My client, a farmer, bought agricultural land well below circle rate with his land-acquisition compensation. The officer has added the difference under section 56(2)(vii)(b). Is agricultural land within the charge at all?
The Delhi Bench held it is not. Following its own coordinate-bench decision in Ramanarayan, and on the footing that the lower authorities had never doubted that what was bought was agricultural land, the Bench allowed the appeal and deleted the addition of Rs 61,02,500. The reasoning is that agricultural land of that description falls outside the definition of capital asset, and 'property' in the Explanation to the clause means the listed capital asset of the assessee.
Decided by the ITAT (Shri S. Rifaur Rahman, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member) on 2026-08-21, reported as ITA No. 2532/Del/2026 (ITAT Delhi, 'C' Bench). It bears on section 56(2)(vii)(b), section 56(2)(x), section 2(14), section 147, section 148, section 148A(b), section 148A(d), section 151 of the Income Tax Act 1961, in Gifts, Shares & Angel Tax, Capital Gains and How Tax Law Is Read matters.
The point turns on a single word in the definition. Explanation (d) to the clause defines 'property' as 'the following capital asset of the assessee', and then lists immovable property being land or building or both, shares and securities, jewellery and so on. If the thing received is not a capital asset within section 2(14) — rural agricultural land, or property held as stock-in-trade — it is not 'property' and the deeming charge has nothing to operate on. What makes this order worth carrying is the state of the authorities it reveals. The Assessing Officer relied on the Jaipur Bench in Trilok Chand Sain; that order was recalled on 21 June 2019 for the very reason that it had failed to consider Explanation (d), a fact this order does not record. Practitioners meeting the same reliance in 2026 should put the recall on the file. The limits also matter: the CIT(A) dismissed for non-prosecution and the Bench proceeded only because the issue was covered and the nature of the land was undisputed below. Where the officer has actually disputed that the land is agricultural, or its distance from a municipality, the case becomes a factual one and Vishnubhai Mafatbhai Desai shows what happens if that evidence is produced for the first time before the Tribunal.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a farmer, did not file a return for AY 2016-17. From the insight verification portal the Assessing Officer noted purchases of immovable property of Rs 84,10,000 and Rs 48,20,000 and issued a notice under section 148A(b) on the footing that the transactions were unexplained; an order under section 148A(d) followed on 29 March 2023. In response to the section 148 notice the assessee returned Rs 2,37,360 and explained that he had received Rs 2,08,50,000 from the Greater Noida Authority on 22 May 2015 as compensation for compulsory land acquisition, out of which he purchased agricultural land for Rs 30,00,000 on 8 September 2015 (circle rate Rs 84,10,000) and further agricultural land for Rs 32,00,000 on 17 October 2015 (circle rate Rs 48,20,000), supporting this with bank statements and the sale deeds. The Assessing Officer added the differences under section 56(2)(vii)(b), rejecting the assessee's reliance on Mubarak Gafur Korabu v. ITO (ITA No. 752/PUN/2018) and Yogesh Maheshwari v. DCIT (ITA No. 300/JP/2019) and preferring the Jaipur Bench in Trilok Chand Sain. The CIT(A)/NFAC dismissed the appeal on 13 January 2026 without any appearance or submissions, observing that no request for a reference to the District Valuation Officer had been shown to have been made. Before the Tribunal the assessee also raised an additional ground that the section 148A(d) order and the section 148 notice were without jurisdiction because the section 151 approval was signed neither digitally nor manually.
The appeal was allowed and the addition of Rs 61,02,500 deleted (paras 10 and 11). Both lower authorities having never raised any doubt about the nature of the land, it was a fact on record that the land purchased was agricultural land, and the facts were exactly similar to the coordinate Bench's decision in Ramanarayan v. ITO; following it, the ground was allowed. The additional ground on the section 151 approval was admitted but not decided.
The Bench treated the matter as covered. It noted that the CIT(A)'s order was ex parte and for non-prosecution, that the assessee is a farmer, and that the issue was covered by a coordinate-bench decision, and so proceeded to adjudicate the appeal itself rather than remand (para 10). It recorded that the assessee had filed detailed supporting documents for the payments and for the source of the purchases, and that the only question was whether what was bought was agricultural land — a question the lower authorities had never joined issue on. Having found the facts identical to Ramanarayan, in which one of the members of the present Bench had been a party, it reproduced that decision and followed it (para 10).
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Handle my notice → Ask a CA on WhatsAppThe Delhi Bench held it is not. Following its own coordinate-bench decision in Ramanarayan, and on the footing that the lower authorities had never doubted that what was bought was agricultural land, the Bench allowed the appeal and deleted the addition of Rs 61,02,500. The reasoning is that agricultural land of that description falls outside the definition of capital asset, and 'property' in the Explanation to the clause means the listed capital asset of the assessee. This was decided by the ITAT (Shri S. Rifaur Rahman, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member) and bears on section 56(2)(vii)(b), section 56(2)(x), section 2(14), section 147, section 148, section 148A(b), section 148A(d), section 151 of the Income Tax Act 1961. It is reported as ITA No. 2532/Del/2026 (ITAT Delhi, 'C' Bench). The point turns on a single word in the definition. Explanation (d) to the clause defines 'property' as 'the following capital asset of the assessee', and then lists immovable property being land or building or both, shares and securities, jewellery and so on. If the thing received is not a capital asset within section 2(14) — rural agricultural land, or property held as stock-in-trade — it is not 'property' and the deeming charge has nothing to operate on. What makes this order worth carrying is the state of the authorities it reveals. The Assessing Officer relied on the Jaipur Bench in Trilok Chand Sain; that order was recalled on 21 June 2019 for the very reason that it had failed to consider Explanation (d), a fact this order does not record. Practitioners meeting the same reliance in 2026 should put the recall on the file. The limits also matter: the CIT(A) dismissed for non-prosecution and the Bench proceeded only because the issue was covered and the nature of the land was undisputed below. Where the officer has actually disputed that the land is agricultural, or its distance from a municipality, the case becomes a factual one and Vishnubhai Mafatbhai Desai shows what happens if that evidence is produced for the first time before the Tribunal. If it applies to you, the first step is this: Establish the agricultural character and the distance from the nearest municipality at the assessment stage, with revenue records and a certificate from the Tehsildar — the Bench in Ramanarayan accepted a handwritten Tehsildar certificate bearing signature and stamp.
The assessee, a farmer, did not file a return for AY 2016-17. From the insight verification portal the Assessing Officer noted purchases of immovable property of Rs 84,10,000 and Rs 48,20,000 and issued a notice under section 148A(b) on the footing that the transactions were unexplained; an order under section 148A(d) followed on 29 March 2023. In response to the section 148 notice the assessee returned Rs 2,37,360 and explained that he had received Rs 2,08,50,000 from the Greater Noida Authority on 22 May 2015 as compensation for compulsory land acquisition, out of which he purchased agricultural land for Rs 30,00,000 on 8 September 2015 (circle rate Rs 84,10,000) and further agricultural land for Rs 32,00,000 on 17 October 2015 (circle rate Rs 48,20,000), supporting this with bank statements and the sale deeds. The Assessing Officer added the differences under section 56(2)(vii)(b), rejecting the assessee's reliance on Mubarak Gafur Korabu v. ITO (ITA No. 752/PUN/2018) and Yogesh Maheshwari v. DCIT (ITA No. 300/JP/2019) and preferring the Jaipur Bench in Trilok Chand Sain. The CIT(A)/NFAC dismissed the appeal on 13 January 2026 without any appearance or submissions, observing that no request for a reference to the District Valuation Officer had been shown to have been made. Before the Tribunal the assessee also raised an additional ground that the section 148A(d) order and the section 148 notice were without jurisdiction because the section 151 approval was signed neither digitally nor manually. The matter was decided on 2026-08-21 by the ITAT (Shri S. Rifaur Rahman, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member). On those facts the ITAT held as follows. The appeal was allowed and the addition of Rs 61,02,500 deleted (paras 10 and 11). Both lower authorities having never raised any doubt about the nature of the land, it was a fact on record that the land purchased was agricultural land, and the facts were exactly similar to the coordinate Bench's decision in Ramanarayan v. ITO; following it, the ground was allowed. The additional ground on the section 151 approval was admitted but not decided.
The Bench treated the matter as covered. It noted that the CIT(A)'s order was ex parte and for non-prosecution, that the assessee is a farmer, and that the issue was covered by a coordinate-bench decision, and so proceeded to adjudicate the appeal itself rather than remand (para 10). It recorded that the assessee had filed detailed supporting documents for the payments and for the source of the purchases, and that the only question was whether what was bought was agricultural land — a question the lower authorities had never joined issue on. Having found the facts identical to Ramanarayan, in which one of the members of the present Bench had been a party, it reproduced that decision and followed it (para 10). The decision followed or applied Ramanarayan v. ITO, ITA No. 767/Del/2024 (ITAT Delhi) — followed; National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC) — applied to admit the additional ground.
It was decided by the ITAT on 2026-08-21 and is reported as ITA No. 2532/Del/2026 (ITAT Delhi, 'C' Bench). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 56(2)(vii)(b), section 56(2)(x), section 2(14), section 147, section 148, section 148A(b), section 148A(d), section 151, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the addition of Rs 61,02,500 deleted (paras 10 and 11). Both lower authorities having never raised any doubt about the nature of the land, it was a fact on record that the land purchased was agricultural land, and the facts were exactly similar to the coordinate Bench's decision in Ramanarayan v. ITO; following it, the ground was allowed. The additional ground on the section 151 approval was admitted but not decided. It arises in Gifts, Shares & Angel Tax, Capital Gains and How Tax Law Is Read matters, on section 56(2)(vii)(b), section 56(2)(x), section 2(14), section 147, section 148, section 148A(b), section 148A(d), section 151 of the Income Tax Act 1961, and was decided by Shri S. Rifaur Rahman, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Frame the ground as a definitional one — the receipt is not 'property' because it is not a capital asset — rather than as an equity or hardship point. If the officer cites Trilok Chand Sain, produce the recall order in M.A. No. 28/JP/2019 dated 21 June 2019. Where the buyer holds the land as stock-in-trade rather than as a capital asset, take the same definitional point; that was the second limb argued in the recalled Jaipur matter and it has not been foreclosed. Do not let the first appeal go by default: this appeal succeeded despite an ex parte order below only because the issue was covered and the facts undisputed.
Searched for later treatment; none was found. That is not the same as a source affirming it. A `citedby:` citator search on this order's Indian Kanoon id returns no later decision citing it. A second, differently worded probe - the assessee's name restricted to documents from 21 August 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. In particular no appeal under section 260A, and so no High Court reversal, could be traced, and no later Bench was found taking the opposite view. This is a August 2026 order, so the silence reflects its age rather than any doubt about it: a practitioner may cite it as the only direct authority on the point but should not expect it to be treated as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
No key_quote is offered, deliberately. The sentence usually taken from this order — 'Since, the assessee has purchased agricultural land the same is outside the definition of capital asset, therefore, the deeming provision u/s 56(2)(x) cannot be invoked in this case' — is the Bench REPRODUCING para 8 of its coordinate-bench order in Ramanarayan v. ITO (ITA No. 767/Del/2024) inside its own para 10. It is not this order's own language, and citing it as such would be a fabricated locator. The Bench's own operative words in para 10 are that the facts are exactly similar to Ramanarayan and 'Respectfully following the above decision, we are inclined to allow the ground raised by the assessee'; that sentence was seen on one pass only, so it is not quoted either. Two further points: the additional ground challenging the section 148A(d) order and section 148 notice for want of a signed section 151 approval was admitted at para 7 on the authority of NTPC but was never adjudicated, the appeal having been allowed on the merits; and paragraphs 2 to 8 consist largely of the officer's, the CIT(A)'s and the representatives' words reproduced in the order, so nothing there is the Bench speaking. The order runs to eleven numbered paragraphs and the disposal is at para 11. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the addition of Rs 61,02,500 deleted (paras 10 and 11). Both lower authorities having never raised any doubt about the nature of the land, it was a fact on record that the land purchased was agricultural land, and the facts were exactly similar to the coordinate Bench's decision in Ramanarayan v. ITO; following it, the ground was allowed. The additional ground on the section 151 approval was admitted but not decided.
TaxSphere, “Firey Ram Bhati v ITO — rural agricultural land is not a 'capital asset', so the deeming provision in section 56(2)(x) cannot be invoked on a purchase below circle rate”, https://taxnotice.vittsphere.com/caselaw/case/firey-ram-bhati-v-ito-agricultural-land-outside-56-2-x/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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