RATAN FATTUJI CHITADE,NAGPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3, NAGPUR

PER KHETTRA MOHAN ROY, AM:

This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Nagpur (for short, “CIT(A)”), dated 23/12/2019 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the assessment order dated 25.03.2015 passed u/s. 143(3) of the Act by the

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) ACIT, Circle-3, Nagpur, for the Assessment Year (AY) 2012-13. 2. The assessee has raised the following grounds of appeal:- 1) That, the Ld. A.O. has erred both in facts and in law. 2) That, the Ld. A.O. was not justified for not accepting the fact that the assessee had not received full sale consideration of Rs. 1,52,84,360/-, because there were 3 cheques returned amounting to Rs. 46,37,195/-, which were not recovered from the purchaser till date and therefore, it should not be a part of sale consideration u/s 45 of the Income Tax Act, 1961. The actual sale consideration received were only Rs. 1,06,47,165/- and LTCG shall be calculated accordingly u/s 50C of the Income Tax Act, 1961. In this regard, the appellant would like to rely on Assistant Commissioner of Income Tax vs Mk Ijyaraj Singhji Kota (ITAT Jaipur). 3) That, the Hon'ble CIT (A) had uploads the order passed by the Ld. A.O. without accepting the fact that the appellant had invested u/s 54B Rs. 63,76,440/- in three different agriculture lands. 4) That, assessee had invested u/s 54F Rs. 9,39,154/- in ancestral property by building a residential house, was available for deduction u/s 54F of the Income Tax Act, 1961. But, unfortunately the Hon'ble CIT (A) had uploads the order passed by the Ld. A.O. and not allowed the claimed. In this regard, the appellant would like rely on DCIT Vs Bagalur Krishnaiah Shetty Vijay Shanker (ITAT Bangalore). 5) That, the Appellant craves leave to add to, alter, amend, modify, substitute, delete or rescind or any of the grounds of appeal on or before Final Hearing, if necessary so arise. 6) Kindly, stay the demand.”

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) 3. Facts of the case in brief are that assessee, an individual, filed his return of income on 31.03.2013 declaring income of Rs. 27,14,250/-. Later on, case was selected for scrutiny through CASS. Notices u/s. 142(1) & 143(3) were issued and served upon the assessee. After considering the submissions of the assessee, Ld. AO has framed the assessment u/s. 143(3) dated 25.03.2015 making the following additions:- a) Rs. 1,04,93,061/- on account of Long Term Capital Gain (LTCG) b) Rs. 21,50,000/- on account of unexplained cash deposit u/s. 68 of the Act.; and c) Rs. 6,691/- on account of interest received cash deposits. 4. Aggrieved with the order of Ld. AO, assessee preferred appeal before the Ld. CIT(A), who after considering the submissions of the assessee and remand report of Ld. AO, deleted the addition of Rs. 21,50,000/- made u/s. 68 of the Act and sustained the additions of Rs. 1,04,93,061/- on account of LTCG and Rs. 6,691/- on account of interest received on deposits. 5. Further aggrieved by the order of Ld. CIT(A), assessee is in appeal before this Tribunal. Learned counsel for the assessee submitted that assessee sold the subject immovable property during the relevant previous year. 3

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) Though the sale deed mentioned a total consideration of Rs. 1,52,84,360/-, cheques aggregating to Rs. 46,37,195/- issued by the purchaser were dishonoured and the said amount has not been recovered till date. He further submitted that capital gain is chargeable on the real income that has accrued or been received by the assessee. Since the amount dishonoured, was never realized, the same cannot be treated as actual consideration received and the consideration whatever amount actually received by the assessee i.e. Rs. 1,06,47,165/- should be considered for the purpose of LTCG. Learned counsel for the assessee further submitted that the authorities below failed to appreciate that the assessee had made investments in agricultural lands amounting to Rs.63,76,440/- and was entitled to exemption under section 54B of the Act. The documentary evidence regarding purchase of agricultural lands was furnished and the conditions prescribed under section 54B stood duly satisfied by the Ld. AO. He further submitted that assessee had further invested Rs. 9,39,154/- towards construction of a residential house and accordingly claimed deduction under section 54F. The exemption was denied without appreciating the factual position and the supporting evidence on record. Ld.CIT(A) merely affirmed the findings of the Ld. AO without adequately dealing with the submissions and evidences furnished by the assessee. 4

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) The impugned order therefore deserves to be set aside and the claim of the assessee deserves to be allowed. In this regard, learned counsel placed reliance on the following case-laws: i) Rambhau Namdeo Gajre vs. Narayan Bapuji Dhotra (2004) (8) SCC 614 (SC) ii) ACIT vs. Sanjeeva Prasad Ponnapula in ITA No. 476/HYD/2020, dated 08.09.2021 (Hyd. Trib.) iii) Sidharth Chaudhary vs. ITO in ITA No. 890/DEL/2020, dated 19.01.2023 (Delhi – Trib.) iv) Sunil Kumar Jain vs. ITO in ITA No. 1005/JP/2024, dated 17.09.2024 (Jaipur – Trib.)

Accordingly, learned counsel prayed that the addition made in computing Long-Term Capital Gain and denial of exemptions under sections 54B and 54F deserve to be deleted. 6. Per contra, Ld. Departmental Representative (DR) submitted that the sale deed executed by the assessee records a total sale consideration of Rs. 1,52,84,360/-. Transfer of capital asset was completed during the relevant previous year and the consideration agreed between the parties stands evidenced by a registered document. Under the scheme of capital gains taxation, the full value of 5

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) consideration arising, as a result of, transfer is required to be considered. Subsequent disputes regarding recovery of sale consideration or dishonour of cheques do not alter the consideration specified in the registered sale deed. Ld.DR further submitted that assessee has failed to establish that the sale consideration stood legally reduced or that any part of the consideration was waived, cancelled/modified. As regards the claim under section 54B, the assessee has not satisfactorily demonstrated fulfilment of statutory conditions, including proof that the land transferred was used for agricultural purposes by the assessee or his parent for the prescribed period and that the new agricultural lands were purchased in accordance with law. Regarding the claim under section 54F, the assessee has not established compliance with all conditions prescribed under the section. The investment in ancestral property and construction thereon does not automatically entitle the assessee to deduction unless the statutory requirements are strictly fulfilled and supported by cogent evidence. Both the authorities below have examined the material available on record and rightly disallowed the claims. Accordingly, the order of the CIT(A) deserves to be upheld and the appeal of the assessee be dismissed. 7. We have heard rival contentions of both the parties and perused the material available on record. The 6

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) grievance of the assessee is that the authorities below erred in computing Long-Term Capital Gain by adopting the entire sale consideration of Rs. 1,52,84,360/- despite the fact that cheques aggregating to Rs. 46,37,195/- issued by the purchaser were dishonoured and the said amount has not been realized by the assessee till date. The assessee has also challenged the denial of deduction under sections 54B and 54F of the Act. A perusal of the sale deed dated 20.12.2011 shows that assessee executed sale deed in favour of the purchaser in the capacity of Power of Attorney (POA). In the registered sale deed, the status of assessee is clearly mentioned that he is acting as POA of Shri Fattesingh S/o Shri Sukhlal Chitale and the ultimate beneficiary is Shri Fattesingh. 7.1 On consideration of the facts of the case, we find merit in the contentions advanced on behalf of the assessee that the material placed on record demonstrates that cheques amounting to Rs.46,37,195/- issued towards sale consideration were dishonoured and the said amount remained unrealized and never travelled to the coffers of beneficiary. There is nothing on record to indicate that the assessee subsequently received the said amount. In such circumstances, taxing an amount which neither accrued to nor was received by the assessee would run contrary to the well-settled principle that only real income can be

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) subjected to tax and hypothetical income can never be taxed. 7.2 We further find that the assessee has placed evidence on record regarding investment of Rs. 63,76,440/- in agricultural lands and Rs.9,39,154/- towards construction of a residential house. The authorities below have not brought any material on record to demonstrate violation of the conditions prescribed under sections 54B and 54F respectively. The denial of the claimed deductions, therefore, is not sustainable on the facts available before us. The Coordinate Delhi Benches in the case of Sidharth Chaudhary (supra), in a similar set of facts considered the issues and decided in favour of the assessee. The operative part of the said order is reproduced as under:- “7. …….. As per section 45 of the Act, any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in section 54, be chargeable to income-tax under the head “capital gains”, and shall be deemed to be the income of the previous year in which the transfer took place. Section 48 of the Act speaks about computation of capital gain. Now the question arises whether capital gain can be charged from the person who sold property as attorney of the owner. In my considered view, there is no ambiguity under the law for chargeability of capital gain in respect of transfer of any capital asset. It is the owner of capital asset who would be liable for capital gain. In case the sale consideration is credited into the account of third party or the attorney of such owner, in that event also the money which has been credited in the account of the third party or the power of attorney cannot be subjected to tax under 8

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) the head ‘capital gains’. Therefore, the action of the authorities below is contrary to the statutory provisions. The money credited to the account of the assessee could not have been subjected to tax as a capital gain earned by the assessee. Under these facts, the addition made by the Assessing officer under the head of ‘capital gain’ is not justified. Hence, the Assessing Officer is directed to delete the addition. However, it is clarified that the Assessing Officer would be at liberty to tax the capital gains/business receipts in correct hands. Grounds of appeal raised in this appeal are allowed.”

7.3 Considering the totality of facts and circumstances of the case, we hold that the unrealized amount represented by the dishonoured cheques cannot be included in the taxable sale consideration for the purpose of computation of capital gains. Consequently, Ld.Jurisdictional Assessing Officer is directed to recompute the Long-Term Capital Gain by considering the actual sale consideration received by the assessee and to grant consequential relief. The Ld.Jurisdictional Assessing Officer is further directed to allow the deductions claimed under sections 54B and 54F in accordance with law after giving due credit to the investments made by the assessee. Thus, the grounds of appeal raised by the assessee are allowed to the extent as indicated above.

ITA No. 81/NAG/2025 (Ratan Fattuji Chitade) 8. In the result, appeal filed by the assessee stands allowed as indicated above.

Order pronounced in open Court on 15.06.2026

sd/- sd/- ANUBHAV SHARMA KHETTRA MOHAN ROY JUDICIAL MEMBER ACCOUNTANT MEMBER

Nagpur: Dated: 15/06/2026 vr/- Copy to: 1. The Assessee 2. The Revenue 3. The Pr.CIT concerned. 4. The DR, ITAT, Nagpur 5. Guard file. By order Vukkem Digitally signed by Vukkem Rambabu Rambabu Date: 2026.06.17 13:15:45 +05'30' Senior Private Secretary ITAT, Nagpur