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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
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.
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – 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).
The background facts leading to present appeal are such that in the 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:
In these grounds, the assessee has challenged the capital gain assessed by AO at Rs. 46,13,227/-. Ld. AR for assessee made certain
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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):
Before proceeding further, we make it clear that the 1st proviso to 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.
Ld. AR next submitted that the assessee sold impugned land vide 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:”
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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.
Ld. DR for revenue strongly opposed the above submission of Ld. AR.
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/-
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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.
In rejoinder, Ld. AR once again carried us to the very same Page No. 2 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 M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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).
Ld. DR strongly countered the submission made by Ld. AR. He 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.
We have considered rival submissions of both sides, perused the 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
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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:
Now, we turn to the second grievance. Facts apropos to this are such :
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.
The first plank of litigation is such that the assessee purchased new 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/
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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 (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, (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 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).
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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.
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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.
The second plank of litigation is whether the assessee having made 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
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12 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:
This ground challenges the interest charged by AO u/s 234A/234B of 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:
M/s.Siddhulal Patidar, Bhopal vs. ITO, 2(2), Bhopal – AY 2011-12
This ground challenges the levy of penalty u/s 271(1)(c) of the Act.
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.
Resultantly, this appeal is partly allowed.
Order pronounced in open court on 28.02.2024.