SH. DHAN SINGH,KARNAL vs. DCIT, PANIPAT

The facts of the case shows that assessee is stated to be an agriculturist who has sold land on 03.02.2006 for Rs.4,59,20,000/- to M/s. Amazon Infracon Pvt. Ltd. Assessee has not filed any return of income and has also not paid any capital gain on sale of the above land. Assessing Officer obtained the information that the above land is situated within 8 Kms. of municipal limit of Panipat city. Therefore, notice under Section 148 of the Income Tax Act, 1961 (the Act) was issued on 21.03.2013. Assessee filed return on 19.03.2014 declaring taxable income of Rs.6,24,000/- and agricultural income of Rs.2,75,000/-. On perusal of the computation of income filed during the course of assessment proceedings about the capital gain on the above properties assessee submitted that it has incurred certain cost of improvement. However, no documentary evidence were submitted. Therefore, Assessing Officer considered only 50% of such deduction. Assessee has also claimed exemption u/s 54B of the Act of Rs.2,12,29,330/-for purchase of agricultural land. The assessee further stated that he has also incurred expenditure for improvement of the land and tube-well etc. amounting to Rs.84,50,000/-. However, no documentary evidences were filed. Therefore, Assessing Officer considered only 50% of such expenditure for allowing exemption u/s 54B of the Act. Thus he allowed deduction u/s 54B of the Act of Rs.2,12,29,330/- being the purchase price of land and Rs.42,25,000/- as cost of improvement thereon. Over and above assessee also claimed deduction u/s 54F of the Act of Rs.92,50,000/- in the construction of residential house. Assessee merely filed the valuation report but did not file any documentary evidence with respect to the cost of construction and, therefore, Assessing Officer allowed the deduction u/s 54F of the Act of only Rs.72,99,500/- comprising of cost of land and cost of construction. Based on this the total income of the assessee was assessed at Rs.1,11,67,180/-. The assessment order under Section 143(3) r.w.s. 147 of the Act was passed on 26.03.2014.

The assessee preferred an appeal before the learned CIT (Appeals). He gave part relief to the assessee and, therefore, assessee is in appeal before us. Indisputable fact coming out from the order is that the assessee filed additional evidences under Rule 46A were held to be not admitted for the reason that no such claim was made earlier. However, the learned CIT (Appeals) considered the Page | 2 additional evidences furnished. Thus, the assessee is in appeal against this order.

The appeal of the assessee was earlier fixed on 21.05.2019, 15.07.2019, 05.09.2019, 07.11.2019. On all these occasions the counsel of the assessee sought adjournment. On 05.09.2019 the appeal were adjourned on 07.11.2019 holding that it was last opportunity to the counsel of the assessee. Despite this fact on 07.11.2019 the learned Authorized Representative requested for adjournment stating that since more material documents and particulars are required from the client and, therefore, the Advocate appearing is unable to contest and hence adjournment was sought. The adjournment letter dated 05.09.2019 was identically worded. Adjournment granted on 15.07.2019 is also identically worded. Therefore, a question was specifically asked that what are those documents that assessee is seeking for. The learned Advocate did not submit any reference to any of the documents which are further required and not considered by the lower authorities. Therefore, adjournment application was rejected. On rejection of the same the learned Authorized Representative submitted that the learned Assessing Officer has without any reason not accepted the cost of acquisition as well as the cost of improvement of the immovable properties. He further submitted that assessee has submitted the Bayana Khatauni towards full proof of the case of the land. However, same was not proved. He further submitted that there were certain formalities which required to be completed. Therefore, the land was not registered at that time in the name of the assessee. He submitted that subsequently the registry has been made and land was purchased. If the same is considered the capital gains chargeable in the hands of the assessee would be „NIL‟. The learned A/R, therefore, submitted that the lower authorities have not considered the documents in the right perspective.

The learned Departmental Representative vehemently supported the orders of the lower authorities.

The ground No. 1 is general in nature and, therefore, same is dismissed.

The ground No. 2 is with respect to disallowing 50% of expenditure is in improvement of land to the tune of Rs.42,50,000/-. The assessee has claimed the deduction of Rs.84,50,000/- for leveling and filling of land, installation of tube- wells and laying down of pipe line for irrigation purposes. The Assessing Officer disallowed 50% of such expenditure. The ld. CIT (Appeals) upheld the order of the Assessing Officer. The assessee has categorically stated that the disallowance made by the ld. Assessing Officer is on very high side. Even otherwise each and every expenditure could not be supported by the detailed vouchers. It was even the 50% of expenditure on boundary wall and gate were disallowed. The assessee has submitted photograph, plan and valuation report of the approved valuer in construction of house property. The comments of the Assessing Officer is that assessee has not proved the incurring of the expenditure of Rs.84,50,000/- by clinching documentary evidence. It may be possible that assessee does not have the expenditure of evidence of incurring each and every rupee of the expenditure. However, ad-hoc disallowance made by the learned Assessing Officer is also not correct. The Assessing Officer must verify the details of the expenditure incurred by the assessee and granting the actual amount of expenditure incurred as the cost of improvement. In view of this we set aside ground No. 2 of the appeal to the file of the Assessing Officer with a direction to the assessee to substantiate its claim of deduction of Rs.84,50,000/- towards the expenditure incurred by improvement of land. The Assessing Officer may examine the same and grant the correct deduction. Thus, ground No. 2 of the appeal is allowed with above direction.

The Ground No. 3 is with respect to not allowing the deduction of Rs.95,00,000/- paid as “Bayana” under Section 54B of the Act. The appellant has submitted that assessee had paid Rs.95,00,000/- on 18.01.2008 and requested for deduction under Section 54B of the Act. The learned CIT (Appeals) did not admit the additional evidences filed on 28.12.2015. However, he considered the “Bayana” which is not registered, but only notarized on 18.01.2008. He also noted that the subsequent sale deed is also not in the name of the assessee. The assessee submitted that there was an HUF which sold the original land, assessee Page | 4 is Karta. Therefore, land purchased in the name of family member is also eligible for deduction. The learned CIT (Appeals) has merely confirmed the order of the Assessing Officer on the basis of notarized “Bayana”. As there was no evidence available of purchase of land as well as such “Bayana” before us, we set aside the whole issue back to the file of the Assessing Officer with direction to the assessee to prove its claim under Section 54B of the Act before the Assessing Officer. The Assessing Officer may examine and decide the issue. This ground No. 3 of the appeal is allowed with above direction.

The appeal of the assessee is allowed, for statistical purposes.