BALU VITTHAL KHARATE,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 1, NASHIK

आदेश / ORDER

PER PARTHA SARATHI CHAUDHURY, JM :

These two appeals preferred by the different assesses emanates from

the separate orders of the Ld. CIT(Appeal)-1, Nashik for assessment year

2011-12 as per grounds of appeal on record.

appraised the Bench that facts and circumstances and issues are common in

both the cases. Therefore, ITA No.1596/PUN/2017 may be taken as lead

case. Hence, these cases were heard together and since facts common, issues

similar, these cases are being disposed of in this consolidated order. We shall

take up the lead case in ITA No.1596/PUN/2017 for both the assessees cases

as per following grounds of appeal on record:

“1.On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax (Appeal)-1, Nashik is not justified in confirming the action of the AO of making reference for valuation of property to the DVO u/s.55A of the Act. 2. On the basis of facts and in the circumstances of the case and as per law, the addition of Rs.5,02,459/- made by the AO on account of Long Term capital Gain by confirming the substitution of the Valuation of DVO as on 01.04.1981 against the valuation adopted by the appellant of agriculture land situated at Gat No.151 Makhmalbad, Nashik. 3. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax (Appeal)-1, Nashik is not justified in confirming the disallowance made by the AO on account of exemption claimed by the appellant u/s.54B of the Act. 4. The appellant craves for addition to deletion, alteration, modification, change any of the grounds.”

derives income from capital gain, interest, etc. It is observed by the Assessing

Officer that the assessee had filed his return of income manually in paper for

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the A.Y. 2011-12 on 19/12/2013 which is beyond due date for filing return of

income for A.Y. 2011-12. Thereafter, the Assessing Officer issued notice u/s.

148 of the Act on the assessee on 02/03/2015. Accordingly, the assessee filed

his return of income on 23/03/2015 in response to notice issued u/s 148 of

the Act declaring total income at Rs.2,66,030/ - and offered Long Term Capital

Gain at Rs.8,22,717/ -. During the year under consideration, the assessee

along with other 5 members sold agricultural land situated in Gat No. 150 &

151 (i.e. S. No. 150 of 39800 sq. m. and S. No. 151 of 59300 sq. m.),

Makhmalabad, Nashik to Suyojit Group for total consideration of

Rs.48,33,334/ - wherein the share of the assessee was 13.72%. The said land

is situated within 8 kilometers of the municipal limits of Nashik Municipal

Corporation, the same is a capital asset within the meaning of section 2(14) of

the Act as such the gain out of sale of agriculture land is chargeable to

Income-tax. The said land was ancestral land, the deemed cost of acquisition

was to be taken the fair market value of the said land as on 01/04/1981. The

assessee took the cost of acquisition at Rs.40,10,616/- as per the report of

approved valuer. The Assessing Officer did not accept the valuation of the

approved valuer. Further, the Assessing Officer made reference to

Departmental Valuation Officer to determine the fair market value of the said

land as on 01/04/1981. The DVO has determined the valuation is Rs.48 per

square metre. The Assessing Officer completed assessment u/s.143(3)

r.w.s147 of the Act determining total income of the assessee at Rs.7,50,080/-

by making addition on account of Long Term Capital Gain as per

additions/disallowance appearing in the Assessing Officer’s order.

the assessee had filed detailed submissions before the Ld. CIT(Appeal). The

Ld. CIT(Appeal) after considering the assessment order, submissions of the

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assessee, upheld the order of Assessing Officer and dismissed the appeal of

the assessee.

as extracted in the preceding paragraph.

are three grounds of appeal. Ground No.1 and 2 refers to the scope of Section

55A of the Act regarding reference to DVO in case of cost of acquisition as on

01.04.1981. The Ld. AR submitted that the Hon'ble Jurisdictional High Court

in the case of CIT Vs. Pooja Prints, reported as 360 ITR 697 (Bom.) has held

that such reference cannot be made prior to the amendment to Section 55A of

the Act. In para 8 of the said order Hon'ble Court specified that law to be

applied for Section 55A shall be as existing during the relevant assessment

year. The copy of the said judgment is enclosed at page 1 to 3 of the legal

compilation submitted before us. The Ld. AR further submitted that following

this judgment in assessee’s group concern, the Hon'ble Pune ITAT has also

considered this reference as beyond the power of the Assessing Officer,

respective orders are attached at page 4 to 6, in case of Bhima Dada Kharate

for assessment year 2009-10 and page 7 to 19 in the case of Arjun Dada

Kharate and Parvatibai Kharate for assessment year 2009-10.

6.1 That with regard to the ground No.3, we had asked the Ld. AR of the

assessee to furnish compilation of dates in case of the assessee as well as in

case of other cases on the assessee relies. The said compilation of dates is as

under:

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Sr. Particulars Appellant Humayun R D Pimple No. Merchant 1 Assessment year 2011-2012 1996-97 2011-1012

2 Due date u/s.139(1) 31/07/2011 31/10/1996 30/09/2011

3 Due date u/s.139(4) 31/03/2013 31/03/1998 30/03/2013

4 Investment made 24/03/2012 01/11/1996 22/08/2012 u/s.54B & 07/08/2012 5 Return of income filed 19/12/2013 04/11/1996 30/03/2013 (original) 6 Return of Income filed 25/03/2015 - - u/s.148

6.2 Thereafter, the Ld. AR of the assessee submitted that the sub-ordinate

Authorities have further denied the exemption u/s. 54B in case of assessee

for reason that the eligible agriculture land has been purchased in the name

of assessee's Sons. In this regard learned Assessing Officer has relied upon

judgment of Hon'ble Bombay High Court in the case of Prakash Vs ITA (2008)

173 Taxman 311 (BOM). The distinguishing factor in this case with that

judgment is that the said judgment is in the context of Section 54F which

applies to purchase of New House Property, whereas the assessee has relied

on the following judgments:

i) Laxmi Narayan Vs. Commissioner of Income Tax, (2018) 89 taxmann.com 334 ( Rajasthan)

ii) Commissioner of Income Tax Vs. Gurnam Singh (2008) 170 taxman 160 ( Punjab & Haryana)

iii) Jagpal Singh Vs. Income Tax Officer (2010) 186 Taxman 26 ( Delhi) (Mag.)

The aforesaid judgments exclusively deals with the exemption u/s.54B

of the Act and it has been held by these judicial pronouncements that such

deduction shall be allowed even if the new agriculture land is purchased in

the name of family members. The Ld. AR of the assessee further submitted

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that the basic purpose of Section 54B of the Act was to support the

agriculturist families so to provide new boost in their livelihood.

6.3 The Ld. AR of the assessee further relied on the decision of the Hon'ble

Apex Court in the case of CIT Vs. Vegetable Products Ltd., reported as 88 ITR

192 where, the proposition that the view favourable to the assessee need to

be taken in the case of conflicting opinions.

Authorities.

pronouncements placed before us in the form of paper book filed. With regard

to ground No. 1 and 2 regarding scope of Section 55A, two propositions come

out from the judgments of the Hon'ble Courts:

(i) Reference to DVO u/s.55A is to be made only when value of property

disclosed by assessee is less than the fair market value. If the value

adopted by the assessee of the property is much more than the fair

market value, there is no question of reference to DVO.

(ii) That the amendment to Section 55A is effective only from 1st July,

2012 and this amendment was not retrospectively applicable.

The second proposition of the judicial pronouncement of the Hon'ble

Court is applicable in the instant case. The present case pertains to

assessment year 2011-12 i.e. F.Y. 2010-11 and the amendment to Section

55A is brought into effect from 1st July, 2012 i.e. effective from assessment

year 2012-13.

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8.1 We also find that in ITA No.1582/PUN/2015 for the assessment year

2009-10 in assessee’s group concern, in the case of Assistant Commissioner

of Income Tax, Circle-1, Nashik Vs. Shri Bhima Dada Kharate, this issue was

observed in detailed and it was held by the Co-ordinate Bench of the Tribunal

that the applicability of amendment so far as Section 55A is concerned, it

cannot be applicable retrospectively. The relevant part of the order is as

under:

“11. I have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before us. I find the assessee in the instant case has sold a piece of land and has adopted the fair market value of the land as on 01-04- 1981 on the basis of the report of the approved valuer which was Rs.2,80,705/- per acre. The AO made reference to the DVO who valued the fair market value as on 01-04-1981 at Rs.1,94,852/- per acre. Since the fair market value adopted by the assessee on 01-04-1981 was higher than the fair market value adopted by the DVO, the AO computed the long term capital gain at Rs.48,18,644/- as against Rs.4,86,023/- declared by the assessee as long term capital gain. I find the Ld.CIT(A) vide order dated 14-09-2015 following the decision of Hon’ble Bombay High Court in the case of Puja Prints (Supra) deleted the addition made by the AO on account of long term capital gain by holding that the AO should not have referred the matter to the DVO u/s.55A of the I.T. Act. I find subsequently the Ld.CIT(A), based on the request of the AO to rectify the order u/s.154, issued notice u/s.154 to the assessee. Since none appeared on behalf of the assessee and observing that the reference to the DVO in the instant case was made by the AO after 01-07-2012, i.e. the date from which the amendment in section 55A came into operation, upheld the action of the AO in making a reference to the DVO.

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Commissioner (Appeal) is not competent to review its own order on the basis of same facts in garb of powers vested u/s.154 of the I.T. Act. All issues which involve prolonged arguments and are debatable and where two views are possible fall outside the scope of the powers u/s.154 of the I.T. Act.

Respectfully, following the aforesaid judicial pronouncement, we set

aside the order of the Ld. CIT(Appeal) and allow the ground No. 1 and 2

raised in appeal by the assessee.

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Act in the case of assessee was not allowed by the Revenue Authorities. Since

the land was purchased in the name of the assessee’s son. Now it has to be

examined as per judicial pronouncements whether exemption/s.54B of the

Act can be allowed even if the new agricultural land is purchased in the name

of family members.

In the case of Laxmi Narayan Vs. Commissioner of Income Tax

(supra.), the Hon'ble Rajasthan High Court dealt with the same issue wherein

assessee sold an agricultural land and out of sale proceeds purchased

another agricultural land in the name of his wife. He claimed deduction

u/s.54B of the Act but same was disallowed as land was purchased by

assessee in the name of his wife. The question was whether the assessee had

invested sale proceeds of agricultural land in purchase of new land, the

assessee could not be denied deduction u/s.54B since the new property was

not in his name but in the name of his wife. The Hon'ble Rajasthan High

Court observed that the contentions which have been raised by the

department are that the investment has to be made by the assessee in his

own name but the Legislature has not used specific language with precision

and the Hon'ble Delhi High Court in CIT Vs. Kamal Wahal reported as 351

ITR 4 has also held that it can be in the name of wife. In that view of the

matter contention raised by the assessee is required to be accepted with

regard to section 54B regarding investment.

In the case of Commissioner of Income Tax Vs. Gurnam Singh (supra.),

the Hon'ble Punjab & Haryana High Court held wherein the assessee sold an

agricultural land and out of sale proceeds purchase another agricultural land

in his name and in name of his only son, he claimed deduction u/s.54B, but

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the same was disallowed by the Assessing Officer on ground that land was

purchased by assessee in the name of his son as co-owner. The Hon'ble

Punjab & Haryana High Court further observed that no substantial question

of law arises for consideration since the Tribunal has recorded findings and

dismissed the appeal of the Revenue. The Hon'ble High Court has held that

the assessee had sold agricultural land which was used by him for

agricultural purposes. Out of sale proceeds of the said sale, the assessee has

purchased other piece of land in his name and in the name of his only son

who was bachelor and was dependent upon him, for being used for

agricultural purposes within the stipulated time. Further it was not the case

of the Revenue that from the sale proceeds of the agricultural land earlier

owned by the assessee, the land in question was purchased for any other

purpose than the agricultural purpose. The purchased land was being used

by the assessee for agricultural purpose and merely because in the sale deed

his only son was also shown as co-owner, the Hon'ble ITAT has rightly come

to the conclusion that it does not make any difference because the purchased

land is being used by the assessee for agricultural purposes.

demonstrate that the said land of the assessee was used for any other

purpose other than agricultural purpose. The Assessing Officer referred to the

judgment of Hon'ble Bombay High Court in the case of Prakash Vs. ITO

(supra.) but the facts are substantially different from the case of the assessee

in hand. Further, we have also considered the decision in the case of CIT Vs.

Vegetables Products Ltd. (supra.), therein the view also favorable to the

assessee that has to be taken, in case of conflicting opinions.

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Order pronounced on 21st day of January, 2019.

Sd/- Sd/- D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 21st January, 2019. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeal)-1, Nashik. 4. The Pr. CIT-1, Nashik. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

12 ITA No. 1596 & 1598/PUN/2017 A.Y.2011-12

Date 1 Draft dictated on 11.01.2019 Sr.PS/PS 2 Draft placed before author 11.01.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order