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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
O R D E R
PER Dr. A. L. SAINI, ACCOUNTANT MEMBER:
Captioned two appeals filed by these assessees, pertaining to the Assessment Year (AY) 2012-13, are directed against the common order passed by the ld. Commissioner of Income Tax (Appeals)-1, Surat [in short “the ld. CIT(A)”] in Appeal Nos. CIT(A), Surat-1/10653/2015-16 & CIT(A), Surat-1/10437/2016-17 dated 18.10.2019, which in turn arises out of separate assessment orders passed by the Assessing Officer (in short “the AO”) under section 143(3)/147 of the Income Tax Act, 1961 [hereinafter referred to as the “the Act”]. & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel 2. Since, the issues involved in these two appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in Assessment Year 2012-13, have been taken into consideration for deciding the above appeals en masse.
Grounds of appeal
raised by the assessee as per lead case in AY.2012-13 are as follows: “1. Ld. CIT(A) has erred in law and on facts in confirming AO's decision to treat assessee's agriculture land bearing RS No. 12/1, B/ 17A located at village Navagam. Tal. Kamrej, Dist. Surat as non-agriculture land (Capital Asset) ignoring the fact that it is located outside SMC limit and was exclusively used for agriculture purpose prior to its sale.
2. Ld. CIT(A) has erred in law and on facts to upheld AO’s disallowance u/s 54B for Rs.1,73,48,462/- overlooking the fact that the assessee has made actual investment for purchase of another agricultural land which are supported by evidences and there is nothing contrary with the AO/CIT(A) to disbelieve assessee’s investment in agriculture land.”
Facts of the case which can be stated quite shortly are as follows: The assessee, before us, is an individual and he filed his return of income for Assessment Year 2012-13 on 03.03.2014 declaring total income at NIL and agriculture income to the tune of Rs.1,50,920/- which was processed under section 143(1) of the Income Tax Act. Thereafter, the assessee`s case was selected for scrutiny through CASS and notice u/s 143(2) of the Income Tax Act was issued on 11.09.2014 and served upon the assessee. During the course of assessment proceedings it was noticed by the assessing officer that the assessee has sold an agricultural land during the year under consideration for sale consideration of Rs.4,41,00,00/- and claimed deduction under section 54F and under section 54B of the Act to the tune of Rs.2,11,18,745/-. In order to examine the correctness of the claim of the assessee, the assessee was requested to furnish the details of such claim, such as copy of purchase and sale deed, payment details etc. & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel 5. On being requested, the assessee has furnished the copies of following details:
Purchase of land Amount claimed Actual amount as per deed Block No.688/701 Rs.675,000 Rs.675,000 Block No. 690/709 Rs.3,32,000 Rs.3,32,000 Block No.706/705-708 Rs. 3,96,000 Rs. 3,96,000 Block No. 704/709 Rs.10,95,610 Rs. 3,43,000 The assessing officer, on perusal of the documents furnished by assessee, noticed that assessee has also filed copies of ‘Satakat agreement' regarding purchase of two lands for Rs.88,00,786/- and also Rs.94,00,786/-. In this connection the stamp duty valuation and copy of deed was obtained from Sub-Registrar of Kamrej, Surat in respect of land having block No.687/101. On perusal of the deed it is ascertained that the land was purchased at Rs.8,00,000/- in the joint name of assessee's mother and therefore the assessee is entitled to claim of Rs.4,00,000/-, as cost of acquisition, in respect of this land.
Regarding the claim of the assessee that he had also purchased a land at Kherda-Karjan, Baroda, the same was inquired into in the office of Sub-Registrar, Kherda-Karjan, Baroda and found that no such land was registered. Therefore this claim of the assessee that he had purchased land for Rs.94,00,786/- at Baroda was not accepted by the assessing officer. The assessee further claimed that he had made the payments in cash. This claim of the assessee was not accepted by the assessing officer as there is no valid support for the claim of the assessee.
7. The assessing officer also obtained stamp duty valuation in respect of the land sold by the assessee from Sub-Registrar, Kamrej, Surat and found that the value adopted by the stamp duty valuation authority is Rs.6,31,87,500/- whereas the value shown in the sale deed is Rs.4,41,00,000/- only and thereby section 50C of the Income Tax Act 1961 is attracted in the case of the assessee. In view of the above findings, the assessing officer has issued a detailed show cause notice to the assessee, vide letter dated 13.03.2015, which is reproduced below: Page | 3 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel “Please refer to this office show cause letter dated 19.2.2015 on the above subject. In this connection, you hereby requested to clarify your claim in the light of the following: Sale Rs.4,41,00,000 as per sale You have shown consideration of deed and being ½ share Rs.2,18,50,000 being your land Rs.2,20,50,000 share. Please explain. Sale Rs.6,31,87,500 You have shown less value by consideration Rs.1,90,87,500. Therefore 50- as per Stamp C is attracted in your case at Duty Valuation Rs.95,43,750/-. (being one half share) You have claim deduction u/s.54F & 54B as under: Purchase of Amount claimed by you Actual amount as per land deed furnished by you/obtained from Sub-Registrar by this office. Block Rs.675,000 Rs.6,75,000 No.688/701 Block Rs.3,32,000 Rs.3,32,000 No.690/709 Block Rs.3,96,000 Rs.3,96,000 No.706/705-708 Block Rs.3,43,000 Rs.3,43,000 No.704/709 Block Rs.88,00,786 Rs.8,00,000 (between No.687/101 you and your mother thereby only Rs.4,00,000 is available to you). 331/Paiki-2 Rs.94,00786 (you have shown Not yet registered. Kherda - payment by cash) Therefore without any Karjan, Baroda concrete evidence for purchase of land, the same cannot be considered. Construction Rs.16,24,283/- You have not provided of house full proof of construction such as certificate by the Engineer or payment proof etc. In view of the above situation, you are requested to file your explanation if any on the above points. You are requested to furnish your detailed explanation on all the above points positively by 19.03.2015. Your failure to furnish the required explanation, the assessment will be completed on merits.” & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel 8. In response to the above notice, the assessee submitted written submission before the assessing officer, which is reproduced below: "In para 2 of your show cause notice you have stated stamp duty valuation of the said land was Rs.6,31,87,500/-, however, sale deed was executed for Rs.4,41,00,000/. Hence, addition of Rs.95,42,750/- being one half share is required to be made u/s 50C of the Act. In this connection, it is respectfully stated that in State of Gujarat Agricultural land can only be purchased by an agriculturist. However, buyer of the said land was not an agriculturist. Therefore, a permission u/s 63 of the state civil laws is a legal requirement to execute registered sale deed. Such permission was granted on 26.03.2012 and immediately thereafter registered sale deed was executed on 30.03.2012. In the said order Hon’ble Dy. Collector, Kamrej Circle, Kamrej Dist., Surat specifically stated that there was a standing crop of sugarcane, bore well and electric motor are there in the said land. On eastern side of the said land, coconut and mango trees are grown. Further it has also been stated that there is neither any construction for residential or industrial purpose are found on the said land. State government has declared different jantri rates for different type of land, stamp duty valuation officer has taken rate of lands being NA Land, however, the assessee has sold agriculture land which is subject to permission u/s 63 of the state civil laws. Under these circumstances, sale proceeds of the land is Rs.4,41,00,000/- and not Rs.6,31,87,500/-. Therefore, addition u/s 50C is not warranted under the law. In para 3 of your show cause notice you have tabulated figures of assessee's claim u/s 54B for investment in agriculture land. So far as investment for block 688/701, 690/709, 706/705-708 and 704/709, there is no dispute and such claim is duly accepted. So far as investment in purchase of agriculture land bearing Block No.687/101 at village Karjan, Dist. Surat, the cost of investment is Rs.88,00,786/- as declared in notary registered Satakhat. Further source of investment is also explained before you during assessment proceedings. It is also explained that entire investment was made out of sale proceeds of agricultural land for which LTCG is offered. In addition to all these a sworn affidavit of seller of the land, confirming receipts of Rs. 88,00,786 being sale consideration by them is also brought on record. Therefore, deduction u/s.54B is requested to be allowed at Rs.88,00,786/- for Block No.687/101 at village Karjan Dist. Surat. In respect of purchase of agriculture land bearing 331/paiki Kherda, Karjan, Dist. Baroda, it is submitted that a notary registered satakhat was submitted hereinbefore. Entire payment of Rs.94,00,786/- was confirmed by the sellers of the land. Sources of investment are also proved in assessment proceedings. A registered sale deed could not be executed due to the fact that sellers are disputing sale consideration they require further more payment for the said land. A sworn affidavit confirming these facts is enclosed in support. So far as investment in construction in residential house for Rs.16,24,283/- it is submitted that complete details of construction cost incurred for residential house is submitted hereinbefore. All bills for such investments are also submitted to you in assessment proceedings. Your goodself has also visited residence of the assessee. These evidences are quite sufficient to entertain assessee's claim u/s.54F of the Act. Further photographs of the property enclosed." 9. The assessing officer has gone through the submission of the assessee and observed that firstly, the assessee has submitted that the purchaser of the land wanted to convert the agriculture land into industrial land and therefore an Page | 5 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel application for permission u/s 63 of state civil laws was sought and after that only the sale was registered. The assessee has further submitted that the state government authority has taken the stamp duty valuation considering the land as non-agricultural (NA) land. Since the assessee has sold agriculture land, the sale proceeds of land is Rs.4,41,00,000/- only and not Rs.6,31,87,500/- and therefore addition u/s 50C is not warranted under the law.
The assessing officer noticed that above claim of the assessee is totally out of place and without any valid ground. The contention of the assessee that the stamp duty valuation officer has determined the stamp duty value for non agricultural land (NA) land, however the assessee has sold agriculture land and therefore the stamp duty valuation may not be considered. Here, it is pertinent to mention that the jantri rates are fixed by the State Government area-wise and not land to land-wise as claimed by the assessee. The jantri rate differs area to area. State Government cannot fix the jantri rates for each land separately and it is a fact generally known and jantri rates cannot be exclusively fixed for any land. Therefore, the claim of the assessee that the determination of value of property by stamp duty valuation officer is for non-agricultural land and not for agriculture land does not make any sense. The Jantri rates are already fixed. The same is not fixed at the time of sale or purchase. Regarding sale of agriculture land to a non-agriculturist, the condition is stipulated that permission u/s 63 of State Civil law is a requirement in such situation. This is common for each and every such sale or purchase transactions. The assessing officer also noted that when the assessee himself is getting the non- agriculture land, then of course he will sell the land as Non- Agricultural land only and not agriculture land as claimed by the assessee. The assessee himself has submitted that he has first got approval of the Collector u/s 63 and then the sale deed was registered. If that was the case then the assessee is not at all entitled to get the benefit of 54B of the Act as he has sold Non Agricultural land. The transaction of sale is final only when the sale deed is registered. In view of the above, the claim of the assessee was not accepted by the assessing officer and therefore an addition of Rs.95,42,750/- was made to the total income of the assessee under section 50C of the Act. Page | 6 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. Aggrieved by the order of the ld. CIT(A), the Assessee is in appeal before us.
Shri Rajesh M. Upadhyay, Learned Counsel for the assessee begins by pointing out that assessee is an agriculturalist and has filed his return of income for AY 2012-13 on 03.03.2014 by declaring total income at Nil and has also shown agricultural income of Rs.1,50,920/-. The Return of Income was processed u/s 143(1) of the Act. Thereafter his case was selected for scrutiny under CASS. During the course of assessment proceedings, the Assessing Officer noted that the assessee has sold agricultural land bearing R. S. No. 12/1, B 17/1 located at village Nava Gam. Tal. Kamrej. Dist. Surat during the year under assessment, for sale consideration of Rs.4,41,00,000/-. The assessee argued that the land is located beyond outer limit of Surat Municipal Corporation and population of village Navagam is less than 10,000 therefore, it is not a Capital Asset, consequently capital gains provisions are not attracted. During assessment proceedings, ld. Assessing Officer issued a letter to the Talati Cum Mantri, Navagam. Kamrej Surat for ascertaining the fact of status of land as well as its distance. The Talati-Cum Mantri has certified in writing that the land in question was within 8 kms from outer limit of Surat Municipal Corporation (in short SMC). Therefore, the Assessing Officer decided that agricultural land sold by the assessee was Capital Asset, therefore, he has started to decide other issues related to the land sold by the assessee. Relevant Para of the assessment order is Para 8 on page 3 of assessment order. On appeal, Ld. CIT(A) is agreed with the views of the AO and held at Para 9.2 page 22 of appellate order, as under: “I have carefully considered this argument, but do not find it acceptable as it is against the letter and spirit of section 2(14). Further, this stand is even against the view held the assessee themselves as they have computed and offered Capital Gains for tax. Hence the grounds are hereby dismissed."
The ld Counsel pointed out that above decision of ld CIT(A) is not acceptable, because the assessee, right from the beginning, is an agriculturalist, his source of Page | 7 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel income is only agriculture. He is residing at village Navagam of Dist. Surat, the population of the village Navagam is less than 10000, therefore such land can not be a capital asset. He has sold agricultural land located outside SMC limits, during the year under the appeal. Following evidences are available on record with respect to status of the land being agriculture: No. Evidence Page No. of Paper book 1 Purchase Deed dated 27-06-2000 -48- to -64- 2 Revenue Record in form 7 & 12 -65- & -66- 3 Agreement to sale -67- to -81- 4 Order of DY. Collector. Kamrej Division Surat dated -82- to -90- 26-03-2012 5 Copy of sale deed dated 3 1-03-2012 91- to -148- The assessee was cultivating the land up to the date of sale. He has not obtained any permission to make use of land for non-agriculture purpose. There is no non- agriculture activities carried out upon the same land till the date of sale. Even as on today also there is no non-agricultural activities have been carried out by the buyers of the land. Surrounding lands are agriculture land. The AO has accepted the fact of selling of rural agricultural land by the assessee wide his order at Para no.
2. The CIT(A) has also accepted the said fact. Relevant Para of appellate order is 9.3.6 on page no.
24. The AO has also accepted agriculture income shown by the assessee. Further. Ld. CIT(A) as well as the AO has allowed partial deduction u/s.54B of the Act. Thus it is undisputed fact that assessee has sold agricultural land on which he was carrying out agricultural activities prior to its sales.
However, Ms Anupama Singla, Learned Departmental Representative (in short “the Ld. DR”) for the Revenue submits that since the land was situated within the eight kilometers of the Municipality limits, therefore it is a capital asset. She took us through the definition of the Capital Asset which is mentioned under section 2(14) of the Act and argued that agricultural land in India is not a capital asset. However, if the land is situated within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population not less than 10,000 then in that situation such agricultural land would & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel be treated as capital asset. That is, if the agricultural land is situated in any area within eight kilometers from the local limits of any municipality or cantonment board and population is more than 10000, in that situation, such land will be treated as an agricultural land. Therefore, assessee’s case clearly falls within the meaning of section 2(14) of the Act, hence assessee`s land is a capital asset, so assessee cannot claim the benefit of exemption being an agricultural land. She also pointed out that when the Act clearly says and language of the Act is unambiguous then whatever mentioned in the Act should be followed. Therefore, the main grievance of ld DR for the Revenue is that when the provisions of section 2(14) of the Act clearly says that if the agricultural land is situated in any area within eight kilometers from the local limits of any municipality, in that situation, the said agricultural land would be capital asset and therefore assessee has to pay capital gain tax. This way, Ld. DR prayed the Bench that order passed by the assessing officer may be upheld and ground raised by the assessee may be dismissed.
We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that assessee and his mother are the co-owners of agricultural Land R. No 12/1, Block no17/A, village Navagam, Tal: Kamrej. Dist Surat. They entered into notarized agreement to sell the impugned land on 23.01.2012 for sale consideration of Rs.4,41,00,000/-.This agreement gives schedule of payment in page 4 and 5. As per this schedule, and para 3 of the agreement, an amount Rs.51,00,000/- has been received on date of agreement, out of which Rs.48,00,000/- is by way of cheques drawn on Bank, Ring Road Branch Surat. On verification of bank account of Suresh D Patel in Bank of Baroda reveals that the cheques are encashed on 27.01.2012 up to Rs. 18 lacs and in bank account of Smt. Kankuben D Patel in Axis Bank on 27.01.2012 up to 30 lacs. The same payments are endorsed in the Registered Sale deed executed on 31.03.2012. (page no. 38-41) The agreement in para 4 (page 6) stipulates that the necessary permission under section 63 of Land Revenue Act to be obtained before executing sale deed as the purchasers are non-agriculturists. Accordingly the Page | 9 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel application for permission under section 63 of Land Revenue Act (LRA) was filed by sellers on 13.02.2012 and the same was granted on 26.03.2012 by the Dy. Collectror, Kamrej. Subsequent to this, the sale deed was executed and registered 31.03.2012. However, for stamp duty purposes, the SVA valued the land at Rs.6,31,81,500/- applying the Jantri rate of non-agricultural land. The Assessing Officer accordingly invoked the provisions of section 50C of Income Tax Act and made impugned addition of Rs.95,42,750/- [( Rs. 6,31,81,500- Rs.4,41,00,000)/2 =Rs.1,90,87,500/2 = Rs. 95,42,750/-] under the head of capital gains. On appeal, ld CIT(A) confirmed the addition. Before the ld CIT(A), the assessee made the submission stating that even though land is situated within 8 kms. of Surat Municipal Corporation (SMC) limits, but the land is used solely for agricultural purposes by the sellers and even by the purchasers after the transfer. The non-agricultural permission is not obtained, so assessee argued that in such circumstances, the land is not a capital asset within the meaning of section 2(14) of the Act. However, ld CIT(A) rejected the contention of the assessee and held that it is against the letter and spirit of section 2(14) of the Income Tax Act, moreover, the assessee himself has computed and offered Capital Gains for tax.
We note that in the case of late Smt. Kankuben Dulahbhai Patel,(mother of assessee and owner of 50% of land) the assessment was framed under section 143(3) r.w.s 147 of the Act dated 11.03.2016 wherein the Assessing Officer has treated the said land as an agricultural land and allowed the claim of the assessee observing as follows: “In this case, the return of income for A.Y.2012-13 was filed on 03.03.2014 declaring total income of Rs.4,910/- and agriculture income of Rs.1,50,920/-. It has come to light that the assessee has sold the immovable property of Rs.4,41,00,000/- and with the assessee has 1/2 share of the total consideration. The jantri value of above said property as per form No.1 was Rs.6,31,00,000/-. Evidently, in the case of the assessee, income to the tune of Rs.95,43,750/- has escaped assessment on account of total consideration received by the assessee. The A.O., therefore, had reason to believe that income chargeable to tax to the extent of Rs.95,43,750/- has escaped assessment within the meaning of section 147 of the I.T. Act. Hence, after recording the reason for reopening of the case, a notice u/s 148 of the I.T. Act was issued on 07.03.2015 and served upon the assessee for filing the return for A.Y. 2012-13 in response of the notice u/s. 148 of the Act. In response to the notice u/s. 148 of the IT Act the assessee has submitted copy of return of income on 24.02.2016 which was filed on 03.03.2014. Page | 10 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel
In response to the above notices, Shri Rajesh Upadhyay CA, AR of the assessee, attended and furnished the details as called for from time to time. The details furnished were verified and kept on record. The case was discussed with him.
3. During the course of assessment proceedings it is noticed that the assessee has sold an agricultural land during the year under consideration for sale consideration of Rs.4,41,00,00/- and claimed deduction u/s.54F & 54B of the Act to the tune of Rs.1,97,00,898/-. The assessee was therefore issued a show cause to furnish the details of such claim as copy of purchase and sale deed, payment details etc. 4. The assessee has furnished the following reply in response to the above show cause notice: “Break-up of claim made u/s 54B and 54F is separately enclosed at Sr. No.1. So far as investment in purchase of agriculture land bearing Block No. 687\161 at village Karjan, Dist. Surat, the cost of investment is Rs. 88,00,786/- as declared in Notry registered Satakhat. Copy enclosed at Sr.No.2. It is to explain that entire investment was made out of sale proceeds of agricultural land for which LTCG is offered. In addition to all these, a sworn affidavit of seller of the land, confirming receipts of Rs.88,00,786/- being sale consideration by them, is also brought on record. Copy is at Sr. No.3. Therefore, deduction u/s.54B is requested to be allowed at Rs.88,00,786/- for Block No. 687/101 at village Karjan, Dist. Surat. The assessee client has also incurred land development expenses, Dalali Expenses and other expenses for Rs.23,63,800/-. Details and evidences of such expenses are at Sr. No.4. The assessee has also made investment for purchase of residence at Village Karjan of Dist. Surat for an amount of Rs.1,32,85,000/-. Proportionate deduction claim u/s. 54F is at Rs.1,29,36,705/-. Copy of purchase deed is at Sr. No.5. In para 3 of your show cause notice, you have stated stamp duty valuation of the said land was Rs.6,31,87,500/-, however, sale deed was executed for Rs,4,41,00,000/-. Hence, there is a violation of Sec. 50C of the IT Act to the extent of Rs.1,90,87,500/-. You have also stated that the said amount is required to be added in our total income. In this connection, it is submitted that the share of Mrs. Kankuben Patel in the captioned property is 50%. Therefore, addition even if proposed must be restricted to Rs.95,43,750/-. In this connection, it is further to state that in state of Gujarat, Agricultural land can only be purchased by agriculturist. In the case before your good self, your assessee is a seller and also an agriculturist. However, buyer of the said land was not an agriculturist.” 5. Submissions of the assessee are verified. In view of the above, addition of Rs.95,43,750/- is made to the total income of the assessee u/s.50C of the Act. Penalty proceedings are initiated for furnishing inaccurate particulars of income.” 15. Therefore, we note that late Shri Kankuben Dulahbhai Patel, is one of the co- owners of the said land (mother of assessee) wherein the Assessing Officer has allowed the deduction under section 54B of the Act treating the said land as an Page | 11 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel agricultural land. Therefore, the Department in the case of one of co-owners of the said land, who is having one half share of the total land, has treated the subject land as an agriculture land and allowed the deduction under section 54B of the Act. To maintain the consistency, the department should also treat the said land as an agricultural land in the hands of the assessee under consideration. However, we note that the Assessing Officer has treated the said land as an agricultural land but at the same time he made addition under section 50C of the Act in the case of Late Smt. Kankuben Dulahbhai Patel ( one of the co-owners, -assessee`s mother).
Now we shall address the main grievance of ld DR for the Revenue. The ld DR pointed out that when the provisions of section 2(14) clearly says that if any agricultural land is situated in any area within eight kilometers from the local limits of any municipality, and population of such area is more than 10,000, in that situation, the said agricultural land would be capital asset and therefore assessee has to pay capital gain tax.
We note that during the course of assessment proceedings, the Assessing Officer noted that the assessee has sold agricultural land bearing R. S. No. 12/1, B 17/1 located at village Nava Gam. Tal. Kamrej. Dist. Surat during the year under assessment, for sale consideration of Rs.4,41,00,000/-. The population of village Navagam is less than 10,000 therefore, one of the conditions of section 2(14) of the Act, has failed, and hence such land is not a Capital Asset, consequently capital gains provisions are not attracted.
Moreover, based on the other conditions, as mentioned by the ld Counsel in his arguments, the said land is an agricultural land. The assessee, right from the beginning, is an agriculturalist, his source of income is only agriculture. He is residing at village Navagam of Dist. Surat. He has sold agricultural land located outside SMC limits, and he was cultivating the land up to the date of sale. He has not obtained any permission to make use of land for non-agriculture purpose. There is no any non-agriculture activities carried out upon the same land till the date of sale. The Assessing Officer has accepted the fact of selling of rural agricultural land by the assessee vide his order at Para no. 2. The CIT(A) has also accepted the Page | 12 ITA No.566 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel said fact. Relevant Para of appellate order is 9.3.6 on page no.
24. The Assessing Officer has also accepted agriculture income shown by the assessee. Further, Ld. CIT(A) as well as the Assessing Officer has allowed partial deduction u/s 54B of the Act, this proves beyond doubt that assessee has sold agricultural land. Thus, it is undisputed fact that assessee has sold agricultural land on which he was carrying out agricultural activities prior to its sales. On similar facts, the Coordinate Bench in the case of Shri Kesavlal Ratanji Patel (in for AY.2006-07) has dealt the said issue in detail. The finding of the Coordinate Bench is reproduced below: “6. We have heard the rival submissions and perused the material available on record. CIT(A) while deleting the addition has given a finding that the land situated in village Segvi is not within the jurisdiction of Municipality. The assessee’s submission is that he is deriving agricultural income from the said land, the status of the land is an agricultural land, the assessee had not applied for use of non-agricultural purposes of the land, the land was never used for non- agricultural purposes and the sale of land was fixed at lump sum price and not on the basis of per sq. yard/metre. The aforesaid facts could not be controverted by the Revenue by bringing any contrary material on record. 6.1. In the case of Madhabhai H.Patel vs. CIT (supra), the Hon’ble Gujarat High Court has held as under:- “What is required to be considered is: Was it agricultural land, when it was sold ? If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land had not taken any step, which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land will have to be regarded as agricultural even though it is included within the municipal limits or that it is sold on per square yard basis and not acreage basis. The purpose for which such a land is sold, though relevant, will not have that much importance and weight as it would have in a case where the land has remained Padatar or idle or is used for the agricultural purpose only by way of stop-gap arrangement. So far as the facts of this case are concerned, there is no dispute that the land, till it was sold, was classified as agricultural land in the revenue records. In the village Form No. VII and XII, popularly known as `record of rights' it is mentioned that the whole of the land was cultivated till the year 1967- 68. The land was cultivated personally by the assessee. The said land belonged to the family and he got it by way of inheritance and not by way of purchase from some other party. There is no material which discloses that any attempt was made by the assessee either to purchase or sell any other land in the past. He had not, at any point of time, applied for permission to use the land for non-agricultural purpose. All these factors have been taken into consideration along with the other relevant factors, viz., that the land was sold to a co-operative housing society; that it was sold at Rs. 20 per sq. yard, and that it was situated within the corporation limits of Ahmedabad city. It is, therefore, not possible to say that the view taken by the Tribunal is unreasonable or erroneous in law. Even if the intention of the assessee Page | 13 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel is considered, when he decided to sell the land, it becomes clear that he wanted to sell the land as agricultural land. In the agreement it is in terms stated that the assessee was selling the land as agricultural land only and, therefore, was not going to sign any application or plan for a non-agricultural use of the said land. There is no material to show that the assessee had taken any part either in getting the plots sub-divided into sub-plots, or in getting the plans prepared and passed for non-agricultural use. All those steps were taken by the purchaser of the land and not by the assessee. Thus, the Tribunal, after considering all the relevant factors and also the decision of the Supreme Court has held that the land in question is an agricultural land. It is, therefore, not possible to accept the contention raised on behalf of the Revenue that the Tribunal committed an error in holding that the land in question was agricultural land.”
In view of the aforesaid facts and respectfully following on the decision of Hon’ble Gujarat High Court, we find no reason to interfere with the order of CIT(A) which is upheld and thus the appeal of the Revenue is hereby dismissed.”
We note that on similar facts, the Coordinate Bench of Amritsar, in the case of Pankaj Dutta (in for AY.2002-03, held as follows: “8. We have heard the rival contentions and perused the facts of the case. We are convinced with the arguments made by the learned counsel for the assessee, Mr. Joginder Singh, CA that at PB-2, a letter issued by Senior Town Planner, Jammu dt. 23rd Dec., 2008 is evident in itself that the land in question does not fall within the territorial jurisdiction of Municipal Corporation or Corporation area as at 15th Feb., 2002 which is the relevant date and point 'c' in the said letter, cannot be made applicable to the present facts and circumstances of the case and therefore, not applicable, as argued by the learned Departmental Representative. Accordingly, the land being outside the jurisdiction of Municipal Corporation, Jammu and therefore, cannot be treated as capital asset under s. 2(14)(iii)(a) or (iii)(b) of the Act. In the facts and circumstances, the order of the learned CIT(A), as reproduced hereinabove, is well reasoned one and we find no infirmity in his order, who has rightly deleted the addition so made by the AO. Thus, all the grounds of the Revenue are dismissed.”
From the above facts of the assessee under consideration, we note that assessee is an agriculturist and has been carrying out agricultural operation on the land for many years. In the Revenue records the said land is an agricultural land. The assessee pays land revenue every year to the Government for such agricultural land. The land sold was agricultural land in revenue record and actually being used for agricultural purposes only. We note that during the assessment proceedings, the assessee has filed written submissions before the assessing officer which is reproduced by us in para no.8 of this order, wherein it is mentioned as follows: “In the said order Hon’ble Dy. Collector, Kamrej Circle, Kamrej Dist., Surat specifically stated that there was a standing crop of sugarcane, bore well and Page | 14 & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel electric motor are there in the said land. On eastern side of the said land, coconut and mango trees are grown. Further it has also been stated that there is neither any construction for residential or industrial purpose are found on the said land.”
The above certificate of Hon’ble Dy. Collector, Kamrej Circle, Kamrej Dist., Surat clearly explains that till the date of sale the assessee`s land was an agricultural land and said land was being used for agricultural purposes. Thus, it is abundantly clear that till the date of sale, the land was an agricultural land. Besides, the population of village Navagam is less than 10,000, at that point of time, therefore, one of the conditions of section 2(14) has failed and hence such land is not a Capital Asset, consequently capital gains provisions are not attracted. Therefore, based on the above factual position, we are of the view that assessee has sold an agricultural land which is not a capital asset hence we direct the assessing officer to treat the said land as an agricultural land.
Now, we shall take ground no.2 raised by the assessee which relates to disallowance of deduction under section 54B of the Act to the tune of Rs.1,73,48,462/-.
We have already held in para 19 of this order that assessee`s land under consideration should be treated as an agricultural land, therefore, deduction under section 54B should be allowed to the assessee. We note that assessing officer has allowed the deduction under section 54B partly. On appeal, Ld. CIT(A) has partly allowed the appeal of the assessee for deduction under section 54B of the Act, observing as follows: “9.4 Ground No. 2 in case of Suresh D Patel Pertains to disallowance of deduction u/s 54B Rs.1,73,48,462. It can be seen that Ld AO has made disallowance of deduction claimed u/s.54B for only one reason being the new agricultural land purchases are not registered. The assessee claims to have paid Rs.1,82,01,572/- for purchase of agricultural lands on the basis two agreements to sale (satakhat). However, the Ld. AO found that only Rs.8 lacs have been paid by way of cheque. The assessee claimed to have paid the balance in cash, he filed confirmation of payee in form of affidavits in support of his claim. The Ld. AO has allowed deduction u/s.54B to extent of payment made by way of cheque and disallowed the rest. On examination of details on record, I do not find merit in claim of assessee as the payments in cash are not verifiable. Hence the action of Ld. AO is sustained. This ground of appeal
is hereby dismissed.” Page | 15 & 567/SRT/2019 Assessment Year.2012
13. Suresh D Patel & Kankuben D Patel
22. Therefore, we note that both the lower authorities did not deny the claim of the assessee under section 54B of the Act, they have allowed the deduction partly. The ld Counsel for the assessee submitted that Ld. CIT(A) erred in law and on facts to upheld AO's disallowance u/s 54B for Rs.1,73,48,462/- overlooking the fact that the assessee has made actual investment for purchase of another agricultural land which are supported by evidences. After selling of agricultural land at village Navagam, the assessee has made investment in another agricultural land. Ld. AO has allowed partial deduction u /s 54B of the Act. In respect of purchase of agriculture land bearing 331/paiki Kherda, Karjan, Dist. Baroda, it is submitted that a notary registered satakhat was submitted. Entire payment of Rs.94,00,786/- was confirmed by the sellers of the land. Sources of investment are also proved in assessment proceedings. A registered sale deed could not be executed due to the fact that sellers are disputing sale consideration they require further more payment for the said land. A sworn affidavit confirming these facts is filed. The assessee took the possession of the land. Thus, we note that assessee has fulfilled the conditions of section 54B of the Act.Therefore, assessee is entitled to claim the deduction under section 54B of the Act.
The Learned Counsel submits that assessee has offered Long Term Capital Gain (LTCG), wrongly by mistake, and he claimed deduction under section 54F of the Act by mistake. The ld Counsel submits that right income is to be assessed in the hands of the right person. If the assessee has wrongly claimed deduction under section 54F of the Act, that does not mean that agricultural land is becoming capital asset. For this, Learned Counsel relied on the judgment of the Supreme Court in the case of Jute Corporation of India Ltd., 187 ITR 688 (SC). The ld Counsel further contended that if the assessee has claimed right deduction in the computation of income and has shown the particulars of income wrongly in the income tax return that does not mean that the assessee’s income would be assessable under the wrong head. It is also duty of the Income Tax Officer (in short “the ITO”) to guide the assessee about the true nature of the income which he has failed to do so, in assessee`s case. On the other hand, Ld. DR for the Revenue, & 567/SRT/2019 Assessment Year.2012-13 Suresh D Patel & Kankuben D Patel opposed the plea taken by the assessee and reiterated the stand taken by the assessing officer.
We have heard both the parties on this particular issue relating to deduction under section 54B of the Act. Since the assessee has made payment for purchase of another agricultural land and took possession of land therefore he is entitled to take deduction under section 54B of the Act. Hence considering the facts narrated above, as the assessee has fulfilled the essential conditions of section 54B of the Act. Therefore, we direct the assessing officer to allow deduction under section 54B of the Act.
Since, we have adjudicated the issue by taking the lead case in AY.2012-13, the same shall be apply mutatis mutandis to the assessee’s appeal in for AY.2012-13.
In the result, both appeals filed by the assessees ( are allowed.
Order is pronounced on 30/04/2021 by placing result on Notice Board.