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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: These cross appeals of the Revenue and the assessee respectively are directed against the order dated 15/05/2012 passed by the learned Commissioner of Income-tax (Appeals), Rohtak, for 2 & 3543/Del/2012 AY: 2009-10 assessment year 2009-10. As both the appeals have been emanated from the same order of the learned Commissioner of Income-tax (Appeals), same are being heard together and disposed off by this consolidated order. The grounds of appeal raised by the Revenue in ITA No. 3839/Del/2012 are as under:
“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing the AO to adopt the Fair Market Value of agricultural Land on 01.04.1981 at Rs. 10,45,000/- which is estimated one and has not been arrived ( by the Sub Registrar) on sound basis.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in accepting the additional evidence as during assessment proceedings sufficient apportunities were provided by the AO to assessee who did not discharge the onus to provide the Fair Market Value as on 01.04.1981 from authentic/appropriate authority.
3. On the facts and in the circumstances of the case, the Ld. CTT(A) has erred in accepting the view of Sub Registrar that the Market Rate of Agricultural Land would be at four times of the collector rate as this is not basis for this estimate. Sub-Registrar was supposed to give Fair Market Value based on comparable instance or other revenue records maintained in his office. No supporting evidences were made available by the Sub Registrar to prove the basis on which the Market Valuation of land in question has been arrived at Rs. 10,45,000/- (@Rs.8 Lacs per acre) 4. The Appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.”
The grounds of appeal raised by the assessee in are as under:
That on the facts and in the circumstances of the case and in law, the authorities below erred in denying exemption u/s 54B of the Income- tax Act, 1961. The assessee having complied with the requirements of 3 & 3543/Del/2012 AY: 2009-10 investment in terms of the cited section was entitled to the exemption. The authorities below be directed to allow the same as per law.
The facts in brief of the case are that the assessee was engaged in running a petrol pump. The assessee filed return of income declaring income of Rs.2,61,417/- on 30/09/2009. In this return, income from capital gain was shown as nil. The case of the assessee was selected for scrutiny and statutory notice under section 143(2) was issued and complied with. The Assessing Officer found some deposits in bank accounts, which were not disclosed in the ‘AIR’ portion of the return of income. It was explained by the assessee that the said deposits were made out of the sale proceeds of certain agricultural land and also out of loans raised from friends and relatives. From the submission of the assessee, the Assessing Officer observed that the assessee sold agricultural land on 31/03/2009, which was jointly held by him with his father, Sh. Bhim Sen for a consideration of Rs.1,21,79,806/-. It was further explained by the assessee that a sum of Rs.64,06,750/-was invested in acquisition of a new asset, i.e., agricultural land and, therefore, the capital gain being exempt under section 54B of the Act, the capital gain was declared as nil in the return of income. 3.1 According to the Assessing Officer, the assessee was not eligible for deduction under section 54B of the Act because of the reason that the capital gain arising out of the sale consideration of the transferred assets was not utilized for acquisition of the new agricultural land in view of the following facts: i) The assessee sold his share of agriculture land jointly held with his father, for a sum of Rs.60,89,903/- on 31.03.2009. ii) Out of the total sale-proceeds of the transferred agriculture land, the assessee received sales consideration at Rs.60,00,000/- 4 ITA No. 3839 & 3543/Del/2012 AY: 2009-10 on 24.10.2008 and the balance amount of Rs.89,903/- on 31.03.2009. iii) The assessee purchased two chunks of agriculture land jointly with his father 13.10.2008 and 23.10.2008 and the payments for purchase of new lands have been made before 23.10.2008 i.e. all the payments have been made before receipt of sale consideration of the transferred agriculture land.
3.2 After taking into consideration the submission of the assessee, the Assessing Officer held that the amount of capital gain arising out of the transfer of agricultural was not invested in the purchase of the new agricultural land and, therefore, assessee was not allowed the claim of deduction under section 54B of the Act. 3.3 The Assessing Officer asked for evidence in support of cost of acquisition of the transferred agriculture land or its fair market value as on 01.04.1981 for computing the capital gains, however, in absence of any reply from the assessee, the Assessing Officer computed the cost of acquisition as nil and computed the capital gain from the transfer of agriculture land as follows: sale price of agricultural land : Rs. 60, 89, 903/- less: cost of acquisition : Rs. Nil long-term capital gains : Rs. 60, 89, 903/- 3.4 Aggrieved with the order of the Assessing Officer, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals) and filed the certificate from the ‘Tehsildar’ in support of the fair market value of the transferred agricultural land as 01/04/1981, as additional evidence in terms of Rule 46A of the Income Tax Rules, 1962. The learned Commissioner of Income-tax (Appeals) forwarded the additional evidences to the Assessing Officer and after getting remand report and the rejoinder of the assessee, he allowed the claim of the assessee of 5 & 3543/Del/2012 AY: 2009-10 cost of acquisition of the transferred land and directed the Assessing Officer to compute the long-term capital gain accordingly. 3.5 On the second issue of deduction under section 54B of the Act the learned Commissioner of Income-tax (Appeals) disallowed the claim holding that the assessee had not fulfilled the conditions for availing deduction under section 54B of the Act as the amount invested in purchase of new agricultural land was prior to receipt of advance for sale of land. 3.6 Aggrieved with the findings of the learned Commissioner of Income-tax (Appeals), both the Revenue and the assessee are in appeal raising the grounds as reproduced above.
ITA No. 3839/Del/2012.
First we take up the appeal of the Revenue in ITA No. 3839/Del/2012.
The effective ground of the Revenue is that the learned Commissioner of Income-tax (Appeals) was not justified in adopting the fair market value of the transferred agricultural land as on 01/04/1981 at Rs.10,45,000/-. 5.1 The learned Sr. Departmental Representative addressing the grounds submitted that the learned Commissioner of Income-tax (Appeals) was not justified in accepting the additional evidence under Rule 46A of the Income Tax Rules as sufficient opportunities were provided by the Assessing Officer to the assessee for submitting evidence in support of fair market value as on 01/04/1981. He further submitted that the direction of the learned Commissioner of Income-tax (Appeals) to adopt fair market value of the transferred agriculture land at Rs.10,45,000/- which was only an estimate arrived by the Tehsildar, is without any sound basis. He submitted that there was no basis in the 6 & 3543/Del/2012 AY: 2009-10 statement of the Sub-Registrar (Tehsildar) that the market rate of the agricultural land would be four times of the collector rate or the rate determined for stamp value purpose. He further submitted that the sub registrar did not provide any evidence in support of the basis of the market value of the land in question. 5.2 On the other hand, the learned Authorized Representative of the assessee relying on the order of the learned Commissioner of Income Tax (Appeals), submitted that the assessee was not provided sufficient opportunity by the Assessing Officer for submitting the evidence in support of fair market value of the transferred agricultural land and, therefore, the learned Commissioner of Income Tax (Appeals) has validly accepted the additional evidences produced by the assessee. He further said that those additional evidences were forwarded to the Assessing Officer for his comments and after taking into his comments, the learned Commissioner of Income-tax (Appeals) has agreed with the contention of the assessee of having fair market value of the transferred agricultural land at Rs.10,45,000/- and accordingly, he directed the Assessing Officer to compute the capital gain. Accordingly, he prayed that finding of the learned Commissioner of Income-tax (Appeals) on the issue in dispute might be upheld. 5.3 We have heard the rival submission and perused the material on record, including the paper book filed by the assessee. We find from the ground No. 2 taken by the Revenue that the Revenue has objected to the additional evidences admitted by the learned Commissioner of Income-tax (Appeals) in respect of fair market value of the land in question as on 01/04/1981. From the facts of the case, we find that the assessee was not granted sufficient opportunity of hearing by the Assessing Officer for producing evidence in support of fair market value, which is evident from the assessment order and, therefore, in our 7 & 3543/Del/2012 AY: 2009-10 opinion, the action of the learned Commissioner of Income-tax (Appeals) of admitting the additional evidence is in interest of justice and in accordance to the law. Thus, ground No. 2 of the appeal is dismissed.
In grounds No. 1 and 3 of the appeal, the main issue in dispute before us is in respect of the fair market value as on 01/04/1981 of the agricultural land at Basti, Bhiwan, Fatehabad, which was transferred by the assessee and his father (each having half share) to M/s. Soma New Towns Private Limited for Rs.1,21,79,806/. Before the Assessing Officer, the assessee did not furnish any evidence and, therefore, he adopted the fair market value at nil. Before the learned Commissioner of Income-tax (Appeals), the assessee submitted a certificate from the office of the Tehsildar, Fatehabad, in which the fair market value of the land in question as on 01/04/1981 was estimated at Rs.10,45,000/-. The copy of the said certificate has been placed by the assessee at page 31 of the paper book. In the said certificate, the officials of the office of the Tehsildar has reported to the Tehsildar that rates of the land in question were Rs.8,00,000/- per acre and, thus, the estimated value should be Rs.10,45,000/-.
In the remand proceeding, the Assessing Officer asked the Tehsildar to provide the basis of calculation for arriving at the fair market value. The contention of the reply of the Tehsildar has been reproduced by the Assessing Officer in remand report, a copy of which is placed on page-34 to 35 of the paper book. The learned Commissioner of Income- tax(Appeals) in para-4.1 of the impugned order has produced the contents of the remand report as under: “4.1 The remand report of the Assessing Officer inter-alia states that a letter was written to Tehsildar Fatehabad for confirmation of the certificate issued by him on 18.01.2012 regarding the FMV of the agriculture land as on 01.04.1981 and also to supply a copy of the calculation sheet and the basis for arriving at the FMV. It was stated in the report of Tehsildar, Fatehabad that agriculture land in the 8 ITA No. 3839 & 3543/Del/2012 AY: 2009-10 vicinity of the agriculture land of the assessee was transacted in the year 1977 at Rs.1,42,222/- per acre and taking 10% increase per year, it comes to Rs.2,08,225/- per acre in the year 1981. Generally, the market rate is about 4 times the Collector rate and therefore FMV comes to Rs.8.00 lacs per acre in 1981. Further, local enquiries aloso confirm the above position.”
On the perusal of the said certificate of the Tehsildar and subsequent explanation given to the Assessing Officer, we find that there is no basis for estimation of the fair market value in the report of the Tehsildar. We find that the Tehsildar has provided sale instance of 1977 and on the basis, he arrived the rate for the year 1981 at Rs.2,08,225/- per acre. But thereafter, he mentioned that generally the market rate was four times the rate adopted by the Collector for stamp duty purpose and, therefore, the market value of the land in question should be Rs.8.00 lacs per acre. We find that the Tehsildar has not provided any basis for taking four times of the stamp duty value as the fair market value of the land in question. Thus, the fair market value of Rs.10,45,000/- as on 01/04/1981 stated by the Tehsildar is not based on value adopted by his office for the purpose of stamp duty valuation. The valuation of the Tehsildar is based on guesswork and not based on the sound evidences or Rules, which could justify the market value as four times the value adopted for stamp duty purposes. In such circumstances, in our opinion the directions given by the learned Commissioner of Income-tax (Appeals) to the Assessing Officer to adopt the fair market value of the agricultural land transferred as on 01/04/1981 at Rs. 10, 45,000/- is not justified.
In view of the facts and circumstances of the case, we feel it appropriate to restore the matter to the file of the Assessing Officer with the direction to make a reference to the valuation officer in terms of 9 & 3543/Del/2012 AY: 2009-10 section 55A of the Act for ascertaining the fair market value of the land transferred by the assessee and then compute the capital gain in accordance with law. Nevertheless to mention that the assessee shall be provided sufficient opportunity of hearing. The grounds No. 1 and 3 of appeal are allowed for statistical purpose. 10. In the result, appeal of the Revenue is allowed partly for statistical purpose.
Now we take up the appeal of the assessee in ITA No. 3543/Del/2012. The sole ground raised
is in respect of denial of deduction under section 54B of the Act.
12. The contention of the Assessing Officer is that the money was received by the assessee on transfer of land on 24/10/2008, which was subsequent to the investment made by the assessee in the new agricultural land purchased on 13/10/2008 and 23/10/2008 and, therefore, the assessee has not utilized the sale consideration of the transferred asset for acquisition of the new agricultural land. The contention of the assessee, however, are that the agreement for transfer of land was made on 03/06/2008 and the possession was duly handed over to the buyer on said date and, therefore, the capital gain accrued to the assessee on said date, whereas the investment in the new agricultural land was made on 13/10/2008 and 23/10/2008 and, therefore, the assessee is eligible for deduction under section 54B of the Act.
13. Before us, the learned Authorized Representative of the assessee relying on the submission made before the learned Commissioner of Income-tax (Appeals) submitted that on delivery of the physical possession of the agricultural land on 03/06/2008 in pursuance of an 10 & 3543/Del/2012 AY: 2009-10 agreement educated on 03/06/2008, a cheque amounting to Rs. 60 Lacs was received by one of the co-owner of the property, in part performance of the contract of the nature referred in Section 53A of the Transfer of Property Act, 1882 and, hence the capital gain in the case of the assessee has arisen on 03/06/2008 i.e. the date of transfer of the property within the meaning of section 2(47)(V) of the Act and therefore the assessee should be allowed deduction under section 54B of the Act.
We have heard the rival submission and perused the relevant material on record. On perusal of the submissions of the parties, it is evident that the sale consideration on transfer of the asset was received by the assessee on 24/10/ 2008 and investment in the new agricultural land was made on 13/10/2008 and 23/10/2008, which is prior to the receipt of sale consideration and, therefore, the money received on account of capital gains has not been utilized towards purchase of new asset. It is relevant to reproduce the section 54B of the Act as under : “Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases. 54B. (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee being an individual or his parent, or a Hindu undivided family for agricultural purposes (hereinafter referred to as the original asset), and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— (i) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or 11 & 3543/Del/2012 AY: 2009-10 (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain. (2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
We find from the plain language of section 54B of the Act that benefit under section would be allowed when the capital gain arising on transfer of land used for agricultural purposes, is invested in the purchase of new agricultural land within two years from the date of the agricultural land transferred. Thus, the thrust is on the utilization of the money received on sale of the agricultural land leading to capital gain towards purchase of new agricultural land. The learned Commissioner of Income-tax (Appeals) has decided the issue in dispute as under: “7. The denial of exemption u/s 54B was contested in grounds no. 3 to 6 of appeal. The submissions made by the AR in this regard are summarized as under:-
The possession of the agriculture land sold was given on 3.6.2008 itself as mentioned in the sale deed executed on 31.3.2009. Therefore, the transfer took place on 3.6.2008 itself in terms of the provisions of section 2 (47) (v) r w s. 53A of Transfer of Property Act. In support of the contentions, the AR relied upon a number of case laws; including that of the jurisdictional High Court in CIT Vs Sodhi Harbhajan Singh, [2011] 200 Taxman 149 (P&H). The assessee invested Rs 64,06,750/- by purchase of agriculture lands on 13.10.2008 and 23.10.2008 out of the advance received of Rs 60.00 lacs on 3.6.2008 from the sale of agriculture lands. This investment is therefore eligible for exemption u/s 54B and the AR relied upon the case law of Hon'ble ITAT Mumbai Bench 'J' in the case of Mrs. Prema P Shah Vs ITO [2006] 100 ITD 60 (Mumbai) and other case laws along with Circular No. ,359 dated 10.05.1983 of CBDT in connection with the relief u/s 54E.
8. I have considered the issue and the submissions made by the AR, Since the possession of the agriculture land was given on 3,6.2008 itself after receipt of advance of Rs 60.00 lacs, as recorded in the sale deed dated 31.03.2009, the transfer of the asset is deemed to hdve taken place on 3,6,2008 itself in view of the provisions of section 2 (47) (v) r.w.s. 53A of Transfer of Property Act, being part performance. However, this advance of Rs 60.00 lacs on 3.6.2008 was given to the father of the assessee Sh. Bhim Sain and the assessee received the advance of Rs 60,00 lacs only on 24.10.2008. Since the assessee invested Rs 60,89,903/- in the acquisition of agriculture lands on 13.10.2008 and 23.10.2008, before the receipt of advance of Rs 60.00 lacs, it cannot be stated that the assessee invested the capital gain arising out of the sale of the agriculture land in the specified assets u/s 54B. The conditions for availing the exemption u/s 54B have therefore not been fulfilled by the assessee. The case laws relied upon by the AR are distinguishable on facts. In view of the above, the action of the AO in disallowing the claim of exemption u/s 54B is upheld and the grounds of appeal are dismissed.”
16. We find that the learned Commissioner of Income-tax (Appeals) after considering the submission of the assessee has arrived at conclusions that assessee has not fulfilled the conditions for availing the benefit under section 54B of the Act. In our opinion, the order of the 13 & 3543/Del/2012 AY: 2009-10 learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference on our part is required. Accordingly, the ground of the appeal is dismissed.
In the result, appeal of the Revenue is allowed partly for statistical purpose and the appeal of the assessee is dismissed The decision is pronounced in the open court on 21st October, 2016.