RAJENDRA BASTIMAL CHORDIYA,,NASHIK vs. INCOME TAX OFFICER,, NASHIK

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 1, Nashik dated 01.03.2017 for the assessment year 2013-14.

Assessee is an individual having income from business. Assessee electronically filed his return of income for A.Y. 2013-14 on 25.02.2014 declaring total income at Rs.2,76,967/-. The case was

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selected for scrutiny and thereafter, assessment was framed u/s 143(3)

of the Act vide order dt.08.12.2015 and the total income was

determined at Rs.13,01,560/-. Aggrieved by the order of AO, assessee

carried the matter before Ld.CIT(A) who vide order dated 01.03.2017

(in appeal No.Nsk/CIT(A)-1/588/2015-16) dismissed the appeal of the

assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal

before us and has raised the following grounds :

“1. On the basis of the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of proportionate exemption of Rs. 10,24,588/- claimed u/s 54B of the I.T.Act without appreciating the fact that agricultural land which was sold was used for agriculture purposes in two years immediately preceding the date of its transfer. The Appellant prays that disallowance made of Rs. 10,24,588/- may please be deleted.

assessee had sold agricultural land at Gut No.247 at Titoli for Rs.50

lakhs (assessee’s share being 1/3rd amounting to Rs.16,66,667/-).

Assessee had shown long term capital gains of Rs.12,64,923/- being his

share. It was stated that assessee had invested the capital gains for

purchase of another agricultural land and accordingly had claimed

exemption u/s 54B of the Act. The assessee was asked to produce

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7/12 extract of land for sale of land and justify the claim of exemption

u/s 54B of the Act. On perusing 7/12 extract and the confirmation of

Talathi of Titoli, AO noticed that out of the total area of 1 hectare 12 R,

rice was grown only on 0.20 R piece of land and the balance land of

0.81 R was non agricultural land. AO noted that no documentary

evidence for carrying out any agricultural activities on the aforesaid

land was brought on record. AO further noted that the Authorised

Representative of the assessee agreed for proportionate disallowance.

AO accordingly worked out the investments at Rs.10,24,588/- being not

allowable u/s 54B of the Act and disallowed the same. Aggrieved by the

order of AO, assessee carried the matter before Ld.CIT(A), who upheld

the order of AO by noting the fact that the Authorised Representative of

the assessee had agreed for proportionate disallowance at the time of

assessment proceedings and therefore he cannot revert back. She

thus upheld the order of AO. Aggrieved by the order of Ld.CIT(A),

assessee is now before us.

Ld.CIT(A) and submitted that neither the A.R. of the assessee was

confronted nor his A.R. agreed for proportionate disallowance. He

further submitted that AO did not grant opportunity of being heard

before making disallowance of proportionate exemption u/s 54B of the

Act and thereby violated the principles of natural justice. In support of

his aforesaid contentions, he pointed to copy of submissions made

before Ld.CIT(A) and which are placed at Page 3 of the Paper Book. On

the merits, he pointed to the map of the land which is placed at Page

No.39 of the Paper Book. From the aforesaid map, he pointed that the

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land is one but having different survey numbers. He thereafter pointed

to the copy of 7/12 extracts which are placed at Page Nos. 37 and 39 of

the Paper Book and pointed to the crop which are grown in the

aforesaid land. He thereafter submitted that the provisions of Sec.54B

of the Act mandates that the land should be used for agricultural

purpose in the immediately two preceding years prior to the date of

transfer. The law does not require that entire land should be used for

cultivation purpose or the land should be used for agriculture purpose

throughout the years. He submitted that even if a part of the land is

used for agricultural purpose by the assessee then assessee is eligible

for claim of deduction u/s 54B of the Act and in support of his

aforesaid contention, he placed reliance on the decision of Pune

Tribunal in the case of DCIT Vs. Shri Mahesh Danabhai Patel (ITA

No.1534/PUN/2015 order dated 31.01.2018). He therefore submitted

that the AO was not justified in denying the claim of deduction. Ld.

D.R. on the other hand, supported the order of AO and Ld.CIT(A). He

further submitted that as the authorized representative of the assessee

admitted before AO for the proportionate disallowance, the assessee

now cannot take a different stand. He thus supported the order of

lower authorities.

record. The issue in the present ground is with respect to the denial of

claim of deduction u/s 54B of the Act for the reason that the land was

not cultivable. We find that the reason for denying the claim of

deduction u/s 54B of the Act was for the reason that out of the total

area of 1 hectare 12R, agricultural activities were carried out on a

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portion of the land and there was no evidence of crop grown on the

balance portion of the land. Before us, it is assessee’s submission that

the entire land is one land and the fact that crop was grown in portion

of land is not disputed. We find that the Co-ordinate Bench of the

Tribunal in the case of Shri Mahesh Danabhai Patel (supra) has held

that provisions of Sec.54B of the Act does not specify that the entire

land should be used for cultivation for claiming benefit u/s 54B of the

Act. It held that if any part of the land is under cultivation for two

years immediately two preceding years prior to the date of transfer, it

would be sufficient to claim benefit u/s 54B of the Act. Before us,

Revenue has not placed any contrary binding decision in its support

nor has placed any material on record to demonstrate that the aforesaid

decision in the case of DCIT Vs. Shri Mahesh Danabhai Patel (supra)

has been set aside or stayed by the higher Judicial Authorities. We find

that AO has noted that A.R of the assessee agreed for disallowance and

therefore the AO proceeded with proportionate disallowance. On the

other hand, it is assessee’s contention that the statement of AO of the

A.R having agreed for disallowance is factually incorrect. In the present

case, we are of the view that since the issue on merits is covered in

assessee’s favour by the decision of Pune ITAT, cited hereinabove, then

merely because of admission of disallowance, the assessee cannot be

denied the benefit to which he is eligible. We therefore following the

decision of Co-ordinate Bench of the Tribunal in the case of Shri

Mahesh Danabhai Patel (supra) are of the view that the AO was not

justified in denying the claim of deduction u/s 54B of the Act and we

therefore direct the AO to deduct the claim. Thus, the grounds of

assessee are allowed.

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Order pronounced on 7th day of June, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 7th June, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-1, Nashik. 4. Pr. CIT-1, Nashik. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक सद�य” / DR, ITAT, “SMC” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER // True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.