SHRI SURESH AGRAWAL,INDORE vs. THE ITO -5(3), INDORE

आदेश /O R D E R

PER O.P. MEENA, ACCOUTANT MEMEBR.

This appeal is filed by the assessee against the order of ld. Commissioner of Income tax

(Appeals)-II, Indore [hereinafter referred to as the CIT (A)] dated 30.11.2005. This appeal

pertains to Assessment Year 2011-12 as against appeal decided in respect of assessment

order dated 07.02.2014 passed u/s. 143(3) of Income Tax Act, 1961(herein after referred to

as "the Act) by the ITO Ward 5(3) Indore [hereinafter referred to as the AO]. The assessee

has raised originally five number of grounds, which were subsequently revised to four as

under:-

In the facts and circumstances of the case and in law, Ld. CIT (A)-II, Indore, Erred In-

Page 2 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 01. Justifying the action of the Ld.AO in not allowing the deduction to the appellant under part E of chapter IV of the Income Tax Act, 1961 (the Act) from the Long Term Capital Gain arising on sale of agriculture land at Gram Jakhiya. 02. Justifying the action of the Ld.AO in not allowing the deduction to the appellant under part E of chapter IV of the Income Tax Act, 1961 (the Act) from the Long Term Capital Gain arising on sale of agriculture land at Gram Buri Barlai. 03. not considering in the proper perspective, the submissions made relating to the impugned two agriculture land being not capital assets within the meaning of section 2(14) of the Act and holding that no specific ground has been filed on addition made towards long term capital gain. 04. not giving any finding on ground no. 06 before him relating to addition made by the Ld. AO of Rs.1,20,000/- on account of household expenditure.

IV of Income Tax Act,1961 on long term capital gains earned on sale of agriculture land

doctor by profession and has filed his return of income on 22.09.2011 declaring total

income of Rs. 4,08,830/- and showing agricultural income at Rs. 1,00,594/-. The assessee

along with his son Dr. Ankur Agrawal has sold land used for agricultural purpose for sale

consideration of Rs. 77,94,000/- on 23.03.2011. This land was purchased on 01.04.2005 in

the joint name of the assessee and his mother Smt. Bhagwatibai Agarwal for Rs. 3,51,140/-

having ratio of 40:60 at village Jakhiya.. The assessee has shown long term capital gains of

Rs. 31,17,600/- on the cost of acquisition of Rs. 1,38,560/-. The assessee along with his son

has sold this land for total consideration of Rs. 77,94,000/- , but the AO noted that the son

of the assessee has not filed any evidence to show that the impugned land is also owned by

him. Therefore, the AO computed long term capital gains at Rs. 72,91,665/- by taking whole

sale consideration of Rs. 77,94,000/- in the case of the assessee i.e. [sale consideration Rs.

77,94,000 less index cost of acquisition of Rs. 5,02,335( 351140x711/497)] and taxed in the

case of the assessee. Similarly, the assessee has also sold agriculture land situated at village

Buri Barlai by executing registered Power of Attorney on 15.06.2010 in favour of Shri

Page 3 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 Nathulal for Rs. 8,70,411/- which was acquired by the assessee on 01.01.2004 for Rs.

1,71,487/- . However, the AO considered the sale consideration at Rs. 14,00,000/- on the

basis of sale deed executed on 14.06.2011 by the assessee along with Power of Attorney

holder Shri Nathulal in favour of purchaser Shri Dinesh. Accordingly, the AO computed long

term capital gains at Rs. 12,28,513/- i.e. [ 14,00,000 – index cost of acquisition 1,71,487 i.e.

(1,11,672x711/463)] and brought to tax in the hands of the assessee.

appellate proceedings, the assessee had filed additional evidences showing the evidence of

ownership of land situated at Gram Jakhiya evidencing that the impugned land sold was

belonged to the assessee and his son Dr. Ankur Agrawal in the ratio of 40:60. The assessee

had also claimed deduction under section 54B of the Act in respect of previously mentioned

sale of two-agriculture land. The Ld. CIT (A) had send the additional evidence to the AO for

his comments and obtained a remand report from the AO. The CIT (A) noted that Smt.

Bhagwati Rai (mother of the assessee) died on 27.04.2008 as per her death certificate. As

per the Will of Smt. Bhagwati Rai , her the grandson Dr. Ankur Agrawal had becomes the

60% shareholder of land situated at Gram Jakhiya. The Ld. CIT (A) also found that Dr. Ankur

Agrawal has also filed his return of income reflecting his share of sale consideration of Rs.

46,76,400/- of said land and claiming deduction u/s. 54B of the Act. Accordingly, the CIT (A)

has directed the AO to consider sale consideration only of 40% in the hands of the assessee.

The CIT (A) further observed that the assessee is not eligible for deduction u/s. 54B of the

Act. The CIT (A) also noted that the assessee has been changing his stand of claim by

claiming that said land is not asset within the meaning of section 2(14) , therefore, the AO

was justified in rejecting the claim under Chapter IV of Income Tax Act,1961. Concerning

another land situated at village Buri Barlai, the CIT (A) observed that the AO has computed

Page 4 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 long-term capital gains by taking sale consideration at Rs. 14 lakhs without considering

deduction u/s. 54D and 54F for the detailed reasons discussed in the assessment order. The

CIT (A) was of the view that the appellant has not filed specific ground on the point, hence,

written submissions could not be taken into consideration on the issue, and accordingly the

appeal was dismissed.

that the assessee has sold land situated at village Jakhiya for Rs. 31,17,600/-( being 40% of

his share as allowed by the CIT(A)) of which index cost was at Rs. 1,98,222/- . Thus, the

assessee has earned long term capital gains of Rs. 29,19,378/- on sale of this agricultural

land. Similarly, the assessee has also earned long term capital gains of Rs. 8,07,484/- ( sale

consideration of Rs. 8,70,411- index cost of acquisition 62,927) for the land sold at village

Buri Barlai. The Ld. A.R. submitted that the assessee is eligible for deduction under section

54B of the Act, as he has made investment of Rs. 22, 41, 974 /- in purchase of land on

26.10.2010 at village Bardani and for Rs. 8, 96, 460 /- on 10.06.2010 by purchasing another

land at village Alwasa. The assessee has also made investment of Rs. 25,50,000/- on

02.03.2012 in agriculture land situated at village Bhorsala. That the Ld. A.R. submitted that

the assessee has made investment of Rs. 31,38,434/0 i.e. [ 22,41,974+8,96,460) period

prior to date of filing of return of income i.e. 22.09.2011, hence, the assessee is eligible for

deduction u/s. 54B of the Act of that amount. For the balance of Rs. 5, 88,484/- the assessee

has made investment of Rs. 25,50,000/- within two years from the sale of agriculture land

and before the completion of assessment. Therefore, the assessee is also eligible for

deduction of that amount u/s. 54B of the Act. The Ld. A.R. further contended that the

assessee has invested enter sale consideration of sale of original assets in new assets hence,

he is eligible for deduction u/s. 54B of the Act. The Ld. A.R. submitted that by inadvertent

Page 5 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 mistake the section was mentioned as 54D of the Act, however, it was revised by filing

revised calculation and claiming deduction u/s. 54B of the Act as could be seen from page

No 63 of Paper Book. The Ld. A.R. further submitted that the issue relating to share in land

sold by the assessee has been allowed by the ld. CIT (A) against which the Department has

not filed any appeal before the tribunal. Therefore, it was urged before us that the issue

required to be adjudicated is the allowance of deduction u/s. 54B of the Act. The Ld. AR

submitted that the mentioning of wrong section for claim of deduction does not make the

assessee for disentitle of claim u/s. 54B. Therefore, the assessee is entitled for the claim of

deduction u/s. 54B of the Act. The Ld. AR referred the CBDT Circular No. 14(XL-35) dated

11.04.1955 to contend that the officers of the department must not take advantage of

ignorance of the assessee as to his rights. The officers should take the initiative in favour of

the tax payers during the proceedings, where proceedings or other particulars before them

indicate that some refund or relief is due to him. The Ld. AR also relied on the decisions of

ITAT Indore Bench in the case of Paramjeet Singh Chhabra (2013) Taxpub (DT) 2001 (Ind

Trib) as dealt with the similar issue wherein wrong section was mentioned by the assessee

and relief was granted by referring to the CBDT Circular dated 11.04.1955. Similar decision

was rendered by the ITAT Rajkot in the case of Rupam Impex (2016) 66 taxmann.com 181

(Rajkot). The Ld. AR also submitted that the Assessing Officer observed that since the

impugned land are converted lands, hence, no deduction is permissible on the capital gains

arising on their sale. However, the Ld. CIT (A) has not given any adverse findings on this

aspect and has partly allowed the appeal. The Ld. AR further submitted that the assessee

has demonstrated with ample documentary evidences on record that the impugned land

were used for agricultural purpose before the sale and the assessee had regularly offered

agricultural income in his returns of income as reflected at page 7 and 12 of appellate order

Page 6 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 of Ld. CIT(A) wherein agricultural income shown in earlier years is mentioned. It was

submitted that for claiming deduction u/s. 54B, it is the use of the land for agricultural

purpose irrespective of type of land holding. In support of this proposition the Ld. AR has

relied in the case of Shri Bhagwanbhai Revabhai Prajapati (2015) 60 taxmann.com 219(Ahd.)

wherein it was held that once it is established that land owned by the assessee has been

used for agricultural purpose. He becomes entitle for claim u/s 54B on sale of land even if he

is not a cultivator but gets it cultivated under his supervisions. The Assessing Officer has also

placed reliance in the case of Asha George vs. Income Tax Officer (2013) 351 ITR

0123/(2013) 214 taxman 0236 (Ker) wherein it was held as under:

“ emphasis u/s 54B is use to which land is put- It is not necessary that land which is

transferred, must be an agricultural land as such fact that land is located in an urban area,

cannot by itself be relevant to deny benefit u/s 54B-Requirement of Section 54B is that

assessee must establish that land was being used for agricultural purpose for a period of two

year prior to date of transfer-finding of fact, at any rate, cannot be overturned based on re-

appreciating material which was considered by tribunal which is final fact finding authority –

finding of fact rendered u/s 54B is not perverse-At any rate, there can be no basis for

invoking section 54B for deduction value of land purchased.

Gram Budi Barlai took sale consideration of Rs.14 lakhs based on the registered sale deed.

However, the assessee had completed his part performance of the contract and transferred

the said land to one Shri Nathulal vide sale agreement and registered power of attorney for

Rs.8,70,411/- on 15.06.2010 as reflected at paper book pages nos. 52 to 53. It was

submitted that the assessee had received the agreed sale consideration and possession was

duly handed over to Shri Nathulal. Thus, it was claimed that the sale was complete viz a viz

Page 7 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 the assessee within the meaning of section 53A of the Transfer of Property Act, 1882 R.W.

Section 2(47) (v) of the Act. Therefore, it was contended that on a subsequent date i.e.

14.06.2011 Shri Nathulal entered into another sale transactions of Rs.14 lakhs and the

registered sale deed was executed under the previously mentioned registered Power of

Attorney. As reflected at page 54 to 60 of paper book by Shri Nathulal, power of attorney

holder in favour of Shri Dinesh son of Nathulal. Therefore, considering these facts the

Assessing Officer ought to have taken the sale consideration at Rs.8, 70,411/- as disclosed in

the return of income by the assessee.

long term capital gain of Rs.37,26,862/- and Rs.31,38,434/- were invested prior to filing of

return of income on 22.09.2011. Balance Rs. 5,88,428/- remained to be invested which was

also done by the assessee when agricultural land was purchased on 02.03.2012 at gram

Bhorasala for a sum of Rs.25,50,000/-. Thus remaining amount of Rs.5,88,428/- was

invested within the period of two years from the date of sale of original assets and before

the completion of impugned assessment. The AR submitted that the plain reading of (2) of

section 54B, makes it clear that only section 139 is mentioned. In section 54B(2), in the

context that the unutilized portion of the capital gain on the sale of land used for agriculture

purpose should be deposited before the date of furnishing the return of the income u/s 139.

Section 139 cannot mean only section 139(1) but it means all sub-sections of section 139. In

support of this proposition the Ld. AR placed reliance in the case of Ashok Kapasiawala

(2015) 63 taxmann.com 284 (Ahmedabad-Trib). Though, on section 54F(2), principal of

which is equally applicable in the instant case of section 54B. Hon'ble Bench has followed

the decision of Hon'ble Karnataka High Court in the case of K. Ramachandra Rao (2015) 56

taxmann.com 163(Kar) while giving relief to the assessee. It was submitted that section 54B

Page 8 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 is a beneficial provisions for an assessee who is otherwise liable to pay income tax under the

head capital gains.

We have considered rival submission perused the facts on record. We find that the assessee

and his son Dr. Ankur Agarwal have sold agricultural land situate at Gram Jakhiya on

23.03.2011 for a sale consideration of Rs.77,94,000/-. The Assessing Officer has considered

the entire sale consideration in the case of assessee whereas the Ld. CIT(A) on the basis of

Additional evidences and Will of mother of the assessee, held that the assessee had 40%

share in the impugned land sold by the assessee with his son Dr. Ankur Agrawal, therefore,

the assessee has shown sale consideration at Rs.31,17,600/- ( being 40% share) on which

index cost is considered at Rs.1,98,222/- on which long term capital gains has been

computed at Rs.29,19,378/- so for the share of assessee in the lands sold is not disputed as

of now as the department has not filed any appeal against the order of Ld. CIT(A) on this

issue. Thus, the assessee has earned long term capital gains of sale of land situated at village

Jakhiya at Rs.29,19,378/- out of his share of sale consideration of Rs. 31,17,600 being 40% of

total sale consideration. Similarly, as regards sale of land situated at Budi Barlai village, the

assessee has shown sale consideration of Rs.8,70,411/- whereas the Assessing Officer has

considered the same at Rs.14 lakhs on the basis of registered sale deed executed on

14.06.2011 by Shri Nathulal. We have pressed the register power of attorney holder as

appearing to page no.46 to 49 of the paper book which shows that the assessee has already

sold said this land to Shri Nathulal on 15.06.2010 for sale consideration of Rs.8,70,411/- as

per registered power of attorney executed in favour of Shri Nathulal. Since the assessee has

received the agreed sale consideration (reflected at page No 49A of paper book) the sale

agreement to sale as per Power of Attorney executed is appearing at page No 46 to 49 of

Page 9 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 paper book. We also find the assessee has disclosed the sale consideration in his return of

income for the assessment year under consideration at Rs. 8,70,411/-. We also find that the

assessee has handed over physical possession of the agriculture land and his rights therein,

therefore, there is transfer of immovable property within the meaning of section 53A of the

Transfer of Property Act 1882, r.w. section 2(47)(v) of the Income Tax Act,1961. Considering

these circumstances we are of the considered opinion that the AO should have taken sale

consideration at Rs. 8,70,411/- on sale of this land and not Rs. 14 Lakh which otherwise does

not fall under the assessment year under consideration. Therefore, we direct the Assessing

Officer to consider the sale consideration at Rs. 8,70,411/- and consider the capital gain at

Rs.8,07,484/- after allowing index cost of Rs.62,927/-in the case of the assessee. In view of

these facts, we find that the assessee has earned long term capital gains from these two

transfers of agricultural land at Rs.37,26,862/- as against the which the assessee has made

investment of Rs.31,38,434/- prior to filing return of income on 20.09.2011 towards

purchase of land at Bardari and Alwasa Land on 26.10.2010 and 10.06.2011 respectively.

Therefore, the assessee is entitled to deduction u/s. 54B to that extent. The assessee has

further made investment of Rs.25,50,000/- in purchase of land at Bhorasla on 02.03.2012.

Further, we find from the record of the assessee appearing at page no.13 to 19 and from the

appellate order at page 7 & 12 that the impugned land were used for agricultural purpose

and the assessee has shown agricultural income in his return of income prior to sale of

agricultural land. Therefore, subsequent conversion of land is immaterial for the purpose of

applicability of section 54B of the Act. This view also supported the decision of Hon'ble

Kerala High Court in the case of Asha George vs. Income Tax Officer (supra) as relied by the

Ld. AR. Wherein catch note read as “ emphasis u/s 54B is use to which land is put- It is not

necessary that land which is transferred, must be an agricultural land as such fact that land

Page 10 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 is located in an urban area, cannot by itself be relevant to deny benefit u/s 54B-Requirement

of Section 54B is that assessee must establish that land was being used for agricultural

purpose for a period of two year prior to date of transfer-finding of fact, at any rate, cannot

be overturned based on re-appreciating material which was considered by tribunal which is

final fact finding authority –finding of fact rendered u/s 54B is not perverse-At any rate,

there can be no basis for invoking section 54B for deduction value of land purchased. In the

light of ratio to this decision we are of the view that the land transferred must be an

agricultural land and used for the purpose of agricultural prior to two years on date of

transfer. These facts are applicable in the case of the assessee. Therefore, provisions of

section 54B are applicable in this case. As regards quantum of deduction u/s. 54B is

concerned, We find that the assessee has invested Rs. 31,38,434/- prior to filing of return of

income. Therefore, the deduction of Rs. 31,38,434/-is available to the assessee u/s. 54B of

the Act from the long term capital gain of Rs.37,26,862/- with regard to balance long term

capital gains of Rs.5,88,428/-( 37,26,862- 31,38,434), We find that the assessee though

made investment within two year of sale, but the assessee has not deposited the unutilized

long term capital gains in specified capital gains scheme as per provision of section 54B(2) of

the Act read with section 139(1) of the Act. The unutilized portion of the capital gain was

required to be deposited in the bank or institution as specified by the Central Government

before furnishing of income u/s 139(1) as prescribed under the provisions of section 54B (2)

of the Act. Since the assessee has failed to deposit the same in the capital gain scheme or

account, therefore, in our considered view, the assessee is not entitle to deduction to the

extent of Rs.5, 88,428/- . This view of us is also supported by the decision of Hon'ble

Bombay High Court in the case of Humayan Sulemane Merchant Vs. CCIT (2016) 387 ITR

421 (Bom) wherein it was held that failure to deposit the amount of consideration not

Page 11 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 utilized towards the purchase of new flat in the specified bank account before the due date

of filing return of income u/s 139(1) is fatal to the claim for exemption. The fact that the

entire amount has paid to the developer/builder before the last date to file the return of

income as irrelevant. The contrary view taken in the case of K. Ramachandra Rao 277 CTR

522(Kar) is sub-silintio in the said decision. Since the assessee has invested the amount of

Rs.31,38,434/- in purchase of new asset before the due date of filing of return hence same

is allowable as deduction u/s 54B and balance amount of Rs.5,88,428/- has not been utilized

towards deposit in capital gains scheme and hence, same is not allowable as deduction u/s.

54B of the Act. In the light of these facts, the ground no. 1 to 3 is partly allowed.

of household expenditure, which is not decided by the Ld. CIT(A). even though submissions

of the assessee and ground were reproduced in appellate order.

Rs.48,350/- therefore the assessee was asked to explain the details of expenses incurred for

house hold, it was explained by the assessee that all family member are separately assessed

and bear the household expenses for the family, therefore, household withdrawal as shown

by the assessee and family members are reasonable and should be considered as a whole

for the family members. However, Assessing Officer did not consider these facts and made

addition of Rs. 1,20,000/- on this account.

assessment proceedings that all the members having sufficient drawing which are as under:

Name of Person Drawing (Rs.) Ankur Agarwal 1,21,280 Suneeta Agarwal 40,350

Page 12 of 12 Shri Suresh Agrarwal, Indore vs. ITO5 (3) /ITA No. 251/Ind/2016/A: Y: 2011-12 Sunila Agarwal 55,560 Suresh Agarwal 48,530 2,65,540

Thus, the aggregate household expenses of the all the family members comes to at Rs. 2, 65,540/- and the family members have incurred expenses at Rs. 2,32,247/-separately for LIC. The House of the assessee is self-owned and there are no rental expenses, there are school neither going kids nor the Assessing Officer as pointed out any specific material or point or defects. Thus, the assessee has shown higher expenses incurred by the assessee, therefore estimated addition of Rs.1,20,000/- is without any basis or pointing out any defects.

Sd/- Sd/- (डी.ट�.गरा�सया) ओ.पी.मीना) �या�यक सद�य लेखा सद�य (D.T.GARASIA) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 17th January, 2017/opm