ACIT, Bangalore V. Sri. Muninaga Reddy, Bangalore

ITA 1489/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68298 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 15-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRISCILLA SINGSIT CITIIIDR
• Assessee Lawyers: P DINESH
• Keywords: Capital asset; Gift; Source of fund; Cost of acquisition
• Section: 143(3); 54B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.1489/BANG/2012 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. VS. SHRI MUNINAGA REDDY, NO.45, 3 RD B MAIN ROAD, 4 TH CROSS, 3 RD BLOCK, KALYAN NAGAR, BANGALORE 560 043. PAN : AFLPR 5736E APPELLANT RESPONDENT APPELLANT BY : SMT. PRISCILLA SINGSIT, CIT-III(DR) RESPONDENT BY : SHRI P. DINESH, ADVOCATE DATE OF HEARING : 13.08.2013 DATE OF PRONOUNCEMENT : 23.08.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 31.08.2012 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSM ENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ S AS UNDER:- ITA NO.1489/BANG/2012 PAGE 2 OF 8 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN UPHOLDING THE CLAIM OF THE ASSESSEE THAT THE LAND WAS HELD BY HIM FOR MORE THAN TWO YEARS AS THE LAND WAS REGISTERED IN THE ASSESSEES NAME ONLY ON 16.08.200 5 AND THE SAME WAS SOLD ON 01.03.2006, AND THEREFORE, THE ACT UAL HOLDING OF THE LAND IS FOR THE PERIOD OF LESS THAN 8 MONTHS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSEE HAS SHOWN THE SOURCE FOR PURCHASE OF THE PROPERTY INCLU DING THE GIFT RECEIVED BY HIM ON 15.10.2004 WHICH CLEARLY SUBSTAN TIATES THAT THE ASSESSEE HAS NOT HELD THE PROPERTY FOR TWO YEAR S AND THE ASSESSEE COULD NOT HAVE GOT THE POSSESSION OF THE L AND BEFORE THE PAYMENT OF THE SALE CONSIDERATION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSEES MAJOR PART OF THE SOURCE FOR PURCHASE OF THE PROPER TY WAS OUT OF THE ADVANCES RECEIVED FORM THE PROSPECTIVE BUYER ON 16.08.2005. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS CARRIED OUT AGRICULTURAL OPER ATIONS SINCE THE PROPERTY WAS BOUGHT WITH AN INTENTION OF SELLING ON LY, AND HAS NOT APPRECIATED THE FACT THAT THE SELLER OF THE LAND TO THE ASSESSEE HAS GIVEN A STATEMENT THAT THE LAND SOLD WAS A DRY LAND AND NO AGRICULTURAL ACTIVITIES WERE CARRIED ON IN IT. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT( A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND, T HAT OF THE ASSESSING OFFICER MAY BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. THE ASSESSEE IS AN INDIVIDUAL. HE DERIVES INCOM E FROM AGRICULTURE. HE IS ALSO ENGAGED IN REAL ESTATE BUSINESS. FOR T HE A.Y. 2006-07, THE ITA NO.1489/BANG/2012 PAGE 3 OF 8 ASSESSEE FILED RETURN OF INCOME ON 31.03.2007 DECLA RING AN INCOME OF RS.17,97,490 AND AGRICULTURAL INCOME OF RS.4,25,621 . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 15.12.2008 BY THE AO, WHO DETERMINED THE INCOME OF THE ASSESSEE AT RS.5,45,59 ,686. 4. DURING THE PREVIOUS YEAR, THE ASSESSEE HAD SOLD AGRICULTURAL LAND. CAPITAL GAIN ON SUCH SALE OF AGRICULTURAL LAND WAS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE A.Y. 2006-07. 5. THE CIT IN EXERCISE OF HIS POWERS U/S. 263 OF TH E ACT PASSED AN ORDER DATED 28.02.2011 IN WHICH HE PARTIALLY SET AS IDE THE ORDER OF THE AO PASSED U/S. 143(3) OF THE ACT DATED 15.12.2008. TH E ISSUES DEALT WITH IN THE ORDER U/S. 263 OF THE ACT RELATED TO COMPUTATIO N OF CAPITAL GAIN ON SALE OF AGRICULTURAL LAND BY THE ASSESSEE. THE CIT IN H IS ORDER U/S. 263 OF THE ACT DIRECTED THE AO TO CONSIDER THE FOLLOWING ISSUE S:- (I) THE COST OF ENTIRE AGRICULTURAL LAND HELD BY T HE ASSESSEE I.E., 69 ACRES 38 GUNTAS WAS TAKEN AS COST OF ACQUI SITION WHEREAS THE ASSESSEE HAD SOLD ONLY 16.11 ACRES. THEREFORE THE EXCESS COST OF ACQUISITION TO THE EXTENT OF RS.20,50,216/- HAS BEEN WORKED OUT AND CONSEQUENTLY THE ASSESSEES INCOME FROM CAPITAL GAINS WAS SHORT COMPUTED TO THAT EXTENT. (II) THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECT ION 54B OF RS.10,38,54,742/- WAS RESTRICTED TO RS.6,70,40,704/ - AS THE ASSESSEE HAD PRODUCED EVIDENCE FOR PURCHASE OF AGRI CULTURAL LANDS ONLY TO THAT EXTENT. HOWEVER THE DEDUCTION UNDER S ECTION 54B SHOULD NOT HAVE BEEN ALLOWED AS THE ASSESSEE HAD NO T USED THE LAND FOR AGRICULTURAL PURPOSES AND ALSO THE LAND WA S HELD BY THE ASSESSEE FROM AUGUST 2004 TO MARCH 2005 I.E., FOR A PERIOD OF LESS THAN 2 YEARS. ITA NO.1489/BANG/2012 PAGE 4 OF 8 6. CONSEQUENT TO THE DIRECTIONS OF THE CIT U/S. 263 OF THE ACT, THE AO PASSED AN ORDER U/S. 143(3) R.W.S. 263 OF THE ACT O N 28.12.2011. AS CAN BE SEEN FROM THE DIRECTION GIVEN BY THE CIT IN HIS ORD ER U/S. 263 OF THE ACT, THE AO WAS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 54B OF THE ACT. U/S. 54B OF THE ACT, CAPITAL GAINS ARI SING FROM TRANSFER OF CAPITAL ASSET BEING LAND WHICH IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE ON WHICH TRANSFER TOOK PLACE WAS BEING USED BY THE ASS ESSEE FOR AGRICULTURAL PURPOSES WILL NOT BE CHARGEABLE TO TAX IF THE ASSES SEE WITHIN TWO YEARS AFTER THE DATE OF TRANSFER OF CAPITAL ASSET PURCHASES ANY OTHER LAND FOR BEING USED FOR AGRICULTURAL PURPOSES. THE CAPITAL GAIN W ILL NOT BE CHARGEABLE TO TAX TO THE EXTENT TO WHICH THE CAPITAL GAIN IS USED FOR PURCHASE OF LAND FOR BEING USED FOR AGRICULTURAL PURPOSES AS AFORESAID. THE CIT IN HIS ORDER FOUND THAT THE EXEMPTION U/S. 54B HAS BEEN ALLOWED TO THE ASSESSEE TO THE EXTENT OF RS.6,70,40,704. THE CIT IN THE ORDER U/S . 263 OF THE ACT FOUND THAT THE ASSESSEE HAD PURCHASED LAND ON 16.08.2005 AND HAD SOLD THE SAME ON 1.3.2006. THEREFORE THE CONDITION FOR AVAI LING EXEMPTION U/S. 54B OF THE ACT VIZ., THAT THE ASSESSEE SHOULD HAVE USED THE LAND WHICH WAS TRANSFERRED TWO YEARS IMMEDIATELY PRECEDING THE DAT E OF TRANSFER FOR AGRICULTURAL PURPOSES, WAS NOT SATISFIED AND THEREF ORE EXEMPTION U/S. 54B OF THE ACT OUGHT NOT TO HAVE BEEN GIVEN. 7. IN THE PROCEEDINGS BEFORE THE AO PURSUANT TO THE ORDER U/S. 263 OF THE ACT, THE ASSESSEE SUBMITTED THAT THOUGH THE SAL E DEED IN RESPECT OF THE PROPERTY WAS REGISTERED ON 16.08.2005, THE ASSESSEE ENTERED INTO AN ITA NO.1489/BANG/2012 PAGE 5 OF 8 AGREEMENT FOR SALE IN RESPECT OF THE PROPERTY WHICH WAS DULY REGISTERED ON 31.10.2003. AS PER CLAUSE (10) OF THE AFORESAID DE ED WHICH IS REPRODUCED BELOW, THE ASSESSEE WAS GIVEN POSSESSION OF THE PRO PERTY AND HAS BEEN CULTIVATING THE LAND RIGHT FROM 31.10.2003:- 10. ON THE EXECUTION OF THE AGREEMENT THE SELLER S HAVE DELIVERED THE POSSESSION OF THE SCHEDULE PROPERTY T OGETHER WITH THE LIST OF DOCUMENTS ETC. XEROX COPY OF THE ENDOR SEMENT ISSUED BY THE SPECIAL DEPUTY COMMISSIONER FOR INAMS ABOLIT ION XEROX COPIES OF THE R.T.C. EXTRACTS AND XEROX COPY OF THE MUTATION EXTRACT, FOR PEACEFUL ENJOYMENT TO THE BUYER AND IN COME RECEIVED/ACCRUED IN SUCH PROPERTY SHALL BE ENJOYED TILL THE EXECUTION OF SALE DEED, WHICH SHALL BE AFTER FINALI ZATION AND DECREE BY THE SAID CIVIL COURT IN O.S. NO.4879/1988 . THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE PROPE RTY WAS SOLD DURING THE PREVIOUS YEAR ON 01.03.2006. THE LAND WAS THUS USED FOR AGRICULTURAL PURPOSES TWO YEAR IMMEDIATELY PRECEDING THE DATE ON WHICH THE CAPITAL ASSET WAS TRANSFERRED. THEREFORE, EXEMPTION U/S. 5 4B WAS RIGHTLY ALLOWED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 8. THE AO, HOWEVER, SUMMONED THE PERSONS WHO SOLD THE LAND TO THE ASSESSEE. IN THEIR STATEMENTS, THEY HAVE STATED TH AT THEY DID NOT CULTIVATE ANY CROPS BECAUSE THE LAND WAS A DRY LAND AND THERE WAS NO WATER RESOURCE. THEY CONFIRMED THE FACT THAT THERE WERE SOME EUCALYPTUS TREES IN THE LAND. THE AO WAS OF THE VIEW THAT IN THE LI GHT OF THE STATEMENT GIVEN BY THE PURCHASER, IT WAS CLEAR THAT THERE WAS NO AG RICULTURAL ACTIVITY PERFORMED IN THE LANDS AND THEREFORE DEDUCTION U/S. 54B OF THE ACT SHOULD ITA NO.1489/BANG/2012 PAGE 6 OF 8 NOT BE GIVEN TO THE ASSESSEE. ACCORDINGLY, THE SUM OF RS.6,70,40,706 WHICH WAS ALLOWED AS EXEMPTION U/S. 54B OF THE ACT WAS WITHDRAWN BY THE AO. 9. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) HELD THAT THE EXEMPTION U/S. 54B OF THE ACT HAS TO BE GIVEN TO TH E ASSESSEE. IN COMING TO THE ABOVE CONCLUSION, THE CIT(APPEALS) RELIED ON CLAUSE (10) OF THE AGREEMENT FOR SALE DATED 31.10.2003, WHEREBY THE AS SESSEE WAS GIVEN POSSESSION OF THE LAND. THE CIT(APPEALS) ALSO RELI ED ON THE EVIDENCE REGARDING SALE OF TREES GROWN ON THE LAND. THE CIT (APPEALS) ALSO RELIED ON THE CERTIFICATE ISSUED BY KATTIGENAHALLI GRAM PANCH AYAT TO THE EFFECT THAT THE LAND WAS USED FOR AGRICULTURAL PURPOSES. 10. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 11. THE LD. DR REITERATED THE STAND TAKEN BY THE RE VENUE AS REFLECTED IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(APPEALS). 12. AFTER GIVING A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS, WE FIND THAT THE REVENUE IN ITS GROUNDS OF APPEAL (GROUNDS NO.1 TO 4) HAS TAKEN A PLEA THAT THE ACTUAL PURCHASE OF THE LAND BY THE AS SESSEE WAS ONLY IN AUGUST, 2005 AND THE SOURCE OF FUNDS FOR MAKING PAY MENTS TO THE SELLER IS TRACEABLE ONLY FROM THE GIFTS RECEIVED IN OCTOBER, 2004 AND ADVANCE ITA NO.1489/BANG/2012 PAGE 7 OF 8 RECEIVED FROM THE PROSPECTIVE BUYERS IN AUGUST, 200 5. IN OUR VIEW, IN THE LIGHT OF THE CLEAR EVIDENCE IN THE FORM OF CLAUSE ( 10) OF THE AGREEMENT FOR SALE DATED 31.10.2003, THE POSSESSION BY THE ASSESS EE OF THE PROPERTIES IS CLEARLY ESTABLISHED. SECTION 54B OF THE ACT DOES N OT CONTEMPLATE LEGAL TITLE AND IS CONCERNED ONLY WITH THE USE OF THE LAND FOR AGRICULTURAL PURPOSES. SINCE THE ASSESSEE WAS IN POSSESSION OF THE LANDS I N QUESTION RIGHT FROM OCTOBER, 2003 AND THE SALE BY THE ASSESSEE TO THE B UYERS WAS IN THE YEAR 2006, WE ARE OF THE VIEW THAT THE ASSESSEE WAS IN P OSSESSION OF THE LANDS FOR A PERIOD OF MORE THAN TWO YEARS, PRIOR TO ITS T RANSFER. 13. AS FAR AS THE USE OF THE LANDS FOR AGRICULTURAL PURPOSE IS CONCERNED, THE REVENUE HAS PROCEEDED TO RELY ONLY ON THE STATE MENT OF THE PERSONS WHO SOLD THE LAND TO THE ASSESSEE. IN THEIR STATEM ENT, THE PERSONS WHO SOLD THE PROPERTY TO THE ASSESSEE HAVE STATED THAT THEY HAVE NOT CULTIVATED ANY CROPS. BUT THEY DID NOT GIVE ANY STATEMENT TO THE EFFECT THAT NO AGRICULTURAL ACTIVITIES WERE CARRIED ON OVER THE PR OPERTY. NOR DID THEY GIVE ANY STATEMENT THAT THE ASSESSEE DID NOT CARRY OUT A NY AGRICULTURAL ACTIVITY. IT IS CLEAR FROM THE ASSESSMENT ORDER IN THE CASE O F THE ASSESSEE FOR THE A.Y. 2004-05 THAT THE ASSESSEE WAS ASSESSED IN RESP ECT OF AN AGRICULTURAL INCOME OF RS.5,52,100. IT IS ALSO SEEN THAT EVIDEN CE REGARDING SALE OF NILGIRI TREES LOCATED IN THE PROPERTY HAVE BEEN GIV EN BY THE ASSESSEE. THE CIT(APPEALS) HAS PLACED RELIANCE ON THOSE EVIDENCE TO COME TO THE CONCLUSION THAT THE ASSESSEE WAS USING THE LAND FOR AGRICULTURAL PURPOSES. ITA NO.1489/BANG/2012 PAGE 8 OF 8 14. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(APPEALS) WAS FULLY JUSTIFI ED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 54B OF THE ACT. WE DO NOT FIND ANY GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(APPE ALS). CONSEQUENTLY, THE APPEAL BY THE REVENUE IS DISMISSED. 15. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF AUGUST, 2013. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 23 RD AUGUST, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.