ITO, WARD-3, SRIGANGANAGAR vs. SHRI BADRI PRASAD, SRIGANGANAGAR

This appeal is filed by revenue and is arising out of the order of the Commissioner of Income Tax (Appeals), Bikaner dated 25.06.2018 [here in after ld. CIT(A))] for assessment year 2013-14 which in turn arise from the order dated 30.12.2017 passed under Shri Badri Prasad section 143(1)/147 of the Income Tax Act, by the ITO, Ward-03, Sriganganagar.

“(i) Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in allowing the benefit of Section 54B to the assessee in respect of property purchased at Chak 14 AS(A) Vijaynagar purchased for a sum of Rs. 82,00,000/- especially when the agreement was doubtful, no sale deed was registered, the land till the date of assessment was still in the name of seller, the sale consideration was still outstanding and there was contradictions in the cash flow statement. (ii) Whether on the facts and in the circumstances of case, the ld. CIT(A) was justified in allowing the benefit of Section 54B to the assessee in respect of property purchased at 1 DJM, 6.262, Command Area Vijaynagar purchased for a sum of Rs. 2,22,75,000/- especially when the agreement was doubtful, the amount of consideration mentioned in the agreement did not match with the amount mentioned in the sale deed and there was contradictions on the cash flow statement. (iii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in allowing indexed cost of acquisition of Rs. 23,34,480/- as against Rs. 13,15,488/- allowed by the Assessing Officer which is based on the fair market value of the land.”

147 of the I.T. Act, 1961. Accordingly notice u/s. 148 was issued and served upon the assessee. The assessee did not file the return in response to notice u/s.

Long Term Capital Gain 1. Ag. Land 10/12/2012 Value u/s 50C Rs.3,28,87,500/- Sale Consideration Received Rs. 3,28,87,500/-

Shri Badri Prasad Sale Consideration Rs. 3,28,87,500/- Less: Transfer expense Rs. 3,28,875/- Less: Indexed Cost of Acq. FY 1981-82 274000/100*852 Rs. 23,34,480/- Rs. 3,02,24,145/- Deduction u/s 54B Rs. 3,02,24,145/- Capital Gain Nil The assessee was asked to file evidence regarding sale, transfer expenses, exemption claimed u/s. 54B. In response the assessee filed two agreements for purchase of different lands in support of claim of exemption u/s. 54B. The details of these purchases submitted is reiterated here in below:

S. No. Details of Seller Purchaser Date Amount as Mode of land Name name per payment Agreement 1 Chak 14 Sh. Madan -do- 16.07.2013 82,00,000/- Cash A.S(A) Lal Vijay Nagar 2 1 D.J.M Sh. Sh. Badri 31.01.2013 2,22,75,000 cash 6.262 Shanker Parsad. 11 camand Lal, 1 LNP area, DJM, Khyaliwala, Vijaynagar. Vijaynagar SGNR The assessee was asked to produce the cash flow and amount paid to the above persons from whom land was purchased. The assessee not filed the required details. The ld. AO thus noted that since the assessee has not filed the details as called for, the direct nexus of Shri Badri Prasad payment of consideration against purchase of these two properties is not established.

4.1 As the assessment getting time barred a final show casue notice dated 20.12.2017 was given to justify the capital gain and deduction claimed. The assessee filed reply to this final show cause notice.

From the details so made available the ld. AO observed that assessee filed a copy of an agreement which was executed between Sh. Madan Lal, Village Kupli, Tehsil- Vijaynagar (expectant- seller) and the assessee i.e. Sh. Badri Prasad(claimant- purchaser). As per this agreement, the seller has proposed to sale the land situated at Chak 14 A.S. (A), Tehsil Sri Vijaynagar to the assessee through agreement at a sale consideration of Rs.82,00,000/- and received an advance of Rs. 80,00,000/- in cash against this property. Based on agreement and the false agreement exemption u/s 54B of Rs. 2,34,85,830/- (on account of investment in both the properties). But the assessee has neither paid the full amount against purchase nor executed the Registry of this land. Therefore, he is not entitled to claim this incorrect claim of exemption to the tune of Rs. 82,00,000/-.

Shri Badri Prasad The sale deed has not been registered till date which violates the provisions of section 54B. As he has not purchased another property within the stipulated time as required in section 54B of the Act. As per land revenue records and clarification of the Tehsildar Vijaynagar, the above question land is in the name of Shri Madan Lal. Therefore, the agreement was false and never been executed. The ld. AO written a letter to sub registrar to provide the certified copy of sale / purchase deed. In response the sub registrar submitted his reply stating that no document has been executed by Shri Madan Lal. The statement of Shri Madan Lal was also recorded. From the statement so recorded the ld. AO noted that (i) The balance amount is also outstanding till date. (ii) No sale-deed was executed till date of the above land. (iii) The validity of the agreement was only for two years. The time of agreement has been lapsed and the agreement was automatically cancelled. (iv) The land is not in the possession of the assessee till date.

The ld. AO further noted that the agreement not signed by the purchaser and therefore, the same is not a valid contract executed between the parties. The ld. AO also noted that assessee has shown payment on 16.07.2013 of Rs. 80,00,000/- in cash to Shri Madan Lal against purchase of land Shri Madan Lal also stated in his statement

Shri Badri Prasad recorded during the assessment proceeding that he has received cash of Rs. 80,00,000/- on the date of agreement i.e. 16.07.2013.

Based on these observations the ld. AO hold that the agreement is fabricated and prepared as an after thought and thereby the claim of Rs. 80,00,000/- was rejected.

4.2 As regards the another purchase the ld. AO noted that a sale consideration of Rs. 18,00,000/- instead of Rs. 2,25,00,000/- as claimed in the agreement. Therefore, the assessee found guilty of excess claim of exemption in view of this registration by Rs. 2,04,75,000/-. On this issue the ld. AO observed that the agreement is fictitious / irrelevant due to the following facts :

“B.1(a) The amount of consideration of the said land as mentioned in the agreement does not match with the sale-deed.

B.1(b) As per section 54B of the Income tax Act, the agreement is irrelevant and not eligible to claim exemption u/s 54B of the IT Act 1961.

B.1(c) The original agreements have agreements have not been furnished. Therefore, the authenticity of these false agreements is not proved.

B.1(d) There is no where mentioned in sale deed regarding agreement dated 31.01.2013.

B.1(e) Agreement is simply written on simple revenue ticked and not notarized. In view of this validity of agreement is not proved.

B.1(f) During the assessment proceedings, A/R of the assessee filed cash flow showing payment to Sh. Shanker Lal is as under:-

B.3 As per agreement, assessee has shown payment of on 31.01.2013 of Rs.50,00,000/- in cash to Sh. Shankar Lal against purchase of land and remaining cash of Rs. 1,72,75,000/- on 24.04.2013. Sh.Shankar Lal also stated in he has received cash of Rs. 50,00,000/- on the date of agreement i.e. 31.01.2013 and remaining on date of purchase deed on 24.04.2013. From the perusal of cash flow statement as cited above, assessee has made payment of Rs. 18,38,000/-in cash on 31.01.2013.

Shri Badri Prasad B.4 In the light of the above, reply of the assessee and agreement is self contradictory. Payment is not made to Sh. Shankar Lalas per agreement. In view of the above agreement/document is fabricated and prepared as an after-thought.

B.5. In view of the facts mentioned in the above and after considering the material facts available on record, I am of the view that the assessee is not eligible to claim exemption u/s 54B of the IT Act, 1961. As per cash flow payment is not made to Sh. Shankar Lal as per agreement. Purchase deed is executed of Rs. 18,00,000/- on 24.04.2013 and in purchase deed nowhere is mentioned about agreement.

B.6. The assessee in view of the aforesaid reasons is found not eligible to claim exemption u/s 54B of the Income-tax Act, 1961. The same has been shortlisted as under:

B.7. He has not purchased another property within the stipulated time as required in section 54B of the Income-tax Act, 1961 as also highlighted in the relevant portion of section enumerated above.

B.7. The amount of capital gains has not been utilized for purchase of new asset before furnishing of return as required u/s 139(1) of the Income-tax Act, 1961 which is 31.07.2013 in this case.

B.8 In the light of the above, Rs. 18,00,000/- is allowed only u/s 54B of the IT as per purchase-deed dated 24.04.2013.”

4.3 The ld. AO further noted that the assessee has claimed transfer expenses of Rs.3,28,875/- against the above property in the computation of income. In this regard, assessee has submitted that this expenditure is a routine in nature in this type of transaction. The reply of the assessee considered but not found tenable because the assessee has neither filed proof of payment nor filed name and address of the recipient who have taken brokerage. In absence of Shri Badri Prasad evidences, it is not possible to allow the above expenditure of Rs.

3,28,875/- is hereby disallowed and the same is added in the total income of the assessee.

4.4 The assessee was asked to vide show cause notice about excess payment of Rs. 4,11,000/-. In response to this, assessee has stated that he got Rs. 4,11,000/- against standing crops which did not come in the definition of capital gain. In sale-deed nowhere is mentioned about standing crops. Assessee was asked to submitted supporting evidence for standing crops. But no documents/ evidences submitted by the assessee. In absence of proof, plea of assessee is rejected and Rs. 2,41,598/- is added to the income of the assessee.

4.5 The ld. AO has also considered the cost of acquisition at Rs. 13,15,488/- as against Rs. 23,34,480/- claimed by the assessee.

Shri Badri Prasad “6.3. I have considered the facts of the case and appellant's submissions and I find that the AO restricted the assessee's claim of deduction u/s. 54B to the extent of Rs. 2,84,24,145/- after observing that the assessee failed to fulfill the onditions as laid down u/s. 54B of the Act. These observations of the AO were mainly influenced by the fact that the payment transaction was not completed by the assessee against the above land and till finalization of assessment. Besides, the AO also doubted the agreements executed between the assessee and sellers. The statements of the sellers were also found contradictory with facts and figures mentioned in the cash flow chart. On the contrary, the appellant submitted that he had duly invested the sale consideration of agricultural land towards purchase of another agricultural lands, hence, it was duly eligible for deduction u/s. 54B. It was claimed that merely because registry for land purchased from Sh. Madan Lal was not executed and in the registry for land purchased from Sh. Shanker Lal sale consideration is mentioned as Rs. 18,00,000/- does not render the assessee's claim of deduction u/s. 54B doubtful, particularly when other facts and evidences clearly suggest that the assessee invested Rs. 82,00,000/- and Rs. 2,22,75,000/- towards purchase of these two agricultural land. It was also contended that both these persons from whom the assessee had purchased properties were semi-literate and not conversant with the legal position and technicalities relating to property transactions, hence, their statement should be considered in ordinary terms.

6.4. Before I proceed to decide this issue in the light of the facts and circumstances of this case, it would be appropriate to refer to the provisions of sec. 54B of the Act which are reproduced as below for the sake of clarity:-

“[Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases.

[(1)] [Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer of a capital asset being land which, in the two years immediately preceeding the date on which the transfer took place, was being used by [the assessee or a parent of his] for agricultural purposes 222[(hereinafter referred to as the original asset)]. and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,-

(1) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the Shri Badri Prasad capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year, and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced by the amount of the capital gain.]

(2) The amount of the capital gain which is not utilised by the assessee…………………..”

6.4.1 A plain reading of this section reveals that the first and foremost condition for claiming exemption u/s, 54B is that the land being sold should have been used by the assessee or his parent or a Hindu Undivided Family for agricultural purposes. In the instant case, the appellant has produced various evidences such as Jamabandi, Girdawari report etc. which reveal that the appellant has been cultivating the land for many years and hence, the assessee satisfies foremost/first condition for claiming exemption u/s. 54B of the Act. In fact, the AO has also not raised any doubt regarding the cultivation of land sold by the assessee as there is no adverse material brought on record to establish that the land sold by the assessee was never cultivated by them. The Hon'ble ITAT Bangalore Bench 'B" in the case of Nagappa Nagaraj vs. ACIT [2010] 36 SOT 253 (Bangalore) held that where it is proved from the evidences that the assessee had purchased land as agriculture land and also carried out agricultural operations on it, he was entitled to claim exemption under section 54B to the extent land so purchased had been utilized for agriculture purposes.

6.4.2. From a plain reading of the above section and ratio laid down by the various courts, it is clear that to claim the benefit of this provision, the following conditions are required to be satisfied.

(i) the capital gain arises from the transfer of land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or his parent for agricultural purposes; and (ii) the assessee has purchased the land within a period of two years after the sale of the above land for being used for agricultural purposes.

Shri Badri Prasad 6.4.3 In the instant case, it has been established that there is no dispute regarding condition No. (i). The dispute is regarding condition No.(ii). The AO did not accept the assessee's claim that she had purchased these two agricultural by making payments as claimed by him.

6.4.4. Section 54B mandates a person to reinvest the sale consideration towards purchase of another agricultural land. In the instant case, there is no dispute in respect of the fact that the old land which was sold by the appellant was used continuously for agriculture and further, the new land which the appellant purchased was also being used for the purposes of agriculture. Merely because the sale deed was not yet registered and in the revenue records, the assessee's name was not registered as owner of the land, the deduction u/s. 54B cannot be denied. Registration is prima facie proof of an intention to transfer, but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed. Thus the seller may retain the deed pending payment of price and, in that case, there is no transfer until the price is paid and the deed is delivered. This view is affirmed by decision of Hon'ble Bench of the Calcutta High Court in the case of Nitai Chandra Naskar vs. Smt. Champaklata Debi reported in (1919) 29 CLJ 250, wherein while referring to s. 54 of the Transfer of Property Act, it has been held that, "sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The true test is, what is the intention of the parties to the transaction. If the intention is that title should pass immediately, even though the consideration has not been paid, title passes, that is, failure to pay the consideration for a conveyance does not defeat the conveyance except where there is an agreement that it should take effect only if the consideration is first paid". In the case of Panchoo Sahu vs. Janku Mandar, reported in AIR 1952 Patna 263, it has been held that title does not pass on the mere execution and registration of the sale deed and the answer to the question regarding passing of the title lies in the intention of the parties, which is to be gathered from the sale deed itself. A similar view has been taken in the case of Shiva Narayan Sah vs. Baidya Nath Prasad Tiwary, reported in AIR 1973 Patna 386.

6.4.5. In the decision rendered by the Hon'ble ITAT Chandigarh Bench in the case of Anil Bishnoi vs. ACIT [2017] 86 taxmann.com 217 (Chandigarh - Trib.) held that the word Purchase cannot be interpreted and detached from the definition of word transfer as given u/s 2(47) of the Act. When the transfer takes effect as per the provisions of section 2(47). The head notes are reproduced as under:-

"IT 'Purchase' cannot be interpreted and detached from definition of word 'transfer as given u/s 2(47). When transfer takes effect as per provisions of section 2(47), if a liability to pay tax arise in case of seller, consequent right to get deduction on purchase of property accrues in favour of purchaser, if he otherwise is so eligible to claim it as per relevant provisions of Act

IT: Where assessee sold land and claimed deduction under section 54B on purchase of agricultural lands one through. registered sale deed and another through an agreement to sell, assessee could not be denied benefit of deduction u/s 548 in respect of purchase of property through agreement to sell"

6.4.6 There is a catena of decisions of various High Courts taking a similar view. I find that in the instant case, the AO's only emphasis is on the fact that the property was not registered in the name of the assessee. As discussed registration of document is necessary which is not true in the given facts of the present case whereas in the light of the above discussion and ratio laid down by the various Courts, it is clear that registration of document is the part and parcel of sale transaction but it is not full and final determinant to conclude the transfer.

6.4.7. In the instant case, Ikranamana dated 31-01-2013 and 16-07-2013 specified that the entire sale consideration was paid as advance in cash and the appellant took possession of the lands from the date of Ikaranama. Thus, it is clear from the evidences produced by the appellant that the sale proceeds of the agriculture land were invested for purchase of another agriculture land within the stipulated time in the appellant's name. Moreover, the land was under cultivation for agriculture purpose in subsequent years. No adverse evidence in thi regard has been brought on record by the AO. The object of provisiori of sec. 54B of the Act is to re invest capital gain arisen out of sale of agriculture land in purchase of agriculture land, which has bec complied with by the appellant. The AO has not conducted any sp enquiries so as to establish that these lands were not in possession the appellant or no agricultural activities were being carried out by : assessee on these lands.

6.4.8. Further, I find no reason to doubt the genuineness of Ikrarnama (sale- agreement) dated 31-01-2013 and 16-07-2013 simply for the reason that both the sellers did not deny to have entered into Ikrarnama (sale-deed) with the assessee. Sh. Madan Lal, seller of agricultural land situated at Chak 14 A. S. (A), Vijaynagar never stated in his statement that deal of this property was below Rs. 80,00,000/- or that he never received any amount against sale of his agricultural land. However, the AO wrongly interpreted his statement by correlating the same with cash flow chart submitted by the assessee. Though it may be true that there was contradiction in statements and cash flow chart submitted by the assessee, however, fact of receiving amounts from the appellant was never denied at any stage. Since most payments were made in cash, it was also difficult for the person, who had no knowledge about legality and technicality of proceeding to state the exact date and figures at instance.

6.5. As regards the AO's observation in respect of property purchased from Sh. Shanker Lal that the amount of consideration of the said land as mentioned in the agreement did not match with the sale- deed, it is observed that as submitted by the appellant in the sale deed figure of Rs. 18,00,000/- was mentioned as the consideration amount. It is general practice employed by the persons entering into transaction of properties to mention only DLC amount. However, deal of any property does not be materializes until and unless amount as agreed by both the parties is paid and received by buyer and seller respectively. Sh. Shanker Lal received Rs. 2,22,75,000/- as per sale agreement dated 31-01-2013 in respect of property situated at 1 D.J.M. 6.262 camand area, Vijaynagar and this fact was never denied by him in his statement.

6.6 After considering the facts in their totality. I find that the AO failed to establish that buyers had not received the amounts as per Ikrarnama executed between them and the assessee/appellant and appellant had not taken possession over of these lands, which he claimed to have purchased from these two sellers. Accordingly, it is held that the AO's observation that the appellant had not paid Rs. 82,00,000/- (to Sh. Madan Lal against purchase of property mentioned at Sr. No. 1 of the table above) and Rs. 2,22,75,000/- (to Sh. Shanker Lal against purchase of property mentioned at Sr. No. 2 of the table above) is not based on proper appreciation of the facts and circumstance of the case and details / evidences furnished by the appellant.

Considering the facts and circumstances of the instant case and legal precedents as discussed above, it is held that the AO was not justified in denying the deduction u/s. 54B of the Act as the appellant does confirm to the express provisions of sec. 54B of the Act. The disallowance of deduction u/s. 54B is held as not justified and addition made on this account is directed to be deleted. The grounds raised by the appellant regarding this issue are allowed.

7.1. The AO in the show-cause dated 20-12-2017, required the assessee to explain the basis of FMV of Rs. 2,74,000/- as on 01-04-1981, on the basis of which indexed cost was worked out at Rs. 23,34,480/-, The AO having not being satisfied with the assessee's reply allowed indexed cost to tune of Rs. 13,15,488/-.

7.2. The appellant submitted before me that agricultural land sold by him was an ancestral land and was purchased before 01-04-1981. At time of Shri Badri Prasad sale of this land in year 2012, value of this land was Rs. 30,00,000/- per bigha and as on 01-04-1981, the same was Rs. 25,000/- per bigha. This value was determined and intimated after getting information regarding FMV of this land from Stamp authority and local property dealers. As per the assessee, Sub Registrar informed him that no other property (agricultural land) got registered in year 1981. The appellant submitted that this agricultural land is situated at Sriganganagar-Hanumangarh National Highway and is 2-3 Kms away from Sriganganagar's residential/population area. Thus, it was claimed that the assessee had rightly taken the FMV at Rs. 2,74,000/- as on 01-04-1984 for total area of 11 bighas whereas the AO considered the FMV at Rs. 1,54,000/- as on 01-04-1981 without any basis. The appellant contended that the AO before taking this value did not even issue show-cause notice or afforded opportunity to the assessee to explain in this regard.”

S. No. Particulars Page No. 1 Copy of reasons recorded. 1 2 Copy of acknowledgement of ITR along with computation 2-4 of income. 3 Copy of notice u/s 143(2) dated 30/09/2016 5 4 Copy of letter to AO 6 5 Copy of letter/notice issued by AO dated 04/10/2016 & 7-10 20/12/2017 6 Copy of reply to AO dated 25/12/2017 11-14 7 Copy of order disposing objection dated 26/12/2017 15-16 8 Copy of letter dated 19/01/2017 17 9 Copy of reply to AO dated 27/01/2017 18-19 10 Copy of sale agreement & affidavit 20-35 11 Copy of statement of Sh. Madan Lal recorded u/s 131 by 36-39 ld. AO during the assessment proceeding. 12 Copy of confirmation letter submitted by Shri Shankar Lal 40 to ld. AO during the assessment proceeding.

Shri Badri Prasad 13 Copy of sale agreement between Shri Shankar Lal and 41-43 assessee. 14 Copy of statement of Shri Shankar Lal recorded by ld. AO 44-49 during the assessment proceeding. 15 Copy of decision of Hon’ble ITAT Chandigarh Bench in 50-52 the case of Anil Bishnoi vs. ACIT in (CHD)2016.

The ld. AR of the assessee heavily relied upon the facts that the assessee has produced all the persons from the land is purchased and they have confirmed having received the money. The ld. CIT(A) has appreciated the fact that the based on the statement recorded the actual consideration has passed. There is no doubt that the assessee sold the property and against the consideration has purchased another property and the source is not doubted and even the investment is also based on the statement of the person who have confirmed to have sold the property and has received the money. On the identical the ld. AR of the assessee relied on the decision of the coordinate bench of Chandigarh in in the case of Anil Bishnoi Vs. ACIT & Ahmedabad bench in ITA no. 561/Ahd/2020 in the case of Dharmendra J Patel has considered the claim of the assessee u/s. 54B of the Act and the ratio of that decision relied upon by the assessee.

Shri Badri Prasad 7. The ld DR is heard who has relied on the findings of the assessing officer and submitted that as regard the investment of the property the ld. AO has relied upon the detailed finding in the assessment proceeding based on that finding taken a view that the assessee has not invested the money and even the registration of the property was not in the name of the assessee and even the possession was not passed the denial to the benefit by the ld. AO is based on the detailed reasoning. Even the ld. CIT(A) has not controverted the finding of the based on the cash flow submitted by the assessee. He relying on the statement of Shri Madan Lal submitted that the agreement was for a period of 2 years and sale is not completed as the assessee has not finally executed the sale deed and thus, the sale is not complete and therefore, the benefit is rightly denied by the ld. AO. The ld. DR also relied upon the finding of the ld. AO that the cash not exchange the hand in real terms and relying on the detailed finding and reasons the appeal of the ld. CIT(A) is not considered on the various aspects as recorded in his order. As regards the cost of acquisition the AO has given the specific show cause notice and the AO has allowed the cost based on the facts placed on record.

Shri Badri Prasad 8. We have heard the rival contentions, perused the material placed on record and judicial decision cited by both the parties to drive home to their contentions. The ground no. 1 & 2 raised by the revenue is granting of benefit to the assessee u/s. 54B of the Act after appreciation of the facts of the case considering that the assessee has paid Rs. 82,00,000/- to Shri Madan Lal against purchase of property and Rs. 2,22,75,000/- to Shri Shankar Lal.

8.1 The assessee has claimed deduction u/s. 54B for purchase of agricultural land from Shri Madan Lal for Rs. 82,00,000/-. In the assessment order ld. AO doubted the authenticity of the sale agreement dated 16.07.2013 and stated that no sale deed was executed for this property. The ld. AO also stated that the land is not transferred in the name of the assessee and still in the name of the Shri Madan Lal in revenue records. In the statement recorded the Madan Lal stated that the amount outstanding with that of the cash flow submitted by the assessee were not matching. Based on these observation the assessing officer denied the benefit of Rs. 80,00,000/- u/s. 54B of the Act. As regards the other property assessing officer noted that the assessee made incorrect claim in the purchase deed as Shri Badri Prasad the sale consideration was only mentioned at Rs. 18,00,000/- instead of Rs. 2,25,00,000/- in the agreement. Thus, ld. AO noted that the assessee made excess claim of deduction of Rs. 2,04,75,000/-.

Therefore, ld. AO doubted about the correctness of claim made vide sale agreement dated 31.01.2013. The amount of consideration of the said land as mentioned in the agreement did not match with the sale deed. The ld. AO also noted that the cash flow statement submitted by the assessee showing payment to Shri Shankar Lal was also found contradictory. Based on this observation the ld. AO also denied the benefit of section 54B in respect of the Shri Shanker.

8.2 In support of the claim u/s. 54B of the Act, the ld. AR of the assessee reiterated the submission made before the ld. CIT(A) and submitted that for claim u/s. 54 B of the Act he has claimed the benefit for purchase of two agricultural land from two different person. Thus, the claim of the assessee was supported by the two agreements and one registry made. In the assessment proceeding the assessee produced both the seller and their statements were recorded. Both the seller admitted to have sold their agricultural land to the assessee.

Shri Badri Prasad 8.3 The ld. AR of the assessee contended that for claiming deduction u/s 44B of the Act. The provisions of section 54B required that sale deed must be registered the only requirement is that the sale consideration decided should be invested in purchase of agricultural land. The ld. AR of the assessee, during the course of argument relied upon the Co-ordinate Bench decision in the case of Sh. Anil Bishnoi vs. ACIT in ITA No. 1459/Chd/2016. The ld. AR of the assessee also relied the decision in the case of Dharmendra J. Patel in of Ahmedabad Bench.

8.4 The ld. AR of the assessee in addition to the decision relied upon also argued that for claiming the deduction u/s 54B of the Act possession of loan is more relevant as per provision of section 53A of the Transfer of Property Act and the provision of section 2(47) of the Income Tax Act. The ld. AR of the assessee has categorically proved and argument that both the buyers were summoned and appeared before the lower authorities and confirmed to have received of consideration for the agricultural land. The Bench noted that the ld. Ld. AO while disallowing the claim of deduction u/s 54B not considered the statements of the seller. The assessee has already discharged his

Shri Badri Prasad onus of producing both the parties before the ld. AO and they have categorically stated that the assessee has purchased the land from them. The assessee has also offered explanation that source of purchase of this property is of the same money for which the capital gain is offered in the computation of income for the year under consideration. Therefore, even this source is also not doubted. As regards the 2nd land, the ld. AO denied the claim to the extent of Rs. 2,84,24,143/- observing the assessee failed to fulfill the condition of section 54B of the Act and these observations of the ld. AO is influenced by the fact that payment transaction was not completed by the assessee against the said purchase of land considering that the statement of the seller are contradictory facts and figures as given in the case of laws. The statement submitted in the assessment proceedings to rebut this version of the AO. The assessee submitted that he had duly invested the sale consideration for purchase of agricultural land and therefore, the deduction u/s 54B cannot be denied. The ld. AR of the assessee relying on the judgment of Chandigarh Bench, ITAT has reported hereinabove. That the law does not confer condition the assessee should execute sale deed to claim the exemption and therefore, both the claim for purchase of land is Shri Badri Prasad allowable. Considering the finding of ld. CIT(A) in detail and argument placed by both the parties and on perusal of the records. We find that it is not under dispute that the assessee has out of the income of capital gain offered it purchase two properties for which the assessee has paid the money. The seller have also been exempted by the Assessing Officer and they have also confirmed that the assessee has purchased the land from them. The source of payment made by the assessee is also proved to be invested in the said agriculture land.

8.5 As regards, the contention of non registration of the sale deed in the name of the assessee, we have considered the decision of the Co- ordinate Bench in the case of Dharmendra J. Patel in dated 22.03.2023. The Co-ordinate Bench held as under:-

“6. We have heard the rival contentions and perused the material on record. We are of the considered view that the Ld. CIT(Appeals) has erred in not looking at the facts of the instant case in the correct perspective. In our considered view, one must not lose sight of the fact that section 54B of the Act is a beneficial provision and aimed at investment of proceeds from sale of agricultural property into new agricultural property. In a recent judgment of Mother Superior Adoration Convent [2021] 126 taxmann.com 68 (SC), the Supreme Court held that beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. In reference to Dilip Kumar's case (Supreme Court), it held that the Constitution bench has not made any distinction between exemption granted generally and exemption provisions that have a beneficial purpose, therefore, it cannot be said that for beneficial exemption liberal rule of construction has been Shri Badri Prasad done away with. In other words, for construction of beneficial exemption strict rule of interpretation may not be required to be applied. The Supreme Court in this case observed as under:

“This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench.”

6.1 The Gujarat High Court in the case of Kishorbhai Harjibhai Patel v. ITO [2019] 107 taxmann.com 295 (Gujarat) held that section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. In the case of State of Gujarat v. S.A. Himnani Distributors (P.) Ltd. [2014] 43 taxmann.com 358 (Gujarat), the Gujarat High Court held that when State is inclined to give some tax benefit to tax payers, terms or provisions of policy should be interpreted in a liberal manner and with an intention to see that purpose for which policy is framed is fulfilled and beneficiaries is helped and the interpretation must not be such which would frustrate objective of policy.

6.2 In the facts before us, we observe that the new property was primarily purchased out of advances received from sale of two agricultural properties. Evidently, the advances so received by the assessee were invested in the new agricultural property after the same were received and within a period of 2 years from the date of receipt of advance. In the case of DCIT v. Shri Indranil Sanjaybhai Rajyaguru, Sanjayraj Estate, Race Course, Rajkot in ITA number 358/Rjt/2015, the ITAT held that advance payment by the appellant to purchase agricultural land from the sale proceed of the land sold by him has been rightly found eligible for benefit under Section 54B of the Act. Again, in the case of Sh. Inderjit Singh Mann v. ACIT in ITA number the Assessing officer noted that the assessee has sold his land on 19th February 2009 but the registration deed of purchase of the other land was dated 9.6.2008. In this connection the assessee has submitted that though the land was sold on 19.2.2009, yet actual possession of the Shri Badri Prasad land was handed over earlier in April 2008 and this land was purchased for Rs. 51,80,000/- by way of withdrawals from his saving bank account dated 9.6.2008 and 10.6.2008. However, the Assessing officer noted that in the sale deed dated 19.2.2009, it has been mentioned that possession of the above land was given to the company on the spot. Therefore, the contention of the assessee that possession was given earlier was not found tenantable. In view of this, the Assessing officer withdrew the exemption claimed u/s 54B of the I.T. Act and computed the capital gain at Rs. 55,59,363/-. The ITAT while allowing relief to the assessee made the following observations: 14. We have considered the rival submissions. The assessee has filed copy of the sale deed dated 19.2.2009 in the paper book in which it is specifically mentioned that assessee received various advances from the purchasers on different dates in the year 2007 before execution of sale deed. According to the chart prepared by the Ld. Counsel for the assessee, upto November 2007, the assessee has received advance money of Rs. 4,63,35,060/-. It would, therefore, prove that purchaser has paid substantial amount to the assessee as advance money as against total sale consideration of Rs. 5.64 crores. No purchaser would make such a huge advance without taking the possession of the land. The contention of the assessee, is therefore, correct that assessee has handed over the possession of land to the purchaser sometime in April 2008 otherwise the purchaser would not make the huge advances to the assessee. It is also proved that when substantial amount was received against the sale of land, it is available to the assessee for making investment in purchases of land. The assessee claimed that he has made investment of Rs. 51,80,000/- in the purchase of another land vide purchased deed dated 9.6.2008. Therefore, authorities below cannot deny deduction claimed u/s 54B of the I.T. Act. Since the assessee has invested the advance money in purchase of land before the date of transfer of the land, the amount invested will qualif y for exemption u/s 54B of the I.T. Act. The evidence and material on record clearly prove that payment for purchase of land was made out of advance received by the assessee against sale of land, in the year under consideration. The claim of the assessee for deduction u/s 54B is thus supported by the Board Circular No. 359 (supra)and the decisions relied upon by the assessee. The authorities below were, therefore, not justified in denying the deduction claimed u/s 54B of the Act for a sum of Rs. 51,80,000/-. In view of the above discussion and in the light of the Board's Circular and the decisions cited above, we direct the Assessing officer to grant deduction claimed u/s 54B of the I.T. Act in a sum of Rs. 51,80,000/-. Since the Assessing officer computed the capital gain of Rs. 55,59,363/-, therefore, the Assessing officer is directed to re-compute the capital gains by giving deduction to the assessee of Rs. 51,80,000/-. This ground of the appeal of the assessee is allowed.

Shri Badri Prasad 6.3 In the case of Ramesh Narhari Jakhadi v. ITO 41 ITD 368 (Pune), the ITAT held that investment made prior to date of transfer out of earnest money or advanced would also be eligible and should be considered as investment made out of sale proceeds for purposes of section 54B.

6.4 Similarly, the Chennai ITAT in the case of ITAT Chennai Bench in the case of ACIT Vs. Dr. S. Balasundarm in (2013) 36 CCH 107, held as under:- "According to the AO, the purchase consideration paid by the assesses was not eligible for deduction u/s 54B of the Act. It was not the case of the AO that the sale consideration received by the assesses under use for the purpose of purchase of the property. The only dispute was the assessee has purchased the property before transfer of the property. Therefore, the AO had denied the claim of the assessee. From the record, it was found that the assessee had entered into an agreement to sell the property. As it was a fact that though the sale deed was executed on 30.12.2008, but the assessee purchased three properties with the sale consideration received. The intention of the Legislature was that the assessee had to use the sale consideration received for the purpose of buying agricultural land. In the present case, the assessee sold agricultural land was not disputed by the AO and also purchased agricultural land. The CIT (A) in his order had given a finding that though the sale deed was executed on 30.12.2008, but the possession was given on 10.09.2008. He had also observed that the sale deed had to be executed on or before four months from the date of agreement. There were certain dispute between the assessee and the purchaser. Therefore, the execution of sale deed was delayed and the sale deed was executed in December, 2008. So far as the objection raised by the revenue was that the property was only transferred in December, 2008, therefore, the property purchased before that date was not eligible for claiming deduction u/s 54B. It was opined, this was only a hyper technical objection raised by the revenue, because, the assessee had received substantial amount from the purchaser before executing sale deed. It was held that so far as registration of the sale agreement was concerned, if both the parties proceeded to carry the execution of the sale as per the agreement whether it was registered agreement or not, there was no effect so far as transfer was concerned. In view of the above, no infirmity was found in the order passed by the CIT (A) & the ground raised by the Revenue dismissed."

6.5 Accordingly, in view of the facts of the above case and judicial precedents on the subject as discussed above, we are of the considered view that the assessee should be allowed the benefit of deduction under section 54B of the Act since the purchase in the new property has been made out of advances received towards sale of agricultural properties held by the assessee.”

Shri Badri Prasad 8.6 On being consistent on the ratio of decision given by the Co- ordinate Bench, we are of the view that there is no infirmity in the order of the ld. CIT(A) granting benefit of section 54F of the Act to the assessee. Based on these observations, Ground Nos. 1 & 2 taken by the revenue is dismissed.

Facts “7.2 The appellant submitted before me that agricultural land sold by him was an ancestral land and was purchased before 01-04-1981. At time of sale of this land in year 2012, value of this land was Rs. 30,00,000/- per bigha and as on 01-04-1981, the same was Rs. 25,000/- per bigha. This value was determined and intimated after getting information regarding FMV of this land from Stamp authority and local property dealers. As per the assessee, Sub Registrar informed him that no other property (agricultural land) got registered in year 1981. The appellant submitted that this agricultural land is situated at Sriganganagar-Hanumangarh National Highway and is 2-3 Kms away from Sriganganagar's residential/population area. Thus, it was claimed that the assessee had rightly taken the FMV at Rs. 2,74,000/- as on 01-04- 1984 for total area of 11 bighas whereas the AO considered the FMV at Rs. 1,54,000/- as on 01-04-1981 without any basis. The appellant contended that the AO before taking this value did not even issue show-cause notice or afforded opportunity to the assessee to explain in this regard.

Finding “7.3. I have considered the facts of the case and appellant's submissions and I find that while computing the LTCG, the assessee had worked out the indexed cost of acquisition in respect of agricultural land sold at Rs. 23,34,480/-, however, the AO allowed indexed cost to the extent of Rs. 13,15,488/- only. The appellant's claim is that he had rightly taken the FMV of the land at Rs. 2,74,000/- as on 01-04-1981. whereas the AO without any Shri Badri Prasad basis or without affording any opportunity to the assessee to explain in this regard, determined the FMV at Rs. 1,54,000/- as on 01-04-1981. I have gone through the assessment order, I find that there is no finding recorded in the assessment order for arriving at a FMV of Rs. 1,54,000/- as on 01-01-1981. On the contrary, it is observed that the appellant had duly furnished his reply stating that he had rightly taken the FMV at Rs. 2,74,000/- (Indexed cost of acquisition at Rs. 23,37,480/- as on 01-04-981). However without giving any comment on appellant's reply, the AO while working out of LTCG had taken FMV at Rs. 1,54,000/- as on 01-04-1981 (indexed cost of acquisition at Rs. 13,15,488/-). This action of the AO cannot be said to be a justifiable action. As per facts stated by the appellant, the FMV arrived at by the appellant at Rs. 2,74,000/- appears to be more reasonable. Hence, the AO is directed to allow indexed cost of acquisition of Rs.23,34,480/-. The appellant succeeds on this ground.”

Thus, the dispute is that the assessee has taken fair market value land at Rs. 2,74,000/- as on 01.04.1981 whereas the AO has computed it without giving proper opportunity to the assessee at Rs.1,54,000/-.

The ld. AO has not discussed or provided any evidence of arriving indexed cost. Therefore, considering this fact, the ld. CIT(A) stated that the arbitrarily taking value at Rs. 1,54,000/- by the AO is not justified

Shri Badri Prasad and not in the interest of principles of natural justice. Not only that we observe that in the present appeal, the ld. AO through, ld. DR did not present any supporting evidence to support the value of Rs. 1,54,000/- whereas the assessee has claimed the fair market value at Rs. 2,74,000/- as on 01.04.1984 for total area of 11 bighas is based on that actual consideration and document executed on that date. The ld. DR did not controvert this fact and has not supported the value of furnishing any evidence before us as taken by the ld. AO. Thus, we do not see any infirmity in the finding of ld. CIT(A) so far as to allow the indexed cost of acquisition to the assessee as claimed in the return of income. Thus, the ground No. 3 raised by the revenue is dismissed.

In terms of these observations, the appeal of the revenue stands dismissed.

Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board.