JAGANNATH KRISHNAJI DEORE, PUNE V. DCIT, CIRCLE-2, PUNE

ITA 2091/PUN/2019

AI Insights

The case involves Jagannath Krishnaji Deore, who appealed against the order of the Commissioner of Income Tax (Appeals)-2, Pune, concerning the assessment year 2012-13. The primary issues revolved around the estimation of fair market value of converted agricultural land, the acceptance of transfer costs, and the claims for agricultural income and deductions under Section 54B of the Income Tax Act. The Tribunal found that the lower authorities had not properly referred the valuation issue to the District Valuation Officer and directed a fresh assessment. It upheld the partial acceptance of transfer costs but rejected the claims related to agricultural income and Section 54B deductions, emphasizing the lack of evidence for agricultural activities on the lands in question.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 135568 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 27-11-2022
• Assessment Year: misc
• Appeal Filed On: 25-09-2022
• Other Referred Cases: Abhishek Jain vs. ITO, Rajendra Bastimal Chordiya Vs. ITO 1(2), Nashik, DCIT Vs. Shri Mahesh Danabhai Patel
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Sale consideration of property below Jantri Value; Capital asset; Business expenditure; Fair market value; Corroborative evidences; Set aside; Capital Gains
• Section: 45(2); 54B; 50C; 54F

Judgement Text

आयकर अपीलीय अिधकरण“ए” ायपीठ पुणे म । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND G.D.PADMAHSHALI, ACCOUNTANT MEMBER आयकरअपीलसं . / ITA No.2091/PUN/2019 िनधा रणवष / Assessment Year: 2012-13 Jagannath Krishnaji Deore, At A-22, Vrindavan Hsg. Soc., Panchavati, Pashan, Pune 411 021 PAN : AFZPD3477N Vs DCIT, Circle-2, Pune Appellant/ Assessee Respondent /Revenue Assessee by Shri Ajay Singh & Shri Deepak S. Sasar Revenue by Shri Ramnath P. Murkunde – DR Date of hearing 28-11-2022 Date of pronouncement 07-12-2022 आदेश / ORDER Per S.S.Godara, JM: This assessee’s appeal for A.Y.2012-13, is directed against the Commissioner of Income Tax(Appeals)-2, Pune’s order dated 14.08.2019 passed in Appeal No.PN/CIT(A)-2/DCIT,Cir- 2,PN/554/2015-16 in proceedings u/s.143(3) of the Income Tax Act, 1961, in short “the Act”. Heard both the parties. Case file perused. ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 2 2. The assessee’s former 3 substantive grounds raise the issue of estimation of fair market value (FMV) on his capital business assets transferred in the relevant previous year, as under : “Original ground no 3 : Estimating Fair Market Value : 1. The Ld.CIT-A erred in confirming the action of AO in estimating the fair market Value of converted agricultural land at Survey No. 23/1/5, Village Nigdi, Tal. Haveli. Dist. Pune at Rs. 688/- per sq.ft., instead of Rs. 955.66 per sq.ft claimed by Appellant for arriving Fair Market Value of land as on 1/4/2011. This conversion of Capital Asset into Stock-in-trade was made as per provisions of Section 45(2) of the Income Tax Act, 1961. 2. Without prejudice, the difference of valuation of Rs. 36,46,332/- was wrongly the income of the Appellant without appreciating the fact during AY 2012-13 only area 13623 Sq.ft out of Total area 26160 Sq. Ft. was transferred of Survey No. 23/1/5, Village Nigdi, Tal. Haveli. Dist. Pune. Original ground no 4 : Reference to DVQ 3. The Ld. CIT-A erred in confirming the action of Ld. Assessing Officers adopting the valuation at Rs. 688/- per Sq.Ft. instead of referring the matter to the District Valuation Officer u/s 50C of the Act, thereby adding the difference of valuation of Rs.36,46,332/- as income of the Assessee.” 3. There is hardly any dispute between the parties that the assessee had sold his lands in Survey No.23/1/5 situated at Nigdi, Pune in the relevant previous year as NA (Non-Agricultural) after converting them to stock in trade as on 01-04-2011. He claimed the valuation thereof as Rs.955.66 per sq.ft. for the purpose of computation of capital gains u/s.45(2) of the Act which stood reduced to Rs.688/- per sq.ft. only by the Assessing Officer resulting in the consequential enhancement of the long term capital gains. This is what leaves the assessee aggrieved. ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 3 4. We have given our thoughtful consideration to the rival pleadings and note that the learned lower authorities have not the statutory reference to the Valuation Officer u/s.142A r.w.s. 50C of the Act. The fact further remains that neither the assessee could prima-facie explain his impugned valuation @ Rs.955.66 per sq.ft. by quoting the exact comparable instances per se of agricultural lands before conversion nor could the Revenue show us any material to reiterate its valuation at the rate of Rs.688/- per sq.ft. for the purpose of computation of capital gains. Faced with this situation, we restore the instant first and foremost issue back to the Assessing Officer for his fresh appropriate adjudication after making reference to the DVO us.142A(1) r.w.s. 50C of the Act as per law. Ordered accordingly. 5. The assessee’s fourth substantive ground challenges correctness of the CIT(A)’s action partly accepting the claim of Rs.3.00 lakhs only out of alleged full cost of transfer of Rs.5.00 lakhs regarding his land at Sy.No.365/1, Village Talegaon Dbhade, Taluka Maval, District Pune. Learnedcounsel vehemently argued that the impugned expenses pertain to legal and other head which ought to have been allowed as cost of transfer in entirety. The fact remains that the CIT(A) has already accepted the assessee’s claim to the extent of Rs.3.00 lakhs out of Rs.5.00 laks.And that there is no further cogent evidence before us which could lead to the entitlement of the entire claim. We thus uphold ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 4 the CIT(A) detailed discussion granting part relief to the assessee. Rejected accordingly. 6. The assessee’s fifth to seventh substantive grounds challenge correctness of the CIT(A) findings partly allowing business expenditure claim of Rs.12.50 lakhs out of that of Rs.24,80,775/- on estimation basis. Mr. Singh vehemently argued that the lower authorities neither supplied a copy of the recipients statement denying the expenses nor do they consider all the supportive documentary evidence comprising of account payee cheques, bills and details of the actual work done in correct perspective. All these assessee’s arguments fail to convince us once the recipient itself could not support it’s case before the Assessing Officer. Be that as it may, we see no reason to disturb the CIT(A) findings accepting half of the claim on estimation basis thereby exercising his powers co-terminus with the Assessing Officer. These fifth to seventh substantive grounds stand rejected accordingly. 7. The assessee’s eight substantive ground pleads that the Assessing Officer herein, i.e. DCIT, Circle-2, Pune had not issued any valid sec. 143(2) notice. Learnedcounsel fails to dispute that the Assessing Officer had duly issued this clinching notice to the assessee on 07-08-2013 which was never challenged u/s. 124(3) of the Act. We thus quote Abhishek Jain vs. ITO [2018] 94 taxmann.com 355 (Delhi) that such a plea could not be entertained beyond the specified period sofar as the ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 5 Assessing Officer’s jurisdiction is concerned. The assessee fails in his eighth substantive ground therefore. 8. The assessee’s ninth and tenth substantive grounds claim agricultural income exemption of Rs.3,89,500/- out of which only Rs.1.25 lakhs has been accepted by the CIT(A). Mr. Singh vehemently argued that not only the assessee has supplied all the necessary details of the amounts concerned being agricultural income in nature but also the departmental authorities have already accepted similar claim in preceding and succeeding assessment years. He fails to dispute that the assessee only claims to have sold the agricultural crops in cash mode which could not be proved in both the lower appellate proceedings by producing all the supporting evidence. There would be further no denial of the fact that the department has also not given credit to the revenue records indicating various crops sown in the assessee’ land in the relevant previous year. Faced with this situation, we conclude that the impugned agricultural income deserves to be accepted to the extent of Rs.2.75 lakhs. Ordered accordingly. The impugned addition of Rs.3,89,500/- is restricted to Rs.1,14,500/- only with a rider that the same shall not be treated as a precedent. The assessee’s ninth and tenth substantive grounds to this effect are partly accepted. 9. Lastly comes the issue of section 54B deduction amounting to Rs.59,91,383/-. Learned counsel invited our attention to the CIT(A) ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 6 detailed discussion to this effect reading as under : “5.5 On this issue, the AO observed in the assessment order that whether appellant wants to claim it u/s.54B or 54F it is not clear and not provided information during assessment proceedings. AO was of the opinion that it appears that appellant want to claim deduction u/s.54B in future and for time being it has been invested in capital gain schemes. For claim of deduction u/s 54B, it is necessary that appellant must do agricultural activities in previous two years prior to sale, being urban land. It was also verified from sale deed of such land, that appellant was merely a consenting party and he had no actual ownership of land. There was no agricultural activity was carried on by appellant and no proof was furnished and in fact in 7/12 of land, appellant’s name was not found. The land was under dispute and amount was paid to appellant also for settlement of dispute only as consenting party. Therefore, the claim that agricultural activities were carried on by appellant is factually incorrect and liable to be rejected. Therefore, the deduction on account of investment in capital gain scheme (without referring any section under which appellant has claimed) is disallowed and Rs.1,93,89,778/- is added back in the income of the appellant. Thus, the AO held that the land at Talegaon and Nigdi both were not agricultural lands. 5.6 The first ground of appeal is only on this aspect that both the lands were not considered as agricultural lands by the AO. Regarding Nigdi land, it is seen from 7/12 extract of Nigdi land that agricultural activities were carried out by the appellant on Nigdi land only upto around 1985-86. After 1985-86 till the date of conversion i.e. 01-04- 2011, no agricultural activities were carried out by the appellant on Nidgi land. Further, the Nigdi land was converted into stock-in-trade then converted to Non-Agricultural land by order of the DM dated 13- 10-2011. Then residential plots were carved out on Nigdi land and around half of the plots were sold during the year under consideration. Thus, first of all no agricultural activities were carried out on Nidgi land and the same was converted into Non-agricultural land before sale so the Nigdi land cannot be treated as agricultiral land at the time of sale. Therefore, it is held that the AO had rightly treated the Nigdi land as non-agricultural land and therefore sale consideration of plots on this land not eligible for deduction u/s 54B of the Act (Agricultural land purchased after sale of agricultural land) 5.7 Regarding the Talegaon land, it is seen that the land was sold as such and was not carved out in plots. The objection of the AO is that in 7/12 of Talegaon land, appellant’s name was not found. The material on record has been examined. The appellant has explained that the dispute regardingagricultural land at survey no 365/1, Village Talegaon was going before Hon’ble Court since year 2001. The dispute is ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 7 mentioned in the sale agreement of the land. This land was allotted to freedom fighter Mr. Suresh Vaidya who was the previous owner of the land. The condition was mentioned by the Government authority on 7/12 extract that 50% nazrana should be paid while transferring the land in future to the other parties. The land at Talegaon was purchased by way of an assignment deed dated 10-10-2000. The clause 1 of the deed (PB 45) says that "The assignees have agreed to purchase & acquire and assignors have agreed to sell, assign, convey, transfer all their rights, titles, interest, claims and benefits in the said property...". Clause 2 (PB 46) also mentions about the ongoing court case and also that the litigation cost will be borne by the assignees. Thus, the appellant purchased the property for all practical purposes. Further, the appellant explained that the order of Collector was not obtained due to which the name of the appellant was not appearing on the 7/12 extract of the land. The dispute of the land was subsequently settled and the compromise decree was passed by the Hon’ble Court. The compromised party obtained the permission from collector to purchase the respective land. The party had purchased the land from the appellant. After the sale of land the name of the purchaser also appeared on the 7/12 extract of Survey No. 365/1. In case of balance land of 14 Acres the name of the appellant entered as owner on the basis of earlier land purchase agreement after compromise of the dispute. The appellant furnished copy of 7/12 extract to show that the court case has been settled and his name now appears in the 7/12 extract as well. Hence it shows that the appellant was the real owner of the land and because of special circumstances, his name was not appearing on the 7/12 extract. 5.8 From the copy of 7/12 extract of Talegaon land furnished by the appellant, it is seen that the entire portion of the land was not under cultivation. When asked, the appellant relied upon the decision of Hon'ble ITAT Pune in the case of Rajendra BastimalChordiya Vs. ITO 1(2), Nashik, ITA No. 1295/PUN/2017 dated 07-06-2019. On similar facts, Hon'ble ITAT held as given below: “6. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to the denial of claim of deduction u/s 54B of the Act for the reason that the land was not cultivable. We find that the reason for denyingthe claim of deduction u/s 54B of the Act was for the reason that out of the total area of 1 hectare 12R, agricultural activities were carried out on a portion of the land and there was no evidence of crop grown on the balance portion of the land. Before us, it is assessee’s submission that the entire land is one land and the fact that crop was grown in portion of land is not disputed. We find that the Co- ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 8 ordinate Bench of the Tribunal in the case of Shri Mahesh Danabhai Patel (supra) has held that provisions of Sec. 54B of the Act does not specify that the entire land should be used for cultivation for claiming benefit u/s 54B of the Act. It held that if any part of the land is under cultivation for two years immediately two preceding years prior to the date of transfer, it would be sufficient to claim benefit u/s 54B of the Act. Before us, Revenue has not placed any contrary binding decision in its support nor has placed any material on record to demonstrate that the aforesaid decision in the case of DCIT Vs. Shri Mahesh Danabhai Patel (supra) has been set aside or stayed by the higher Judicial Authorities. We find that AO has noted that A.R of the assessee agreed for disallowance and therefore the AO proceeded with proportionate disallowance. On the other hand, it is assessee’s contention that the statement of AO of the A.R having agreed for disallowance is factually incorrect. In the present case, we are of the view that since the issue on merits is covered in assessee’s favour by the decision of Pune ITAT, cited hereinabove, then merely because of admission of disallowance, the assessee cannot be denied the benefit to which he is eligible. We therefore following the decision of Co-ordinate Bench of the Tribunal in the case of Shri Mahesh Danabhai Patel (supra) are of the view that the AO was not justified in denying the claim of deduction u/s 54B of the Act and we therefore direct the AO todeduct the claim. Thus, the grounds of assessee are allowed. ” Thus, in the above case, It was held that if any part of the land is under cultivation for two years immediately two preceding years prior to the date of transfer, it would be sufficient to claim benefit u/s 54B of the Act. Thus, it is held that the land at Talegaon was agricultural land and the sale consideration of this land will be eligible for deduction u/s 54B on account of purchase of agricultural land at Goa on 21-11-2013. 5.9 As already discussed earlier Nigdi land is held to be non agricultural land and therefore the sale consideration of Nigdi land is held to be not eligible for deduction u/s 54B of the Act. 5.10 Accordingly, Ground No 1 of the appellant is PARTLY ALLOWED” 10. Mr. Singh vehemently argued during the course of hearing that both the lower authorities have erred in law and on facts in treating the ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 9 assessee’s Nigdi land as non-agricultural so as to be giving rise to section 54B deduction claim on account of its transfer in the relevant previous year. He further sought to buttress that the assessee could not use his lands in issue for agricultural purposes owing to rapid urbanization in the nearby pickets and therefore, it would not be treated as fatal to the deduction claim. The Revenue has placed strong reliance on the CIT(A) findings in issue. 11. We have given our thoughtful consideration to the foregoing vehement stand and find no merit in assessee’s arguments. This is for the precise reason that he has not been able to prove the clinching fact of having used the lands transferred for agricultural purposes for two years immediately preceding the date on which the transfer took place. That being the case, we adopt stricter interpretation in light of CIT Vs. Dilip Kumar and Company (2018) 9 SCC 1 (SC) (FB) to affirm the impugned disallowance made by both the lower authorities. This last substantive ground is declined therefore. 12. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open Court on 07 th December, 2022. Sd/- Sd/- (G.D.PADMAHSHALI) (S S GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दनांक / Dated : 07 th December, 2022 Satish ITA No.2091/PUN/2019 Jagannath KrishnajiDeore 10 आदेशक ितिलिपअ ेिषत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. यथ / The Respondent. 3. The CIT(A) concerned. 4. The Pr. CIT concerned. 5. िवभागीय ितिनिध,आयकरअपीलीयअिधकरण, “ए” ब च, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाड फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT,Pune. S.No Details Date Initials Designation 1 Draft dictated on 30.11.2022 Sr. PS/PS 2 Draft placed before author 05.12.2022 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order