M/S SIDDHULA;L,BHOPAL vs. THE ITO 2(2) BHOPAL, BHOPAL

आदेश / O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by appeal-order dated 03.02.2023 passed by learned Commissioner of Income-Tax (Appeals), NFAC, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 27.12.2016 passed by learned [“AO”] u/s 143(3) r.w.s. 147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2011-12, the assessee has filed this appeal on following grounds:

“(1) The Ld. CIT(A) was not justified in sustaining the addition of Rs. 46,13,227/- under capital gain, which is bad in law, void ab initio, illegal, contrary to the facts, records, submissions and circumstances of the case, liable to be annulled.

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M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal ITA No. 110/Ind/2023 – AY 2011-12

(2) That the Ld. CIT(A) erred in denial of deduction u/s 54B of the Income-tax Act, 1961, without considering the facts, submissions and circumstances of the case, which is liable to be annulled. (3) The Ld. CIT(A) was not justified in not considering the provision of section 50C(2) of the Income-tax Act, 1961, i.e. Valuation Rules. (4) That on the facts and circumstances of the case, the Ld. CIT(A) erred in sustaining charging of interest u/s 234A and 234B which is unjustified. (5) The Ld. CIT(A) was not justified in sustaining the levy of penalty u/s 271(1)(c).

case of assessee-individual, the AO received an information that the

assessee sold a land on 06.09.2010 for Rs. 35,00,000/-, having stamps

valuation of Rs. 48,05,000/- and earned capital gain. Accordingly, to assess

the same, the AO issued notice u/s 148. In response, the assessee filed

return declaring a total income of Rs. Nil. The AO, however, completed

assessment after making an addition of Rs. 46,13,227/- on account of long-

term capital gain, calculated as under:

Full value of consideration 48,05,000

Less: Indexed cost of acquisition 1,91,773

Long-term capital gain 46,13,227

Aggrieved, the assessee went in first-appeal but did succeed. Now, the

assessee has come in next appeal before us on grounds mentioned earlier.

Ground No. 1 to 3:

assessed by AO at Rs. 46,13,227/-. Ld. AR for assessee made certain

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specific pleadings qua these grounds and we confine our adjudication to the

pleadings made before us and argued by both sides. Ld. AR pointed out that

the assessee has two-fold grievances, namely (i) the lower-authorities are

wrong in not allowing the benefit of 1st proviso to section 50C(1), and (ii) the

lower-authorities are wrong in not giving benefit of exemption u/s 54B to

assessee.

Benefit of 1st Proviso to section 50C(1):

section 50C(1) was although enacted through Finance Act, 2016 w.e.f.

01.04.2017 but both sides agree that as per judicial rulings, it was

retrospective in operation and applicable to AY 2011-12 under consideration

before us. Hence, there is no dispute between parties on this aspect.

registered-deed dated 06.09.2010 for Rs. 35,00,000/- and admittedly the

valuation done by stamps authority was Rs. 48,05,000/- on that day but

the lower-authorities have ignored an important fact that the sale was made

pursuant to an agreement dated 29.09.2006, copy of agreement is filed at

Page No. 22-25 of Paper-Book. Ld. AR submitted that the 1st proviso to

section 50C(1) provides thus:

“Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:”

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Thus, according to 1st proviso, the assessee was entitled to take stamps

authority valuation on the date of agreement i.e. on 29.09.2006 instead of

valuation on the date of registration i.e. on 06.09.2010. Ld. AR submitted

that the stamps authority valuation as on 29.09.2006 was not more than

Rs. 35,00,000/- as agreed and received by assessee as per sale-agreement.

However, the lower-authorities have adopted the stamps authority valuation

of Rs. 48,05,000/- as on the date of registration of sale-deed i.e. on

06.09.2010 in utter disregard to 1st proviso. Therefore, the assessee should

be given the benefit of 1st proviso and if that is done, the full value of

consideration adopted by lower-authorities at Rs. 48,05,000/- is wrong; the

same must be held to be Rs. 35,00,000/- only.

He invited our attention to the 2nd Proviso to section 50C(1) which prescribes

thus:

“Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer:” Ld. DR submitted that the aforesaid 2nd proviso prescribes a rider that the

1st proviso shall apply only in a case where the amount of consideration or a

part thereof has been received by way of an account payee cheque or

account payee bank draft or by use of electronic clearing system. However,

the details of payments noted on Page 2 of sale-agreement entered by

assessee clearly reveals that the assessee received a sum of Rs. 6,00,000/-

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in cash, Rs. 10,00,000/- through cheque dated 09.10.2006, Rs. 5,00,000/-

through cheque dated 24.06.2007 and Rs. 14,00,000/- subsequently. Thus,

Ld. DR contended, the assessee has received only a sum of Rs. 6,00,000/-

in cash before 29.09.2006 (date of agreement) and other payments through

cheques are received from 09.10.2006 onwards. Therefore, the assessee has

not received any part of the consideration through a/c payee cheque on or

before 29.09.2006 (date of agreement), therefore the requirement of 2nd

proviso is not satisfied and the assessee does not deserve benefit of 1st

proviso as being claimed by Ld. AR.

of the sale-agreement as referred by Ld. DR and submitted that the sale-

agreement clearly mentions that the cheque dated 09.10.2006 was a “post-

dated” cheque. He contended that the assessee received cheque on

29.09.2006 (date of agreement) although it was post-dated 09.10.2006. He

contended that the requirement of 2nd proviso is only to receive part of the

consideration through cheque on or before the date of agreement and that

requirement is fully satisfied once the assessee has received cheque of Rs.

10,00,000/- on 29.09.2006, the day on which agreement was entered. He

submitted that merely because the cheque is post-dated 09.10.2006, it

cannot be said that the requirement of 2nd proviso is not satisfied. Ld. AR

went on further submitting that it is a settled law that if a cheque given by

debtor to creditor is encashed and not dis-honoured ultimately, the payment

to creditor shall be deemed on the day on which cheque is delivered to

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creditor and not on the day on which it is encashed. He placed reliance

upon (i) Benjamin on Sale, 8th edition, Page 789, (ii) Petaled Turkey Red Dye

Works Co. Ltd. Vs. CIT 1963 AIR 1484, (iii) CIT Vs. Ogale Glass Works Limited

1954 (4) TMI 3 (SC) and (iv) Oswal Wooelen Mills Ltd. Vs. CIT (1980) 122 ITR

789 (P&H HC).

submitted that the intention of law in 2nd proviso is very clear and does not

leave any scope for ambiguity. He submitted that when the 2nd proviso

mandates that a part of consideration “has been received by way of an

account payee cheque…on or before the date of the agreement”, there has to

be a de facto receipt and not an illusory receipt. He submitted that if the

contention of assessee is given any weightage, it would frustrate the very

object of prescription of 2nd proviso and give an unfettered opportunity to

any person to make an agreement specifying receipt of a post-dated cheque

and thereby claim benefit of 1st proviso. Ld. DR submitted that any such

argument of assessee/AR should not be encouraged and it must be rejected.

documents placed before us and also carefully analysed the verdict of 1st

Proviso and 2nd Proviso to section 50C(1). At first, we note from submission

of Ld. AR that the cheque of Rs. 10,00,000/- received by assessee from

buyer was ‘post-dated’ 09.10.2006. Then, from bank statement filed in

Paper-Book, we find that the cheque was credited in assessee’s bank a/c on

11.10.2006. There is no quarrel with the proposition held in the cases

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quoted by Ld. AR that if the cheque is ultimately encashed, it could relate

back to the date on which it was delivered by debtor to creditor. But the

case of assessee is absolutely different and distinguishable. In assessee’s

case, as accepted by Ld. AR for assessee, the cheque itself was ‘post-dated’

09.10.2006 whereas the sale-agreement was made on 29.09.2006. Further,

the bank a/c of assessee shows that the cheque was cleared on 11.10.2006.

Thus, in the situation, although the cheque was cleared on 11.10.2006, it

could be treated as having been received on 09.10.2006. But it cannot be

accepted as having been received on 29.09.2006. Had the assessee received

on 29.09.2006, a ‘present-dated’ cheque and not ‘post-dated’ cheque and

the same would be have been cleared in bank in 2-3 normal working days,

there might have been strength in the argument that it should be treated as

having been received on 29.09.2006 but this is not so in present case. Ld.

AR has not quoted any decision holding that in a case where cheque itself is

post-dated 09.10.2006 and cleared on 11.10.2006, the payment can be

treated to have been received on 29.09.2006. In any case, we also agree with

Ld. DR that if the stand taken by assessee/Ld. AR is accepted, it would give

an unfettered leeway to persons to by-pass the requirement of 2nd proviso to

section 50C(1) by applying a trick where a person can receive a post-dated

cheque of any period and thereby mis-use the benefit of 1st proviso. We do

understand that such a situation ought to be stopped. Therefore, we are not

convinced by arguments of Ld. AR in this respect. In conclusion, we are not

satisfied that the assessee has received any part of consideration through

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cheque on or before 29.09.2006 (date of agreement) and therefore we hold

that the AO was right in not giving benefit of 1st proviso to section 50C(1) to

assessee. The first grievance projected by assessee is therefore rejected.

Benefit of exemption u/s 54B:

The assessee made a new investment of Rs. 53,29,440/- on 20.06.2007 in

purchase of an agricultural land in the name of his son, Shri Rameshwar

Patidar, copy of registered purchase-deed is filed at Page No. 38-46 of Paper-

Book. On the strength of this investment, the assessee claimed exemption

u/s 54B. However, the lower-authorities denied exemption for two reasons,

namely (i) the new land was purchased in the name of son and not in the

name of assessee himself; and (ii) the new investment was made on

20.06.2007 whereas the sale-deed is registered on 06.09.2010, thus the

investment has been made before the date of transfer which is not permitted

u/s 54B. For this issue, learned Representatives of both sides made

vehement submissions. We present their submissions as well as our

adjudication in next paras.

land in the name of son which is not acceptable to authorities. In this

regard, Ld. AR for assessee relied upon certain decisions where investment

was made by assessee from his own funds but the new property is acquired/

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registered in the name of assessee’s son or wife and still the courts have

allowed exemption. The decisions relied by Ld. AR are:

(a) PCIT Vs. Balmukund Meena ITA No. 188/2016 (MP High Court)

(b) CIT Vs. Kamal Wahal 351 ITR 4 (2013) (Delhi High Court)

(c) CIT Vs. V. Natarajan 154 Taxman 399 (Madras High Court)

(d) Bhagwan Swaroop Pathak Vs. ITO, ITA No. 2754/Del/2019

(e) Mukkamala Srihari Rao Vs. ACIT 142 Taxman.com 479 (Ranchi)

Ld. AR submitted that the first decision in above list i.e. PCIT Vs.

Balmukund Meena ITA No. 188/2016 is a decision of Hon’ble jurisdictional

High Court of Madhya Pradesh in which it has been clearly held that the

land purchased in the name of son is eligible for exemption u/s 54B. Ld. AR

submitted that the decision is binding upon ITAT, Indore and involve

identical facts as in present case, therefore it has to be applied. Ld. AR,

however, went on submitting that there are other decisions also as

mentioned at (b) to (e) in above list where the same proposition has been

held. Ld. AR also submitted that even if there is any decision holding against

assessee in the knowledge of department, the view favourable to assessee

has to be taken as per landmark judgement of CIT Vs. Vegetable Products 88

ITR 192 (SC).

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11.1 Ld. DR for revenue submitted that every person is independent in the

eyes of law as well as Income-tax Act, 1961 and even wife or son of an

individual is also independent. He submitted that the assessee has

purchased new land in the name of son and not in his own name, therefore

clearly not entitled for exemption. To support his contention, Ld. DR relied

upon a decision in Bahadur Singh Vs. CIT(A) (2023) 154 Taxmann.com 456

(P&H) in which the Hon’ble Punjab and Haryana High Court has rejected

assessee’ claim of exemption u/s 54B on the basis of purchase of land in the

name of wife. Ld. DR pointed out that the assessee’s SLP against the said

decision has also been dismissed by Hon’ble Supreme Court vide order

dated 29.08.2023 published in (2023) 154 Taxmann.com 457 (SC). Therefore,

the issue is finally settled against assessee. Accordingly, Ld. DR prayed to

uphold the lower-authorities’ order.

11.2 We have considered rival submissions of both sides. After a careful

consideration, we find that there is no dispute between the parties qua the

factual aspect that the investment in new land has been made by assessee

from sale proceeds of the land sold. The dispute is only for the reason that

the new land has been got registered in the name of son and not in the

name of assessee himself. On a careful consideration, we find that the

assessee’s case is directly covered by decision of Hon’ble Jurisdictional High

Court of Madhya Pradesh in PCIT Vs. Balmukund Meena ITA No. 188/2016.

Furthermore, there are few more decisions quoted by Ld. AR, mentioned in

foregoing paragraph, which again decide the issue in favour of assessee.

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Therefore, even if the decision of Hon’ble Punjab & Haryana High Court in

Bahadur Singh (supra) referred by Ld. DR is against assessee, the assessee

shall be entitled to the favourable view coming from all decisions as held in

CIT Vs. Vegetable Products 88 ITR 192 (SC). Thus, in any case, the assessee

can be said to be entitled for exemption u/s 54B even if the registration has

been taken in the name of son. At this stage, we may also mention that the

Hon’ble Supreme Court has dismissed the assessee’s SLP against the

decision of Hon’ble Punjab & Haryana High Court by passing a one line

summary order; therefore as per settled judicial view such dismissal cannot

be treated as pronouncement of final law by the Hon’ble Supreme Court.

The effect of dismissal in this manner can only have the effect that the

decision of High Court remains intact and did not get disturbed.

investment on 20.06.2007 before the registration of sale-deed on 06.09.2010

is eligible for exemption. In this regard, Ld. AR made several contentions as

follows : (i) Although the assessee made investment before registration of

sale-deed on 06.09.2010 yet it was after sale-agreement dated 29.09.2006,

(ii) The assessee made investment out of the moneys received from buyer

under sale-agreement, (iii) Once the assessee has received sale-

consideration from buyer, there was no purpose of holding such moneys till

registration of sale-deed or investing such moneys for some strange purpose.

The assessee has made a better compliance of law by making immediate

investment in new land, (iv) the purpose of section 54B is to remain invested

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in agricultural land and the assessee has achieved such purpose fully, and

(v) That the section 54B is an incentive provision and it must be interpreted

beneficially and liberally. Then, Ld. AR also relied upon following decisions

wherein the assessee made investment of advance/earnest-money/

consideration/sale-proceed received under sale-agreement and the Courts

have allowed exemption u/s 54B even though the investment was made

before registration of sale-deed:

(a) Dharmendra J. Patel Vs. DCIT (2023) 152 Taxmann.com 465 (ITAT,

Ahmedabad)

(b) Ramesh Narhari Jakhadi Vs. ITO (1992) 41 ITD 368 (ITAT, Pune)

(c) Smt. Narayan F. Patel Vs. PCIT (2023) 152 Taxmann.com 53 (ITAT,

Surat) – It followed the decision of Hon’ble Bombay High Court in Mrs.

Parveen P Bharucha Vs. Union of India WP No. 10437 of 2011 dated

27.06.2012 (Para No. 12 of order).

12.1 Per contra, Ld. DR for revenue contended that the language of section

54B is very plain, simple and clear. He submitted the section clearly

prescribes that the investment has to be made within a period of two years

after the date of transfer. He submitted that in the present case, the sale-

deed was registered on 06.09.2010 and therefore the date of transfer is also

06.09.2010, therefore the assessee could be entitled to exemption only if the

new investment would have been made after 06.09.2010. Ld. DR submitted

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that the investment made by assessee on 20.06.2007 cannot help in giving

exemption to assessee.

12.2 We have considered rival submissions of both sides and also analysed

the judicial decisions cited before us. The controversy here is very short i.e.

whether the investment made by assessee after execution of sale-agreement

but before registration of sale-deed, from the moneys received under sale-

agreement, is eligible for exemption or not? On a careful consideration, we

find that the issue is settled in favour of assessee by the decisions quoted by

Ld. AR as mentioned in foregoing paragraph. Therefore, we hardly need to

delve this issue. We are inclined to carry the view taken in those judicial

rulings and accordingly hold that the investment by assessee in the new

land from sale-proceed of old land, even if made before registration of sale-

deed, is eligible for exemption. Accordingly, we direct the AO to allow

exemption. This grievance of assessee is accepted.

Ground No. 4:

the Act. The interest u/s 234A/234B is statutory and to be charged as per

relevant provisions. Further, no submission has been made by Ld. AR qua

this ground. Therefore, this ground is dismissed as non-pressed/non-

pleaded.

Ground No. 5:

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The penalty u/s 271(1)(c) is an independent levy and cannot be a part of present appeal before us. Further, no submission has been made by Ld. AR qua this ground. Therefore, this ground is dismissed as non-pressed/non- pleaded.

Order pronounced in open court on 28.02.2024.

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore िदनांक /Dated : 28.02.2024. CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

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