SHRI LEELAHAR PALASIYAWALA,INDORE vs. THE ITO 4(4), INDORE

आदेश / O R D E R

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

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 3. The registry has informed that the present appeal was required to be filed by 21.05.2021 but it has been filed after a delay of 490 days beyond the last date and therefore time-barred. Ld. AR submitted that the assessee has filed an application for condonation of delay supported by an affidavit on stamp. On perusal of the application/affidavit, we observe that the assessee has explained total delay of 490 days in two parts. The first part of delay of 375 days from 21.05.2021 to 30.05.2022 was due to Covid-19 Pandemic and therefore covered by the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws was granted. The second part of the delay of 115 days from 30.05.2022 to 22.09.2022 was due to an improper advice given by assessee’s counsel. To explain this part, Ld. AR submitted that the revision-order, which is impugned in present appeal, was passed by PCIT on 22.03.2021 and in pursuance thereof, the AO passed consequential assessment-order on 26.03.2022. The assessee’s counsel mistakenly filed direct appeal to ITAT against consequential assessment-order (in instead of filing appeal against impugned order. The assessee has already withdrawn the said ITA No. 130/Ind/2022 from ITAT and thereafter filed the present-appeal against impugned order. Thus, the delay of 115 days had occurred due to mis-understanding of law by counsel whereby he filed appeal against consequential assessment-order instead of impugned order. With this submission, Ld. AR prayed that the entire delay of 490 days is duly explained, the same is not because of any lethargy, negligence or mala fide intention of assessee and the assessee does not stand to derive any benefit because of delay. In the circumstances, Ld. AR prayed to condone the delay. Ld. DR did not show any objection, perhaps realizing it to be a fit case for condonation as claimed by assessee. Taking a judicious view of the facts, we condone the delay, allow this appeal and proceed for hearing.

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 4. Brief facts are such that the assessee filed return of income of relevant assessment-year which was subjected to scrutiny-assessment and the AO completed assessment u/s 143(3). Subsequently, Ld. PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263. Accordingly, Ld. PCIT issued show-cause notice dated 09.07.2018 wherein he mentioned that the assessee, alongwith other co-owners, sold an ‘agricultural land’ situated at Bijalpur for Rs. 2,06,50,000/- vide registered-deed dated 24.11.2014 and earned share in long-term capital gain. While filing return, the assessee declared his share in long-term gain but claimed exemption u/s 54B on the basis of new investment made in two agricultural lands, namely (i) Rs. 48,00,000/- invested in 1st agricultural land, and (ii) Rs. 14,20,000/- (correct amount should be Rs. 14,16,360/-) invested in 2nd land. Ld. PCIT noted that the AO has passed assessment-order without enquiring into certain aspects of exemption so claimed by assessee. Therefore, the AO has passed assessment-order which is erroneous-cum-prejudicial to the interest of revenue. By the aforesaid show-cause notice, the assessee was asked to explain as to why the assessment-order may not be revised.

(i) That the assessee furnished copies of Khasra P-II and B-I as evidence to claim that there have been agricultural activities on the land sold by him. But mere submission of P-II and B-I is not sufficient documentary evidence to substantiate assessee’s claim. The AO did not conduct necessary enquiries in this regard.

(ii) The 1st agricultural land claimed to have been purchased for Rs. 48,00,000/- was not supported by any documentary evidence. The Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 assessee has submitted only copy of “Vikraya Anubandh Lekh” (i.e. sale-agreement) claiming it to have been executed on 14.03.2015 but no ‘date of execution’ is mentioned in the said agreement. The date ‘14.03.3015’ mentioned therein is the date placed by stamp vendor on stamp-paper. The AO accepted date of 14.03.2015 without verifying genuineness and authenticity of such agreement. Further, the assessee did not produce copy of sale-deed of land. The AO did not examine this aspect too.

In the case of 2nd land claimed to have been purchased for Rs. (iii) 14,16,360/-, the purchase-deed was executed on 22.02.2017 and the assessee paid Rs. 7,00,000/- on 13.02.2017 and Rs. 6,20,000/- on 15.02.2017. All these dates were beyond the prescribed period of 2 years from the date of transfer (24.11.2014). The AO did not examine this aspect.

(a) Vide Para No. 1 of letter dated 08.05.2017, copy at Paper-Book Page-2, the assessee submitted following information to AO which shows that the AO has examined the Issue No. (i) raised by PCIT:

“1. Copy of Khasra P-II showing the evidence that the said land was an agricultural land on which the agricultural activities were being performed. As the assessee jointly owned the said agricultural land with other family members having been engaged in agriculture activities for years, no such books of accounts have been maintained keeping vouchers and sale bill for the expense and sale proceeds of the agricultural produce, the copy of B-I and P-II are sufficient compliance for showing the agricultural activities on the said land. The land is an agriculture land and being held and used for agriculture purposes for years by the assessee and his family.” (b) Vide letter undated, copy at Paper-Book Page-3 to 4, the assessee

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 submitted following information to AO which shows that the AO has duly examined the Issue No. (ii) and (iii) raised by PCIT:

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 8. Therefore, Ld. AR strongly contended, the PCIT is grossly wrong in observing that the AO has not examined the issues raised by him whereas the fact is that the AO has conducted enquiries on all issues and after seeking explanation from assessee, allowed exemption.

9.1 Issue No. (i) – Whether agricultural activities were done or not over the land sold by assessee?

(a) That Khasra Copy (P-II) is a revenue record of the State Govt. of Madhya Pradesh, copy at Page No. 28-31 of Paper-Book, which clearly mentions that the land was “irrigated”. Further, the “Bhu-rin Pustika (Land Pass-Book)” is again a record of State Govt. of Madhya Pradesh, copy at Page No. 38-39 of Paper-Book, which clearly contains the entries of Khasra No., Land Size, Lagan etc.

(b) That, subsequently, the assessee has also filed an application dated 07.03.2022 to the office of Tehsildar requesting for supply of details of crop cultivated on the land for submission in Income-tax proceedings and in response the said request, the office of Tehsildar has issued a certificate No. 1300/Ri/2022 dated 17.03.2022 confirming that the land was cultivated in the year 2014-15 and earlier years.

(c) That the copy of registered sale-deed of land sold by assessee is filed at Page No. 9-27 of Paper-Book. Ld. AR demonstrated that on Page No. 2 of sale-deed, it is clearly mentioned that the impugned land is ‘agricultural land’. Thereafter, on Page No. 3, it is categorically mentioned that the sellers had been doing agricultural activity over the land.

9.2 Issue No. (ii) – Investment in 1st land:

(a) Copy of ‘Vikray Anubandh Lekh (sale-agreement)’ is filed at Page No.

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 40-44 of Paper-Book. The stamp on which said agreement is executed is dated 14.03.2015. In Para No. 3 of the agreement, the consideration of Rs. 48,00,000/- is mentioned; out of which payment of Rs. 41,00,000/- through cheques dated 26.03.2015 and payment of Rs. 7,00,000/- in cash having been made before 26.03.2015 are acknowledged by the sellers. The agreement is signed by sellers, assessee (purchaser) and witnesses. Ld. AR also drew our attention to the pass-book of assessee’s A/c No. 2907 with Buldana Urban Co- operative Credit Society wherein three cheques of Rs. 14,00,000 + Rs. 13,00,000 + Rs. 14,00,000 aggregating to Rs. 41,00,000/- have been debited on 26.03.2015.

(b) Ld. AR drew our attention to Paper-Book Page 39 where a copy of mutation document is filed. Referring to same, Ld. AR submitted that the assessee acquired land from his relative who was co-owner in the land and that the assessee’s name is entered in mutation.

(c) Lastly, it is submitted that the execution of sale-deed is not a condition for allowability of exemption u/s 54B. What is required is only investment in new land and once that is done which has been done in present case, the assessee becomes entitled to exemption.

9.3 Issue No. (iii) – Investment in 2nd land:

It is submitted that although the sale-deed of sold land was executed on 24.11.2014 but the assessee realized sale consideration from buyers in piecemeal and the lastly it was received on 05.02.2015. Therefore, the sale/transfer completed on 05.02.2015 (i.e. the date on which last of the sale consideration was received) and not on 24.11.2014 (i.e. the date of sale- deed); hence the period of 2 years for making new investment should be reckoned from 05.02.2015 and not from 24.11.2014 and once it is reckoned so, the assessee could very well make investment upto 04.02.2017 (05.02.2015 + 2 years). It is then submitted that the assessee purchased 2nd

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 land for Rs. 14,16,360/- on 04.01.2017 through sale-agreement, copy filed in Paper-Book Page-44 to 46, although the sale-deed was subsequently executed on 22.02.2017, copy in Paper-Book Page No. 47-63. Thus, the assessee has made investment on 04.01.2017 which is before expiry of 2 years period on 04.02.2017 and therefore the investment is made in prescribed period. Ld. AR submitted that the AO has, after due consideration, accepted that the ‘date of transfer’ should be taken on last receipt of sale-consideration (05.02.2015) and not on execution of sale-deed (24.11.2014) and rightly allowed exemption to assessee.

(a) He submitted that mere raising queries before assessee and keeping response of assessee in the departmental file cannot be treated as conduct of enquiries by AO. According to Ld. DR, had the AO analysed the replies of assessee, he would have certainly made a detailed noting in the assessment-order but this is not so in present case. He submitted that the assessment-order is totally silent on the issues raised by Ld. PCIT, which clearly demonstrates that the AO has not made enquiries as required; therefore Ld. PCIT was constrained to conduct revision-proceeding. Ld. DR submitted that in Para No. 3 of show-cause notice, the PCIT has noted that the AO has not properly verified the claim made by assessee u/s 54B. Then, in Para No. 3 of revision-order also, the PCIT has noted that while completing scrutiny assessment proceedings, all the facts of the case have not been considered carefully.

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 (b) With regard to investment in 1st land, Ld. DR submitted that it is well established by the landmark decision of Hon’ble Supreme Court in Balbir Singh Maini Civil Appeal No. 15619 of 2017 that the title of immovable property passes only by a registered document but in present case, the agreement presented by assessee is unregistered and no sale-deed had been executed subsequently. Therefore, the assessee cannot claim ownership of land. Being so, the assessee does not deserve any exemption u/s 54B.

With regard to investment in 2nd land, Ld. DR submitted that the sale- (c) deed of sold land was executed on 24.11.2014 and thus the transfer took place on that day itself. He submitted that it was assessee’s own arrangement to defer the payment/receipt of consideration and on that basis, the assessee cannot claim that the sale/transfer took place on receipt of last consideration on 05.02.2015. He submitted that if such a contention is allowed, every assessee would defer receipt of say 1 rupee of consideration and thereby claim that the sale/transfer had not completed till receipt of 1 rupee. Ld. DR urged that such a bad contention of assessee must be rejected. Ld. DR submitted that the assessee has failed to make investment in 2 years period from 24.11.2014 and attempting to take a futile chance to show eligibility of exemption.

(a) He attempted to explain the difference between ‘lack of enquiry’ and ‘inadequate enquiry’. He submitted that revisionary-jurisdiction u/s 263 can be invoked only in case of ‘lack of enquiry’ but not in case of ‘inadequate enquiry’.

(b) He relied upon CIT Vs. Krishna Capbox 372 ITR 310 (All), Nirav Modi 241 Taxman 255 (Bom) and CIT Vs. J.L. Morrison (India) Ltd. (2014) 46 taxmann.com 215 (Cal) and contended that if the AO

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 has passed assessment-order after certain queries from assessee, mere non-discussion or non-mention thereof in assessment-order could not lead to assumption that AO did not apply his mind; invoking of revision proceeding u/s 263 on such ground is unjustified.

(c) Relying upon the judgement in Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC), he submitted that if the AO has taken one of the possible views, the assessment-order cannot be said to be erroneous in so far it is prejudicial to the interest of revenue and consequently revision u/s 263 cannot be done.

“10. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income- tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law.” [Emphasis supplied] Clearly, the apex court has held that if two views are possible and the AO has taken one view, then the AO’s order cannot be treated as erroneous order prejudicial to the interest of revenue. But it is subject to a rider that the view taken by AO should not be unsustainable in law. That means, if the view taken by AO is unsustainable, the AO’s order would be considered as Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 erroneous-cum-prejudicial to the interest of revenue and revisionary action would be justified.

(a) The Issue No. (i) is whether there were agricultural activities on the land sold by assessee? This issue is very important for allowability of exemption u/s 54B because the section 54B prescribes thus:

“54B. (1) Subject to 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, and ……..” Therefore, the exemption u/s 54B is allowable only if the assessee (or his parent) had been using the sold land for agricultural purposes in two years immediately preceding the date of transfer. When the AO questioned assessee on this issue, the assessee has, vide reply dated 08.05.2017 re-produced in foregoing paragraph, clearly admitted that he has not maintained any bills/voucher of expenses and sale of crop etc. The assessee only relied upon documents P-II and B-I and claimed that those documents reveal that agricultural activities were done on the land and the AO accepted assessee’s claim. We have perused copies of these documents filed in Paper-Book at Page No. 28 to 31 and 38 to 39 but nowhere find the details of any crop having been mentioned therein. Therefore, the assessee’s claim that these documents show the agricultural activities actually done, is not established. Ld. AR refers an application dated 07.03.2022 filed by assessee to the office of Tehsildar seeking details of crop cultivated on the land and it is being claimed that in response to such application, the office of Tehsildar has issued a certificate No. 1300/Ri/2022 dated 17.03.2022 confirming that the land was being cultivated in the year

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 2014-15 and earlier years. These documents, being application dated 07.03.2022 filed by assessee to office of Tehsildar and certificate dated 17.03.2022 issued by office of Tehsildar are newer evidences/ documents which had come in existence after passing of the impugned revision-order on 17.03.2021. Therefore, these evidences/ documents cannot impinge the revision-proceeding conducted by Ld. PCIT. Moreover, these documents are ‘additional evidences’ as per ITAT Rules but the same have been filed by assessee with the help of Shradha Piplodiya, Advocate, not as per procedure prescribed in Rule 18(4) of Income-tax (Appellate Tribunal) Rules, 1963; therefore the same are not considerable and liable to be rejected. Another argument of Ld. AR that the sold land is clearly mentioned as ‘agricultural land’ in the sale-deed, in our considered view, cannot help the assessee since the sale-deed is a document drafted by assessee himself and any mention therein, by itself, cannot be conclusive. Moreover, even if the impugned land had been an agricultural land, section 54B requires that the land must be de facto used for agricultural purposes in two years immediately before the date of transfer. This requirement of section 54B is very strict and it has to be proved by assessee with clinching evidence. We find that the assessee has not been able to explain the factum of agricultural activities having been undertaken even before PCIT during revision-proceeding, therefore the PCIT is justified in making revision on this issue.

(b) Next Issue No. (ii) is whether the 1st land claimed to have been purchased by assessee for Rs. 48,00,000/- through unregistered purchase-agreement without executing any registered deed is sufficient for giving exemption u/s 54B to assessee or not? It is an admitted fact that the assessee claims to have purchased the said land through an unregistered agreement. In this regard, the section 54B prescribes thus:

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 “54B. (1) Subject to 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, and the assessee has, within a period of two years after that date, purchased any other land for being used ……..” [Emphasis supplied] Thus, the section clearly requires that the assessee has to ‘purchase’ land. At this stage, we find from decision of Hon’ble Supreme Court in Balbir Singh Maini relied upon by Ld. DR that there cannot be a sale of immovable property without a registered document. When there cannot be any ‘sale’ by seller, how can there be a ‘purchase’ by buyer? Therefore, in view of the said decision, we find that the assessee cannot be said to have purchased the property and consequently not eligible for exemption. Ld. AR makes a further pleading that the assessee was a co-owner in the said land and the assessee’s name is also available in the mutation document. We are afraid to accept his pleading because admittedly the assessee was co-owner in the said land and the mutation might be as a result of pre-existing co- ownership, therefore we cannot arrive at a definite conclusion in favour of assessee from this pleading. Thus, we find that the PCIT is justified in making revision on this issue also.

(c) Last issue No. (iii) is whether the 2nd land claimed to have been purchased by assessee for Rs. 14,16,360/- through sale-agreement dated 04.01.2017 followed by sale-deed 22.02.2017, can be said to be within the permissible period of 2 years? The facts clearly indicate that the assessee sold original land vide sale-deed dated 24.11.2014. Therefore, the date of transfer would be 24.11.2014. But the assessee makes an interesting claim. He claims that the sale-consideration was received in piecemeal and the last of the consideration was received on 05.02.2015, therefore the date of transfer of sold land must be taken as 05.02.2015 and not 24.11.2014. We are unable to accept this argument for several reasons. The first and foremost reason is such Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 that once the assessee has executed a sale-deed, given possession and the buyer performs his obligations as agreed, the date of transfer would necessarily be the date on which sale-deed is executed and cannot defer to the receipt of last part of the consideration. Secondly, if the argument of assessee is accepted that date of transfer should be 05.02.2015, it would create an anomalous situation qua the intervening period of 24.11.2014 to 05.02.2015. On one hand, the assessee as seller claims that this period was the period for which he continued to own/hold the property, the buyer would in his own assessment claim that the same period was the period of ownership/ holding by him. That means, the period of 24.11.2014 to 05.02.2015 would be claimed as ownership/holding period by both parties in the manner suitable to them. We cannot accept such anomalous situation. Thirdly, the Ld. DR for revenue is very much correct in submitting that if the date of transfer is accepted to be the date on which last part of consideration is received, any assessee or every assessee would be tempted to keep payment of 1 rupee deferred and thereby avoid the entire scheme of law/taxation. For these reasons, we are not convinced with the claim of assessee that the date of transfer would be 05.02.2015. We hold that the date of transfer was 24.11.2014 only and therefore the assessee’s investment goes beyond the prescribed period of two years. Thus, we find that the PCIT is justified in making revision on this issue also.

Leeladhar Palasiawala, Indore, vs. Pr. CIT –I, Indore. AY 2015-16 16. Before parting, we would like to make it clear that our adjudication in this appeal represents a prima facie view qua the sustainability of revision- order passed by PCIT. Our observations should, however, not be taken as conclusive by AO in consequential order passed or to be passed as a result of revision-order. The AO shall be free to take his own judgement while passing consequential order.

Order pronounced in the open court on 19.12.2023.