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Facts
The assessee sold agricultural land, leading to reassessment proceedings initiated by the AO under sections 147 and 144. The AO made additions for long-term capital gains (LTCG) of Rs. 1.23 crores and unexplained cash credits of Rs. 1.22 crores under section 69A, totaling Rs. 2.46 crores. The assessee challenged the non-service of notice under section 148, the LTCG valuation, and claimed deductions under sections 54B and 54F, also providing explanations for bank credits. The CIT(A) dismissed the appeal as 'not admitted' under section 249(4)(b) but also confirmed and enhanced additions on merits.
Held
The Tribunal ruled that the CIT(A) was unjustified in dismissing the appeal as 'not admitted' after having considered the case on merits and obtaining a remand report. It accepted the assessee's computation of LTCG at Rs. 37.02 lakhs, based on the base year valuation (Rs. 3,700/marla) previously accepted for a brother's similar case, and allowed deductions under sections 54B and 54F for reinvestments. All bank credits, including those from land sales, cheque returns, and transfers from family members, were found to be sufficiently explained and accepted based on the remand report.
Key Issues
1. Validity of reassessment given alleged non-service of notice u/s 148. 2. Proper computation of Long Term Capital Gains (LTCG) on agricultural land sale, including base year valuation and eligibility for deductions u/s 54B and 54F. 3. Justification of additions for unexplained cash credits u/s 69A. 4. Whether CIT(A) can dismiss an appeal as 'not admitted' after considering it on merits.
Sections Cited
Income Tax Act, 1961: 250, Income Tax Act, 1961: 147, Income Tax Act, 1961: 144, Income Tax Act, 1961: 2(14), Income Tax Act, 1961: 133(6), Income Tax Act, 1961: 148, Income Tax Act, 1961: 142(1), Income Tax Act, 1961: 69/69A, Income Tax Act, 1961: 249(4)(b), Income Tax Act, 1961: 54B, Income Tax Act, 1961: 54F, Income Tax Act, 1961: 251(2), Income Tax (Appellate Tribunal) Rules, 1963: 34(4), Income Tax Rules, 1962: 46A
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. MANOJ KUMAR AGGARWAL & SH. UDAYAN DASGUPTA
This appeal is filed by the assessee against the order of the ld. CIT(A) NFAC, Delhi dated 30.07.2024 passed u/s 250 of the Income Tax Act, 1961 which has emanated from the order of the ITO, Ward-1(5), Jalandhar passed u/s 147 r.w.s. 144 of the Act, 1961 dated 27.12.2018.
Grounds of appeal taken by the assessee in Form No. 36 are as follows:
“1. That the order passed by the Hon'ble CIT(A) dated 30.07.2024 is against the law and facts of the case.
2. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 144 r.w.s 147 of the Act and without complying with the mandatory conditions u/s 147/148/151 as envisaged under the Income Tax Act, 1961.
That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 144 r.w.s 147 of the Act without considering the facts that notice u/s 148 and other notices were never received/served on the assessee.
4. (a) That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in dismissing the appeal as not admitted in view of section 249(4)(b) of the Act without considering the submission of the assessee and facts of the case.
(b) That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in passing contradicted order wherein appeal is dismissed as not admitted and on the other side Hon'ble CIT(A) confirmed the addition on merits and also enhanced the addition made by Ld. AO.
5. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs. 1,22,50,000/- u/s 69/69A of the Act, on account of cash/credits deposit in bank account, without considering the facts of the case and without observing the principles of natural justice.
6. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Assessment Year: 2011-12 Rs. 1,23,76,091/-, on account of long-term capital gain on the sale of agricultural land, without considering the facts of the case and without observing the principles of natural justice.
7. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
3. The brief facts emerging from records are that the assessee has sold two agricultural lands situated at “Basti Bawa Khel Hadbasad”, under the jurisdiction of Sub registrar, Jallandhar, on 20th August, 2020 for a total sales consideration of Rs. 1,40,96,000/- (Rs. 58.46 lakhs plus 82.50 lakhs ) both together measuring ten kanal and five marla, and no return of income has been filed in spite of the fact that the agricultural lands sold were capital assets within the meaning of section 2(14) of the Act 61, and in absence of any compliance to enquiry notice u/s 133(6) of the Act, proceedings were initiated vide notice u/s 148 dated 28th March , 2018 after necessary approval from higher authorities , which has been claimed by the AO to have been served (vide dispatch no 2017 dated 28/03/2018 ) , on the assessee on 30th March, 2018, (a claim denied by the assessee and challenged in the grounds as non-service of notice ).
In absence of any response to various subsequent notices issued u/s 142(1), the assessment was completed on the basis of information gathered from the Sub- Registrar, Jallandhar, u/s 133(6), by application of the rates supplied by the Tehsildar, year) and taxable capital gains was determined at Rs. 1,23,76,091/-, on sale of both the properties.
Apart from above, the total credits appearing in the bank account of the assessee with Union Bank of India, A/c No xxxx9104 , Jallandhar , during the year under appeal totaling Rs.1.22 crores were held to be unexplained u/s 69A, in absence of any explanation regarding source of such deposits, and the assessment was completed ex- parte on a total income of Rs.2.46 crores ( which included Rs.1.23 crores on LTCG plus Rs.1.22 crores u/s 69A ) .
The matter carried in first appeal has been challenged both on the legal issue of non-service of notice u/s 148, as well as on facts and during appellate proceedings written submissions including documentary evidences were filed along with copies of land sale deeds and subsequent purchase deeds of agricultural lands , claiming exemption u/s 54B, computation of income as per assessee, and submissions explaining the source of credit entries in his Union bank A/c , and remand report has been obtained from the AO as per procedure, u/r 46A, (on verification of fresh evidence submitted ) and subsequent rejoinder to remand has also been filed.
However, the Ld. first appellate authority after considering the submissions of the assessee and documentary evidences on record and after considering the remand report filed by the AO, has dismissed the appeal by observing as follows:
“5.6 Nevertheless, even on merits, the facts of the case has been extensively analyzed by the A.O. in his remand report dated 03.02.2024, I have perused the remand report and agree with all the points and facts analyzed by the A.O. and based on his findings all the grounds of appeal are dismissed, even on merit.
5.7 During the appellant proceedings it is noted that the appellant has not included the credit of interest of bank account number 485502010009104 maintained in its Union Bank of India account. Therefore, this interest income of Rs. 1,04,371/- needs to be added to the total income of the appellant. As per section 251(2) of the income tax act the appellant was provided an opportunity to present his case against the enhancement of income vide notice dated 25.06.2024. The appellant vide reply dated 05.07.2024 submitted sir, it is requested that only interest for the period 01.04.2010 to 31.03.2011 may kindly be added and not for the preceding and next period as stated in your notice. Thus, the appellant has accepted the enhancement of income. The A.O. is directed to include the interest income as part of total Income and enhance the assessed income for F.Y 2010-11. Further the A.O. is instructed to levy penalty on the above enhanced income as arrived.
6. To conclude, appeal is dismissed.”
Before the tribunal the Ld. AR of the assessee took up grounds no 5 and 6 which according to him are inter-linked and submitted that the forefathers of the assessee migrated from un-divided India (now Pakistan) during independence and has settled in Punjab, and has been residing at Basti Bawa Khel since then and is an agriculturist and of inherited ancestral agricultural lands , ( which was owned by the entire extended family consisting of his brothers and other family members), during the year under appeal , vide registered deeds dated 20th August , 2010, and part of the sale proceeds has been utilized for purchase of new agricultural lands ( at different locations ) vide deed dated 10th March, 2011, and deed dated 9th December, 2011, against which the assessee is entitled to deduction u/s 54B of the Act and the remaining portion of the sale proceeds has been invested in purchase of a residential flat vide deed dated 27th March, 2011, at Jalandhar , against which the assessee is entitled to deduction u/s 54F of the Act, 61 and copies of all the registered deeds are filed before the appellate authority (copies of which are also filed before the AO in course of remand proceedings).
He further submitted that since these agricultural lands are capital assets u/s 2(14) of the Act, dispute in this appeal arose for the purpose of estimation of the fair market value (in the base year 1981, applicable to transactions prior to 2017), for working out the index cost of acquisition for determination of LTCG, where the AO from the tehsildar , and the assessee has taken the same at Rs.3,700/- per marla , on the basis of a comparative case of the brother of the assessee Mr Pushwinder Singh (non-PAN assessment order dated 11/12/2019 passed by the AO – ward 1(3)
Jallandhar u/s 144 rws 147, Asst year 2012-13), relating to the same plot of land sold by his brother , (which is a part of the whole) , and he submitted that for all logical purpose the estimated value of the land per marla already accepted by the AO , at Rs.3,700/- will also form the basis in the case of the assessee and his computation accordingly is as follows :
Referring to the above computation the Ld. AR prayed for accepting the long term capital gains at Rs.37.02 lakhs , instead of Rs.1.23 crores determined by the AO, because there is nothing wrong in the said computation filed and corresponding investments u/s 54B and 54F are all supported by documentary evidences, the benefit being an agriculturist had no taxable income and this income under LTCG has arisen for the first time.
Regarding the addition of Rs.1.22 crores being credit entries in Union Bank A/c, Jallandhar, the Ld. AR of the assessee has given the explanation of the source of such deposits vide the following details:
Regarding the “other credit entries in bank a/c ” the Ld. AR submitted referring 12. to the above schedule furnished that the amount of Rs.12 lakhs , Rs. 22.50 lakhs and Rs.30 lakhs are entries of cheque return and accepted by the AO on verification in course of remand ( page – 6 of report , placed in page 26 of PB ) and in respect of the other entry of Rs.50 lakhs on 25/03/2011, is stated to have been received from the mother of the assessee Smt. Jagbir Kaur by way of family settlement, through bank channel, and has been sourced out of sale proceeds of immovable property held by mother and duly disclosed by her in her tax returns , and no adverse findings are recorded by the AO in remand.
Regarding the receipt of Rs. 20 lakhs, on 05/07/2010, from his brother Mr. Pushpinder Singh Pannu (HUF) (PAN: CXSPS5284D) the same has been transferred the funds are sourced out of maturity proceeds of earlier fixed deposits as evident from bank statement itself (sweep transfer), further supported by Form -16A issued by the bank.
The Ld. AR prayed for deleting the above additions totaling to Rs. 1.22 crores , being fully explained.
Before concluding his arguments, the Ld. AR argued on ground no -4 and submitted that the assessee has already paid an amount of Rs.10,72,874/- being the admitted tax on the LTCG as per his computation in course of first appellate proceedings. He further submitted referring to the last part of the CIT(A) order, that the Ld. first appellate authority has already admitted the appeal, and has considered the written submissions and the documentary evidences and has forwarded the same to the AO for remand report as per provisions of Rule 46A of the IT Rules 62, and copy of such remand has been forwarded to the assessee against which the assessee has submitted his rejoinder to remand , which also is noted in the appellate order .
Therefore, he submitted that since in the instant case the Ld first appellate authority has already admitted the appeal and proceeded with the same, to the next stage, for discussion on merits , he was not legally justified in subsequently dismissing the same evidence of which was evident from the portal in form 26AS.
Before resting his arguments the Ld. AR , referring to the grounds contained in 1 to 3 of the memo of appeal , submitted that in the instant case notice u/s 148 has not been actually received by the assessee because no notice has been properly served on the assessee as per procedure and has relied upon decisions of various courts and tribunals relating to disputed service of notices ( and a case law compilation of 56 pages , has been filed and taken on record ).
The Ld. DR relied on the order of the Ld. CIT(A) and submitted that the estimated fair value in the base year as certified by the tesilhdar should be treated as correct and not the base value as accepted by the AO in case of the brother because the same was ex-parte assessment, and regarding the deposits in bank account the Ld. DR has raised dissatisfaction on account of the dates of actual deposits in bank on 16th October, 2010 , being two months later from the registered deed of sale dated 20th August, 2010 . He has also doubted the creditworthiness of the funds of Rs.20 lakhs being transferred by the brother Mr. Pushpinder Singh from his HUF A/c, in absence of source and has prayed for upholding the order of the Ld. first appellate authority.
Regarding the legal issue on non-service of notice u/s 148 he has also relied upon various judicial precedents in his written submission. are of the opinion that the Ld. first appellate authority has already admitted the appeal and has considered the submission of the assessee and has accepted the fresh evidence u/r 46A and has proceeded with the same to obtain remand report from the AO and thereafter, copy of the same was forwarded to the assessee in response to which rejoinder has been filed and after discussing the issue on merits , he was not legally justified to dismiss the appeal for alleged violation of the provisions of section 249(4)(b), more so when the admitted tax of Rs. 10.72 lakhs on LTCG, has already been paid in course of first appeal, as per the computation of the assessee.
We are also of the opinion that the estimated MV of the agricultural lands in the base year 1981, has been accepted by the AO at Rs. 3,700/- per marla , in scrutiny proceedings in the case of the brother of the assessee , vide order dated 11/12/2019 passed by the AO – ward 1(3) Jallandhar u/s 144 r.w.s. 147, Asst year 2012-13), which is the same whole plot of land inherited by the family , which is now being sold in parts by the brothers and their family as per respective shares, and for all logical purpose it is the same base value that is to be applied in the case of the assessee also for the purpose of determination of index cost of acquisition for arriving at the taxable value of long term capital gains, and the Ld. DR has not pointed out any factual error in such computation of LTCG . regarding the claim of the assessee relating to the deductions u/s 54B and in respect of purchase of agricultural lands vide deed dated 10th March, 2011, and deed dated 9th December, 2011, which has been used for agriculture and earmarked as agricultural in the purchase deed registered before the registrar, and there is no adverse comments in respect of purchase of residential flat which entitles the assessee to a deduction u/s 54F of the Act 61.
Regarding the credits in the bank account , the same has also been explained by the assessee in the above schedule and there is no reason to form a different opinion on such explanation and in respect of the transfer entry of Rs.20 lakhs from his brother from his HUF bank account , the relevant portion of the bank statement is being made a part of this order which clearly reflects the said transaction and explains the source thereof. it fit and proper to allow the deduction u/s 54B and 54F as claimed by the assessee being supported by documentary evidences and we also accept the explanations regarding the credits in the bank account.
The taxable LTCG is accepted at Rs.37.02 lakhs.
Since, we have decided the appeal of the assessee on merits, the legal grounds taken by the assessee in grounds 1 to 3, has not been discussed because the same will only be academic.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 10.12.2025