SHRI T.N. RAJAMOHAN,CHENNAI vs. ACIT, CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

AgainstRs.4,40,00,000/-, he had claimed the following: (i) Indexed cost of acquisition of land - Rs. 6,84,804 (ii) Indexed cost of development of land - Rs.2,43,66,622

(iii) Deduction u/s 54F Rs. 25,29,064 Since the assessee did not adduce any evidence in respect of (ii) and (iii) above at the time of the assessment, the Assessing Officer disallowed them, added Rs.2,68,95,686/- and completed the assessment u/s 143(3) on 30.12.2011.Against that order, the assessee filed an appeal before the CIT(A).

Before the CIT(A), the assessee made an attempt to claim that the nature of the land which he sold is an agricultural land and hence is not liable for taxation etc by filing certain additional evidence. The CIT(A) sought a remand report from the A O. The AO replied , inter alia, that the assessee did not cooperate in the remand proceedings. In his return, the assessee admitted LTCG from the sale of the impugned land. When confronted with the disallowance of his claimstowards deduction of Indexed Cost of development etc at Rs. 2.43 crores etc for want of evidence, he has made a U-turn and claimed that the lands sold are agricultural lands before the CIT(A) and hence this claim is clearly an after-thought. Since the assessee did not cooperate in the remand proceedings, on examination of facts and circumstances of this case from the available material, considering various case laws viz the decisions of the Apex Court in the case of Sarifabibi and Court of Wards 204 ITR 631(SC) & 105 ITR 133(SC) , 136 ITR 621(Guj) , Gopal C Sharma Vs CIT 209 ITR 946 etc, the AO reported that the impugned land is not an agricultural land, the assessee has not brought any evidence to prove the claim of expenditure on development of land either during the assessment or during the remand proceedings , he made a round about claim by an after- thought with a motive of depriving the Revenue of its legitimate taxes and hence the AO requested the CIT(A) not to entertain additional evidence etc.

The CIT(A) found that the appeal is belated by 117 days and there was no condonation petition. Even though he dismissed the appeal in limine, however, taking into account all the facts and circumstances , the CIT(A) , inter alia, held that the appellant has failed to produce any supporting evidence to establish the actual carrying on of agricultural operations in the said lands. In other words, as rightly pointed out by the Assessing Officer, in his remand report, the assessee has not at all demonstrated the user of the land for agricultural purposes, having failed to produce details of crop grown, yield etc., despite specific opportunities granted to the assessee at the stage of remand proceedings. Applying the ratio of the decisions of the Apex Court in the case of Sarifabibi and Court of Wards(supra), it is clear that the assessee is not entitled for exemption of the Capital Gains arising from the sale of these lands. The Assessing Officer is justified in rejecting the assessee’s claim that the lands in question are agricultural in nature and bringing to tax the Capital Gains arising from the sale thereof. He is also justified in denying the claim of indexed cost of expenditure on development of land amounting to Rs. 2.43 crores for want of supporting evidence.

Aggrieved, the assessee filed this appeal .

3.1 The AR further submitted that the Bombay Bench of the Income Tax Appellate Tribunal in the case decided on 30.09.2015 in I.T.A.No.4806/MUM/2012, 'F' Bench has dealt with similar issue. In the said case, the Mumbai Bench after noticing the condonation of delay in filing the appeal before the First Appellate Authority considered the maintainability of the assessed Short Term Capital Gains for testing the new fresh claim for tax exemption. In the said case, the assessee offered the surplus from the sale of agricultural lands as Short Term Capital Gains and not claimed tax exemption by mistake. The fresh claim was made for tax exemption before the First Appellate Authority and the said claim was accepted based on the CBDT Circular No.14(XL- 35) dated 11.04.1955. Considering the facts, the Mumbai Bench dismissed the departmental appeal in accepting the approach of the First Appellate Authority. The Jurisdictional Bench of the Income Tax Appellate Tribunal in the case reported in 135 ITD 55 (Third Member) has noticed the well settled principle of jurisprudence that delivery of justice should not be fettered by technicalities and further noticed Article 265 of the Constitution of India and according to the said article, 'taxes not to be imposed say by authority of law - no tax shall be levied or collected except by authority of law'. The Jurisdictional Bench of the Income Tax Appellate Tribunal has also noticed the CBDT circular dated 11.04.1955 and observed 'the income tax department is collecting tax not for itself. It is collecting tax for the sovereign stage, that is, Union of India. Union of India has a sovereign authority does not require to levy tax on an amount returned by mistake. The sovereign authority does not want to take advantage of a mistake committed by innocuous assessee. It is not the policy of the sovereign state to crave for undue enrichment.' The Bangalore Bench of the Income Tax Appellate Tribunal in the case of Ideal Homes Co-operative Society decided on 7.3.2014 posed with the similar situation and the interest income eligible for tax exemption/deduction benefit u/s 80P(2)(d) of the Act and such tax exemption/deduction was not claimed in the return of income. The assessee supported the claim in the appellate proceedings based on the decision of the Supreme Court in the case of Mahindra Mills reported in 243 ITR 56 pleaded for granting the said deduction with a view to arrive at the correct income for taxation. The Bench after referring to the Supreme Court decision noticed that the interest income was not offered for taxation while as a consequence the claim was not made in the return of income. The Bench even in such circumstances granted the benefit of the said deduction at the appellate stage in terms of section 80P(2)(d) of the Act. The Delhi High Court in the case of Mr. Vijay Gupta decided on 20.03.2016 referred to the decision of the Supreme Court reported in 261 ITR 367 and the Apex Court in the said decision has held that if the assessee has by mistake or inadvertently or on account of ignorance included in his income any amount which is exempted from payment of income tax or is not the income within the contemplation of law, the assessee may bring the same to the notice of Revenue which if satisfied may grant the assessee necessary relief and refund the tax paid in excess if any. Further in the said decision, the Delhi High Court referred to the decision of Bombay High Court reported in 269 ITR page 1 and in the said Bombay High Court decision it is ruled that there cannot be any estoppel against the statute while Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Further it is observed/ruled that acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the same decision, the Delhi High Court referred to another decision of the Bombay High Court reported in 310 ITR 310 and wherein it is observed that tax can be collected only as provided under the Act and if any assessee under a mistake, misconception or not being properly instructed is over assessed, the Revenue under the Act is required to assist him and ensure that only legitimate taxes due are collected.

3.2 Therefore, the AR submitted that the claim for tax exemption for the sale of exempted agricultural lands under consideration cannot be rejected on technical grounds and in fact the essential documents to establish and to fortify the fresh claim are already available on record and examined by the Assessing Officer in the remand report. Therefore, there is absolutely no case for giving credence to the return of income which according to the Appellant was filed incorporating wrong computation of Long Term Capital Gains. The letter of confirmation from the Appellant who is residing at New Zealand is obtained and placed on record to support the above facts. On the cumulative consideration of the facts and in the circumstances of the case, the issue relating to the claim of tax exemption for the sale of exempted agricultural lands may be adjudicated in favour of the Appellant and thus render justice.

In the event of the rejection of the claim for tax exemption for the sale of exempted agricultural lands, the issue relating to reinvestment in the house property eligible for tax exemption/deduction u/s 54F of the Act to the extent of RS.58,72,675/- may be allowed in the interest of justice. In fact, the remand report dated 23.12.2013, the Assessing Officer in the last page accepted the entitlement of the tax exemption/deduction u/s 54F of the Act in the Long Term Capital Gains computation and the first appellate authority has not considered the said issue for appropriate direction/decision in relation thereto.

The assessee did not co operate in the remand proceedings too. On due analysis of available material and due application of the Apex court and High Court ratios, the AO reported to the CIT(A) that the impugned land is not an agricultural land, the assessee has not brought any evidence to prove the claim of expenditure on development of land either during the assessment or during the remand proceedings , he made a round about claim by an after- thought with a motive of depriving the Revenue of its legitimate taxes and hence the AO requested the CIT(A) not to entertain additional evidence etc.The CIT (A) ,after taking into account all the facts and circumstances upheld the assessment. The DR invited our attention to the following portion of the order of the CIT(A)

(ii) As rightly pointed out by the Assessing Officer, the impugned lands have to be held as non-agricultural in nature, for the following reasons: (a) The land is situated in proximity to industrial areas like Guduvanchery, Vandalur etc., on one side and to areas on the OMR (IT hub of Chennai) like Navalur, Siruseri, Kelambakkam etc. (b) The land in question has been sold to a renowned real estate company M/s Casa Grande Limited, who exploited the land for building villas in the Ponmar.

(c) The sale consideration for 5.23 acres is Rs. 4.4 crores, which is a price normally obtained in the sale of building sites. (d) The land has been sold at an astronomical price at which no bonafide agriculturist would purchase nor could afford to purchase for genuine agricultural operations, given other constraints faced by agriculturists in that area like non- availability of assured water supply for irrigation, non-availability of labour for agricultural operations in view of the booming activity in the IT sector in the vicinity of the place and rapid industrial growth in the nearby areas etc. The Assessing Officer has also rightly pointed out that the assessee, having originally offered the Capital Gains arising from the impugned lands to Capital Gains, when confronted with the possibility of disallowance of claim for deduction of Indexed Cost of development amounting to Rs. 2.43 crores for want of evidence, has made a U-turn and only then claimed that the lands are agricultural lands. I fully agree with the Assessing Officer, that this claim itself is clearly an after-thought. Hence, taking into account, all the aforementioned facts, it is seen that the Assessing Officer is justified in rejecting the assessee’s claim that the lands in question are agricultural in nature and bringing to tax the Capital Gains arising from the sale thereof. The Assessing Officer is also justified in denying the claim of indexed cost of expenditure on development of land amounting to Rs. 2.43 crores for want of supporting evidence. The addition made by bringing to tax the Long Term Capital Gains of Rs. 2,68,95,686/-, is upheld.

6. In the result, the appeal is dismissed.

and submitted that the above facts and circumstances of this case are clearly distinguishable with reference to the cases relied on by the AR. So, he pleaded to sustain the orders of the lower authorities.

Computation of Total Income Income from Capital Gain (Chapter IV E) 16419510 Long Term Capital Gain Agriculture Land 10/10/2008 Sales Consideration 44000000 Less: indexed Cost Land 684804 F. 1993-94 287100/244*582 Land Development- 4665064 F.Y.1993-941955800/244*582 Land Development 4238039 F.Y. 1994-95 1886000/259*582 Land Development 3431315 F.Y. 1995-961656700/281*582 Land Development 2794936 F.Y. 1996-97 14,64700/305*582 Land Development 2150411 F. Y. 1997-98 1223000/331*582 Land Development 1715656 F.Y. 1998-991034700/351*582 Land Development 1464126 F.Y. 1999-2000978600/389*582 Land Development 1357235 F.Y. 2000-01 946800/406*582 Land Development 1033255 F.Y. 2001-02756300/426*582 Land Development 1516585 F.Y. 2002-03 1164800/447*582 ------------ 25051426 ------------- 18948574 Deduction u/s 54 2529064 ------------ Income from Capital Gain 16419510

Income from Other Sources (Chapter IV F) 3427 Interest from Bank 342726 Gross Total Income 1676223 Total Income 1676223 Round off u/s 288A 1676223

Tax Due 23546 Tax on Long Term Capital Gain 3283902 Total Tax 3307448 Surcharge @ 10% 330745 3638193 Education Cess 109146 3747339

Interest u/s 234 A/B/C 213597 3960936 Tax payable 3960940 0 Deposit u/s 140A made on 14.05.2009 From the above, it is clear that the assessee has declared long term capital gain of Rs. 1,64,19,510/- on the sale consideration of Rs. 4,00,40,000/-.

While computing the capital gain, he has claimed the indexed cost of land at Rs. 6,84,804/-. Further, he has claimed huge land development cost from financial year 1993-94 to financial year 2002-03, indexed them and arrived such indexed cost of land development at Rs. 2,50,51,426/-. He has claimed this sum against the sale consideration and arrived Rs. 1,89,48,574/- as the capital gain, against which he claimed Rs. 25,29,064/- investment in house property u/s. 54F. Thus, he has arrived the long term capital gains at Rs. 1,64,19,510/-, to which he added Rs. 3,42,726/- interest from bank and arrived the gross total income at Rs. 1,67,62,240/-. On such income, he worked out the tax and interest payable at Rs. 39,60,940/- and paid them on 14.05.2009, although, he filed the return of income of 29.07.2009. The filing of a return in the form prescribed under section 139 is not an empty formality.

It assumes importance when the assessee has paid the self assessment tax on the admitted income. The AO when he considers that it is necessary or expedient to ensure that the assessee has not understated his income in any manner, he requires the assessee, by issue of a notice u/s 143(2) , to produce or cause to be produced before him any evidence on which the assessee may rely in support of the return. In this case, the AO has called for the details of land development expenses etc., which the assessee could not furnish and hence he added Rs. 2,68,95,686/- to the returned income and completed the assessment. As pointed out earlier, after the completion of the assessment, before the CIT(A), the assessee claimed that the impugned land is agricultural land and hence he is not liable to pay the taxes. On the remand proceedings also, the assessee could not furnish any material in support of his plea and hence, the CIT(A) confirmed the assessment. Before us, the assessee pleads that the CIT(A) is wrong in dismissing the appeal in limine for the substantial delay of 117 days in filing the appeal for failing to seek condonation. The assessee pleads that the decision of the CIT(A) without giving him an opportunity is wrong. Since, the CIT(A) has decided the appeal on merit and the issues are being canvassed and considered on merit, we are of the opinion that this issue is academic. On merit, once the assessee files the return, discloses the basis of return and paid the taxes, he cannot claim that he has committed a wrong in admitting certain income before the appellate authority. Even then, the assessee could not furnish any material or evidence as to how his return is wrong , what are the grounds on which such mistake happened, the basic material on which such mistake was detected etc. Further, he could not substantiate his claim either before the CIT(A) or before us. Hence, we do not find any reason to interfere with the order of the :-14-: CIT(A), but for the claim of deduction u/s. 54F. Since, the facts of this case are peculiar as detailed supra, the case laws relied on by the AR are not applicable to the facts of this case and hence, they are not dealt with.

Though, the Assessing Officer has pointed out in the remand report to the CIT(A) that the only relief to which the assessee may be entitled is the deduction u/s. 54F in respect of which additional evidence has been adduced before the department for the first time during appellate proceedings, the CIT(A) has not addressed this issue in his order. Considering the facts and circumstances, we remit this issue back to the AO for a fresh examination.

The AO after giving due opportunity to the assessee shall decide this issue in accordance with law. To this extent, the assesse’s grounds are allowed.

Order pronounced on Friday, the 20th day of April, 2018 at Chennai.