KISHOR GANPAT KARANDE,,JALNA vs. INCOME-TAX OFFICER, WARD - 2,, JALNA

I find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set ex- parte. Therefore, I proceed to dispose of the appeal by hearing the ld. DR and perusing the material available on record.

The assessee raised six grounds of appeal challenging the action of CIT(A) in confirming the order of AO in denying exemption u/s. 54B of the Act and disallowance of improvement cost in the facts and circumstances of the case.

I note that according to the AO, the assessee is an individual and an agriculturist. The Government of Maharashtra acquired the land belonging to the assessee admeasuring 1H 21R and paid compensation to the assessee. The AO opined that as per 7/12 extract that the said land is barren land and situated within 8 K.M. from the Municipal area of Jalna. The AO treated the said land as non-agricultural land within the meaning of provisions of section 2(14)(iii)(b) of the Act. Further, he found that the assessee did not utilize the amount of capital gain in purchasing of new asset before filing of return of income u/s. 139(1) of the Act, even not deposited in any capital gains accounts scheme. The assessee contended that he is illiterate, no knowledge of Income Tax technicalities but taken FDR. Having not satisfied with the contention of the assessee, the AO proceeded to deny exemption u/s. 54B of the Act. Further, he disallowed improvement cost for non-filing of documentary evidence. Before the CIT(A), I find the same contention was reiterated by the assessee in support of claim u/s. 54B of the Act. The CIT(A), however, confirmed the view of AO in denying exemption u/s. 54B of the Act, upheld the disallowance made by the AO towards improvement cost for want of evidence.

Heard ld. DR and perused the material available on record. The AO opined that land belong to the assessee is barren land as per 7/12 extract and the finding of CIT(A) that the said land is within 8 K.M. from the Municipal area of Jalna falling u/s. 2(14)(iii)(b) of the Act. I find there is no evidence brought on record by the AO to show that the land belonging the

I find Shri S.N. Puranik, CA filed paper book containing 40 pages, on perusal of the same 7/12 extract of assessee’s agricultural land is provided at page 4. According to which it is noted that the said land was in cultivation from 2002-03 to 2007-08. The ld. DR did not dispute the same. Though it was alleged as barren land, was in cultivation during immediately two preceding years of the year under consideration. Further, at page 6, English translation of sowing sheet is provided issued from Talathi office stating that the assessee is owns agricultural land admeasuring 1 Hectare 21 R at G.N. 57 at Mouje Nagewadi and sown the produce Mung in 1 Hectare area of land in F.Y. 2006-07. Further states,

Further, at pages 27 to 31 of the paper book Shri S.N. Puranik, CA placed reliance on the decision of Hon’ble High Court of Bombay in the case of Balmukund Acharya reported in 310 ITR 310 (Bom). On careful reading of the said decision, I note that the Hon’ble High Court of Bombay was pleased to hold that the authorities under the Act are required to assist the assessee and ensure that only legitimate taxes due are collected, if any assessee, under a mistake, misconception or on not being properly instructed. I note that the assessee placed reliance on the said decision in favour of the fact that the assessee made wrong claim before the AO seeking deduction u/s. 54B of the Act. It is contended that the compensation given by the Government of Maharashtra for compulsory acquisition of assessee’s land is actually non-taxable u/s. 10(37) of the Act. It is noted that no claim or whatsoever claimed in this regard before the AO. As discussed above, the AO proceeded on the premise of claim made by the assessee u/s. 54B of the Act. I note that the fact of compulsory acquisition of assessee’s land by the Government of Maharashtra for the purpose of MIDC is not disputed and the compensation thereon is non-taxable u/s. 10(37) of the Act.

Section 10 of the Act describes income not included in total income. Sub-section (37) of section 10 of the Act was inserted by Finance Act 2 of 2004 and came into effect from 01-04-2005. Sub-section (37) of section 10 provides exemption on capital gain arising from compulsory acquisition of

Coming to the decision of Hon’ble High Court of Bombay in the case of Balmukund Acharya (supra), I note that the assessee therein filed return of income offering the capital gain to tax under mistaken belief. The Hon’ble High Court of Bombay was pleased to hold that the authorities under the Act are required to assist the assessee to ensure that only legitimate taxes due are collected. Further, it is noted the purpose of assessment proceedings before the taxing authorities is to assess correctly tax liability, in accordance with law. In the present case, the assessee shown capital gain and claimed deduction u/s. 54B of the Act, in my opinion, is a wrong claim, denial of the same for violation of provisions u/s. 54B of the Act is misconceived. As noted earlier, the assessee fulfilled all the conditions contemplated in clause (i) to (iv) of sub-section (37) of section 10 of the Act, but however, ignorant of the same as entitled to claim compensation derived from the Government of Maharashtra of compulsory acquisition as non-taxable, offered the capital gains to tax by claiming deduction u/s. 54B of the Act. As held by the Hon’ble High Court of Bombay that the authorities under the Act are required to assist the assessee in the assessment proceedings by giving effect on the correct position of law, even if the assessee makes wrong claim. Therefore, the compensation derived from the Government of Maharashtra on the compulsory acquisition of assessee’s land, the assessee is entitled to claim

In the result, the appeal of assessee is allowed.