ACIT, FARIDABAD vs. SH. PRAHLAD, BALLABGARH

PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal has been preferred by the Revenue against the order dated 28.06.2010 passed by the Ld. CIT(A)-Faridabad wherein the assessee’s appeal pertaining to assessment year 2007-08 was partly allowed.

per acre. The assessee was also asked to provide documentary evidences in respect of agricultural income of Rs. 1,06,62,500/- which the assessee had shown to have been received from agriculture. In response, the contention of the assessee before the AO was that the market value of another piece of land in the same area on 20.7.1981 was Rs. 1,64,571/- per acre and, therefore, the value taken at Rs. 80,000/- per acre was appropriate. However, the Assessing Officer did not accept the assessee’s contention and calculated the indexed cost of acquisition at Rs. 15,21,448/- instead of Rs. 45,53,571/- as declared by the assessee. While doing so the AO relied on the registered sale document of another piece of land which, as per the AO, was sold @ Rs. 50,000/- per acre. The Assessing Officer also treated the income of Rs. 1,06,62,500/- shown as having received from sale of agricultural land by the assessee as long term capital gain as the assessee did not produce any evidence of agricultural land being in his name. The Assessing Officer also disallowed deduction u/s 54B of the Act, amounting to Rs. 30,50,600/- and u/s 54F of the Act amounting to Rs. 57,41,940/-. The assessment was completed at an income of Rs. 2,42,80,390/-.

2.2 Aggrieved, the assessee preferred an appeal before the Ld. Commissioner of Income Tax (A) who deleted the addition of Rs. 1,28,739,999/- being the difference due to difference in indexed cost of acquisition. The Ld. Commissioner of Income Tax (A) also directed deletion of addition of Rs. 1,06,62,500/- on account of agricultural income being treated as long term capital gain. The Assessing Officer was also directed to allow the deduction claimed by the assessee u/s 54B of the Act. The Assessing Officer was also directed to allow a further claim of deduction u/s 54F amounting to Rs. 19 lakh.

2.3 Aggrieved with the order of the Ld. Commissioner of Income Tax (A), the department has now approached the ITAT and has raised the following grounds of appeal:-

1. On the facts and in the circumstances of the case, the learned CIT(A) has erred on facts and in law in working out the index cost of the land at Rs. 45,53,571/- instead of Rs. 15,21,448/- taken by the Assessing Officer ignoring the fact that the circle rate circulated by the D.C. Faridabad as on 01.04.1987 was Rs. 80,000/- per acre and as per a registry made in the year 1981 in which rate was even less than Rs.50,000/- per acre, thus sustained the circle rate of land taken by the assessee without giving any logic.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 1,06,62,500/- made by the Assessing Officer as long term capital gain as shown as agricultural income by the assessee which remained unsubstantiated.”

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in allowing the deduction amounting to Rs. 30,50,600/- u/s 54B of the Income Tax Act, 1961 on the land in question even though the assessee did not satisfy the conditions as laid down in section 54B(1) of the Income Tax Act, 1961 wherein investment was required to be made within two years of the sale of agricultural land which had not done within the stipulated time by the assessee. 4

4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in allowing deduction amounting to Rs. 19,00,000/- u/s 54F of the Income Tax Act, 1961 in respect of investment in purchasing of two plots in the name of his children and in construction on the said plots even though the assessee did not satisfy the conditions as laid down in section 54F of the Income Tax Act, 1961 wherein deduction for the amount spent on construction of any property which is not in the name of assessee do not qualify for the deduction u/s 54F and even without discussing any evidence which may prove that self occupied property actually belongs to the assessee.”

4.1 With regard to ground no.2, the Ld. AR submitted that it was undisputed that the land existed in the name of the assessee and the copies of Jambandi were also filed as a proof of the agricultural land being registered in the name of the assessee and, therefore, the ld. CIT (A) was correct in negating the claim of the Assessing Officer that the income of Rs.1,06,62,500/- had to be treated as income from capital gains.

4.2 On ground no. 3, the Ld. AR submitted that as far as claimed deduction u/s 54B of the Act was concerned, the assessee had got the agricultural land registered in his name on 28.5.2009. An agreement had been entered into for the purchase of agricultural land with Mr. Sumer Singh Saini on 14.05.2007 and the land was agreed to be registered by 20.3.2008. It was further submitted that due to certain problems, the land could not be registered by the agreed date and a Memorandum of Understanding was signed between the parties on 20.03.2008 wherein the physical possession was transferred and the agreed date was shifted to 30.05.2009. It was further submitted that land was finally registered in the name of the assessee on 28.5.2009 by paying the balance amount which was credited in capital gain account scheme till that date. It was submitted that the fact that it was a conditional registry has been mentioned in the registry itself.

4.3 Ld. AR also submitted that ground no. 4 raised by the department was infructuous and liable to be dismissed as this issue was not raised by the assessee before the Ld. CIT (A).

5. We have heard the rival submissions and perused the material available on record. As far as ground no. 1 of the department’s appeal is concerned, the Ld. CIT (A) has noted that the Assessing Officer’s action of reducing the cost of acquisition and thereby the indexed cost of acquisition could not be sustained as it had no basis. The Ld. CIT (A) has noted that the fact that the copy of registry which the Assessing Officer claimed to reflect the cost per acre at Rs. 50,000/- per acre was never provided to the assessee for his comments and, therefore, the Assessing Officer’s reliance on the same was not justified. The Ld. CIT (A) as well as the assessee have also placed reliance on the judgment of the Hon’ble Kolkata High Court in the case of Jagat Mohan Kapur (supra) as well as order of the Cuttack Special Bench in the case of Heera Lal Lokchandani vs ITO (supra) for holding that the cost inflation index cannot be applied in the reverse direction. The Ld. Departmental Representative, in the course of proceedings before us, could not point out any judgment to the contrary favouring the revenue in this regard. Therefore, in such a circumstance, we find no reason to interfere with the order of the Ld. CIT (A) on this issue and we uphold the same.

5.1 As far as second ground regarding agricultural income being treated as long term gains is concerned, it is seen that the Ld. CIT(A) has given a finding of fact in Para 12 of the impugned order. The Ld. CIT (A), while deleting the addition, has recorded that he has perused the assessment records of the assessee and noted that the assessee had produced before the Assessing Officer all the relevant evidences in respect of agriculture land from the land in acquisition in the shape of Jambandi and Girdawari and which were available on the assessment records.

The Ld. CIT (A) has further noted that as per these two documents, it was clear that the possession of land was with the assessee. The Ld. CIT (A) has also referred to the Jambandi and has noted that the same clearly evidences the possession of land by the assessee having the 1/4th, 1/5th, 1/6th and 1/8th part of the four agricultural lands in question which were subjected to self-cultivation and accordingly the crops and trees produced by this land yielded the income of Rs. 1,06,62,500/-. The Ld. CIT(A) has also noted that the Assessing Officer, though tried to verify the authenticity of Jambandi, Girdawari, Furd, Intkal of the lands mentioned in the registry from the Tehsildar, Ballabgarh, the same was not actively pursued by the Assessing Officer and the order was finally passed without any further action in the matter. This finding of the Ld. CIT (A) could not be negated by the department even during the course of proceedings before us. The Ld. Sr. DR has not been able to find out any factual error in the findings as recorded by the Ld. CIT (A) and, therefore, there is no reason for us to interfere on this issue also and the same is being left undisturbed by us.

5.2 As far as ground no. 3 of the appeal is concerned, the ld. CIT (A) has discussed the issue in Para 12 of the order wherein he has noted that as per revised agreement dated 20.03.2008, the date of possession was shifted to 3.5.2009. He has also noted that the land was finally registered on 28.05.2009 in the name of the assessee and the payments till then were kept by the assessee in the capital gain account scheme. Ld. CIT(A) has also noted that the agreement was made first and the possession was transferred as per the terms of the agreement and that the Assessing Officer had not been able to point out anything adverse or defective in that agreement. The Ld. CIT(A) had also referred to the provisions of section 53A of the Transfer of Property Act and provisions of section 2(47)(v) applicable to the assessment order in question and has held that the assessee satisfied all the conditions for claiming of deduction u/s 54B of the Act. This factual finding of the Ld. CIT (A) could not be negated by the Ld. Sr. DR during the course of proceedings before us. The department has not been able to point out any factual or legal defect in the action of the Ld. CIT (A) in directing the Assessing Officer to allow claim of deduction u/s 54B. In the circumstances, we find no reason to interfere with the order of the Ld. CIT (A) on this issue also.

5.3 As far as ground no. 4 of the department’s appeal is concerned, we agree with the contentions of the ld. AR that the same is infructuous as this issue was not raised by the assessee before the Ld. CIT (A). Therefore, this ground is dismissed as in fructuous.

Order pronounced in the open court on 25th October, 2017.