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Facts
The assessee appealed an order of the CIT(A) concerning assessment year 2013-14. The case involved the computation of capital gains on the sale of agricultural land and a claim for exemption under Section 54F. The AO had made additions on account of under-reported sale consideration and denial of exemption.
Held
The Tribunal noted that the AO did not examine whether the agricultural land qualified as a 'capital asset' under Section 2(14) and failed to consider Section 50C regarding stamp duty value. Furthermore, the claim for exemption under Sections 54B and 54F was not properly examined. The Tribunal set aside the orders and remanded the issue to the AO for fresh examination.
Key Issues
Whether the agricultural land was a 'capital asset', proper computation of capital gains considering Section 50C, and correct applicability of exemptions under Sections 54B and 54F.
Sections Cited
2(14), 48, 50C, 54B, 54F, 139(1), 143(2), 234A, 234B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
The assessee is in appeal against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 30.06.2022 passed for assessment year 2013-14.
The assessee has taken nine grounds of appeal
, however, his grievance revolves around two issues, namely; a) True computation of capital gain on sale of agricultural land measuring
12. Kanal
4. Marla, and A.Y.2013-14 2 b) Denial of exemption u/s 54B and 54F
3. With the assistance of ld. Representative, we have gone through the record carefully. It emerges out from the record that assessee has filed his return of income electronically on 09.10.2014 declaring total income of Rs. 2,13,450/-. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that assessee has made deposits of Rs.77,10,000/- in the Saving Bank Account with Punjab & Sind Bank. The AO initiated the enquiry about source of this deposit. The assessee in his reply submitted that he has agreed to sell 12 Kanal 4 Marla (7320 sq.yds. of agricultural land) by way of three different Agreements and he has received cash on this Agreement of sale. Thereafter, Sale Deeds have been registered partly. The ld. AO left the question of source for depositing in the SB Account but started the investigation qua determination of capital gain deserves to be computed in the hands of the assessee and denial of deduction u/s 54F of the Income Tax Act. The brief finding recorded by the AO on this aspect read A.Y.2013-14 3 as under : A. Issue of capital gain; The assessee has sold his land measuring 2 kanals i.e 1200 Sq. yard vide vasika No. 14973 dated 31.12.2012 to Sh. Harish Singla, Joshi Nagar, Haibowal Kalan, Ludhiana and Sh. Bablesh Kumar, Deep Nagar, Ludhiana,; This document has been registered for Rs.23,76,000/-. The registry has been made as per Government Rates. Actually, the assessee, vide agreement dated 11.02.2012 (Table -2), has made agreement to sell the land @ 12000/- per square yard. The actual consideration of this land comes to Rs. 12000/- * 1200 = Rs. 1,44,00,000/-. Therefore the assessee has shown less capital gain by Rs. 1,20,24,000/- on sale of land measuring 2 Kanals (1200 square yards) to Sh. Harish Singla, Joshi Nagar, Haibowal Kalan, Ludhiana and Sh. Bablesh Kumar, Deep Nagar, Ludhiana. Therefore an addition of Rs. 1,20,24,000/- is made in the total income of the assessee. B. Issue of deduction under section 54F of the Income Tax Act. 1961:-
The assessee had claimed deduction under section 54F on account of amount spent on construction of new house amounting to Rs. 43,00,000/-. The assessee has not fulfilled the conditions laid down in the provisions of section 54F of the Income Tax Act, 1961. The assessee not produce even a single bill for verification of the same that the amount was spent for construction before the due date of filing the return of income under section 139(1) of the Income Tax Act, 1961 for the relevant assessment year 2013- 14. The assessee has not deposited any sum in any such bank or institution specified by the Government for this purpose before the due date of ITR under section 139(1). The assessee has claimed deduction u/s 54F to the extent of Rs.35,87,266/-. The same is rejected and the amount of Rs.3 5,87,266/- is added in the total income of the assessee. The income of the assessee is computed as under: 1. Income as per return filed by the assessee: Rs. 2,13,450/- Addition as per Para (A) above: Rs. 1,20,24,000/- Addition as per Para (B) above: Rs. 35,87,266/- Income under the head LTCG for special rate: Rs. 1,56,11,266/- Total Income Rs.l,58,24,716/- Charge Interest under section 234A & 234B of the Income Tax Act, 1961. Penalty proceeding for giving wrong particulates of income has been initiated separately. Sd/- (Durga Dhingra) lncome Tax Officer Ward-7(4), Ludhiana.
ITA No.594/CHD/2022 A.Y.2013-14 4
On appeal, ld. First Appellate Authority has further enhanced the computation of Long Term Capital Gain.
On perusal of the record, we find that since it was an agricultural land, the first issue required to be examined by the AO is whether this asset falls in the ambit of ‘capital asset’ provided in the definition of ‘capital asset’ u/s 2(14) of the Income Tax Act, because agricultural land otherwise not being treated as a ‘capital asset’ except it falls within the prescribed limit of ‘Municipality’ or ‘Municipal Corporation’ or within specified distance from these urban bodies. This aspect has not been looked into by both the parties.
The Long Term Capital Gain is required to be computed u/s 48 of the Income Tax Act and this Section contemplates that income chargeable under the head ‘Capital Gains’ shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the following amounts, namely; a) Expenditure incurred wholly and exclusively in connection with such transfer, b) The cost of acquisition of the asset and cost of improvement thereto A.Y.2013-14 5 6.1 It is also pertinent to note that Section 50C would come into play which contemplates that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both is less than the value adopted or assessed by any authority of a State Government for the purpose of charging Stamp Duty, then full value of sale consideration contemplated in Section 48 would be deemed equivalent to the amount on which Stamp Duty was paid. The authorities have not taken into consideration the Sale Deeds and the value of land determined in those Sale Deeds as per Section 50C, rather they are relying upon the alleged Sale Agreements for working out the quantum i.e. land was sold @ Rs.12000/- per sq.yd. but a concrete evidence has not been collected by the AO nor any Report u/s 50C sub-clause (2) has been obtained from the DVO. Similarly, the authorities have not examined the claim of the assessee u/s 54B or 54F. It is pertinent to note that assessee is an agriculturist and semi- literate person, not well versed with the income tax proceedings, therefore, it was the duty of the AO to apprise him the correct position instead of putting an extra tax A.Y.2013-14 6 liability because of his ignorance. The quasi-judicial authorities are being respected not on account of their power to legalize the injustice on technical grounds but because they are capable of removing injustice and is expected to do so. Therefore, on an analysis of both the impugned orders and the material on record, we are satisfied that both these orders deserve to be set aside and issue is required to be relegated to the AO for fresh examination. It is needless to say that our observation will not impair or injure the case of the AO and will not affect explanation or defense of the assessee. The assessee will be at liberty to submit any detail in support of his defense before the AO. The ld. AO shall re-frame the assessment after providing due opportunity of hearing to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 23.06.2025.