My client sold inherited farm land, filed no return because he thought it was exempt, and an ex parte assessment has taxed the whole sale consideration. He now has the population and distance certificates. Can he still produce them?
Yes, and it worked. The Tribunal admitted the population certificate and the distance certificate as additional evidence under Rule 29 of the ITAT Rules because they related to the core issue contested and had not been available before the revenue authorities, condoned a 180-day delay, and held on those documents that the land sold was agricultural land situated beyond the prescribed municipal limits and distance in section 2(14)(iii), so that it did not constitute a "capital asset" and the gain was not chargeable as capital gains under section 45. The addition of Rs 1,28,00,000 made ex parte under section 144 as undisclosed short-term capital gain, and sustained by the Commissioner (Appeals), was deleted and the appeal allowed.
Decided by the ITAT (Shri Keshav Dubey, Judicial Member and Shri Balakrishnan S, Accountant Member (Income Tax Appellate Tribunal, Bangalore Benches, Bench 'B'); order per Balakrishnan S, Accountant Member) on 2026-08-12, reported as ITA No. 1654/Bang/2025; assessment year 2016-17; hearing concluded 2 July 2026; no law-report citation printed on the document. It bears on section 2(14), section 2(14)(iii), section 45, section 144, section 148, section 142(1), section 133(6), section 194-IA, section 139(1) of the Income Tax Act 1961, in Capital Gains, Evidence & Burden of Proof, Appeals and Reassessment & Reopening matters.
This is the recovery route for the very common case where a farmer sells rural land, does not file a return, is reassessed ex parte on information flagged under the Risk Management Strategy, and then does not appear before the Commissioner (Appeals) either. Three things make it work. First, the section 2(14)(iii) point is definitional: if the land is outside the municipal limits and beyond the aerial distance, there is no capital asset and section 45 never engages — nothing has to be exempted, reinvested or claimed. Second, the proof is documentary and specific: a population certificate for the municipality or cantonment board concerned and a distance certificate stating the aerially measured distance from its local limits. Those two documents are the case. Third, Rule 29 of the Income Tax (Appellate Tribunal) Rules is available to get them on the record at the Tribunal stage where they relate to the core issue and were not before the lower authorities. The Tribunal also recorded the assessee's submission that an erroneous deduction of tax at source under section 194-IA cannot alter the nature of the income — worth taking where the buyer has deducted. On delay, the Tribunal applied Collector, Land Acquisition, Anantnag v. Mst. Katiji and accepted that an agriculturist with limited education who did not follow electronic notices in English, and who believed on advice that no return was needed for a sale of rural agricultural land, had sufficient cause.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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On information flagged under the Risk Management Strategy for financial year 2015-16 it was noticed that the assessee had sold agricultural land. The case was reopened and a notice under section 148 was issued. In response the assessee filed a return on 24 April 2023 claiming exempt income of Rs 1,28,00,000 on account of the sale of agricultural land. Notices under section 142(1) and a show cause notice followed, and the Assessing Officer also issued a notice under section 133(6) to the purchaser. In the absence of any document or evidence in respect of the claimed exempt income the assessment was completed ex parte under section 144 and Rs 1,28,00,000 was added as undisclosed short-term capital gain, the total income being determined at that figure. The assessee did not comply with the notices issued by the Commissioner (Appeals), who dismissed the appeal by order dated 27 November 2024. Before the Tribunal there was a delay of 180 days, explained on the footing that the assessee is an agriculturist with limited educational qualifications who is not conversant with English, did not properly understand the electronic communications, and believed on advice that no return was required for the sale of agricultural land situated beyond the prescribed municipal limits. The assessee filed a petition under Rule 29 of the ITAT Rules seeking admission of a population certificate and a distance certificate, and submitted that the land was ancestral agricultural land outside the definition of capital asset and that an erroneous deduction of tax at source under section 194-IA could not alter the nature of the income.
The appeal was allowed and the addition deleted. The Tribunal condoned the delay of 180 days, admitted the additional evidence under Rule 29 because it related to the core issue contested and had not been available before the revenue authorities, and held that the land sold was agricultural land situated beyond the prescribed municipal limits and distance contemplated under section 2(14)(iii) and therefore did not constitute a "capital asset" within the meaning of section 2(14); consequently the gain arising from the sale of the said rural agricultural land is not chargeable to tax as capital gains under section 45. The addition made by the Assessing Officer and sustained by the Commissioner (Appeals) could not be sustained and was deleted.
On delay the Tribunal applied Collector, Land Acquisition, Anantnag v. Mst. Katiji, that where substantial justice and technical considerations are pitted against each other the cause of substantial justice deserves to be preferred and that there is no presumption that delay is occasioned deliberately or through culpable negligence or mala fides, and found sufficient and reasonable cause. On admission of evidence it reasoned that the documents related to the core issue contested and were not available before the revenue authorities during the assessment and the first appellate proceedings. On the merits it framed the short question as whether the land constituted a capital asset within section 2(14), set out the definition, and held on a plain reading that the exclusion in section 2(14)(iii) is material: agricultural land situated outside the specified municipal or cantonment limits and beyond the prescribed distance, subject to the statutory conditions, is not regarded as a capital asset, and the primary question is the character of the land and its location in terms of that sub-clause. Examining that question against the population certificate and the distance certificate, it held that prima facie those documents establish that the agricultural land was situated beyond the prescribed municipal distance contemplated under section 2(14)(iii).
Consequently, the gain arising from the sale of the said rural agricultural land is not chargeable to tax as capital gains under section 45 of the Act.
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Handle my notice → Ask a CA on WhatsAppYes, and it worked. The Tribunal admitted the population certificate and the distance certificate as additional evidence under Rule 29 of the ITAT Rules because they related to the core issue contested and had not been available before the revenue authorities, condoned a 180-day delay, and held on those documents that the land sold was agricultural land situated beyond the prescribed municipal limits and distance in section 2(14)(iii), so that it did not constitute a "capital asset" and the gain was not chargeable as capital gains under section 45. The addition of Rs 1,28,00,000 made ex parte under section 144 as undisclosed short-term capital gain, and sustained by the Commissioner (Appeals), was deleted and the appeal allowed. This was decided by the ITAT (Shri Keshav Dubey, Judicial Member and Shri Balakrishnan S, Accountant Member (Income Tax Appellate Tribunal, Bangalore Benches, Bench 'B'); order per Balakrishnan S, Accountant Member) and bears on section 2(14), section 2(14)(iii), section 45, section 144, section 148, section 142(1), section 133(6), section 194-IA, section 139(1) of the Income Tax Act 1961. It is reported as ITA No. 1654/Bang/2025; assessment year 2016-17; hearing concluded 2 July 2026; no law-report citation printed on the document. This is the recovery route for the very common case where a farmer sells rural land, does not file a return, is reassessed ex parte on information flagged under the Risk Management Strategy, and then does not appear before the Commissioner (Appeals) either. Three things make it work. First, the section 2(14)(iii) point is definitional: if the land is outside the municipal limits and beyond the aerial distance, there is no capital asset and section 45 never engages — nothing has to be exempted, reinvested or claimed. Second, the proof is documentary and specific: a population certificate for the municipality or cantonment board concerned and a distance certificate stating the aerially measured distance from its local limits. Those two documents are the case. Third, Rule 29 of the Income Tax (Appellate Tribunal) Rules is available to get them on the record at the Tribunal stage where they relate to the core issue and were not before the lower authorities. The Tribunal also recorded the assessee's submission that an erroneous deduction of tax at source under section 194-IA cannot alter the nature of the income — worth taking where the buyer has deducted. On delay, the Tribunal applied Collector, Land Acquisition, Anantnag v. Mst. Katiji and accepted that an agriculturist with limited education who did not follow electronic notices in English, and who believed on advice that no return was needed for a sale of rural agricultural land, had sufficient cause. If it applies to you, the first step is this: Get the two certificates before you argue anything: a population certificate for the named municipality or cantonment board, and a distance certificate stating the distance MEASURED AERIALLY from its local limits.
On information flagged under the Risk Management Strategy for financial year 2015-16 it was noticed that the assessee had sold agricultural land. The case was reopened and a notice under section 148 was issued. In response the assessee filed a return on 24 April 2023 claiming exempt income of Rs 1,28,00,000 on account of the sale of agricultural land. Notices under section 142(1) and a show cause notice followed, and the Assessing Officer also issued a notice under section 133(6) to the purchaser. In the absence of any document or evidence in respect of the claimed exempt income the assessment was completed ex parte under section 144 and Rs 1,28,00,000 was added as undisclosed short-term capital gain, the total income being determined at that figure. The assessee did not comply with the notices issued by the Commissioner (Appeals), who dismissed the appeal by order dated 27 November 2024. Before the Tribunal there was a delay of 180 days, explained on the footing that the assessee is an agriculturist with limited educational qualifications who is not conversant with English, did not properly understand the electronic communications, and believed on advice that no return was required for the sale of agricultural land situated beyond the prescribed municipal limits. The assessee filed a petition under Rule 29 of the ITAT Rules seeking admission of a population certificate and a distance certificate, and submitted that the land was ancestral agricultural land outside the definition of capital asset and that an erroneous deduction of tax at source under section 194-IA could not alter the nature of the income. The matter was decided on 2026-08-12 by the ITAT (Shri Keshav Dubey, Judicial Member and Shri Balakrishnan S, Accountant Member (Income Tax Appellate Tribunal, Bangalore Benches, Bench 'B'); order per Balakrishnan S, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed and the addition deleted. The Tribunal condoned the delay of 180 days, admitted the additional evidence under Rule 29 because it related to the core issue contested and had not been available before the revenue authorities, and held that the land sold was agricultural land situated beyond the prescribed municipal limits and distance contemplated under section 2(14)(iii) and therefore did not constitute a "capital asset" within the meaning of section 2(14); consequently the gain arising from the sale of the said rural agricultural land is not chargeable to tax as capital gains under section 45. The addition made by the Assessing Officer and sustained by the Commissioner (Appeals) could not be sustained and was deleted.
On delay the Tribunal applied Collector, Land Acquisition, Anantnag v. Mst. Katiji, that where substantial justice and technical considerations are pitted against each other the cause of substantial justice deserves to be preferred and that there is no presumption that delay is occasioned deliberately or through culpable negligence or mala fides, and found sufficient and reasonable cause. On admission of evidence it reasoned that the documents related to the core issue contested and were not available before the revenue authorities during the assessment and the first appellate proceedings. On the merits it framed the short question as whether the land constituted a capital asset within section 2(14), set out the definition, and held on a plain reading that the exclusion in section 2(14)(iii) is material: agricultural land situated outside the specified municipal or cantonment limits and beyond the prescribed distance, subject to the statutory conditions, is not regarded as a capital asset, and the primary question is the character of the land and its location in terms of that sub-clause. Examining that question against the population certificate and the distance certificate, it held that prima facie those documents establish that the agricultural land was situated beyond the prescribed municipal distance contemplated under section 2(14)(iii). In the words reproduced by the source cited on this page: "Consequently, the gain arising from the sale of the said rural agricultural land is not chargeable to tax as capital gains under section 45 of the Act." The decision followed or applied Collector, Land Acquisition, Anantnag & Anr. v. Mst. Katiji & Ors. [(1987) 167 ITR 471 (SC)] — applied on condonation of delay.
It was decided by the ITAT on 2026-08-12 and is reported as ITA No. 1654/Bang/2025; assessment year 2016-17; hearing concluded 2 July 2026; no law-report citation printed on the document. 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 2(14), section 2(14)(iii), section 45, section 144, section 148, section 142(1), section 133(6), section 194-IA, section 139(1), 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 deleted. The Tribunal condoned the delay of 180 days, admitted the additional evidence under Rule 29 because it related to the core issue contested and had not been available before the revenue authorities, and held that the land sold was agricultural land situated beyond the prescribed municipal limits and distance contemplated under section 2(14)(iii) and therefore did not constitute a "capital asset" within the meaning of section 2(14); consequently the gain arising from the sale of the said rural agricultural land is not chargeable to tax as capital gains under section 45. The addition made by the Assessing Officer and sustained by the Commissioner (Appeals) could not be sustained and was deleted. It arises in Capital Gains, Evidence & Burden of Proof, Appeals and Reassessment & Reopening matters, on section 2(14), section 2(14)(iii), section 45, section 144, section 148, section 142(1), section 133(6), section 194-IA, section 139(1) of the Income Tax Act 1961, and was decided by Shri Keshav Dubey, Judicial Member and Shri Balakrishnan S, Accountant Member (Income Tax Appellate Tribunal, Bangalore Benches, Bench 'B'); order per Balakrishnan S, Accountant 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. If those documents were not before the Assessing Officer or the Commissioner (Appeals), move under Rule 29 of the ITAT Rules and say expressly that they go to the core issue and were not available earlier. Frame the ground as an exclusion from the definition of capital asset under section 2(14)(iii), not as an exemption, and take the consequence that section 45 does not apply. Where the buyer has deducted tax under section 194-IA, say in terms that deduction does not alter the character of the income, and claim the refund. For delay, file an affidavit setting out the specific reason — here, non-comprehension of electronic notices in English and a bona fide belief based on advice — and rely on Mst. Katiji. Do not treat non-appearance before the Commissioner (Appeals) as fatal; the Tribunal admitted the evidence and decided the point on merits notwithstanding the dismissal below for non-compliance.
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 12 August 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. The 47 hits beyond this order are unrelated Karnataka civil and service matters picked up by loose name matching. 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.
The order runs to 21 numbered paragraphs and ends with the disposal at paragraph 21; that count was established by transcribing the whole order from the raw ?type=print text, not by asking. Paragraph 15 sets out the definition of "capital asset" as the Tribunal had it, and that reproduction is NOT the current departmental text: it prints the PRE-substitution item (b) of sub-clause (iii) followed by the departmental footnote "The following item (b) shall be substituted for the existing item (b) of sub-clause (iii) of clause (14) of section 2 by the Finance Act, 2013, w.e.f. 1-4-2014" and then the substituted item (b); and its sub-clause (vi) omits the Gold Monetisation Scheme, 2015 words that the departmental Year 2025 page carries. The Tribunal was evidently working from an older print. The assessment year is 2016-17, so the aerially measured test applied. A gap in what I could read: at paragraph 17 the order says the population certificate and the translated distance certificate are "extracted below", but the retrieval did not carry their content — the transcription shows a bracketed note that the certificates are referenced but their text is not shown. I therefore cannot state what population or what distance those certificates recorded, and the entry does not do so. Paragraphs 10 to 12 are the parties' submissions; the Tribunal's own findings are at paragraphs 13 to 21. The order refers to a coordinate-bench decision in Swamiappan v. DCIT (56 taxmann.com 185) as relied on by the authorised representative; I did not open that decision and state nothing about it — the citation is reproduced only as a neutral reference appearing in the order. 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 deleted. The Tribunal condoned the delay of 180 days, admitted the additional evidence under Rule 29 because it related to the core issue contested and had not been available before the revenue authorities, and held that the land sold was agricultural land situated beyond the prescribed municipal limits and distance contemplated under section 2(14)(iii) and therefore did not constitute a "capital asset" within the meaning of section 2(14); consequently the gain arising from the sale of the said rural agricultural land is not chargeable to tax as capital gains under section 45. The addition made by the Assessing Officer and sustained by the Commissioner (Appeals) could not be sustained and was deleted.
TaxSphere, “Muniswamappa Ananda v. ITO, Ward 6(1)(1), Bengaluru (ITAT Bangalore) — population and aerial-distance certificates admitted as additional evidence under Rule 29, and the section 2(14)(iii) exclusion applied to delete a Rs 1.28 crore addition”, https://taxnotice.vittsphere.com/caselaw/case/muniswamappa-ananda-population-and-distance-certificates-admitted-under-rule-29-to-prove-rural-agricultural-land/ (validity last checked 2026-09-09)
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My client sold ancestral farm land near a town and the Assessing Officer has charged capital gains. What are the exact population and distance limits in section 2(14)(iii), and from when is the distance measured aerially rather than by road?
My client's agricultural land inside the municipal limits has been compulsorily acquired. Section 2(14)(iii) does not help because the land is urban. What exactly must he prove under section 10(37)?
The land acquisition officer has deducted ten per cent from my compensation cheque. When is s.194LA actually attracted, what is the threshold now, and does the RFCTLARR exemption stop the deduction?
I sold my agricultural land in small plots over several years, leaving roads and drains. The Assessing Officer has taxed part as business income and part as capital gains and invoked s.45(2). Can he split it like that?
