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आदेश/Order
PER BENCH:
These appeals by the assessee are directed against the separate orders each dt. 26/04/2019 of Ld. CIT(A)-2, Chandigarh. Since the issues involved are common and the appeals were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity.
Firstly we will deal with the appeal in ITA No. 967/Chd/2019 for the A.Y. 2013-14 in the case of Shri Darshan Singh, Mohali Vs. ITO, Mohali wherein following grounds have been raised:
The Ld. Commissioner of Income Tax (Appeals)-2, Chandigarh has wrongly confirmed the imposition of capital gain tax on Agricultural land which is outside the Municipal limits and used for agricultural purposes. 2. The Ld. Commissioner of Income Tax (Appeals)-2, Chandigarh has wrongly applied the rate of agriculture land as on 01.04.1981 when the Appellant has not owned land. The land was transferred to the Appellant in the financial year 1996-97 by the order of the court and the rate for acquisition of land may be applied when the land was acquired by the Appellant. 3. The Ld. Commissioner of Income Tax (Appeals) has wrongly not allowed the deduction of Rs 1,01,169/- taken by the Appellant from the bank as loan of land against pledging agriculture land before sale. 4. Any other ground of Appeal which may be taken before the hearing of Appeal with the permission of the Honble ITAT Chandigarh.
Facts of the case in brief are that the A.O. on the basis of information that the assessee alongwith co-owner jointly sold land measuring 15 Bigha 16 Biswa in Village Lakhnaur, Tehsil Kharar, Distt. Mohali on 20/07/2012 for a total consideration of Rs. 6,00,00,000/- to S/Shri Mohan Singh, Mann Singh, Narinder Singh and Darshan Singh. Share of the assessee out of the total sale consideration received came to Rs. 76,07,709/- as confirmed by Tehsildar, Kharar vide his report dt. 01/03/2016. The A.O. observed that the assessee had not furnished any return of income for the assessment year under consideration, therefore the capital gain earned on sale of land remained unverifiable and undisclosed. The A.O. initiated the proceedings by issuing the notice under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) but no compliance was made by the assessee to the said notice, thereafter the A.O. issued notice under section 142(1) of the Act alongwith questionnaire. In response to the said notice, the Ld. Counsel for the Assessee submitted vide his reply dt. 01/09/2017 that the land in question was acquired by the assessee alongwith co-owner by way of inheritance, the land belonged to the period prior to 1947 and for the purposes of calculating capital gain, cost of land was to be taken as on 01/04/1981 as Fair Market Value(FMV) but no collectorate rate was available as on 01/04/1981 in the office of the Tehsildar from whom information was sought by the assessee. It was submitted that by adopting backward indexation method the FMV of the land as on 01/04/1981 for the purpose of calculating capital gain was worked out at Rs. 66,02,113/-. It was also stated that all the eight persons i.e; co-owner should have been assessed simultaneously as it was one transaction of sale of agriculture land in which all the eight persons were co-parceners by inheritance and the same assessment order may be applicable to all. However, the A.O. did not accept the said contention of the assessee by observing that in the sale deed share of each co- owner had been defined.
3.1 The assessee calculated the taxable capital gain as NIL by giving the computation as under:
Saies consideration as on 20.07.2012 A 60,000,000.00 Less: 25% which is deducted while preparing notified cost inflation index 15,000,000.00 Amount Equivalent to cost inflation index 852 45,000,000.00 If 852 of C.I.I, is 45,000,000.00 Then for 100 it will be (45000000/852*100) 5,281,690.14 Add: to be increased by 25% (which was deducted earlier) 1,320,422.54 Cost as on 01.04.1981 which is equal to cost index=100 6,602,112.68 Indexed Cost for A.Y.2013-14 (6602112.68/100*852) B 56,250,000.00 Long Term Capital Gain C (A-B) 3,750,000.00 Less: Investment in Agriculture Land as per Section 54B 14,787,100.00 (Registry Value)
Details of Investment in Agriculture Land Dated ____ Registry Value _____________________ Stamp Papers ____________ Total 30.07.12 10,792,000.00 539,600.00 11,331,600.00 30.07.12 3,070,000.00 153,500.00 3,223,500.00 06.02.13 225.000.00 7.000.00 232.000.00 Total 14.087.000.00 700,100.00 14.787.100.00 Taxable Capital Gain Nil Share of Taxable Capital Gain of the 'A' Nil The assessees have also invested some of the amount on the construction of the houses (& houses) The details have already been submitted.
3.2 The A.O. however did not accept the aforesaid contention of the Assessee and worked out the capital gain at Rs. 51,15,840/- by observing in para 4 of the assessment order as under:
To determine the fair market value as on 01.04.1981 of the land sold by the assessee the method of backward indexation on the basis of inflation index adopted by the learned counsel of the assessee is not acceptable on the facts of the case of the assessee. As stated by the learned counsel of the assessee, admittedly there were no collectorates fixed by the competent authorities. To ascertain the fair market value as on 01.04.1981, another proper way and base is the prevalent rate at which other lands in surrounding area / vicinity of the land sold by the assessee have been sold and registered by the Registration Authority. Accordingly, registry of the lands sold near the surrounding area of lands sold by
the assessee was procured from the office of the Tehsildar, Kharar u/s 133(6) and it is noticed that the land measuring 6 bighas and 3 biswas was registered at Rs.20,000/- on 29.05.1981 which gives rate per bigha at Rs.3125/-. At this rate, value of the lands measuring 15 bighas 16 biswas sold by the assessee jointly comes to Rs.49,375/- as on 01.04.1981 which is taken into consideration to determine the Long term capital gains in the hands of the assessee. Accordingly, the share of capita! gain on the land sold by the assessee jointly with other co- owners is calculated as under:-
Total sale consideration received Rs. 6,00,00,000/-
Less: Cost of Acquisition as on 01/04/1981 @ Rs. 3,125/- Rs. 49,375/- as calculated above
Indexed cost of the land 49375/100 x 852 Rs. 5,20,675/-
Long term capital gain Rs. 5,94,79,325/-
Share of the assessee (being 23485 share ) Rs. 75,41,690/- 37044 x 5
Investment u/s 54B 5,37,250/- 18,88,600/- Rs. 24,25,850/- Rs. 51,15,840/-
Being aggrieved the assessee carried the matter to the Ld. CIT(A)and submitted as under:
"It is respectfully submitted that the Ld. Income Tax Officer has mentioned wrong facts in the case mentioned above to assess as a capital assets of the Land sold by the Appellant U/s 2 (14) of Income Tax Act 1961. The detail of seller of land has wrongly been given in the first Para of the Assessment order. The correct position of the Land sold is given as under :-
Source o f Acquisitions o f the Land :
The name of sellers of the land are mentioned as below: 1. Didar Singh S/o Rachan Singh 2. Darshan Singh S/o Haqikat Singh 3. Kesar Singh S/o Haqikat Singh 4. Baljinder Sing S/o Haqikat Singh 5. Bharbhur Singh S/o Bhupinder Singh 6. Nirbhi Singh S/o Bhupinder Singh 7. Surjeet Kaur Wd/o Haqikat Singh 8. Gurdeep Singh S/o Haqikat Singh 9. Dalbir Singh S/ o Haqikat Singh
The Appellant filed a case against the following persons in the court :-
Rulda Singh S/o Sucha Singh, 2. Surjeet Kaur w/o Gurbax Singh, 3. Mohinder Kaur w/o Tara Singh, 4. Palo w/o Kamail Singh, 5. Chhatro w/o Charan Singh.
Assessee along with the other stake holders, filed case in the Court of Honourable Judge Harminder Singh Madaan , Civil Judge , Jr. Division , Kharar on 05.06.1995 for the land which was not given to them by the second party . The Case was decided on 10-02-1996 by the court and a decree was announced by the Honourable Court in the name o f Appellants, in suit No-274/5.06.95. The effect of this order in the Revenue Record was made through Intkal No-1684 dated on 19- 11-1996. This way the impugned land came to the possession of the person on 19- 11-1996 and not by inheritance before 1947. The basis for taking value as on 01.04.1981 by the AO is completely incorrect. The seller had not possessed the land before date o f the Mutation No:-1684 date 19-11-1996. The valuation of calculating of gain has wrongly been adopted by the Ld. Income Tax Officer which may likely be deleted. The correct working of capital gain is mentioned as below :-
Share of land sold as taken Rs. 76, 07,709 /- by the I.T.O
Less Cost of land as per order of decree vide deed entered in village Laknaur as per Tehsil record of 1996-97 in deedNo-2012 dated 11-12-1996for Cost indexing in F.Y-1996-97 at the sale rate of Rs -2, 75,000 / 305*852 = 7, 68,197/-for share Of land of the Appellant Rs. 7,68,197/- Balance Gain Rs. 68,39,512/-
Less : 1. Loan returned to Punjab Gramin Bank Mohali taken for improvement of land 29-01-2013. Rs-1,01,169/- 2. Investment U/s 54 (Residential Property) Rs- 35,95,440/-
Share of Investment in Agricultural land purchased as per copy of purchased deed Enclosed Rs. 24,35,850/-
Balance Amount Rs. 7,07,053/-
AO placed reliance on the fact that the land of the Appellant is situated within 1 km from the NH-1-21 taking the land as capital assets in the provision of section 2(14) of Income Tax Act 1961. Section- 2 (14) (Hi) has specified the nature of
agricultural land mentioned from Para (a) to (b) which do not qualify as capital Assets from agricultural land mentioned in the Income Tax Act 1961. It is further submitted that the onus lies on the department to prove that the Land is non- agricultural or that it forms part of business assets in view oflTR 686 ( MAD) mentioned in Case - Gemini Pictures Circuit (P) Ltd vs. CIT . (1981) 130 ITR 686 ( MAD). There is no reference of NH 1-21 mentioned in the Income Tax Act on which the Ld. Income Tax Officer has relied upon to treat the Land sold by the Appellant as a capital asset mentioned in Income Tax Act 1961. The Sold Land was an agricultural land and is presently used as agricultural Land for growing of crops on it. Also, the land does not fall in Municipal Limit as mentioned in the Income Tax Act 1961 and the limit of Population in the village Lakhnaur does not fulfill the condition as prescribed in the Income Tax Act 1961."
4.1 The assessee also furnished additional evidence by stating as under:
"The appellant was not a regular Income tax Payer and no return of income tax is accepted by the Income Tax Department without PAN. The appellant had applied for the allotment of PAN with the department while the case was decided by the AO u/s 144 without affording a reasonable opportunity. The appellant was prevented by a reasonable cause for not producing the relevant records required for the completion of assessment. It is therefore requested that the appellant may kindly be allowed to file additional evidence in his case as mentioned below: 1) Photocopy of order of Civil Judge Kharar for possession of land 2) Photocopy of Mutation in Revenue record on dated 19/11/1996 3) Photocopy of Rate of land prevailing in village Lakhnaur 4) Photocopy of loan on land returned 5) Photocopy of construction of house and amount spent as per valuation of approved valuer 6) Photocopy of land purchased 7) Photocopy o f Girdwari o f crops grown on the land sold." Additional evidences as stated above, which goes to the root of the matter, are admissible u/s 46A of IT rules and may kindly be admitted."
4.2 The Ld. CIT(A) forwarded the additional evidence to the A.O. for his comments on the admissibility. The A.O. commented that the case of the assessee was not covered under any of the exceptions as prescribed under Rule 46A of the Income Tax Rules 1962 and requested not to admit the additional evidences however no comment was given on the merit of the papers sought to be adduced as evidence by the assessee.
4.3 The Ld. CIT(A) forwarded the letter of the A.O. to the assessee for his reply / explanation/justification. In response the assessee submitted as under:
"Appellant sold his share of agriculture land as mentioned by the Ld. Income Tax Officer from 1 km behind from NH1. The NH1 area is not mentioned as capital asset U/s 2(14) of the Income Tax Act, 1961. The land is presently used for agriculture purposes and crops are cultivated on the land.
It is further submitted that as per letter enclosed as per annexure page no. 1 to 3 on dated 13.12.2017 forwarded by the counsel of the Appellant to the Income Tax Officer that final opportunity was given on 6/07.12.2017. The notice was received after the date of hearing given by the Ld. Assessing Officer in which the date of hearing was fixed on 11.12.2017 but the notice received by the assessee on 12.12.2017 for the A.Y. 2010-11 and not for the A.Y.-2013-14.The explanation regarding the reasons for short time of hearing given by the Ld. Assessing Officer where no time to file the documents was given by the Ld. Assessing Officer and the assessment was completed on 24.12.2017 U/s 144 of the Income Tax Act 1961.
4.4 The Ld. CIT(A) thereafter admitted the additional evidences however he did not entertain the claim of the assessee by observing as under:
7.4 The submissions of the assessee alongwith documentary evidences furnished during the appellate proceedings apart from the assessment order have been carefully considered. The fact that needs reiteration and flagging right at the outset, lest the assessee rakes up the issue again, is the initial claim made that the land that was sold was agricultural and therefore no capital gains arose on the sale. The subsequent claims made by the assessee that the gains were offset by the operatibility of sections 54B and 54F (credit for 54B was given by the AO) clearly is taken as a concession on its part that the land transaction was one of a capital asset. The claims of the assessee by themselves corroborate the AO's findings that the land in contention was a capital asset (put to agriculture use). This issue thereafter need not be adjudicated any further.
4.5 Ld. CIT(A) did not accept the claim of the assessee for deduction under section 54B of the Act to the extent of Rs. 24,25,850/- by observing that the assessee had not requested for any additional ground, however, he allowed the deduction under section 54F. He also did not accept the claim of the assessee for repayment towards loan taken from the Bank for improvement of land.
Now the assessee is in appeal.
Ld. Counsel for the assessee submitted that the A.O. passed the assessment under section 144 of the Act and that the additional evidences which go to the root of the matter were not considered by the Ld. CIT(A) in right perspective and even a claim under section 54B of the Act was not accepted.
It was also submitted that the A.O. did not comment on merit of the case on the additional evidence which were admitted by the Ld. CIT(A). He requested to remand this matter back to the file of the A.O. for a fresh adjudication after considering the additional evidences admitted by the Ld. CIT(A).
In his rival submissions the Ld. Sr. DR supported the order of the Ld. CIT(A) and submitted that ample opportunities of being heard were provided by the A.O. as well as the Ld. CIT(A) therefore the matter may not be restored back to the A.O.
We have considered the submissions of both the parties and perused the material available on the record. In the present case it is an admitted fact that certain additional evidences which were not available at the time of assessment proceedings were furnished by the assesse to the Ld. CIT(A) under Rule 46A of the Income Tax Rules. Those evidences were forwarded to the A.O. by the Ld. CIT(A) for his comments. However, the A.O. requested not to admit those additional evidences but had not given the reasons for the same and even he had not commented on the merits of the evidences which were admitted by the Ld. CIT(A). In our opinion this matter requires fresh adjudication at the level of the A.O. after considering the additional evidence furnished by the assessee before the Ld. CIT(A), which were in the form of order of Civil Judge, Kharar for possession of land and photo copy of rate of land prevailing in the village where the land was situated and the evidence of construction of house alongwith amount spent on the valuation of approved valuer. Those evidences go to the root of the matter. Accordingly the issue is restored to the file of the A.O. to be adjudicated in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
The facts in all other cases are identical to the facts involved in the case of Shri Darshan Singh in ITA No. 967/Chd/2019 which we have already discussed
in the former part of this order, therefore our observations shall apply mutatis mutandis for all the cases of the other assessees.
In the result, appeals of the assessees are allowed for statistical purposes.
(Order pronounced in the open Court on 16/01/2020 )
Sd/- Sd/- संजय गग� एन.के.सैनी, (SANJAY GARG ) ( N.K. SAINI) �या�यक सद�य/ Judicial Member उपा�य� / VICE PRESIDENT AG Date: 16/01/2020
आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :
अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar