Chinnappa Anthonappa, Bangalore V. ACIT, Bangalore

ITA 663/BANG/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6962 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-07-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVAMSHI B ENGALURU
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Capital asset; Period of limitation; Cost of acquisition; Tangible material; Assessment record; Reassessment proceedings
• Section: 143(3); 54B; 54F; 143(1); 147; 148; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 663/BANG/2015 ASSESSMENT YEAR : 2010 - 11 CHINNAPPA ANTHONAPPA, DORAISANIPALAYA BILEKAHALLI, BANNERGHATTA ROAD, BANGALORE 560 076. PAN: ALUPA 9484B VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 10(1), BANGALORE. APP EL L ANT RESPONDENT APP ELL ANT BY : SHRI B.S. BALACHANDRAN, ADVOCATE RE SPONDENT BY : SHRI VIKAS SURYAVAMSHI, ADDL .CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 23. 0 7 .2019 DATE OF PRONOUNCEMENT : 31 . 0 7 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.02.2015 OF THE CIT(APPEALS)-4, BANGALORE RELATIN G TO ASSESSMENT YEAR 2010-11. 2. THE ISSUE INVOLVED IN THIS APPEAL BY THE ASSESS EE IS WITH REGARD TO THE VALIDITY OF INITIATION OF PROCEEDINGS U/S. 147 OF THE INCOME-TAX ACT, 1961 [THE ACT] WITH REGARD TO ALLOWABILITY OF ASSESSEE TO EXEMPTION U/S. 54B OF THE ACT. 3. THERE IS A DELAY OF TWO DAYS IN FILING THIS APPE AL BY THE ASSESSEE BEFORE THE TRIBUNAL. THE ASSESSEE IS 84 YEAR OLD SENIOR CITIZEN WITH HEALTH ITA NO. 663/BANG/2015 PAGE 2 OF 11 ISSUES. BECAUSE OF OLD AGE AND ILL-HEALTH, THE ASS ESSEE COULD NOT CONTACT THE COUNSEL AND FILE THE APPEAL IN TIME. THE DELAY IN FILING THE APPEAL IS ONLY TWO DAYS AND HENCE KEEPING IN MIND THAT THERE IS NO NEGLIGENCE OR LACK OF DILIGENCE IN FILING THE APPEAL BELATEDLY, W E CONDONE THE DELAY OF TWO DAYS IN FILING THE APPEAL. 4. THE ASSESSEE IS AN INDIVIDUAL. HE SOLD AGRICULT URAL LANDS BELONGING TO HIM IN SY.NO.165/17, DORAISANIPALAYA, BILEKAHALL I VILLAGE, BEGUR HOBLI FOR A CONSIDERATION OF RS.6,95,00,000 UNDER AN AGREEMEN T DATED 06.09.2007 WHEREBY POSSESSION OF THE PROPERTY WAS ALSO DELIVER ED TO THE PURCHASER IN AY 2008-09. THE ASSESSEE DEPOSITED RS.6 CRORES IN CAPITAL DESIGNATED CAPITAL GAIN DEPOSIT ACCOUNT WITH SYNDICATE BANK, J AYANAGAR MARKET BRANCH ON 14.12.2007. THE PROVISIONS OF SECTION 5 4B OF THE ACT ARE AS FOLLOWS:- CAPITAL GAIN ON TRANSFER OF LAND USED FOR AGRICULT URAL PURPOSES NOT TO BE CHARGED IN CERTAIN CASES. 54B. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET BEING LAND WHICH, IN THE TWO YEARS IMMEDIATELY PRECEDING THE D ATE ON WHICH THE TRANSFER TOOK PLACE, WAS BEING USED BY THE ASSE SSEE OR A PARENT OF HIS FOR AGRICULTURAL PURPOSES (HEREINAFTER REFERRED TO AS THE ORIGINAL ASSET)], AND THE ASSESSEE HAS, WITHIN A PE RIOD 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 YEA R IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS T O SAY, ( I ) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER THA N THE COST OF THE LAND SO PURCHASED (HEREINAFTER REFERRED TO AS THE N EW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GA IN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SE CTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITA L GAIN ITA NO. 663/BANG/2015 PAGE 3 OF 11 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 B E CHARGED UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING F ROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURC HASE, THE COST SHALL BE REDUCED, BY THE AMOUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT UTI LISED BY THE ASSESSEE FOR THE PURCHASE OF THE NEW ASSET BEFORE T HE 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 NO TIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND S UCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR T HE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY, ALREADY UTI LISED 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-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OF T HE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THE N, ( I ) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDE R SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF TWO YEARS FROM THE DATE OF THE TRANSFER OF THE ORIG INAL ASSET EXPIRES; AND ( II ) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUCH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. 5. AS CAN BE SEEN FROM THE PROVISIONS OF SEC.54-B (2) OF THE ACT, IF THE CAPITAL GAIN IS NOT UTILIZED AS CONTEMPLATED U/S.54 -B(1) OF THE ACT WITHIN THE DUE DATE FOR FILING RETURN OF INCOME U/S.139 OF THE ACT, TO CLAIM ITA NO. 663/BANG/2015 PAGE 4 OF 11 EXEMPTION/DEDUCTION, THE ASSESSEE HAS TO DEPOSIT TH E CAPITAL GAIN IN A SPECIFIED ACCOUNT. AS PER PROVISO TO SECTION 54B(2) , IF THE AMOUNT DEPOSITED IN THE CAPITAL GAINS ACCOUNT IS NOT UTILI SED WHOLLY OR PARTIALLY FOR PURCHASE OF NEW ASSET WITHIN THE PERIOD SPECIFIED I N SUB-SECTION (1) I.E., WITHIN A PERIOD OF TWO YEAR AFTER THE DATE OF TRANS FER OF CAPITAL ASSET WHICH GIVES RISE TO CAPITAL GAIN, THEN THE AMOUNT NOT SO UTILISED SHALL BE CHARGED U/S. 45 AS INCOME OF THE PREVIOUS YEAR IN WHICH PER IOD OF TWO YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET EXPIRES. IN THAT CASE THE CAPITAL GAIN WILL NOT BE TAXED IN THE YEAR OF TRANSFER BUT WILL BE TAXED IN THE PREVIOUS YEAR WITHIN WHICH IT HAD TO BE UTILIZED AND IF NOT SO UTILIZED IT WILL BE CHARGED TO CAPITAL TAX IN THAT YEAR IN WHICH THE PERIOD FOR UTILIZATION OF THE CAPITAL GAIN EXPIRES. THIS IS HOW THE DEDUCTION U/S.54B OF THE ACT CAME UP FOR CONSIDERATION IN AY 2010-11 EVEN THOUGH THE TRANSFE R OF THE CAPITAL ASSET WHICH GAVE RAISE TO CAPITAL GAIN WAS IN AY 2008-09 . 6. THE ASSESSEE CONTEMPLATED BUYING OF ANOTHER AGRI CULTURAL LAND AND CLAIMED EXEMPTION FROM TAX OF CAPITAL GAIN U/S. 54B OF THE ACT. AS FAR AS AY 2010-11 IS CONCERNED, THE ASSESSEE HAD FILED RET URN OF INCOME ON 20.05.2011. AS TO WHETHER, THERE WAS ANY INTIMATIO N U/S. 143(1) OR 143(3) ORDER IS NOT CLEAR FROM THE ORDER OF ASSESSMENT PAS SED U/S. 143(3) R.W.S. 147 OF THE ACT. HOWEVER, THE ASSESSMENT ORDER MENT IONS THE FACT THAT ASSESSMENT WAS BEING REOPENED BY ISSUE OF NOTICE U/ S. 148 OF THE ACT AS IT WAS FOUND THAT ASSESSEE DID NOT REINVEST THE SALE P ROCEEDS RECEIVED ON TRANSFER OF AGRICULTURAL LAND WHICH WAS DEPOSITED I N THE CAPITAL GAIN SCHEME ACCOUNT WITHIN THE STIPULATED TIME. IN THE REASSES SMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE NET CAPITAL GAIN OF TRA NSFER OF CAPITAL ASSET WAS RS.5,24,56,600 WHICH WAS NOT DISPUTED BECAUSE THIS IS THE SUM BROUGHT TO TAX AS CAPITAL GAIN (LONG TERM) IN THE REASSESSMENT PROCEEDINGS. ITA NO. 663/BANG/2015 PAGE 5 OF 11 7. THE ASSESSEE SUBMITTED THAT IT HAD UTILISED THE CAPITAL GAIN FOR PURCHASE OF ANOTHER AGRICULTURAL LAND AND PAID THE FOLLOWING SUMS TO THE FOLLOWING PERSONS UNDER AGREEMENT FOR SALE:- A) SALE AGREEMENT WITH RAMAKRISHNA.K.C. AND AMOUNT PAID TO THE VENDOR RS.1,45,25,000 B) BALANCE DUE TO RAMAKRISHNA.K.C. PAYABLE AT THE TIME OF REGISTRATION RS. 94,7 5,000 C) SALE AGREEMENT WITH NARAYANAPPA & OTHERS AMOUNT PAID TO THE VENDOR RS.1,60,00,000 D) SALE AGREEMENT WITH NARAYANAPPA & OTHERS AMOUNT PAID TO THE VENDOR RS. 38.00,000 E) PROBABLE STAMP DUTY AND REG.FEE RS. 30.00.0 00 RS. 4,68,00,000 8. COPY OF SALE AGREEMENT BETWEEN ASSESSEE AND NARA YANAPPA & ORS. DATED 3.3.2008 IS AT PAGE 19 TO 45 OF ASSESSEE S PB. SIMILARLY, ANOTHER AGREEMENT DATED 26.11.2008 BETWEEN NARAYANA PPA & ORS. AND ASSESSEE IS ALSO AT PAGES 46 TO 57 OF ASSESSEES PB . THE ASSESSEE POINTED OUT THAT BECAUSE OF DISPUTES REGARDING TITL E OF THE VENDORS UNDER THESE AGREEMENTS IN COURTS OF LAW, THE SALE COULD N OT BE COMPLETED. THE ASSESSEE ALSO FILED COPY OF AGREEMENT WITH RAMAKRIS HNA.K.C. AND ASSESSEE DATED 25.4.2016. EVEN IN RESPECT OF THE P ROPERTY AGREED TO BE PURCHASED FROM RAMAKRISHNA.K.C., THERE WERE DISPUTE S IN THE COURTS OF LAW AND THEREFORE THE SALE COULD NOT BE COMPLETED. STA ND OF THE ASSESSEE WAS THAT AS PER THE REQUIREMENTS OF SECTION 54B OF THE ACT, CAPITAL GAIN HAD TO BE UTILISED IN PURCHASE OF ANOTHER AGRICULTURAL LAN D AND THE FACT THAT ASSESSEE HAD PAID THE ENTIRE SUM OF RS.4,68,00,000 OUT OF THE CAPITAL GAIN WITHIN THE PERIOD CONTEMPLATED U/S. 54B OF THE ACT WAS NOT DISPUTED. THE FACT THAT REGISTRATION AND OTHER FORMALITIES COULD NOT BE COMPLETED OWING TO CIRCUMSTANCES BEYOND THE CONTROL OF ASSESSEE CANNOT BE THE BASIS ON WHICH DEDUCTION U/S. 54B OF THE ACT CAN BE DENIED T O THE ASSESSEE. THE ASSESSEE IN THIS REGARD HAD PLACED RELIANCE ON THE DECISION OF THE HONBLE ITA NO. 663/BANG/2015 PAGE 6 OF 11 HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. SAMBANDAM UDAYKUMAR IN ITA NO.175 OF 2012, JUDGMENT DATED 15.02.2012 WHEREIN THE HONBLE HIGH COURT TOOK THE VIEW IN THE CONTEXT OF PROVISIONS OF SECTION 54F OF THE ACT WHICH REQUIRES CONSTRUCTION OF A RESIDENTIAL HOUSE FOR CLAIMING EXEMPTION. THE COURT FOUND THAT CAPITAL GAIN HAD BEEN INVESTED FOR CONSTRUCTION, BUT THE CONSTRUCTION OF HOUSE WAS NOT COMPLETE. THE CO URT TOOK THE VIEW THAT REQUIREMENTS OF SECTION 54F OF THE ACT WERE COMPLET ED BY THE ASSESSEE INASMUCH AS WITHIN THE PERIOD REQUIRED BY PROVISION S OF SECTION 54F OF THE ACT, CAPITAL GAIN WAS INVESTED IN CONSTRUCTION OF R ESIDENTIAL HOUSE, BUT THE FACT THAT ACTUAL CONSTRUCTION WAS COMPLETED BEYOND THE PERIOD CONTEMPLATED U/S. 54F OF THE ACT WAS NO GROUND TO D ENY THE BENEFIT OF DEDUCTION U/S. 54F. APPLYING THE SAME ANALOGY, THE ASSESSEE PLEADED THAT THE CAPITAL GAIN IN QUESTION SHOULD BE ALLOWED AS D EDUCTION U/S. 54B OF THE ACT. 9. THE AO, HOWEVER, DID NOT ALLOW THE CLAIM OF ASSE SSEE AND HE PROCEEDED TO HOLD AS FOLLOWS:- ACCORDING TO SEC. 54B CITED ABOVE, THE ASSESSEE OU GHT TO HAVE PURCHASED A PROPERTY WITHIN THE STIPULATED PERIOD T O CLAIM THE EXEMPTION U/S.54B.IN THE INSTANT CASE THE ASSESSEE HAS PAID AN ADVANCE AND ENTERED INTO AN AGREEMENT TO BUY A PROP ERTY HOWEVER, THE PROPERTY WAS NOT BOUGHT BY THE ASSESSEE EVEN TI LL DATE, HENCE THE ASSESSEE IS NOT ELIGIBLE FOR THE DEDUCTION U/S.54B OF THE I.T.ACT,1961. ACCORDINGLY, THE AMOUNT OF RS. 3,98,0 0,000/- CLAIMED AS CONSIDERATION REQUIRED TO BE PAID FOR PURCHASE O F AGRICULTURAL LAND AND REDUCED FROM THE NET CAPITAL GAIN IS DISALLOWED . THE CLAIM O DEDUCTION U/S.54B CAN ONLY BE ALLOWED IF THE CONDIT IONS ARE FULFILLED. IN THIS CASE AS THE ASSESSEE COULDN'T FU LFILL THE CONDITION AS REQUIRED U/S.54B, HE IS NOT ELIGIBLE FOR THE DEDUCT ION. THE ADDITION COMES TO RS. 3,98,00,000/-. THE LTCG ON TRANSFER OF AGRICULTURAL LAND IS RE-COM PUTED AS FOLLOWS: ITA NO. 663/BANG/2015 PAGE 7 OF 11 SALE VALUE RECEIVED RS.7,25,00,000/- LESS: AMOUNT PAID TO SMT.NIRMALA KUMARI RS. 30,00,000/- EXPENSES INCIDENTAL TO TRANSFER RS. 41,50,000/- INDEXED COST OF ACQUISITION RS.1,28,93,400/- ------------------- RS.2,00,43,400/- NET CAPITAL GAIN CHARGEABLE TO TAX RS.5,24,56,60 0/- 10. ACCORDINGLY, CAPITAL GAIN IN QUESTION WAS BROUG HT TO TAX BY THE AO. 11. BEFORE THE CIT(APPEALS), THE ASSESSEE CHALLENGE D THE INITIATION OF REASSESSMENT PROCEEDINGS ON THE GROUND THAT REASONS RECORDED WAS NOT PROVIDED TO THE ASSESSEE AND THAT THERE WAS NO BELI EF REGARDING ESCAPEMENT OF INCOME CHARGEABLE TO TAX. THIS GROUN D WAS REJECTED BY THE CIT(APPEALS) BY OBSERVING THAT FROM THE RECORDS IT IS SEEN THAT ASSESSEE WAS PROVIDED WITH REASONS RECORDED BY THE AO AND AS SESSEES REPRESENTATIVE FILED OBJECTIONS BEFORE THE AO. THE CIT(APPEALS) ACCORDINGLY REJECTED THE CLAIM OF ASSESSEE. 12. WITH REGARD TO DEDUCTION U/S. 54B OF THE ACT, T HE CIT(APPEALS) HELD THAT THOUGHT THE AMOUNT OF CAPITAL GAIN WAS INVESTE D IN PURCHASE OF AGRICULTURAL LAND, THE ASSESSEE FAILED TO GET VALID TITLE IN HIS NAME WITHIN THE STIPULATED PERIOD AND THEREFORE ASSESSEE WAS NOT EN TITLED TO DEDUCTION U/S. 54B OF THE ACT. THE ASSESSEE HAD, BEFORE THE CIT(A PPEALS), RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V. KULDEEP SINGH [2014] 49 TAXMANN.COM 167 (DELHI) WHEREIN THE HONBLE COURT TOOK THE VIEW THAT IF THE ASSESSEE ENTERS INTO AN AGREEM ENT WITH THE BUILDER WITHIN THE PRESCRIBED PERIOD CONTEMPLATED U/S. 54 O F THE ACT, I.E., TWO YEARS FROM THE DATE OF TRANSFER OF CAPITAL ASSET, THE ASS ESSEES CLAIM FOR DEDUCTION SHOULD BE ALLOWED, EVEN THOUGH THE ASSESS EE DID NOT GET LEGAL OWNERSHIP OF THE FLAT IN WHICH HE HAD INVESTED THE CAPITAL GAIN. THIS ITA NO. 663/BANG/2015 PAGE 8 OF 11 DECISION WAS, HOWEVER, DISTINGUISHED BY THE CIT(APP EALS) WITH THE FOLLOWING OBSERVATIONS: - 7. I FIND THAT THIS DECISION IS DISTINGUISHABLE ON FACTS. THE CASE BEFORE THE HON'BLE COURT WAS THAT ADVANCE HAD BEEN PAID TO THE BUILDER AND THE SAME WAS LINKED TO THE STAGE OF CONSTRUCTION, MOREOVER THERE WAS A VERY HIGH DEGREE OF CERTAINTY IN COMPLETING THE TRANSACTION OF PURCHASE. WHEREAS IN THE INSTANT CASE, THERE IS NO CERTAINTY THAT THE ASSESSEE WAS GOING TO WIN THE LITIGATION IN HIS FAVOUR AND THE WHOLE MATTER IS DEPENDENT ON MER ITS OF THE CASE BEFORE THE JUDICIARY. HENCE, THERE IS NO DEGRE E OF CERTAINTY AT ALL. ON ACCOUNT OF THESE REASONS, I AM IN AGREEMENT WITH THE AO THAT THE EXEMPTION / DEDUCTION NEEDS TO BE DENIED A ND HIS ACTION IS HEREBY UPHELD. 13. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT(APP EALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. C OUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE TH E REVENUE AUTHORITIES AND FURTHER PLACED RELIANCE ON THE DECISION OF ITAT CHENNAI BENCH IN THE CASE OF SMT. V.A. TARABAI V. DCIT, ITA NO.1894(MDS)/2011 DA TED 12.01.2012, WHEREIN THE TRIBUNAL TOOK THE VIEW THAT WHEN THERE ARE DISPUTES PENDING IN COURT, THE ASSESSEE CANNOT BE E XPECTED TO COMPLY WITH THE CONDITIONS OF DEDUCTION UNDER THE INCOME-TAX AC T. 15. THE LD. DR RELIED ON THE ORDER OF REVENUE AUTHO RITIES. 16. THIS APPEAL WAS HEARD ON SEVERAL OCCASIONS. ON 6.2.2018, THE LD. DR WAS ASKED TO PRODUCE THE ASSESSMENT RECORDS TO V ERIFY THE REASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS U/S. 147 OF THE ACT. ON 21.5.18, TIME WAS GIVEN TO THE DEPARTMENT TO COMPLY WITH THE DIRECTIONS DATED 6.2.18, BUT THE DEPARTMENT DID NOT PRODUCE TH E RECORDS TO SHOW WHAT WAS THE REASONS RECORDED BY THE AO FOR INITIATING P ROCEEDINGS U/S. 147 OF THE ACT. ON 24.5.18, ANOTHER OPPORTUNITY WAS GIVEN TO THE DEPARTMENT, BUT ITA NO. 663/BANG/2015 PAGE 9 OF 11 THE DEPARTMENT DID NOT PRODUCE THE RELEVANT ASSESSM ENT RECORDS. LATER, ON 25.6.18 AS WELL AS 3.12.18 AND 25.3.19, THE DEPARTM ENT DID NOT COMPLY WITH THE DIRECTIONS OF TRIBUNAL. 17. WHEN THE APPEAL WAS FINALLY HEARD ON 27.3.2019, EVEN ON THIS DATE, THE DEPARTMENT COULD NOT PRODUCE THE RELEVANT RECOR DS. THE ASSESSEE HAD PLEADED FOR COPY OF REASONS RECORDED UNDER THE RTI ACT, 2005 AND IN RESPONSE TO THE SAID APPLICATION, THE AO HAS GIVEN A COPY OF THE ASSESSMENT ORDER TO THE ASSESSEE, BUT HAS INFORMED THE ASSESSEE THAT ASSESSMENT RECORDS FOR AY 2010-11 WAS NOT READILY T RACEABLE AND REASONS RECORDED WOULD BE FURNISHED AS SOON AS RECORDS ARE AVAILABLE. EVEN IN THE PROCEEDINGS BEFORE THE TRIBUNAL, THE DEPARTMENT HAS INFORMED THAT APPEALS MAY BE DECIDED ON MERITS, RATHER THAN ON VALIDITY O F INITIATION OF PROCEEDINGS U/S. 147 OF THE ACT. 18. WE ARE OF THE VIEW THAT INITIATION OF REASSESSM ENT PROCEEDINGS HAVE NOT BEEN ESTABLISHED TO HAVE BEEN IN ACCORDANCE WIT H THE REQUIREMENTS OF SECTION 147 OF THE ACT. THERE IS NO MATERIAL BROUG HT TO OUR NOTICE THAT REASONS WERE RECORDED BEFORE ISSUE OF NOTICE U/S.14 8 OF THE ACT WHICH IS A SINE QUO NON FOR VALID INITIATION OF REASSESSMENT P ROCEEDINGS U/S.147 OF THE ACT. APART FROM THE ABOVE, THERE APPEARS TO BE NO TANGIBLE MATERIAL COMING INTO THE POSSESSION OF AO AFTER EXPIRY OF PERIOD OF LIMITATION FOR FRAMING ASSESSMENT ORDER U/S. 143(3) OF THE ACT BASED ON WH ICH, HE CAME TO THE CONCLUSION THAT THERE HAS BEEN ESCAPEMENT OF INCOME CHARGEABLE TO TAX. THE DEPARTMENT HAS ALSO NOT BEEN ABLE TO SHOW BEFOR E THE TRIBUNAL THE REASONS RECORDED TO JUSTIFY THE VALIDITY OF INITIAT ION OF REASSESSMENT PROCEEDINGS U/S. 147. IN THESE CIRCUMSTANCES, DRAW ING AN ADVERSE INFERENCE, WE HOLD THAT INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT WERE NOT VALID. ITA NO. 663/BANG/2015 PAGE 10 OF 11 19. AS FAR AS MERITS OF THE ADDITION IS CONCERNED, IT IS SEEN THAT THE ASSESSEE HAS INVESTED A SUM OF RS.4.68 CRORES BY PA YING ADVANCE FOR PURCHASE OF AGRICULTURAL LANDS. IT IS NOT DISPUTED THAT HAD THE SALE BEEN COMPLETED PURSUANT TO THOSE AGREEMENTS, THE ASSESSE E WOULD BE ENTITLED TO BENEFITS OF DEDUCTION U/S. 54B OF THE ACT. IT I S ALSO NOT DISPUTED THAT DUE TO PENDING LITIGATION, THE SALE COULD NOT BE COMPLE TED BETWEEN THESE PARTIES. HOWEVER, IN RESPECT OF AGREEMENT BETWEEN ASSESSEE AND NARAYANAPPA & OTHERS., THE LITIGATION HAS ENDED AND ASSESSEE HAD GOT TITLE OF PROPERTY ON 03.07.2019, COPY OF THE SALE DEED WA S FILED BEFORE US. WE ARE OF THE VIEW THAT EVEN OTHERWISE, THE ASSESSEE H AS COMPLIED WITH THE CONDITIONS FOR GRANT OF DEDUCTION U/S. 54B OF THE A CT INASMUCH AS HE HAS UTILISED, WITHIN A PERIOD OF TWO YEARS FROM THE DAT E OF TRANSFER OF CAPITAL ASSET, THE CAPITAL GAIN IN PURCHASING ANOTHER LAND FOR BEING USED FOR AGRICULTURAL PURPOSES. THE FACT THAT THE ASSESSEE DID NOT GET LEGAL TITLE TO THE LANDS IS NO GROUND TO DENY THE BENEFIT OF DEDUC TION U/S. 54B. THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF KULDEEP SINGH (SUPRA) AS WELL AS THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SAMBANDAM UDAYKUMAR (SUPRA) CLEARLY SUPPORTS THE PLEA OF ASSESSEE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE SHOULD BE ENTITLED TO BENEFIT OF DEDUCTION U/S. 54B OF THE ACT. WE HOLD AND DIRECT ACCORDINGLY. TO THE EXTENT CAPITAL GAIN OVE R AND ABOVE THE SUM OF RS.4.68 CRORES EXCLUDING THE STAMP DUTY AND REGISTR ATION FEES BUT INCLUDING THE ACTUAL STAMP DUTY AND REGISTRATION CHARGES PAID FOR ACQUIRING TITLE TO THE PROPERTY FROM NARAYANAPPA & ORS. VIDE SALE DEED DAT ED 3.7.2019, THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S. 54B OF TH E ACT. THESE OBSERVATIONS ARE ONLY MADE BY WAY OF ABUNDANT CAUTI ON. THE INITIATION OF REASSESSMENT PROCEEDINGS HAS ALREADY BEEN HELD TO B E BAD IN LAW BY US IN THE EARLIER PART OF THIS ORDER. ITA NO. 663/BANG/2015 PAGE 11 OF 11 20. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JULY, 2019. SD/- SD/- ( JASON P. BOA Z ) ( N. V. VASUDEVAN ) ACCOUNTAN T MEMBER VICE PRESIDENT BANGALORE, DATED, THE 31 ST JULY, 2019. / D ESAI S MURTHY / COPY TO: 1. THE APP ELLANT 2. THE R ESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUA R D F ILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.