Income Tax Appellate Tribunal - Jodhpur
Kishan Lal Chanwaria, 1 ,Near Shiv ... vs Ito, Ward 2(2) Bikaner on 6 June, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
JODHPUR BENCH, JODHPUR.
BEFORE: DR. S. SEETHALAKSHMI, JUDICIAL MEMBER &
SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER
I.T.A. No. 225/Jodh/2023
Assessment Year: 2012-13
Kishan Lal Chanwaria Vs. ITO,
1, Near Shiv Mandir Nawal Ward-2(2),
Basti Shiv Bari, Bikaner. Bikaner.
[PAN: AEDPL3475P] (Respondent)
(Appellant)
Appellant by Ms. Suhani Maharwal, C.A.
Respondent by Sh. Prem Prakash Meena, Sr. DR
Date of Hearing 13.03.2024
Date of Pronouncement 06.06.2024
ORDER
PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Ld. CIT(A), National Faceless Appeal Centre, Delhi dated 27.04.2023 [here in after "ld.CIT(A)(NFAC)"] for assessment year 2012-13, which in turn arise from the order dated 17.12.2018 passed under section 147/143(3) of the Income Tax Act, by the ITO, Ward 2 (2), Bikaner.
2. In this appeal, the assessee has raised following grounds: -
I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 2 "1. On the facts and in the circumstances as well as law Ld. AO erred in intimation of proceedings u/s 147 and simultaneously ld. CIT(A) erred in sustaining in spite of factually incorrect facts and ITR is not filed and in absence of ITR the sources of investment of Rs. 9050000/- is not substantiated, whereas ITR had been filed u/s 139(1). In the case the re-
opening based on wrong and inexistent facts is bad in law and liable to be quashed.
2. On the facts and in the circumstances as well as law Ld. AO erred in making addition u/s 147 without making addition on the reasons to believe of escapement and hence the addition is without acquiring valid jurisdictional and also CIT(A) erred in sustain such addition which is illegal, without jurisdiction and liable to be quashed.
3. On the facts and in the circumstances as well as law ld. AO and CIT(A) erred in not allowing deduction u/s 54B of Rs. 461910/- for want of nexus between invested funds and funds raising on sale of agricultural land without having such law which is illegal and liable to be quashed.
4. On the facts and in the circumstances as well as law Ld. AO and CIT(A) erred in not accepting the agricultural income declared by assessee for want of sale bills which is unjustified and liable to be quashed.
5. That assessee wants to pray to keep right to file additional ground or to later or delete the existing grounds of appeal on or before the hearing of appeal."
3. Brief fact of the case are that the assessee is an individual and residing at address: Behind Shiv Temple, Ambedkar Colony, Shivbari, Bikaner and filed his return of income on 14.08.2012 showing income of Rs. 1,61,390/- which consisted of income from long term capital gain of Rs. 1,38,539/- and income from other sources viz Interest from Bank of Rs. 22,851/-. Apart from this the assessee also earned agricultural income of Rs. 2,65,110/- and duly disclosed the same in his return of income. The ld. AO issued a notice u/s 148 of the Act. In the notice reasons were stated that assessee has purchased an agricultural land I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 3 during the year and since he has not filed his income tax return therefore the source for purchase of land is from undisclosed source of income and such income has escaped assessment and on this ground permission of Ld. PCIT has been obtained to issue the notice under section 148. Subsequently, notice under section 142(1) and 143(2) along with questionnaire were issued on various dates, which were duly served upon the assessee. The ld. AO raised some queries during the assessment proceeding and the assessee submitted the replies of the same from time to time. The ld. AO passed an assessment order U/s 143(3) rws 147 of the Income tax Act, 1961 considering the opening balance of cash of Rs. 20,90,186/- received against sale of agricultural land as unexplained money U/s 69. The Ld. AO also disallowed an amount of Rs. 4,61,910/- being an investment in new agricultural land for claiming deduction under section 54B of the act with a view that the same has not been made out of sale proceed of agricultural land. Further Ld. AO has also disallowed the entire agricultural income of Rs. 2,65,110/- earned by the assessee and bank interest of Rs. 268 (declared short) and assessed the total income at Rs.29,78,860 of which calculation as per assessment order is as under:-
Total Income as per ITR 161390 Add: Disallowance of deduction u/s 54B 461910 Add: Disallowing agricultural income and treating the same as 265110 I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 4 income from other sources Add: Interest income less show 268 Add: Opening cash treated as income from other sources 2090186 Total Income 2978864 Rounded off 2978860
4. Aggrieved from the order of the assessing officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds of the appeal so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below:-
"6.1 Ground No. 1, 2 & 3: The appellant through these grounds of appeal has contended that the order passed by the AO is illegal, unjustified and bad in law and on facts hence it is liable to be quashed. And notice u/s 148 is bad in law therefore the assessment order passed on such notice will automatically become bad in law and void ab-initio.
6.1.1 I have examined the issue so raised. The Assessing Officer initiated reassessment proceedings only after properly appreciating and analyzing evidences. The Assessing Officer had initiated proceedings u/s 147 was certain and constitutes sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. Thus, there was reason to believe that income of the appellant had escaped assessment on account of failure on the part of the appellant to disclose fully and truly all material facts/particulars of its income necessary for its assessment.
6.1.2 In Peass Industrial Engineers (P) Ltd. vs. Deputy Commissioner of Income-tax [2016] 73 taxmann.com 185 (Gujarat), it was held that what is required at stage of issuing notice under section 148 is a reason to believe and not established fact of escapement of income and, therefore, looking to the scope of section 147 as also sections 148 to 152 even if scrutiny assessment has been undertaken, if substantial new material is found in form of information on basis of which assessing authority can form a belief that income of petitioner has escaped assessment, it is always open for assessing authority to reopen assessment.
I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 5 6.1.3 In Assistant Commissioner of Income-tax vs. Kisco Casting (P) Ltd. [2013] 34 taxmann.com 37 (Chandigarh-Trib.), it was held that action can be taken under section 147 read with section 148, on basis of report from Investigation wing of department. Therefore, where assessing Officer had been supplied with information by Investigation wing and he applied his mind to such information, there was no infirmity or illegality in issuance of notice under section 148.
6.1.4 In the case of Principal Commissioner of Income-tax-7 vs. Paramount Communication (P) Ltd. [2017] 79 taxmann.com 409 (Delhi), it has been held that:-
"Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was tangible material outside record to initiate valid reassessment proceedings."
6.1.5 The Assessing Officer should have reason to believe that the income of the assessee had escaped assessment and this belief should be of an honest and reasonable person based on reasonable grounds. Taking the totality of the facts and circumstances of this case into consideration, I reject the contentions of the AR and uphold the validity of the notice u/s 148 issued and subsequent assessment made. Ground No. 1, 2 & 3 is accordingly dismissed." 6.3 Ground No. 5 relates the addition of Rs 4,61,910/-being an investment in new agricultural land for claiming deduction u/s 54B with a view that the assessee has used the amount of sale proceeds for some other purpose and has not used this sale proceeds in purchasing the agricultural land. The purpose of deduction u/s 54B is to not tax sale proceeds/capital gain from sale of a property if it is used for purchasing another asset or property. Since in this case, the new asset has been funded by a loan; it cannot be said that the capital gain were invested.
6.3.1 During the course of assessment proceedings, the assessing Officer in his assessment order has stated that-
fopkj.kh, o'kZ ds nkSjku djnkrk }kjk d vpy laifRr #i;s 80]00]000@& esa fodzhr dh x,h gSA fu/kkZj.k izfdzik ds nkSjku bl Ojogkj ij iwt a h ykHk dh ns;rk ds lac/a k ds iwNus ij djnkrk jkjk fuEukuqlkj Li"Vhdj.k izLrqr fd;k x;k ;g fd foRr o"kZ 2011&12 esa izkFkhZ dh xzke mnklj ftyk chdkusj fLFkr d'f'k Hkwfe dk fodz; #i;s 80]00]000@& ek esa fd;k x,k ftldk dz, izkFkhZ Jkjk foRr okZ 2007808 esa fdik xik FkkA fodz; Is izklr 'kq) ykHk dk izkFkhZ )kjk vk dj v/kfuje dh /kkjk 54oha ds rgr fuos'k fdik xik] ftilesa d d'f'k Hkwfe okds xzke f'kockM+h] chdkusj esa #is 4]61]910@& oa dSfiVy xsu fMikWftV Ldhe [kkrs esa #i;s I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 6 39]00]000@& dk fuos'k 'kkfey gSA bl izdkj day NwV vUrxZr /kkjk 54oha #is 43]61]910@& ek= viuh vk;dj fooj.kh esa n'kkZ;h x;h gSA"
mijksDr ls Li"V gS fd djnkrk jkjk iwathykHk dks nks enksa esa fuos'k dik gS& %1% dSfiVy xsu MiksftV Ldhe Ikkrs esa # 39]00]000@& oa 42% d'f'k Hkwfe dz; djus esa #i;s 4]61]910@&A bl lac/a k esa dSfiVy xsu fMiksftV Ldhe [kkrs esa djnkrk jkjk fdik xik fuos'k miyC/k nLrkostksa ds vkyksd esa IR;kfir gksrk gS] vr% bl jkfk dh dVkSfr ns; gS ijUrq djnkrk )kjk d'f'k Hkwfe dz; djus esa n'kkZ;k xik fuos'k #i;s 4]61]910@& Lohdkj djus ;ksX; ugha gS Diksfa d fu/kkZj.k izfdzik ds nkSjku djnkrk }kjk izLrqr laifRr dz; pkVZ esa djnkrk us #i;s 4]61]910@& dh d'f'k Hkwfe dz; djus esa fuos'k dk Jksr eSIIZ vej izrki MsoyilZ izk-fy- Is fy,s xis #i;s 5]00]000@& ds _k is n'kkZ;k gSA blls Li"V gS fd djnkrk jkjk #is 4]61]910@& ds iat w hykHk dk mi,ksx d'f'k Hkwfe dz, u djds vU; dgha fd;k gS] vr% m-uqlkj vfHkys[k ij miyC/k nLrkostksa ds vk/kkj ij djnkrk }kjk /kkjk 54ch ds rgr nkok dh xih dVkSfr dh jkfk esa Is #i;s 4]61]910@&dh dVkSrh dh nkok vLohd'r djrs gq, nh/kZdkyhu iwt a hykHk 'kh"kZ esa #i;s 4]61]910@& dh vfHko'f) dh tkrh gSA 6.3.2 In support of his case, the appellant has stated that he has sold his land being used for agricultural purpose and has purchased the new agricultural land on 16.02.2012 i.e. before the date of filing his return of income and therefore has duly complied with all the requirements of provision of section 54B of the Act and is therefore eligible to claim deduction u/s 54B of the Act.
6.3.3 I have perused the matter. It is noticed from the assessment order that the appellant has purchased an agricultural land by taking loan amounting to Rs 5,00,000/- from M/s Amar Pratap Developers Pvt. Ltd. Out of Rs 5 lacs the appellant utilized Rs 4,61,910/- to acquire the said agricultural land and claimed the deduction u/s 54B of the Act.
6.3.4 The Sec. 54B of the Act states that-
"Following conditions should be satisfied to claim the benefit of section 54B • The benefit of section 54B is available only to an individual or a HUF. • The asset transferred should be agricultural land. • The land may be a long-term capital asset or short-term capital asset. • The agricultural land should be used by the individual or his parents for agricultural purpose at least for a period of two years immediately preceding the date of transfer. In case of HUF the land should be used by any member of HUF.
Within a period of two years from the date of transfer of old land the taxpayer should acquire another agricultural land. In case of compulsory acquisition the period of acquisition of new agricultural land will be determined from the date of receipt of compensation. However, as per section 10(37), no capital gain I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 7 would be chargeable to tax in case of an individual or HUF if agricultural land is compulsorily acquired under any law and the consideration of which is approved by the Central Government or RBI and received on or after 01-04- 2004.
6.3.5 In view of the above facts and circumstances of the case, it is clear that the appellant has not used the said amount of Rs 4,61,910/- for agricultural purpose and used the amount of sale proceeds in some other purpose. The appellant does not fulfill the criteria to claim the deduction u/s 54B of the Act as the said land purchased by taking loan and the capital gains has not been invested as mentioned in the section 54B of the Act. Therefore, the claim of the appellant is denied. And Ground No. 5 is dismissed.
6.4 Ground No. 6 of the appeal is against treating agricultural income as taxable income in the absence of documentary evidence of agricultural by the AO.
6.4.1 The appellant has stated that the AO grossly erred in disallowing a part of agricultural income just on the basis that the sale bills were not produced by the assessee, the AO failed to consider the submission made by the assessee in which the assessee had stated that the agricultural produce was directly sold by the assessee from the agricultural farm and not through mandi therefore no sale receipt of mandi was available with the assessee. The AO is not placing any reliance upon the submissions made during the assessment proceedings, being Girdawari report (prepared by the concerned department of the Rajasthan State Government), submitted by the assessee in support of the agricultural activities being done by the assessee during the current as well as various previous years.
6.4.2 The appellant has further stated that the AO on one hand has accepted the claim of deduction u/s 54B considering the agricultural activities being done by the assessee but on the other hand has disallowed the entire agricultural income despite of the fact that the related girdawri report is submitted by the assessee during the course of assessment proceedings.
6.4.3 The Assessing Officer in his assessment order has stated that-
djnkrk }kjk iwathykHk dks nks enksa esa fuos'k dik gS& 41½ dSfiVy xsu fMiksftV Ldhe [kkrs esa #i;s 39]00]000@& oa 42% d'f'k Hkwfe dz; djus esa #i;s 4]61]910@&A bl laca/k esa dSfiVy xsu fMiksftV Ldhe [kkrs esa djnkrk }kjk fdik xik fuos'k miyC/k nLrkostksa ds vkyksd esa IR;kfir gksrk gS] vr% bl jkfk dh dVkSfr ns; gS ijUrq djnkrk }kjk d'f'k Hkwfe dz; djus esa n'kkZ;k xik fuos'k #i;s 4]61]910@& Lohdkj djus ksX; ugha gS Diksafd fu/kkZj.k izfdz;k ds nkSjku djnkrk }kjk izLrqr laifRr dz; pkVZ esa djnkrk us #i;s 4]61]910@& dh d'f'k Hkwfe dz, djus esa fuos'k dk I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 8 Jksr eSIIZ vej izrki MsoyilZ izk-fy- Is fy;s x;s #i;s 5]00]000@& ds_k ls n'kkZ;k gSA blls Li"V gS fd djnkrk }kjk #i;s 4]61]910@& ds iawthykHk dk mi;ksx d'f'k Hkwfe dz; u djds vU; dgha fdik gS] vr% m-uqlkj vfHkys[k ij miyC/k nLrkostksa ds vk/kkj ij djnkrk jkjk /kkjk 54ch ds rgr nkok dh x;h dVkSfr dh jkf'k esa Is #i;s 4]61]910@&dh dVkSrh dh nkok vLohd'r djrs gq, nh/kZdkyhu iwathykHk 'kh"kZ esa #i;s 4]61]910@& dh vfHko'f) dh tkrh gSA 6.4.4 I have perused the matter. During the year, the appellant was asked to produce the sale bill and supporting evidence in support of his case, but the appellant has failed to produce the sale bills, no documentary evidence of agricultural activities carried out. Hence, in absence of supporting evidence, the claim of the appellant was not fund acceptable. Ground No. 6 is dismissed."
5. As the assessee did not receive any favour from the appeal filed before ld. CIT(A). The present appeal filed against the said order of the ld. CIT(A) before this tribunal on the grounds as reiterated in para 2 above. To support the various grounds so raised by the ld. AR of the assessee filed a written submission and the same is reproduced here in below :
"Assessee has been regular assessee filed the return of income u/s 139(1) on dated 14.08.2012. The ITR was processed u/s 143(1)(a) of I.T Act 1961. Later on JAO (Jurisdictional Assessment Officer) issued notice u/s 148 on dated 22.08.2017. Ld. JAO assumed jurisdiction to invoke the powers u/s 148 by recording of reasons that assessee did not file return of income and therefore investment amounting to Rs. 9050000/- has escaped assessment (Copy of reasons is enclosed on Paper book page no 1) In the assessment u/s 143(3)/148 Ld. JAO made following additions:-
Particulars Amount
(a) Addition on account of unexplained opening cash in 2090186/- hand
(b) Addition u/s 54B by disallowing deduction for want of 461910/-
nexus of investment vs. sale consideration
(c) Agricultural income as other sources 265110/-
(d) Interest 268/-
I.T.A. No. 225/Jodh/2023
Kishan Lal Chanwaria. 9
No addition or discussion for the escapement proposed amounting to Rs. 9050000/-
was made in order.
In the first appeal addition under (a) and (d) have been deleted by Ld.CIT (A). Addition under (b) and (c) are upheld and also the legal grounds of appeal against the re-opening of assessment were rejected. Aggrieved by the order, assessee came into this appeal.
First Ground "On the facts and in the circumstances as well as law Ld.AO erred in initiation of proceedings u/s 147 and simultaneously Ld.CIT(A) erred in sustaining in spite of factually incorrect facts that ITR is not filed and in absence of ITR the sources of investment of Rs. 9050000 /- is not substantiated, whereas ITR had been filed u / s * 139(1) . In the case the re- opening based on wrong and inexistent facts is bad-in- law and liable to be quashed."
Re-opening is made on incorrect facts that the ITR was not filed and in absence of ITR the investment to the tone of Rs. 9050000/- has been not subjected to verification. Your honour it is the fact that ITR u / s * 139(1) was filed on 14.08.2012. Both the JAO and CIT (A) accepted the fact. The re-opening was based on fact that assessee did not file ITR for the year and therefore investment to the tone of Rs. 9050000/- was not subjected to verification.
Whereas the established fact is that ITR u/s 139(1) had been filed (Page no 2- 3 of paper book). Since ITR has been filed naturally the investment had been subjected to verification. In that case very foundation of re-opening is failed and collapsed. Thus the JAO had no valid jurisdiction to proceed with section 147. Your honour, I may rely upon the decision of:-
(i) Deepak Wadhva vs ACIT 435 ITR 699 (Delhi High Court) (Page no 4-8 of paper book)
(ii) (ii) Mumtaz Hazi Mohammad Menon Vs ITO 408 ITR 268 (Gujrat High Court)
(iii) (iii) ITAT Mumabi ITO vs Champak Lal Mathura bhai Mehta ITA No 2253 / M * um / 2022 (Page no 9-19 of paper book) In case of Deepak Wadhawa case Hon'ble Delhi High Court stated that the proof put in place by assessee with regard to that acknowledgment of return filed has not been disputed by revenue, the challenge to impugned notice and impugned order will have to satisfy. Both other decision relied upon were passed in favour of assessee as I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 10 identical facts. In the circumstances of assumptions of incorrect jurisdiction on non-
existing facts the re-assessment is not valid.
Second Ground "On the facts and in the circumstances as well as law Ld.AO erred in making addition u / s 147 without making addition on the reason to believe of escapement and hence the addition is without acquiring valid jurisdiction and also CIT(A) erred in sustain such addition which is illegal, without jurisdiction and liable to be quashed."
Your honour the reason of escapement was that investment of Rs.9050000/- has escaped assessment for want of ITR. Whereas no such addition is made in assessment. Assesse filed his ITR u / s 139(1) . He sold capital assets for Rs.8000000/- on which income from capital gain was offered. He acquired fixed assets worth Rs. 21574060/- for which he offered explanation about sources and no addition remain after the 1st appeal. Ld.AO only made an addition of Rs. 2090186/- for claim of having cash in hand at the opening of year. This addition was only made for sake of justification of re-opening. The same has been deleted by Ld.CIT (A). In the circumstances, the re-assement is not justified. Your honours please see the order of AO 2nd para. He even did not discuss the original charge that assessee has made an investment of Rs. 9050000/-. Instead he acquired fixed assets worth Rs.21574060/- for which he had sources no addition is sustained at this stage for investment.
I rely upon the decisions of this beach in case of (A). Apoorva Sharma vs ITO ITA по 219 / J * P / 2020 (Page no 20-41 of paper book) (B). Meena Boldna vs ITO ITA no 872 / J * P / 2018 (C). Ram Mohan Rawat vs ITO o 1014 / J * P / 2018 In the circumstances reason recorded by AO is on wrong and inexistent facts are not tenable. Therefore re assessment was without valid Jurisdiction. Third Ground "On the facts and in the circumstances as well as law Ld.AO and CIT(A) erred in not allowing deduction u / s 54B of Rs. 461910/- for want of nexus between invested funds and funds raising on sale of agricultural land without having such law which is illegal and liable to be quashed"
The deduction u / s 54B amounting to Rs. 461910/- was denied stating that the assessee could not use the same money which was derived from sale of capital I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 11 assets. Ld.AO stated than the agricultural land was purchased by assessee from borrowed funds not from the funds which was received on sale of agricultural land the deduction is not allowed.
Your honour Ld.CIT (A) dealt with this ground in his order page no 26 and 27 para
6.3.4 and para 6.3.5. Ld.CIT (A) mentioned the provisions of section 54B CIT (A) himself said that to get deduction in sec 54B following conditions should be satisfied.
(i) The benefit of section 548 is available only to an individual or a HUF.
(ii) The asset transferred should be agricultural land. The land may be a long-term capital asset or short-term capital asset.
(iii) The agricultural land should be used by the individual or his parents for agricultural purpose at least for a period of two years immediately preceding the date of transfer. In case of HUF the land should be used by any member of HUF.
(iv) Within a period of two years from the date of transfer of old land the taxpayer should acquire another agricultural land. In case of compulsory acquisition the period of acquisition of new agricultural land will be determined from the date of receipt of compensation. However, as per section 10(37), no capital gain would be chargeable to tax in case of an individual or HUF if agricultural land is compulsorily acquired under any law and the consideration of which is approved by the Central Government or RBI and received on or after 01-04-2004.
Your honour undisputed facts are that assessee an individual transfer the agricultural land and within the period allowed acquired another agricultural land. In the section nowhere stated that such consideration or capital gain is required to use in acquiring new agricultural land. No nexus is required to prove the assessee to claim the deduction u/s 54B. Similar provisions of deduction are also given in statue in section 54&54F. In case of 54 the LTCG on sale of residential house could be claimed as deduction in assessee acquired another residential house subject to certain conditions of time line. In case 54F the deduction is allowed if assessee acquired residential house within certain time limit, if he derived LTCG on sale of Long term capital assets other than residential house. In no section 54, 54F or 54B the condition is there that such consideration or gain should be used. Only condition is available that assessee acquire residential house or agricultural land as the case may be. Even no stipulation is mentioned in statue to claim the deduction u/s 80C. Assessee can claim the deduction u/s 80C for expenses or investment out of borrowed funds. However earlier upto AY 1984-85, the assessee can claim the deduction u/s 80C if he incur or invest out of income. The condition has been removed afterwards.
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Kishan Lal Chanwaria. 12
Here I rely upon following judgements:-
(a). Ishwar Singh Chawla, Mumbai vs Assessee on 30 July, 2009. (Page no 42- 46 of paper book)
(b). Ajit Naswanit vs CIT 1127 Taxmann 123 (Delhi) 2001 In both the cases your honour it was held that assessee is entitled to get deduction u/s 54 even if he uses borrowed money to acquire another house.
(c). Milan Sharad Ruparel 005 ITR 0570(ITAT Mum 2010) It was said that saying the same funds should be used would frustrate the object of introduction of beneficial provision.
Some other decision in favour of assessee are as under:
(a) ACIT vs DR P.S Pasricha ITA no 1808/Mum/2003
(b) Prema P. Shsh vs ITO 101 TTJ 849 (Mum ITAT) In the above circumstances please direct to allow the deduction u/s 54B Fourth Ground "On the facts and in the circumstances as well as law Ld.AO and CIT(A) erred in not accepting the agricultural income declared by assessee for want of sale bills which is unjustified and liable to be quashed."
Denial of agricultural income, Assessee declared agricultural amounting to Rs.265110/- During the course of assessment proceedings assessee filed the proof of growing crops (Copy of Girdawari for two years 47-48 of paper book). He could not produce sale bill from Mandi. Your honours the crop of farmers more than 50% in total sale in cash. Farmers have no infrastructure to carry their production to mandi yard. Entire productions of assessee were sold in cash at site. Ld.AO accepted having agricultural land. He also accepted the growing of crops, since the deduction u/s 54B was allowed by him. However no income was considered by Ld.AO and entire agricultural income was added as income from other sources."
5.1 The ld. AR of the assessee also supported the written submission by filling the following evidence / records / judgments:-
I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 13 S. No. Particulars Page No. 1. Copy of reasons 1
2. ITR and Computation 2-3
3. Deepak Wadhva vs. ACIT 435 ITR 699 (Delhi High Court 4-8
4. ITAT Mumbai ITO vs. Champak Lal Mathura Bhai Mehta ITA 9-19 No. 2253/Mum/2022
5. Apoorva Sharma vs. ITO ITA No. 219/JP/2020 20-41 th
6. Ishwar Singh Chawla, Mumbai vs. Assessee on 30 July, 42-46 2009
7. Girdawari 47-48
6. The ld. AR of the assessee while dealing with the grounds so raised, submitted that the assessee has challenged the order of the lower authority on the legal as well as on merits of the case. So far as the legal grounds considered she has supported the decision of Delhi High court and others as discussed in the written submission. As regards the merits of the case the agricultural income to be assessed as such as the assessee has filed all the related proof and deduction u/s. 54 B of the Act is denied without appreciating the facts of the case.
7. Per contra, the ld. DR relied upon the orders of the lower authority on the ground on facts as well as on legal ground raised by the assessee.
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Kishan Lal Chanwaria. 14
8. We have heard the rival contentions, perused the material placed on record. Ground No. 3 raised by the assessee is in relation to denial of deduction u/s 54B of the Act for an amount of Rs. 4,61,910/- for want of nexus between invested fund and funds realised on sale of agricultural land. Apropos to this ground the fact emerging from the order of lower authorities is that the assessee was denied the deduction u/s 54B on the ground that the assessee could not use the same money which was derived from sale of capital asset. The ld. AO noted that the agricultural land was purchased by the assessee from borrowed fund and not from the fund which was received on sale of agricultural land and thus deduction was denied to the assessee. The ld. CIT(A) while dealing with grounds of appeal of the assessee noted that the assessee purchased an agricultural land by taking loan amounting to Rs. 5,00,000/- from M/s Amar Pratap Developers Pvt. Ltd., out of Rs. 5,00,000/- so borrowed. The assessee utilized Rs. 4,61,910/- to acquire the said agricultural land and claimed the deduction u/s 54B of the Act. The ld. CIT(A) was of the view that the deduction is not admissible to the assessee as the assessee does not fulfil the provision of section 54B of the Act and therefore to understand the provision of section 54B of the Act the same is reproduced herein below:
I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 15 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
(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.T.A. No. 225/Jodh/2023
Kishan Lal Chanwaria. 16
(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.
Explanation.--[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] The bench noted that the assessee to fulfil the condition that there must be transfer of capital asset, the land sold was used for agricultural purpose and the assessee has transferred the said land has also purchased the land. This fact has not been disputed by the lower authorities and therefore, we are of the considered view that the law does not fasten the liability on the assessee to prove that the investment should have direct nexus with the sale of land. Based on these observations, ground No. 3 raised by the assessee is allowed.
9. Ground No. 4 raised by the assessee is in relation to, the income of Rs. agricultural income of Rs. 2,65,110/- which was not considered as such and added as other income of the assessee. The ld. CIT(A) noted that the assessee has not produced the sale bill and supporting evidence in support of the claim and therefore, in the absence of the evidence claim of agricultural income of the assessee was not considered. The ld. AR of the assessee in support of the grounds so raised submitted that the assessee filed the proof of growing crops in the I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 17 form of copy of Girdawari report for two years. The assessee merely did not file the copy of sale bill for meagre income which are generally in the nature of cash sales and the farmer has no infrastructural and expertise of sustaining the evidence and since the assessee has already accounted the receipt of cash on sale of agricultural produces. The claim of agricultural income ignoring the fact that the assessee is holding agricultural land, produce the agricultural commodities, the same is supported to Girdawari report of last 2 years. Merely the assessee could not support the sale with the bills, the deduction for an amount of Rs. 2,65,110/- cannot be denied to the hands of the assessee. As it is evident that the assessee has proved their source along with other evidences which are not disputed by the revenue and therefore, considering the nature of receipt we are of the considered view that the assessee cannot be denied the benefit of agricultural income. Thus, we direct to the lower authorities to consider the income of the assessee to the extent of Rs. 2,65,110/- as agricultural income. Based on these observation ground No. 4 raised by the assessee is allowed.
10. Since we have considered the appeal of the assessee on its merits the ground No. 1 and 2 being legal in nature the same becomes I.T.A. No. 225/Jodh/2023 Kishan Lal Chanwaria. 18 infructuous and not decided. Ground No. 5 being general in nature does not require any adjudication.
In the result, the appeal of the assessee is allowed.
Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.
Sd/- Sd/-
((Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai)
Judicial Member Accountant Member
*Ganesh Kumar, Sr. PS
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By order