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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-5, Pune, dated 30-11-2016 for the Assessment Year 2011-12.
Grounds raised by the assessee are extracted here as under :
“I. Grounds related to Wrong Treatment of Agricultural Land. 1. The Ld. AO has made mistake by treating the land as non- agricultural land transferred by the assessee. 2. The Ld. AO has made mistake of facts of the agreement of agricultural land transfer. 3. The Ld. AO has wrongly treated the amount received as the income from other sources. II. Disallowance of cost of acquisition & cost of transfer of land 4. The Ld. AO has not allowed the cost of acquisition and cost of transfer claimed by the assessee.
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III. Grounds related to not considered the provisions of the Act.
The Ld. AO has not properly applied the provisions of section 56 of the Income Tax Act, 1961. 6. The Ld. AO has not property apply provisions of section 45 regarding chargeability of Capital Gain of the Income Tax Act, 1961.
IV. Grounds related section 54B Investment
The Ld. AO has made a mistake by not allowing deduction u/s.54B of the Income Tax Act, 1961.
V. Procedural Grounds
The Appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal.”
Briefly stated relevant facts of the case are that the assessee is an
individual and filed the return of income on 01-08-2011 declaring total
income at Nil. During the scrutiny assessment, AO noticed that certain
lands were sold and the assessee is a consenting party along with others.
However, the sale deeds indicate that the assessee is not the owner of the
land. The assessee’s grand-mother Smt. Indrayani Tajane is the land
owner on records and rest of the family members are the consenting
parties. Details of the land transactions entered into by the assessee are
given below :
Sr. Name of the seller Name of the Date of document Consideration No. purchaser received 1 Shri Dnyaneshwar Shri Sandeep 02-06-2010 1,85,00,000/- Pandharinath Rasiklal Shah Talekar and others and other two 2 Shri Dnyaneshwar Shri Ramesh 05-10-2010 1,37,00,000/- Pandharinath Shamrao Lokare Talekar and others
Assessee received a sum of Rs.46,75,000/- in these transactions. The
land is non-agricultural in nature and is situated within the limits of
Pimpri Chinchwad Municipal Corporation. The AO noticed that the land
was neither owned by the assessee nor by any single person. The same
was an ancestral land presumably owned by some HUF in the past. There
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is no clarity on this claim. AO opined that, in such cases, the amount
received need to be taxed as income from other sources only and
accordingly denied the benefit of section 54B of the Act.
Therefore, it is certain that the property is held in the name of
grand-mother and the share of sale consideration received by the assessee
is not entitled for benefit u/s.54B of the Act. Thus, the AO treated the
said amount of Rs.46,75,000/- as income of the assessee and taxed the
same on protective basis under the head “income from other sources.
In the First Appellate proceedings, the CIT(A) confirmed the same.
While confirming the said addition made by the AO, CIT(A) gave directions
for initiating necessary action for taxing the receipts in the hands of Smt.
Indrayani Tajane. The discussion given in Para Nos. 4.6 to 4.10 is
relevant and therefore the same is extracted here as under :
“4.6 I have perused carefully the material on record and the contention of the Appellant. I find that, the Appellant has claimed deduction u/s.54B for the Capital Gains on the amount he has claimed to have been received by him on the two transactions of sale of agriculture land. The AO has dealt with this issue by not granting him the deduction on the ground that, the land was not an agricultural one as the Assessee was unable to give any proof of agricultural activity on the said land, it fell under the Pimpri Chinchwad Municipal Corporation and was sold for non-agricultural purposes. To controvert this view of the AO, the AR of the Appellant has made long submission relying on the 7/12 extract and Shetshera extract to buttress his claim, that the land was an agricultural land and therefore, the Appellant was entitled to deduction u/s. 54B.
4.7 In the other part of the Assessment Order, the AO deals with the facts that the Agreements to sell the lands showed the Appellant as a Consenting Party and therefore, charged the entire amount of Rs.46,75,000/- as his income from Other Sources. This has been countered by the Appellant by submitting that, the said owner of the land was his grandmother and made an alternate claim that, the amount was not the Appellant's income in such a situation the same be treated as a gift which is not taxable as per Section 56(2).
4.8 The Appellant has claimed in the submission and during the course of Appellate Proceedings that, the land belonged to the (Smt. Indrayani Tajane) grandmother of the Appellant who was the seller of the land. A she could not cultivate the said lands due to old age and wished that her family members which included two daughters, Son-in-laws and Grandsons to be her heirs, the lands were sold off. A perusal of the sale deed indicates the
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name of the seller to be that of the grandmother and the rest of the family members as consenting parties. The other documents submitted during the course of Appellate proceedings like the 7/12, Shetsara also substantiate the fact that the owner of the land was Smt. Indrayani Tajane. The fact has also not denied by the Appellant. It is thus very clear that, the Appellant was not the owner of the land and therefore, no capital gains could accrue to him, thereby the question of claiming deduction u/s. 54B on these gains did not arise. The capital gains would accrue to the owner of the land and not to the Appellant. The AO has correctly disallowed the deduction u/s. 54B albeit for different reasons. The grounds relating to this issue are dismissed.
4.9 The alternate plea of the Appellant, of treating the amount received by him as a gift in the hands of the Appellant cannot be accepted due to the want of any confirmation from the donor of the said gift, gift deed or any document indicating even the gift in contemplation of death. The Appellant cannot suo motto claim the amount to be gifted to him. The alternate plea is therefore dismissed.
4.10 It is obvious from the records that, the amounts received from the sale of lands were suo-motto taken to be the capital gains by the Appellant, of the Appellant. In a transaction whether the gains accrued actually lie in his hands has to be decided by the documentation, the facts and the nature of the transaction. This is not the case of the Appellant. It is probably a very crude and a basic device used by him and the others to probably split the capital gains received in various lands without substantiating it with any evidence of ownership. In view of the fact that that Appellant is not the owner of the lands and therefore the amount in his hands is not capital gains, the AO is directed to take necessary action, verify and re- open the case, if required, of the owner of the land in whose hands the capital gains would accrue and tax the same in the right hands in the right year.The AO has taxed the amount of Rs.46,75,000/-in the hands of the Appellant as income from other sources received for being a consenting party. The Appellant has himself admitted to having received this amount. In view of the fact that the Appellant is not the owner of the lands but has admitted to the amount having been received by him, this amount of Rs.46,75,000/- is confirmed in the hands of the Appellant on a protective basis. In case the addition is undisputed in the hands of the owner of the land the AO may pass the necessary rectification order to delete the protective addition in the hands of the Appellant. The Grounds of Appeal raised are accordingly dismissed.”
Before us, Ld. Counsel for the assessee submitted that there is no
dispute about the property being held in the name of Smt. Indrayani
Tajane. The assessee is only a Power of Attorney holder. He further
submitted that, with his share of income, the agricultural lands are
procured by the assessee and the assessee is entitled for deduction
u/s.54B of the Act. The amount received by the assessee in connection
with the transfer of land, to which the assessee is a claimant in the
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capacity or inheritor to the property, is legally eligible for claim u/s.54B of
the Act.
Further, Ld. Counsel argued that the assets sold are the ancestral
property or may be an HUF property, and in such case, assessee is duly
entitled to his share as coparcener of HUF. Therefore, despite the fact his
name does not appear on the title deeds, the claim of the assessee is valid
and sustainable.
On the other hand, Ld. DR for the Revenue relied heavily on the
orders of the AO/CIT(A). According to the Ld. DR for the Revenue, at the
time of sale transaction, the assessee is not the owner of the land.
Therefore, the income earned in connection with the sale transaction of
the land is taxable in the hands of Smt. Indrayani Tajane only. To that
extent, as per Ld. DR, the order of CIT(A) is fair and reasonable and it does
not call for any interference. The fact that assessee received
Rs.46,75,000/- at the most can be a gift received by the assessee from her
grand-mother Smt. Indrayani Tajane, and on appropriation, the assessee
is not entitled for deduction u/s.54B of the Act as the same is not
relatable to the agricultural lands. Otherwise, he relied on the orders of
the AO/CIT(A).
We heard both sides and perused the orders of the Revenue. We
find admittedly there is no dispute about the non-appearance of
assessee’s name on the title deeds of the land. The said land is legally
owned at the relevant point of time by Smt. Indrayani Tajane, the grand-
mother of the assessee. On sale of the land, the income if any is normally
taxable in the hands of Smt. Indrayani Tajane only and not in the hands
of the assessee. Therefore, to that extent, and subject to the other issues,
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the order of CIT(A) is fair and reasonable and the same does not call for
any interference.
7.1 However, there is another issue, i.e. whether the lands are ancestral
in nature. Assessee claims that he is the owner by virtue of his birth right
in the said ancestral lands. We find there is no categorical finding of the
AO/CIT(A) on this claim of the assessee. Therefore, we proceed to remand
this issue for fresh adjudication.
7.2 Regarding the allowability of deduction u/s.54B of the Act, we find
the deduction is allowable only if the agricultural income is appropriated
for acquiring the agricultural lands as per the conditions specified in
section 54B of the Act. In view of this, we are of the opinion that the
receipt of Rs.46,75,000/- by the assessee cannot be considered as
agricultural income in view of lack of ownership in the hands of the
assessee. However, the same is subjected to finding of fact on the claim of
ancestral land. In effect, the grounds raised by the assessee are allowed
for statistical purposes.
7.3 Therefore, we are of the view that there is need for finding of fact on
the claim of nature of ancestral property. Other issues are contingent on
the said finding of fact. Hence, instead of giving any finding, we find it
appropriate to remand the entire issue raised in all the grounds to the file
of AO for fresh adjudication. AO shall grant reasonable opportunity of
being heard to the assessee as per the set principles of natural justice.
Assessee is directed to file any document/evidence to demonstrate his
claim of ancestral property and the same shall be admitted in the interest
of administration of justice.
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In the result, the appeal of the assessee is allowed for statistical
purposes.
Order pronounced on 31st day of August, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य
पुणे Pune; �दनांक Dated : 31st August, 2018 सतीश आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-5, Pune 4. The Pr.CIT-4, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “SMC Bench” 5. Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार
स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune