LATE. SMT. INDIRA J. VIKAMSY , MUMBAI V. DY. CIT RG-22(1), MUMBAI

ITA 1607/MUM/2020

AI Insights

The case involves an appeal by the legal heir of Late Smt. Indira J. Vikamsey against the order of the Commissioner of Income Tax (Appeals) -25, Mumbai, which upheld the disallowance of a deduction of Rs.21,25,000/- under section 54B of the Income Tax Act, 1961, and the disallowance of interest of Rs.4,91,496/- incurred as cost of improvement of the assets sold. The primary contention was whether the land sold was agricultural land, qualifying for the deduction under section 54B, and whether the interest incurred was justifiably a cost of improvement. The Tribunal directed a re-examination of the agricultural use of the land based on the 7/12 extract for the two years preceding the sale, while upholding the disallowance of the interest cost due to lack of evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125429 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 20-04-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LALKA
• Keywords: Sale consideration of property below Jantri Value; Salary income; Corroborative evidences; Valuation report; Capital Gains
• Section: 43B; 143(3); 54B; 50C; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, AM & MS.KAVITHA RAJAGOPAL, JM ITANo.1607/Mum/2020 (Assessment Year: 2011-12) Late Smt. Indira J. Vikamsey C/o.T.M.Gosher &Co.C.As. 12, Shivaji Fort CHS Ltd., Easter Express Highway, Sion(E), Mumbai-400 022 Vs. Dy.CIT, Range-22(1) Vashi ,Navi Mumbai—400703 PAN/GIRNo.AACPV4797M (Appellant) (Respondent) Assessee by Shri Lalka Revenue by Ms.Vranda U.Matkar Date of Hearing 21.04.2023 Date of Pronouncement 14.07.2023 ORDER PER KAVITHA RAJAGOPAL, JM: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) -25, Mumbai (‘Ld.CIT(A) for short), passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'), relevant to the Assessment Year (‘A.Y.’ for short) 2011-12. 2. The assessee has challenged the grounds of disallowance of deduction of Rs.21,25,000/- u/s.54B on the ground that the land which was sold was not an agricultural land and has also challenged the disallowance of interest of Rs.4,91,496/- incurred as cost of improvement of the assets sold, for the purpose of calculating capital gains. ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 2 3. The brief facts of the case are that the assessee is an individual and had filed her return of income for the impugned year dated 01.08.2011, declaring total income of Rs.1,58,15,460/-. The assessee's case was selected for scrutiny and the assessment order dated 20.03.2014 was passed u/s. 143(3) of the Act, determining the total income at Rs.2,33,76,497/- after making a disallowance u/s. 54B of the Act amounting to Rs.21,25,000/- and disallowance of expenditure of Rs.4,91,496/- against the long term capital gain on sale of property. 4. The assessee preferred an appeal before the ld. CIT(A). The Ld. CIT(A) confirmed the said addition/disallowances on the ground that the assessee has failed to substantiate the fact that the land sold by her was an agricultural land and that the assessee was carrying out the agricultural activities immediately preceding two years from the date of the transfer. During the pendency of the appeal before the first appellate authority, the assessee expired on 17.12.2014 and thereafter was represented by the Legal Heir (LH) of the assessee through the Authorized Representative. The Ld.CIT(A) also upheld the disallowance of interest amount on the ground that the assessee has failed to discharge her onus by providing documentary evidence in support of her claim. 5. The assessee's LH is in appeal before us, challenging the order of the Id.CIT(A) in upholding the disallowance made by the A.O. 6. It is observed that the assessee has derived income from salary and income ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 3 from other sources and had sold agricultural land during the impugned year for which the assessee has earned capital gains. The said agricultural land was said to be located at Karjat, for which sale agreement dated 09.09.2010 was furnished by the assessee. 7. The A.O. determined the value of the consideration as per section 50C of the Act to be Rs.2,35,86,659/- for which the assessee had claimed LTCG of Rs.21,25,000/- on sale of agricultural land u/s. 54B of the Act. The assessee has further stated that the assessee was deriving income from agricultural activity such as sale of grass in earlier years and had relied on the purchase deed dated 26.09.1980 which has categorized land described (a) as non agricultural land and land described in (b) & (c) as non cultivable land and the valuation report of the registered valuer has certified that the land in Survey No. 44/2 and 44/C 1-A and 1-A2 is agricultural land which was sold by the assessee and the proceeds of which has been used to purchase another agricultural property, thereby fulfilling the conditions prescribed u/s. 54B of the Act. The A.O. observed that the valuation report dated 09.09.2010 of the Sub Registrar, Karjat which was annexed to the agreement for sale has described the said land as Nagari (Shahri) Khulya Zamin which term mean "Urban (City) Open Land where the A.O. held that it is not an agricultural land and thereby denied the deduction us. 54B of the Act. The A.O. also stated that the assessee's purchase deed also describes the land as non agricultural and non cultivable and is fallow land. The A.O placed reliance on the valuation report which has described the property as a part of the hill, lying open and unused with no water supply and drainage facilities and ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 4 has specified that natural grown bushes and trees are present in the said property. The AO further stated that the assessee's name is not reflected in 7/12 extract Annexure to the sale agreement thereby disallowing deduction u/s. 54B of the Act. 9. The Ld CIT(A) disregarded the assessee's submission that the assessee was cultivating paddy in the said property for the reason that the valuation report specifies that there is no water supply in the property and the paddy crops requires a good amount of water and the same cannot be cultivated in the hilly areas. The ld. CIT(A) held that the assessee has not satisfied the condition of section 54B where the land should have been utilized for the purpose of agriculture for two years immediately preceding the date of transfer which fact the A.O. has also not looked into during the assessment proceeding. The Ld. CIT(A) further stated that the land was sold in 2010 in which the latest 7/12 extract dated 06.09.2010 issued by the Talathi (Revenue Officer), Karjat has not mentioned about any crop cultivation. The ld. CIT(A) also stated that paddy cultivation in 7/12 extract was in respect of Plot No. 60/1, Village Kundevaral, Taluka - Dhapoli was in the name of Smt. Krupa Anil Patil and Shri Pramod Bhoir. The ld. CIT(A) further stated that the assessee has failed to furnish the latest 7/12 extract prior to the date of sale, i.e., 09.09.2010. The Id. CIT(A) has held that the assessee has not substantiated her claim by any supporting documentary evidence. The valuation report of the registered valuer M/s Powle Shri Powle P. N. & Associates certifying that the said land is an agricultural land was not relied upon by the A.O. The Valuation Officer in his report has stated that there are various mistakes ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 5 in the report of the registered valuer relied upon by the assessee which cannot be relied upon in totality. The ld. CIT(A) upheld the order of the A.O. on the ground that the assessee has failed to substantiate her claim. 10. The learned Authorized Representative (ld. AR for short) for the assessee contended that the registered valuer has certified the same to be an agricultural land and that the assessee was cultivating paddy prior to the sale of the property. The Id. AR further stated that the assessee has sold two plots of agricultural land and has invested in another agricultural land. The ld. AR relied on page no. 15 of the paper book which is an extract of ''xkokpk uequk lkrÞ in which it has specified as ''Hkkr'' as the name of the crop cultivated which means 'paddy" The ld. AR also relied on page no. 66 of the paper book where the valuation report of the registered valuer has been enclosed which has classified the said plot as agricultural land. The Id. AR brought our attention to page no. 59 of the paper book where the word has been specified. The Id. AR relied on the valuation report of the registered value to substantiate the fact that the land sold by the assessee was classified as agricultural land and also the 7/12 extract showing the land as agricultural land. 11. The learned Departmental Representative (ld. DR for short) for the Revenue, on the other hand, controverted the submissions of the Ld. AR and relied on page no. 4 of the paper book where the said land has been classified as 'Urban Land' The ld. DR further stated that the valuation report relied upon by the assessee has specified as Survey No. 45B as non agricultural land and had stated that the same cannot be ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 6 relied upon for deciding whether the said land is agricultural or non agricultural. The ld. DR relied on the orders of the lower authorities. 12. We have heard the rival submissions and perused the materials available on record. It is evident that the assessee has sold plots bearing No.43C, H. No. 1 & 2 and Plot No. 44/2 in 2010 vide sale agreement dated 09.09.2010 to M/s. Siddhivinayak Enterprices (Smt. Krupa Anil Patil and Shri Ramdas K. Mahadnagar) for a sale consideration of Rs. 20 lacs which at the time of purchase dated 26.09.1980 were described as non-agriculture land. It is also observed that the Assessee was holding the said land for more than these 3 decades since 1980. Merely because at the time of purchase, the purchase agreement has described it as non agricultural land cannot be relied upon after almost thirty years when the sale took place. The assessee placed the reliance on the valuation report dated 10.2.2014 by M/s. Powle P.N & Associate and also the purchase agreement dated 26.09.1980 wherein it has specified plot no. 43B as non-agricultural land and other plot including 43C and 44/2 as agricultural land. The assessee also contends that the extract of 7/12 will substantiate the fact that the assessee was utilizing to said land for agriculture purpose and also fulfill the condition prescribed u/s. 54B. It is also pertinent to point out to fact that the Ld.CIT(A) in his order at para 5.3.3 has stated that “the AO had not challenged the use of land by the appellant for agricultural purpose” which clearly indicates that the lower authority have not established the fact that the assessee has not used the said land for the purpose of cultivation. From the above observation we deem it fit to ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 7 direct to the AO to allow the claim of the assessee u/s.54B subject to the verification of the 7/12 extract of the lands sold by the assessee for two years prior to the date of sale of the land. Therefore, ground No.1 raised by the assessee is allowed. 13. Ground No. 2 pertains to the disallowance of Rs. 4,91,496/- towards interest cost as cost of improvement of the capital asset sold, for the purpose of calculating the capital gain. The assessee has submitted that the funds have been borrowed for investing in the lands, for which interest was paid which amounted to the improvement of the said land. The assessee has failed to furnish any documentary evidence in support of her claim neither before the lower authorities nor before us. In the absence of the assessee’s failure to furnish supporting evidences, we uphold the disallowance of Rs. 4,91,496/- towards interest cost made by the AO. Hence, ground no. 2 is dismissed. 14. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 14.07.2023 Sd/- Sd/- (Amarjit singh) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 14.07.2023 Aniket Singh Rajput, Stenographer ITA No.1607/Mum/2020 Late Smt. Indira J. Vikamsy vs. Dy.CIT 8 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai