate” is Mandatory: In disputes regarding the distance of land from municipal limits, Courts and Tribunals rarely accept certificates from local bodies like Panchayats or private architects. You must obtain a distance certificate from the Tehsildar or the Public Works Department (PWD) to substantiate your claim.

“As the Crow Flies”: Remember that per the Finance Act 2013 amendment, the distance is measured aerially (straight-line distance), not by road. Make sure your certificate specifies the mode of measurement.

IN THE ITAT CHANDIGARH BENCH ‘B’

Manjit Kaur Kamboj

Income-tax officer

Laliet Kumar, Judicial Member
and Manoj Kumar Aggarwal, Accountant Member

IT Appeal No. 550 (CHD) OF 2025
[Assessment year 2012-13]

NOVEMBER 20, 2025

Ms. Meenal Goyal, CA and Abhinav Jain, Adv. for the Appellant. Dr. Ranjit Kaur, Addl. CIT for the Respondent.

ORDER

1. Appeal in this case has been filed by the assessee against the order dated 21.03.2024 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for A.Y. 2012-13.

2. Grounds of appeal, as taken by the Assessee in Form 36, are reproduced as under:

For both the orders impugned orders failed to appreciate the submissions and documentary evidences filed by the Appellant vide Response dated 09.12.2019 disclosing vital facts, and the hence, same are liable to be set aside vide Aphv India Investco. Private Limited v. ACIT, 2023 LiveLaw (Del) 813.

For that on the facts and circumstances of the case and in law, the Ld. CIT(A) as well as the Ld. AO failed to even address comprehensive documentary evidences and additional evidences under Rule 46A, placed before both authorities demonstrating that the land sold by the Appellant is a rural agricultural land and hence not a capital asset.

For that on the facts and circumstances of the case, the impugned orders are unsustainable in law since the Ld. CIT(A) failed to appreciate that the Ld. A.O. passed the 2^nd impugned order without providing a copy of reasons to believe recorded u/s 148 of the Act, despite specific request by the Appellant, in violation of settled law in Ujagar Holdings Pvt. Ltd. v. Income Tax Officer, ITA No, 2205/Del/2015, dated 16.05.2016.

The Appellant craves leave to add, delete, modify or vary the aforementioned Grounds of Appeal as any time during the pendency of the appeal or at the time of hearing.

(1) Under the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) (“Act”) vide an erroneous and nonspeaking order dated 21.03.2024 u/s. 250 of the Income Tax Act, 1961 (“Act”) (hereinafter referred to as 1^st impugned order”) has erred in upholding the assessment order u/s 143(3) r.w.s. 147 of the Act by the Ld. Assessing Officer (“Ld. A.O.”) dated 11.12.2019 of the Assessment year 2012-13 (“Subject ASSESSMENT YEAR”) making in addition of Rs. 59,68,800/- as the same is also factually flawed, based on incorrect information, passed after failing to appreciate material on record and is hence bad and untenable in law.

(2) For that on facts and law, the both impugned orders passed by the Ld. CIT(A) dated 21.03.2024 and Ld. A.O. dated 11.12.2019 are perverse insofar as they do not apply the law laid down u/s. 2(14) of the Act correctly and erroneously fail to appreciate that the rural agricultural land sold by the Appellant is situated 12 km from the district Jagadhiri, Haryana, and has a population of only 558 people (much less that 10,000 people), and therefore is not a capital asset as per condition laid down u/s 2(14)(iii)(b) of the Act.

(3) For that on facts and law, the Ld. CIT(A) failed to appreciate that the conditions laid down u/s 2(14)(iii)(b) of the Act that decide whether or not a land in rural agricultural land for the purposes of being considered a ‘capital asset’, are to be read conjunctively and not separately as per this Hon’ble’ble Tribunal’s decision in Principal Commissioner of the Income-tax-3 v. Anthony John Pereira (Bombay)[04-02-2020] and in Srinivas Pandit (HUF) v. ITO

(4) For that the 1^st impugned order passed by the Ld. CIT(A), & non-speaking order merely affirming the 2^ndimpugned order and is therefore liable to be quashed vide Rajkumar Anandchand Jain v. Dy Commissioner of Income Tax, ITA No. 3092/Mum/2023 (dated 07.02.2024).

3. The Registry has pointed out that there is a delay of 313 days in filing of the appeal before the Tribunal.

4. The Counsel of the Assessee has filed an Affidavit dated 03.8.2024 for condonation of delay which is reproduced as under:-

5. We have considered the detailed reasoning given in the affidavit and we are inclined to condone the delay.

6. The ld. DR did not have any objection for this condonation of delay.

7. The ld. AR had raised the following issues –

(i)

i.e. the land in question falls outside the purview of the municipal limit and therefore, is not required to be considered as agricultural land and in turn the capital assets within the meaning of Income Tax Act, 1961 (in short ‘the Act’).

(ii)

Further, she has drawn our attention to the Certificate issued by the Gram Panchayat certifying that the land is situated outside the municipal limit of Yamunanagar. She has drawn our attention to page 44 of the paper book to the following effect: –

8. The ld. AR had further submitted that once the documents have been placed on record substantiating that the property is agricultural land and is not situated within the municipal limits of Yamunanagar, it need not be considered a capital asset within the meaning of Section 2(14) of the Act. Further, in alternative Ld. AR had submitted that the population of the Yamunanagar municipality, even as per the case of the Assessee is less than 10000 and, therefore, is not required to be considered as a capital asset within the law.

9. Per contra, It was fairly submitted by the Ld. DR that the Ld. CIT(A), while adjudicating the matter on merits, had already granted the benefit of indexation on the purchase value of the property as reflected in the registered sale deed, and therefore, to that extent, the assessee was not aggrieved by the impugned order. The Ld. DR, however, drew our attention to page 20 of the paper book, referring to the specific observations recorded by the Ld. CIT(A), which are to the following effect:

“The appellant has challenged the impugned penalty. The appellant contends that the impugned prop property was an agricultural land and is beyond 8 kms from the municipal limits and hence no capital gains arises thereon. It is the contention of the appellant that she was under bonafide impression that the impugned land falls beyond 8 kms off the Municipality of Jagadhiri and for that reason no capital gains was offered on the same. On careful consideration, it is seen that the appellant has sold land measuring 1 canal 8 marla situated in Village- Sahkameshpur, for a consideration of Rs. 65,34,000/-. As per the appellant the said land is an agricultural land and beyond 8kms from the Municipal limits of Jagadhiri. The appellant had furnished letter from Gram Panchayat to this effect. However, the Inspector of Income Tax found that the land was situated within 7kms radius of the Municipal limits. Considering these facts, it appears that the appellant was under bonafide impression that the land falls outside the Municipal limits because the ITI has also measured the distance to around 7 kms. The fact that the land is agricultural land is also not in dispute. Considering these facts and overall facts and circumstances of the case it appears to me that there was no willful default on the part of the appellant. Accordingly, it is held that the appellant is not liable for penalty u/s 271(1)(c) of the Act. The penalty amounting to Rs. 4,20,320/- is cancelled. The ground no.1 to 4 of the appeal are allowed. Ground no. 5 is residuary ground which has not been availed. Hence, the same is dismissed.”

10. On the basis of the above evidences and the material placed on record, it was submitted that the impugned land is situated within the municipal limits of Jagadhri, and therefore, the contention advanced on behalf of the assessee that the said land falls beyond the municipal limits of Yamunanagar was asserted to be devoid of any factual foundation and wholly without basis.

11. We have heard the rival submissions and carefully perused the material available on record. The sole issue requiring adjudication is whether the land in question constitutes an “agricultural land” within the meaning of section 2(14) of the Act. For this purpose, the Ld. AR invited our attention to page 173 of the paper book, wherein a copy of the purchase deed of the property has been placed. The registered value of the property therein is reflected at ? 34 lakhs, and it is specifically recorded in the said deed that the land purchased was agricultural in nature and situated outside the municipal area. It is an admitted position that the assessee subsequently sold the said property through a registered sale deed dated 01.09.202 1. In order to examine the factual position, a remand report was called from the Assessing Officer, and the AO, in the report reproduced at page 4 of the order of the Ld. CIT(A), has mentioned as under:

2. The assessee sold land measuring 1 Kanals 8 Marlas situated in Village – Sahkameshpur, Tehsil-Jagadhri for sale consideration of Rs.65,34,000/- vide Registered Sales deed no.- 6352 dated 01.09.2021 during F.Y. 2011-12 relevant to A.Y. 20212-13. The land was capital asset in terms of section 2(14) of the Income Tax Act, 1961 as the same was situated within 8 KMs from the Municipal limit of Jagadhri, distt. Yamuna Nagar. However, as the assessee did not file return of income for the relevant Assessment Year 2012-13 voluntarily in pursuance of the provisions of section 139(1) of the Income Tax Act, 1961 and thus did not offer the income under the head capital gain arising on transfer/sales of land, to tax, the Assessing Officer, therefore, initiated the proceedings u/s 147 of the Income Tax Act, 1961 and issue Notice u/s 148 of the Income Tax Act, 1961 dated 21.03.2014 which was served upon the assessee’s son on 24.03.2019. The Notice was issued after recording the reasons and takin prior approval of the Pr. Commissioner of Income Tax, Panchkula in pursuance of the provisions of Section 151(2) of the Income Tax Act, 1961.”

12. Besides that, the AO at page 5 has also mentioned as

“5. First of all the assessee has contested that the land in question which was sold and is subjected to capital gain, is not a capital asset in terms of section 2(14) of the Income Tax Act, 1961 being situated at distance of more than 8 KMs from Municipal limit of Jagadhri. He has furnished a certificate issued by Gram Panchayat and duly signed by Sarpanch Naseem Khan certifying that the land is situated at distance of 15 KMs approximately from limit of Municipal Committee, Jagadhri. However, exact distance of the land has not been mentioned.

Therefore, the Income Tax Officer, Ward-03, Yamunanagar has deputed his Inspector to ascertain and verify the exact distance of land concerned from the end of the limit of Municipal Committee of Jagadhri. The Inspector after visint there vide there report dated 27.01.2022 has reported that the land is situated at distance of 7 KMs from municipal limit of Jagadhri thus situated within Municipal Limit of Jagadhri. In this regard, it is further, submitted that the inspector during his visit to the land in question also met Naseem Khan, Sarpanch of that village and another localite namely, Sh. Diyan Chand S/o Sh. Dojan. (copy of report enclosed). Under any circumstances the said land is not situated beyond the 8 KMs and it is situated well within the limit 8 KMs from the Municipal limit of Jagadhri and thus the same is a capital asset in terms of section 2(14) of the Income Tax Act, 1961.”

13. The aforesaid facts clearly demonstrate that, firstly, the property is situated within 8 kilometres of the municipal limits of Jagadhri, as specifically noted by the Assessing Officer, and secondly, the Assessing Officer had deputed the Inspector to physically verify the distance, who, upon verification, reported that the land was situated at a distance of less than 8 kilometres (approximately 7 kilometres). On the basis of these two parameters, the Assessing Officer concluded in the remand report that the land sold constituted a “capital asset” within the meaning of section 2(14) of the Act and was accordingly exigible to tax. As noted hereinabove, the assessee has contended that the property does not fall within the municipal limits; however, the assessee has withheld the best evidence available—namely, the registered sale deed executed on 01.09.2021. The purchase deed placed at page 174 indicates that, at the time of purchase, the land was shown as being outside the municipal limits, and had the same position continued at the time of sale, a corresponding endorsement should have been reflected in the registered sale deed. Likewise, at serial number 11 of the purchase document, the nature of the land is required to be specified, and if it was indeed “agricultural land,” the same description ought to have been reflected in the subsequent sale document as well. However, for reasons best known to the assessee, the registered sale deed has not been produced before us.

14. In view of the aforesaid circumstances, an adverse inference is required to be drawn to the effect that the sale deed—had it been produced—would not have supported the assessee’s claim and would, in all probability, have indicated that the land sold formed part of the municipal limits of Jagadhri. It is also significant that no material was placed before the Bench to establish that the land situated in Mauja Sahkameshpur, Tehsil Jagadhri did not fall within the jurisdiction of the Jagadhri Municipality or was located outside its municipal boundaries. In the absence of any clinching documentary evidence demonstrating that the land in question was not within the municipal limits of Jagadhri, no option is left with us but to affirm the finding recorded by the Assessing Officer. Furthermore, we find it necessary to observe that the certificate dated 04.06.2020 produced by the assessee does not inspire confidence. The certificate does not indicate the precise nature of certification issued by the Gram Panchayat, District Yamunanagar, nor does the registered purchase deed contain any reference to such certificate. The property has been consistently described as forming part of Mauja Sahkameshpur, Tehsil Jagadhri, and nothing contrary has been brought on record by the assessee.

15. We further note that the certificate dated 04.06.2020 placed at page 44 of the paper book does not specify the exact distance of the land from the municipal limits of Yamunanagar. Although, at the time of purchase, the consistent position reflected in the documents was that the land pertained to Jagadhri, the said certificate curiously measures the distance from Yamunanagar. There is no finding recorded by the Gram Panchayat to the effect that Yamunanagar was the nearest municipality. On the contrary, the Inspector’s report—obtained by the Assessing Officer and duly provided to the assessee by the Ld. CIT(A)—categorically puts the distance from the Jagadhri Municipality at approximately 7 kilometres. The assessee has not rebutted the said factual finding by producing any credible contrary evidence.

16. In these circumstances, we are of the considered view that the certificate issued by the Gram Panchayat cannot be accepted as a valid or reliable document for determining the municipal distance. It is a settled position that, for the purpose of ascertaining whether a particular piece of land falls within or outside 8 kilometres of a municipality, the competent authorities are the Revenue officials, such as the Tehsildar, or the Municipal authorities through their Revenue Wing. No such certificate from the competent statutory authority has been furnished in the present case.

17. In light of the above discussion, we find no justification to interfere with the order of the Ld. CIT(A). Accordingly, the appeal of the assessee stands dismissed.

18 No other issue was raised or argued by the Ld. AR, therefore, we are not adjudicating any other issue or ground.

19. In the result, appeal of the Assessee is dismissed.