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Income Tax Appellate Tribunal, INDORE SMC BENCH, INDORE
Before: SHRI VIJAY PAL RAO
This appeal by the Assessee is directed against the order dated 06.03.2023 of Commissioner of Income Tax(Appeal), National Faceless Appeal Centre, Delhi for Assessment Year 2010-11. The assessee has raised following grounds of appeal:
“1. That on the facts and in the circumstances of the case of the assessee the Ld. Commissioner of Income Tax / National faceless Appeal Centre (NFAC) was not justified in confirming the proceedings initiated under section 148 as valid.
That on the facts and in the circumstances of the case of the assessee the Ld. Commissioner of Income Tax/ National faceless Appeal Centre (NFAC) was not justified in confirming the addition of Rs. 4,92,300.00 and disallowing the deduction under section 54 B of the Act.
The assessee craves leave to add, alter amend or withdraw any ground of appeal on or before the time of hearing.” Page 1 of 13 Pitamber Lal Sunderdas Rajdev Page 2 of 13 2. The assessee is an individual and deriving income from marriage garden and nursery. Initially the assessee filed belated return of income on 08.03.2011 for the year under consideration but did not declare any capital gain arising from sale of agricultural land. Thereafter, the assesse revised the return of income on 27.02.2012 therein the capital gain from sale of agricultural land was declared. However, the original return of income was belated therefore, the revised return of income was invalid. Thereafter, the AO issued notice u/s 148 on 27.03.2017 to assess the income from escaped assessment on account of sale of agricultural land by the assesse. In response to the notice u/s 148 the assesse filed the reply and stated that the revised return of income filed on 27.02.2012 may be treated as return filed in compliance to notice u/s 148 of the Act. The assessee also claimed deduction u/s 54B of the Act to the tune of Rs.23,31,940/- on account of investment made in purchase of agricultural lands on different dates i.e. 03.03.2008, 11.11.2010 & 18.05.2010. The AO noted that the assessee sold the agricultural land vide sale dated 30.09.2009 and observed that the claim of deduction u/s 54B in respect of the land purchased by the assessee on 03.03.2008 of Rs.4,92,300/- does not qualify the said deduction as deduction is available only on the property which has purchased within two years immediately after the date on which the agricultural land is sold. Accordingly the AO has made addition of Rs.4,92,300/- by denying the claim of deduction u/s 54B in respect of the land purchased on 03.03.2008. The assesse challenged the action of the AO before the Ld. CIT(A) but could not succeed.
3. Before the tribunal the Ld. AR of the assessee has submitted that the reopening of the assessment is invalid as the assessee has transferred the agricultural land on 06.03.2009 when the assessee has entered into an agreement with the buyer and also executed a power of attorney in favour of the buyer. He has pointed out that the assesse has also received sale consideration of Rs.41,20,000/- from 28.02.2008 to 01.01.2009. Therefore, the date of sale of the agricultural land shall be taken as Pitamber Lal Sunderdas Rajdev Page 3 of 13 06.03.2009 when the assessee has executed the registered power of attorney as well as agreement to sale. He has further submitted that the sale deed dated 30.09.2009 was executed by power of attorney holder in favour of the buyer and assesse has received sale consideration as it was originally received. The Ld. AR has submitted that the AO has accepted the receipt of the consideration by the assessee as mentioned in the sale deed which was much prior to the date of execution of the sale deed. Thus, Ld. AR has submitted when the transaction took place during the F.Y.2007-08 relevant to the assessment year 2008-09 then the reopening of the assessment for A.Y.2010-11 is invalid and liable to be quashed.
4. On the other hand, Ld. DR has submitted that the assesse is not disclosed this transactions for A.Y.2008-09 and disclosed this transaction in the return of income filed by the assesse for the year under consideration on 27.02.2012. Further there was no record either disclosed by the assesse or available with the AO except sale deed registered on 30.09.2009 showing the transactions of sale of agricultural land by the assessee. Therefore, the AO has rightly issued a notice u/s 148 on 27.03.2017 for the year under consideration as the assessee himself has disclosed this transaction and reported the capital gain in the return of income filed on 27.02.2012. He has relied upon the order of the CIT(A).
5. I have considered the rival submission as well as relevant material on record. There is no dispute that the sale deed was executed and registered on 30.09.2009 for transfer of agricultural land owned by the assessee. Further the assessee himself has reported this transaction of sale of agricultural land and declared the capital gain arising from the sale of agricultural land in the return of income filed on 27.02.2012. Though the said return of income may not be a valid return of income but when the assessee has not disclosed this transaction prior to the said date of file the return of income on 27.02.2012 then this contention of the assessee that the sale of agricultural land took place on 06.03.2009 when the assessee has executed the power of attorney as well as agreement sell and also received part sale consideration has no substance. At the time of Page 3 of 13 Pitamber Lal Sunderdas Rajdev Page 4 of 13 initiating proceedings u/s 147 the AO was having only the information of transfer of the land in question vide sale deed dated 30.09.2009 and therefore, the said claim of the assessee that the property in question as sold earlier by way of agreement to sale power of attorney is only a matter of investigation and cannot be considered at the time of forming the belief that the income assessable to tax as escaped assessment in view of the sale deed dated 30.09.2009. Further the assesse himself has declared this sale and capital gain arising from the sale under consideration only for the assessment year under consideration. Hence in view of the above facts and circumstances of the case, I do not find any merit or substance in the ground no.1 of the assesse’s appeal challenging the validity of the initiation of proceedings u/s 147/148 of the Act and the said ground is dismissed.
6. Ground no.2 is regarding denial of deduction u/s 54B of Rs.4,92,300/- in respect of the agricultural land purchased by the assessee on 03.03.2008. The Ld. AR of the assessee has submitted that the assesse is entered into an agreement of sale of agricultural land on 06.03.2009 with Mr. Ramchand Premchandani for a consideration of Rs.41,20,000/-. The assessee received the sale consideration on various dates from 28.02.2008 to 01.01.2009. He has pointed out that the receipt of sale consideration of Rs.41,20,000/- has not been disputed by the AO as it is part of the sale deed registered on 30.09.2009 and the amount was duly credited in the bank account of the assesse. He has further pointed out that after receiving entire sale consideration the assessee handed over the physical possession of land to the purchaser on 06.03.2009 and also executed special power of attorney in favour of Shalendra Premchandani duly registered with the Sub-registrar on 06.03.2009. Thus, Ld. AR has submitted that the actual date of transfer of the agricultural land is 06.03.2009. He has then submitted that the assessee is entitled for deduction u/s 54B even for the land purchase on 03.03.2008. In support of his contention he has relied upon following decisions:
(i). Ramesh Narhari Jakhadi vs. ITO 41 ITD 368 Page 4 of 13 Pitamber Lal Sunderdas Rajdev Page 5 of 13 (ii). ACIT vs. Dr. S. Balosundaram 36 CCH 107 (ITAT, Chennai)
(iii). Subhash Vinayak Supnekar 158 TTJ 237
On the other hand, Ld. DR has submitted that when the assessee has offered the income arising from the sale of the agricultural land for the year under consideration then the claim of the assessee that the land in question was transferred on 06.03.2009 cannot be accepted as the same would fall in the assessment year 2009-10 and not for A.Y.2010-11 which is under consideration. He has relied upon the order of the authorities below.
I have considered the rival submission as well as relevant material on record. The assessee has himself had declared the sale transaction and capital gain arising from the sale of the agricultural land in question for the year under consideration. So far as, the AO has allowed the deduction claimed by the assesse u/s 54B of the Act in respect of other two lands the assessee has no grievance. The details of the land purchased by the assessee are given by the AO in para 6 as under:
Description of Land Amount of purchase Date of purchase Rs. 4,50,000/- + 03.03.2008 कृ�ष भू�म �सं�चत �ाम इ�लाम नगर तह. हुजूर िजला भोपाल, खसरा *मांक 34/1, पटवार� ह1का Rs. 42,300/- नं. 12, राज�व 3नर�4क मंडल 01 (ईटखेडी) (stamp duty) Rs. 9,60,000/- + 11.11.2010 कृ�ष भू�म �ाम इ�लाम नगर तह. हुजूर िजला भोपाल, खसरा *मांक 106/1/1/ड. पटवार� ह1का Rs. 85,200/- नं. 12, राज�व 3नर�4क मंडल 01 (ईटखेडी) (stamp duty) Rs. 7,10,000/- + 18.05.2010 कृ�ष भू�म �ाम इ�लाम नगर तह. हुजूर िजला भोपाल, खसरा *मांक 34/1/ख, पटवार� ह1का नं. Rs. 63,020/- 12, राज�व 3नर�4क मंडल 01 (ईटखेडी) (stamp duty) Pitamber Lal Sunderdas Rajdev Page 6 of 13 9. The AO has disallowed the claim of deduction u/s 54B only in respect of the land purchased by the assessee on 03.03.2008 on the ground that the provisions of section 54B provides the incentive only for the purchase of land within a period of two years after the sale of existing agricultural land. Thus, if the contention of the assessee is accepted that actual date of transfer of the agricultural land by the assessee is 06.03.2009 then the capital gain arising from the sale of the said land as well as the claim of deduction u/s 54B of the Act ought to have been declared and claimed for A.Y.2009-10 and not for the A.Y.2010-11 which is under consideration. Therefore, the assessee cannot be allowed to take the contrary stand one by taking benefit of section 54B of the Act for the year under consideration and another by claiming the transfer of the agricultural land pertaining to the A.Y.2009-10. Since the AO has considered the date of transactions as on 30.09.2009 when the sale deed was registered in respect of transfer of the agricultural land in question therefore, the claim of deduction u/s 54B has to be considered only by accepting the fact that the land was transferred on 30.09.2009. The assessee has relied upon various decisions on the point that the deduction u/s 54B is alloweable even in case of investment made by the assessee for purchase of the agricultural land prior to the date of sale if the assessee has made the said eligible investment only from the sale proceeds of agricultural land sale/transfer by the assessee. The AO has not disputed the fact that the assessee has received the sale consideration as per the details of which are given in the sale deed as under:
Therefore, the sale consideration was received by the assessee from 27.02.2008 to 01.01.2009 as it was also reflected in the bank account of the assessee. Out of this sale consideration received in the month of Pitamber Lal Sunderdas Rajdev Page 8 of 13 February 2008 the assessee has purchased the agricultural land on 03.03.2008. Therefore, it is manifest from the record that the assessee has made the investment in purchase of the agricultural land out of the sale consideration received against transfer of the existing agricultural land. Pune Bench of the Tribunal in case of Ramesh Narhari Jakhadi vs. ITO (supra) has considered an identical issue in para 8 & 9 as under:
“8. We have duly considered the rival submissions and the paper compilation filed by the learned counsel for the assessee. In our view, too much of emphasis was given or attention has been paid by the authorities to the aspect of legal title which is conveyed by registration of sale deed. It is well-known that a person cannot convey legal title in respect of immovable property, except by executing conveyance deed which is duly registered. The definition of short term capital asset refers to capital assets held for not more than 36 months preceding the date of transfer. Therefore, the word "held" is significant and comprehensive and comprise of physical domain and control of the property which is obtained by way of possession. It is said that possession is nine points in law. Even Section 54B is concerned with transfer of capital asset being land which was being used for agricultural purposes in the two years preceding the date of transfer and therefore it contemplates assets held for less than 36 months as well as assets held above 36 months. Therefore, it is clear that this section contemplates capital gains arising on transfer of both short term as well as long term capital assets. In any case, the CIT(Appeals) has conceded this point in his appellate order and therefore, it is academic to go into the question.
Another aspect that is required to be considered is that the section contemplates user of agricultural land in the two years immediately preceding the date of transfer and therefore, the reference is to the years and not during the whole period of two years as viewed by the authorities. 'In other words, if the asset has been used for the whole of the immediately preceding year and some days of the year earlier to the preceding year, still the requirement of Section 54B would be satisfied. Applying the definition of short term capital asset with reference to the word "held", it could be said that any asset held in the two years immediately preceding the date of transfer would be eligible for relief under Section 54B on the capital gains arising on its sale. Since it is common practice to obtain earnest money or advance or instalments before a property is conveyed by registering sale deed, the investment made would amount to investment out of sale consideration. For this conclusion, the Circular No. 359, dated 10-5- 1983 issued by the Board in connection with relief under Section 54E is relied upon. In other words, the logic in the aforesaid circular issued in connection with 54E would apply with equal force to relief Page 8 of 13 Pitamber Lal Sunderdas Rajdev Page 9 of 13 under Section 54B also. Inasmuch as the above circular has been issued by the Board keeping in view the purpose and spirit of Section 54E, same consideration would apply for relief under Section 54B also, because if an agriculturist is dispossessed of his agricultural land and obtains possession of another agricultural land for the purpose of being used for agricultural purposes, the same benefit available under the Board's circular should be extended to the assessee governed by Section 54B also. In this connection, it is also necessary to consider the question whether the investment should be made in new agricultural land necessarily within a period of two years after the date of transfer or not. Applying the spirit of the circular of the Board, it could be said that the investment made prior to the date of transfer would also be eligible and should be considered as investment made out of sale proceeds. The limit of two years' period after transfer is an outer limit, while the investments made earlier to the date of transfer out of the earnest money or advances should be considered to fall within two years' time limit period and which would be the inner limit, so to say. The Andhra Pradesh High Court had occasion to consider the significance of the word "purchase" in the case of Mrs. Shahzada Begum cited. The Andhra Pradesh High Court held connection with relief under Section 54(1) that obtaining of full domain and control over a new property within the period of one year would be material or relevant and the delay in getting the property registered would be immaterial. It is significant to point out that Section 54(1) also contemplates purchase within a period of one year before or two years after the date of transfer of the residential property in order to claim the benefit of Section 54( 1). The same word is used in Section 54B also. Therefore, the ratio of the Andhra Pradesh High Court in the case of Mrs. Shahzada Be gum would apply with equal force to the assessee's case also. Applying the ratio of the Andhra Pradesh High Court, it could be reasonably held that the assessee has purchased the lands in respect of which he has obtained domain and control and on which he has invested Rs. 2,15,471 up to 16-2-1986 and Rs. 6,06,000 from 17-2-1986 to 16-2-1988. All these amounts were invested by the assessee out of the advances received from M/s IBP Co. Ltd. during the period 23-10-1984 and 25-10-1986. In view of the judgment of the Andhra Pradesh High Court in the case of Mrs. Shahzada Begum, the obtaining of domain and control is relevant and the delay in obtaining registration deed is not relevant for the purpose of relief under Section 54(1). The reason for the delay in getting the registration of purchase deed is said to be dispute among the family members of the vendors and now that the Court case has been settled, registration would be effected in favour of the assessee by the vendors of the land. Even ignoring the fact of registration of sale deed to be effected later on, we hold that the assessee is entitled to the benefit of Section 54B in respect of the total amount invested in the new agricultural lands up to 16-2-1988 totalling to Rs. 8,21,471. Accordingly, we hold that the benefit of Section 54B should be Page 9 of 13 Pitamber Lal Sunderdas Rajdev Page 10 of 13 worked out by the ITO with reference to this investment of Rs. 8,21,471. In the case of ITO v. Chimanlal Thakordas [1991] 39 ITD 159, the Ahmedabad Bench held that where the assessee had paid full price of new residential house to vendor and has also obtained possession thereof before the expiry of the period mentioned under Section 54, the relief under that section could not be denied merely on the ground that the registered sale deed in respect of the property was executed beyond the time limit prescribed under Section 54. Accordingly, we reverse the order of the CIT(Appeals) and direct the ITO to grant consequential relief to the assessee as directed above.”
Similar view has been taken by the Pune Benches of the tribunal in a subsequent decision in case of Subhash Vinayak Supnekar vs. ACIT(supra) in para 8 to 8.4 as under:
“8. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. Ground of appeal No. 1 by the assessee relates to addition of Rs. 50 lakhs made by the AO by disallowing the claim under s. 54EC and upheld by the learned CIT(A). We find the assessee has invested the said amount in Rural Electrification Corporation Ltd. bonds on 2nd Feb., 2007. It is the case of the AO that since the property at Mukundnagar was sold on 5th April, 2007 for a total consideration of Rs. 16 crores and the assessee has invested prior to the date of the sale, therefore, the assessee is not entitled to the claim. While doing so, he further held that the Circular No. 359 dt. 10th May, 1983 is not applicable to the facts of the present case since the same was in context of s. 54E. We find the learned CIT(A) rejected the claim of the assessee on the ground that there is only one agreement for sale which is dt. 5th April, 2007 and the assessee neither at the assessment stage nor during the appeal proceedings has brought any evidence or documents on record to indicate that any prior agreement for sale had taken place. Therefore, distinguishing the decision of the Nagpur Bench of the Tribunal he rejected the claim of the assessee. 8.1 From the copy of the sale deed placed at paper book page Nos. 4 to 25 we find cl. (d) of the agreement reads as under : "In compliance to the agreement to sell dt. 21st Feb., 2006, registered in the office of the Sub-Registrar, Haveli No. 2, at serial No. 1234/2006, the vendor by this instrument sold, assigned, transferred and otherwise absolutely conveyed the said property, upto and in favour of the purchaser herein, for and at the lump sum price of Rs. 16,00,00,000 (sixteen crores only), paid by the purchaser to the vendor as mentioned herein."
Pitamber Lal Sunderdas Rajdev Page 11 of 13 Therefore, the order of the learned CIT(A) that there was no agreement prior to date of sale is incorrect in view of the express provision in the sale deed dt. 5th April, 2007 cited above. We find the CBDT vide Circular No. 359 (F. No. 207/8/82-ITA-ll) dt. 10th May. 1983 has held that earnest money or advance is a part of the sale consideration and therefore if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of the asset, the amount so invested will qualify for exemption under s. 54E. Although in the instant case the issue is under- s. 54EC, however, we find the language in the above section is similar to that of s. 54E. Therefore, we find force in the arguments of the learned counsel for the assessee that earnest money or advance money is a part of sale consideration. 8.2 We find the Nagpur Bench of the Tribunal in the case of Bhikulal Chandak (HUF) (supra) has held that assessee cannot be treated as defaulter in making investment in bonds as required under s. 54EC on receipt of advance as per the agreement to sell property and claiming exemption under s. 54EC. So far as the decision of the Hon'ble Bombay High Court in the case of Hindustan Unilever Ltd. (supra) relied on by the learned CIT(A) is concerned we find the same is distinguishable and not applicable to the facts of the present case. The Hon'ble Court in the said case has held that for the purpose of claiming deduction under the provisions of s. 54EC, the date of investment by the assessee must be recorded as the date on which payment was made and received by the National Housing Bank. Since in that case the investment was within a period of 6 months from the date of transfer of the asset the Hon'ble Court held that the provisions of s. 54EC were complied with by the assessee. However, in the instant case, the issue is regarding advance money received on the basis of agreement to sell and the applicability of s. 54EC on account of investment in specified bonds out of advance money but before the date of actual sale. Therefore, the said decision is not applicable to the facts of the present case. We also do not find force in the submission of the learned Departmental Representative that the Act does not contemplate any advance and that the CBDT Circular No. 359. dt. 10th May, 1983 is not applicable to the facts of the present case. 8.3 So far as the decision of Hon'ble Karnataka High Court in the case of H.P. Vishweswaraiah (supra) is concerned, we find the issue was compulsory acquisition of land and receipt of enhanced compensation after omission of s. 54E(3). It was held that enhanced compensation dates back to original receipt and the assessee is entitled to exemption under s. 54E(3) of the IT Act, 1961 though the additional compensation was received at the time when the provisions of s. 54E(3) were no longer in the statute book insofar as the same were omitted. Pitamber Lal Sunderdas Rajdev Page 12 of 13 8.4 Since in the instant case the assessee has invested an amount of Rs. 50 lakhs out of the advance money received on the basis of the agreement to sell therefore, following the spirit of the CBDT Circular No. 359 dt. 10th May, 1983 in the context of s. 54E and the ratio of the decision of Nagpur Bench of the Tribunal in the case of Bhikulal Chandak (HUF) (supra) we hold that the assessee is entitled to deduction under s. 54EC on account of amount of Rs. 50 lakhs. The order of the CIT(A) is accordingly set aside and the ground raised by the assessee is allowed.
12. It is pertinent to note that the language of section 54B as well as section 54EC so far as the investment is concern are pari materia and therefore, in view of the decision of Pune Bench of the Tribunal the claim of the assesse u/s 54B cannot be denied on the ground that the investment in purchase of agricultural land is made by the assessee prior to the transfer of the existing agricultural land if the said investment is made from the consideration received against this transfer. The decision of the Pune Benches of the Tribunal in case of Subhash Vinayak Supnekar (supra) has been upheld by the Hon’ble Bombay High Court reported 77 taxmann.com 226. Accordingly in the facts and circumstances of the case the claim of deduction u/s 54B of the Act in respect of the investment made for purchase of land dated 03.03.2008 is allowed.
In the result, the appeal of assesse is partly allowed.
Order pronounced in the open court on 12.12.2023