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Facts
The assessee sold land for Rs.4,31,25,000/- in 2012, resulting in a Long Term Capital Gain (LTCG) of Rs.4,22,73,000/-, but did not file an income tax return for A.Y. 2013-14. Reassessment proceedings were initiated under section 147, and the assessee filed a return claiming deductions under section 54F for constructing a house (Rs.1,14,39,350/-) and section 54B for purchasing agricultural land (Rs.3,08,33,650/-). The Assessing Officer disallowed these deductions and made an addition of Rs.40,00,000/- for an alleged unsecured loan, which was upheld by the Ld. CIT(A).
Held
The ITAT allowed the deduction under section 54F, finding sufficient evidence for house construction on ancestral land. It also allowed the deduction under section 54B for the purchase of agricultural land, including land bought in the wife's name, citing judicial precedents. Furthermore, the Tribunal deleted the addition of Rs.40,00,000/-, accepting that it was a transaction between brothers for land purchase that was later squared off.
Key Issues
The key legal issues were the assessee's eligibility for deductions under Section 54F for residential house construction, under Section 54B for agricultural land purchase (including in the wife's name), and the validity of the addition for an alleged unexplained unsecured loan.
Sections Cited
147, 143, 148, 54F, 54B
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ NEW DELHI
(Assessment Year : 2013-14) Phool Singh Vs. ITO Plot No.2394 (Basement), Ward – 3(2) Sector – 46, Gurgaon Gurgaon, Haryana – 122 002 PAN : EURPS 4895 E (Appellant) (Respondent) Assessee by Dr. Rakesh Gupta, Adv. and Shri Somil Agarwal, Adv. Respondent by Shri Rajesh Dhanesta, Sr. D.R. Date of Hearing 08.10.2024 Date of Pronouncement 18.12.2024 O R D E R PER VIMAL KUMAR, JM:
The appeal filed by assessee is against the order dated 31.01.2019 of Learned Commissioner of Income Tax (Appeals)-1, Gurgaon [hereinafter referred to as ‘Ld. CIT(A)’] arising out of assessment order dated 28.12.2017 of the Income Tax Department, Gurgaon (hereinafter referred as ‘Ld. AO’) u/s 147 read with section 143 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the Assessment Year 2013-14.
Phool Singh vs. ITO A.Y. 2013-14 2. Brief facts on the basis of the information available with the Department, it was found that assessee had sold land for Rs.4,31,25,000/- on 27.12.2012 which resulted into Long Term Capital Gain (LTCG) amounting to Rs.4,22,73,000/- and received pension amounting to Rs.2,32,059/- and interest amounting to Rs.2,32,059/-, however, assessee did not file his return of income for A.Y. 2013-14. Proceedings under section 147 of the Act were initiated after recording the reasons, in writing and taking necessary approval from the Joint Commissioner of Income Tax, Range-3, Gurgaon. Notice under section 148 of the Act for A.Y. 2013-14 was issued on 24.01.2017. In compliance with the notice, assessee filed return of income on 29.06.2017 declaring income of Rs.3,82,020/- and claimed deduction under section 54F of the Act amounting to Rs.1,14,39,350/- and under section 54B of the Act amounting to Rs.3,08,33,650/-. On receiving the Income-tax Return, in response to the notice under section 148 of the Act, notice under section 143(2) of the Act was issued on 07.07.2017. Copy of reasons were provided to assessee vide order sheet entry dated 07.07.2017. The assessee represented by Shri L. C. Yadav, Advocate on 24.11.2017, raised objections to recording of reasons which was dealt with vide office order dated 29.11.2017 served on assessee on 04.12.2017.
During the assessment proceedings, after taking into consideration various replies, show-cause notice was issued on Phool Singh vs. ITO A.Y. 2013-14 18.12.2017. In compliance with show-cause notice, assessee filed reply dated 22.12.2017. The assessee vide letter dated 29.01.2016 gave details of the salaries. On completion of assessment proceedings, additions of Rs.1,14,39,350/-, Rs.3,08,33,650/- and Rs.40,00,000/- were made by the Assessing Officer.
Aggrieved by the order of learned Assessing Officer, Appellant/assessee preferred appeal before the learned CIT(A). The CIT(A) dismissed the appeal of the assessee.
Being aggrieved by the order of learned CIT(A), appellant/assessee preferred present appeal before the ITAT.
Learned Authorized Representative for the appellant/assessee submitted that ground nos.1 & 2 were not pressed by the assessee.
Learned Authorized Representative for the appellant/assessee submitted that learned CIT(A) has erred in law and on facts in not allowing the benefit of deduction under section 54F of the Act amounting to Rs.1,14,39,350/- by recording incorrect facts and findings and without observing the principles of natural justice.
Learned Authorized Representative for the appellant/assessee submitted that learned CIT(A) held that no evidence for construction was filed, no evidence of ownership of land on which Phool Singh vs. ITO A.Y. 2013-14 construction was claimed to be made was filed. Assessee initially submitted that house was constructed in the name of his son but subsequently it was contended that it was constructed in his name. Thus, the exemption claimed by assessee u/s 54F was disallowed.
8.1 The case of assessee is that from the proceeds of the sale, assessee constructed a house property on his ancestral land situated in village Mohhadpura, Jharsa Lal Dora. The assessee invested a total amount of Rs. 1,25,20,000/- on the construction of house property within 3 years from the sale of land. The following evidences were filed by assessee in this regard: “PB 81-85 is the copy of valuation report submitting the valuation of the house property constructed by assessee which shows that construction was done between the period of Jan, 2013 to July, 2015 and the total cost of construction was valued at Rs.1,25,20,000/-. It also shows that the owner of this is assessee and it is a residential property PB 92-94 is the copy of Aksh, Sizra and Jamabandi of the ancestral land showing establishing the ownership of assessee of the land bearing Khasra no 32-16/3 PB 95 is the copy of certificate issued by Councillor, Ward 24, Nagar Nigam. Gurgaon certifying that assessee is a resident of village Mohammed Pur. Gurgaon and he has constructed a house in the year 2013 to 2015 in the said village by selling his agricultural land. PB 22-23 is the copy of cash flow statement of assessee which would show that cash was withdrawn from bank at regular interval of time and was invested for construction of house property. PB 3 is the copy of reply filed on 07.07.2017 by assessee before Ld. AO submitting that he has constructed a residential house in Phool Singh vs. ITO A.Y. 2013-14 village on his ancestral land for a sum of Rs.1,25,20,000/- and the house was completed within the period of three years from the date of sale of agricultural land. The house was constructed in Lal Dora of the village Mohammedpur Jharsa, Gurgaon for his and his family's residence. The construction of the house in this village does not require any permission from Municipal Corporation. PB 78 is the copy of reply dated 11.10.2017 filed by assessee before Ld. AO again submitting the above facts. PB 79-89 is the copy of detailed reply filed by assessee before Ld. AO submitting that the residential house was constructed by directly employing the labours and various thekedars who supplied material for construction. PB 89-91 is the copy of reply dated 13.11.2017 filed by assessee before Ld. AO submitting that he has constructed the house. PB 109-112 is the copy of written submissions dated 25.10.2018 filed before Ld. CIT(A).”
Learned Authorized Representative for the appellant/assessee submitted that learned CIT(A) erred in not allowing benefit of deduction under section 54B of the Act amounting to Rs.3,08,33,650/- 9.1 Ld. CIT(A) has held that agricultural land has been purchased by the appellant in the name of the wife and hence, in view of the jurisdictional High Court's decisions in the case of Kamal Kant Kambojh 84 taxmann.com 541 and the decisions relied upon by the Ld. AO the deduction was not to be allowed.
Phool Singh vs. ITO A.Y. 2013-14 9.2 Assessee's case is that assessee purchased agricultural land within 2 years and therefore was entitled for exemption u/s 54B. The evidence in this regard are as under: PB 112 is the submission before Ld. CIT(A) in which assessee has submitted that he was seriously ill since 2012 and even as on the date he is not in position to survive and that is why he has purchased the agricultural land in the name of his family members. PB 13 is the submission to Ld. AO submitting the chart of agricultural land and jamabandi of land purchased. PB 24 is the detail of purchase of land by the assessee which would show that total value of land purchased by the assessee was to the tune of Rs. 3,08,33,650/- PB 26-67 are the purchase deeds/agreements executed by assessee for purchase of agricultural land. PB 77-78 is the submission to the Ld. AO in which it was submitted that he is illiterate and is not aware of the income tax laws and is suffering from serious diseases since 2012 and after selling his ancestral agricultural land as stated, he invested the amount by purchasing further agricultural land. PB 86-88 are further submission to Ld. AO submitting that the land was purchased in the name of his wife also to save stamp duty and that assessee was suffering from ailments and the purchases were made from the sale the land only. proceeds of the land only. PB 99-101 are further submissions to Ld. AO submitting agricultural land has been purchased.
9.3 Reliance is further placed on the following judicial decisions:
In CIT vs. Gurnam Singh, of 2007 dated 01.04.2008, Hon’ble High Court of Punjab and Haryana has observed that :- "Undisputedly, the purchased land is being used by the asessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, the 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. It is not the case of the revenue that the said land is being used exclusively by his son. In our view, a pure finding of fact has been recorded by the ITAT which does not require any interference in this appeal.”
Similar is position in Laxmi Naryan vs. CIT 402 ITR 117, High Court of Rajasthan, CIT vs. Kamal Wahal, (2013) 351 ITR 4, High Court of Delhi, CIT vs. Natarajan, (2006) 287 ITR 271, High Court of Madras, CIT vs. Ravinder Kumar Arora, (2011) 52 sot 201, ITAT Delhi Bench and Sh. Rajkumar Mandani vs. DCIT, dated 20.11.2018, ITAT Delhi Bench.
9.4 So, it is clear that assessee has purchased agricultural land and therefore, is eligible for deduction u/s 54B of the Act.
Learned Authorized Representative for the assessee/appellant submitted that learned CIT(A) has erred in law and on facts in confirming the action of Learned AO in making addition of Rs.40,00,000/- on account of alleged unsecured loan.
Phool Singh vs. ITO A.Y. 2013-14 10.1 The case of assessee is that assessee has five brothers and all the purchase of land is shared by all of them equally. At times any one of them make the payment for purchase of land on behalf of others and later on the payments are squared off by mutual agreement between the brothers and this is exact transaction that was undertaken between assessee and his brother, Shri Brahm Singh. He purchased a land and paid the assessee's share of Rs.40,00,000/- by withdrawing cash from his own bank account which was shown by assessee as unsecured loan in the statement of affairs as on 31.03.2013. Later on, assessee made payment on behalf of Shri Brahm Singh for purchase of another land and thus, squared of the transaction. The evidence in this regard are as under: “PB 102-103 is the copy of affidavit of Sh. Brahm Singh wherein he has stated on oath that he has paid a sum of Rs. 40,00,000/- on behalf of assessee for purchase of land and the same was outstanding as on 31.03.2013. Thereafter, assessee made payment on behalf of Sh. Brahm Singh for purchase of another land and thus, squared off the transaction. He has also stated his PAN no. in this affidavit.
PB 22 is the cash flow statement of assessee showing the receipt (i.e. payment by Sh. Brahm Singh on behalf of the assessee) on 14.02.2013 which was returned by assessee to Sh. Brahm Singh by making payment on his behalf on 10.04.2013.
Phool Singh vs. ITO A.Y. 2013-14 Further, the creditworthiness of Sh. Brahm Singh also cannot be question for the reason that he was a party to the sell agreement dated 26.12.2012 for sale of agricultural land wherein he has received a sum of Rs.4,31,50,000/- for his share (PB 72) and therefore, he had enough money available with him to make payment on behalf of the assessee.
PB 99-100 is the copy of reply dated 22.1.22017 filed by assessee before Ld. AO stating the above facts.
PB 112-113 is the copy of written submissions dated 25.10.2018 filed by assessee before Ld. CIT(A) explaining the above facts.
As such the addition made by Ld. AO is without any basis, evidence or material and may please be deleted.”
Learned Departmental Representative for the Department of Revenue submitted that appellant/assessee a pensioner, had been dealing with the sale and purchase of properties of huge value but had failed to file the Income-tax Return. Reliance was placed on the order of learned CIT(A).
From examination of record in light of aforesaid rival contentions, it is crystal clear that learned CIT(A) at para no.4.4 observed that the learned AO had specific information with regard to sale of land by assessee along with his brothers and receiving sale consideration of Rs.4,31,25,000/-, received pension of Rs.2,51,820/- and interest of Rs.48,526/- and observed that no Phool Singh vs. ITO A.Y. 2013-14 income from the sale transaction was shown in the return of income by the assessee. Therefore, assessment in the case was reopened. The learned CIT(A) in para no.5.3 observed that assessee has raised contentions against following additions under the head capital gains: i. The land under transfer was not a capital asset. ii. The appellant was eligible for deduction under section 54F of the Act. iii. The appellant was eligible for deduction under section 54B of the Act.
12.1 The land under transfer was not a capital asset as the land was situated within the municipal limits of Gurgaon.
12.2 The claim being eligible for deduction under section 54F of the Act was rejected because there is no evidence of construction of house except a valuation report, no evidence regarding the actual period during which the construction was made, no evidence regarding the source from which the construction expenses were incurred, the land on which the construction of residential house was claimed to have been made was claimed to be lal dora, there is no evidence to show investment in construction of house and as pointed out by the AO in the assessment order the appellant has originally claimed that the sale consideration was used towards construction of house in the name of his son.
Phool Singh vs. ITO A.Y. 2013-14 12.3 The valuation report at page 81 of the paper book mentions valuation of the house property constructed by assessee which shows that construction was done between the period of Jan, 2013 to July, 2015 with value of Rs.1,25,20,000/-. Aksh, Sizra and Jamabandi of the ancestral land showing the ownership of assessee are at page nos. 92-94 of the paper book. Copy of Certificate issued by Councillor, Gurgaon at page 95 of the paper book, Copy of cash flow statement of assessee at pages 22-23 of the paper book and reply dated 07.07.2017 filed by the assessee mentions the residential house on ancestral land for a sum of Rs.1,25,20,000/- was constructed in 3 years. The house situated in Lal Dora of the village Mohammedpur, Jharsa, Gurgaon. Nothing was brought on record by learned AO to disregard the above evidence produced by assessee. It is a material fact that assessee had sold agricultural land and received Rs.4,31,25,000/- by selling agricultural land and sufficient fund. In view of the above facts, assessee deserves benefit of section 54F of the Act, therefore, the findings of learned CIT(A) deserves to be set aside.
12.4 Regarding disallowance of exemption under section 54B of the Act amounting to Rs.3,08,33,650/-, the details of purchase of land by assessee for Rs.3,08,33,650/- is at page 24 of the paper book. Sale deed agreements executed by assessee for purchase of agricultural land are at pages 26-67 of the paper book. The assessee claims to be illiterate and was not aware of the income tax Phool Singh vs. ITO A.Y. 2013-14 laws and was suffering from serious diseases since 2012. Before learned AO assessee submitted that land was purchased in the name of wife to save stamp duty which is at pages 86-88 of the paper book. As per ratio of judgment in CIT vs. Gurnam Singh’s case (supra), it is observed that: "Undisputedly, the purchased land is being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, the 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. It is not the case of the revenue that the said land is being used exclusively by his son. In our view, a pure finding of fact has been recorded by the ITAT which does not require any interference in this appeal."
12.5 In view of the above material facts and well settled principle of law, the assessee having purchased agricultural land was eligible for deduction under section 54B of the Act. Therefore, the findings of learned CIT(A) denying benefit of deduction under section 54F of the Act, is set aside.
12.6 Regarding unexplained cash credit of Rs.40,00,000/- on account of unsecured loan received by assessee from his brother Shri Brahm Singh, assessee filed copy of affidavit of Brahm Singh on pages 102-103 of the paper book and cash flow statement at page 22 of the paper book. Agreement of sale dated 26.12.2012 is at page 72 of the paper book. In view of the above, said affidavit, cash flow statement and agreement to sale, it is evident that Shri Brahm Phool Singh vs. ITO A.Y. 2013-14 Singh had paid Rs.40,00,000/- on behalf of assessee for purchase of land as same was outstanding as on 31.03.2023. Assessee had made payment on behalf of Shri Brahm Singh for purchase of another land and thus squared off the transaction. In light of above facts, the addition of Rs.40,00,000/- consider as unexplained cash credit on account of unsecured land deserves to be deleted.
In light of above observations, Ground No.3 to 5 are allowed.
In the result, appeal of the assessee is allowed. Order pronounced on this day 18th December, 2024