Devappa Muniraju, Bangalore V. Income tax Officer, Ward - 3(2)(2), Bangalore

ITA 981/BANG/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8837 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 06-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Additional evidence; Set aside; Capital Gains
• Section: 54B; 2(14); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESEIDENT AND SHRI PADMAVATHY S, ACCOUNTANT MEMBER ITA No.981/Bang/2019 Assessment year : 2015-16 Shri Devappa Muniraju, No.5151, Vijayaraj Uttarahalli, Srinivasapura-Kengeri Road, Bengaluru – 560 002. PAN: ABVPM 0978R Vs. The Income Tax Officer, Ward 3(2)(2), Bangalore. APPELLANT RESPONDENT Appellant by : Shri Vishal S. Rao, CA Respondent by : Dr. Shankar Prasad K., Addl.CIT(DR)(ITAT), Bengaluru. Date of hearing : 06.09.2022 Date of Pronouncement : 09.09.2022 O R D E R Per Padmavathy S., Accountant Member This appeal by the assessee is against the order of the CIT(Appeals)-3, Bengaluru dated 22.1.2019 for the assessment year 2015-16. 2. The assessee has raised the following grounds of appeal:- “ 1. The Learned First Appellate Authority erred in upholding the order of assessment made by the AO which is opposed to law and facts of the case and hence is liable to set aside. ITA No.981/Bang/2019 Page 2 of 11 2. The Learned First Appellate Authority erred in upholding the addition of Rs.1,56,48,700/- towards the alleged unexplained cash deposits made into the Appellant's Bank Account disregarding the facts of the case, the sources available with the Appellant, law relevant and the evidences adduced and hence the same is liable to set aside. 3. The Learned First Appellate Authority erred in upholding the disallowance of deduction of Rs. 3,65,22,294/- made by the Assessing Officer while computing the Appellant's income from LTCG on sale of Hemmigepura Lands and the same being opposed to law and facts is liable to set aside. . 4. The Learned First Appellate Authority erred in upholding the disallowance of the deduction of Rs.1,62,84,358/- u/s 54B of the Act disregarding the facts that the lands sold by the Appellant were agricultural land as contemplated u/s 2(14) of the Act and as such the same is liable to set aside. 5. The Learned First Appellate Authority erred in upholding the disallowance of deduction of Rs. 1,94,20,600/- u/s 48(ii) of the Act made by the AO with complete disregard to facts and circumstances of the case, the law relevant and as such the same is liable to set aside. 6. The Learned First Appellate Authority erred in upholding the disallowance of deduction of Rs. 60,000/- u/s 48(i) of the Act towards the professional fee and hence the same is liable to set aside. 7. The Learned First Appellate Authority erred in upholding the disallowance of deduction of Rs. 17,452/- u/s 48(ii) of the Act being the alleged difference in the indexation cost of the Stamp Duty paid even when the claim made by the Appellant was correct and hence liable to set aside. 8. The Learned First Appellate Authority erred in upholding the addition of Rs.7,39,884/- made by the AO rejecting the deduction of the indexation cost of the Brokerage paid u/s 48(ii) of the Act and as such the same is liable to set aside.” ITA No.981/Bang/2019 Page 3 of 11 3. There is a delay of 38 days in filing the appeal before the Tribunal. It was submitted that the delay was due to the reason that the assessee was indisposed and hence could not file the appeal on time before the due date. Considering the same, we condone the delay in fling the appeal and admit the appeal for adjudication. 4. The assessee has also raised additional grounds of appeal which read as follows:- “1. The Learned First Appellate Authority erred in upholding the deduction of entire cost u/s 48(ii) of the Act disregarding the facts of the case as per which the Appellant was entitled only to 50% of the deduction thereof. 2. The Learned First Appellate Authority erred in upholding the levy of Surcharge of Rs.12,24,510/- even when the Appellant is not liable for the same. 3. The Learned First Appellate Authority erred in upholding the levy of interest u/s 234A of the Act even when the Appellant is not liable for the same. 4. The Learned First Appellate Authority erred in upholding the levy of interest u/s 234B of the Act even when the Appellant is not liable for the same. 5. The Learned First Appellate-Authority erred in upholding the levy of Education Cess and Higher Education Cess even when the Appellant is not liable for the same.” 5. Additional grounds No.2 to 5 are consequential and do not warrant separate adjudication. Ground No.1 is connected to main ground Nos.5 to 8 and therefore following the Hon’ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383 (SC), this additional ground is admitted for adjudication. ITA No.981/Bang/2019 Page 4 of 11 6. The assessee is an individual and filed the return of income for AY 2015-16 on 18.1.2017 declaring a total income of Rs.14,03,440. In the return, the assessee has declared NIL income against capital gains after claiming a deduction u/s. 54B of the Income-tax Act, 1961 [the Act] on the net consideration received for Rs.5 crores on transfer of agricultural land. The case was selected for scrutiny of cash deposits and deductions from capital gains. 7. During the course of hearing, the assessee submitted that the assessee has sold 5 acres of agricultural land for a total consideration of Rs.10 crores and 50% of the consideration is offered to tax in the year under consideration vide Sale Deed executed on 14.8.2014. The assessee also submitted that the other 50% of the consideration was received during the AY 2013-14 and the possession of half of the land was handed over on 13.4.2013 (pg.245 of PB). It was further submitted that the assessee has purchased agricultural land on 23.5.2013 for a consideration of 1.64 crores and claimed deduction u/s. 54B for AY 2015-16. 8. The AO during the course of assessment noticed that besides the deduction u/s. 54B, the assessee had claimed certain other deductions. The AO called upon the assessee to submit the details pertaining to expenses claimed as deduction and after considering the submissions of the assessee, he proceeded to disallow the deduction u/s. 54B and also the expenses as the assessee could not furnish any evidence. The AO also made an addition towards unexplained cash deposits into the ITA No.981/Bang/2019 Page 5 of 11 bank of Rs.1,56,48,700. Aggrieved, the assessee preferred an appeal before the CIT(Appeals), who confirmed the order of the AO, against which the assessee in appeal before the Tribunal. 9. We will first consider the addition/disallowance made towards long term capital gains. The AO made the following disallowances on the basis that no documentary evidence were produced by the assessee:- Exemption/deduction claimed under the head Deduction/exemption Claimed proposed to be disallowed Amount 1. ___ Since the land transferred in question is a capital asset as per section 2(14) of I.T.Act Exemption claimed u/s.54B is hereby proposed to disallow. Rs.1,62,84,358/- 2 Expenses at the time of purchase Claimed of Rs.3,75,000/- (before indexation claimed) Rs.7,39,884/- 3 Land scaping & Other expenses claimed of Indexation cost of improvement claimed as deduction is disallowed in the absence of proof. Rs.1,94,20,600/- 4 Stamp duty actually paid is Rs.9,88,791/- Claimed Rs. 10,06,243/- difference of Rs,17,452/-to be added to LTCG Rs. 17,452/- 5 Professional fee paid to lawyer No proof produced Rs.60,000/- 3,65,22,294/- 10. On merits, the ld. AR reiterated the submissions before the lower authorities with regard to the claim of deduction u/s. 54B of the Act. The ld. DR supported the orders of the lower authorities and ITA No.981/Bang/2019 Page 6 of 11 submitted that the assessee cannot claim deduction u/s. 54B since the agricultural land is purchased prior to the sale. 11. We have considered the rival submissions and perused the material on record. With regard to deduction u/s. 54B in the year under consideration, we will first look at the provisions of section 54B which are as follows:- “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.” ITA No.981/Bang/2019 Page 7 of 11 12. From a plain reading of the section, it is clear that the assessee is entitled for the claim of deduction provided the agricultural land is purchased within two years after the date of sale of agricultural land. In assessee’s case, the agricultural land is sold on 14.2.2014 (50% share) and the agricultural land against which deduction u/s. 54B is claimed was purchased on 23.5.2013 which is prior to the sale. Therefore, we are of the view that the assessee is not entitled to claim deduction u/s. 54B of the Act for the agricultural land which is purchased prior to the sale of agricultural land. We therefore see no reason to interfere with the order of the CIT(Appeals) in this regard. 13. With regard to expenses at the time of purchases of Rs.3,75,000, the ld. AR submitted that the assessee had submitted confirmations from 3 persons which the CIT(Appeals) did not consider on the basis that the additional evidence are not furnished as per Rule 46A and no explanation was provided for additional evidence. The ld. DR supported the order of the lower authorities. 14. After hearing both the parties, we notice that with regard to the amount of Rs.3,75,000 (indexed @ Rs.7,39,884) claimed as expenses at the time of purchases, we notice that the assessee has submitted confirmation from 3 parties viz., Shri Jayadevappa Rajasekhar, Shri Gullapa Narasimmaiyah, Shri T.K. Nagesh before the CIT(Appeals), who rejected the same on the reason that the same was not as per Rule 46A by relying on the decision of ITAT Bangalore in the case of Anupam Kothari [ITA No.837/Bang/2012]. It was submitted by the ld. ITA No.981/Bang/2019 Page 8 of 11 AR that the counsel handling the assessee’s matters was not keeping well for a long time due to which the same could not be produced before the AO. We see merit in this submission of the ld. AR. The CIT(Appeals) has power to admit the additional evidence before him which goes to the root of the issue and cannot reject the evidence merely on technicality of Rule 46A. In our considered view, there was sufficient and reasonable cause for the assessee in producing the confirmations before the AO. We therefore admit these additional evidence and remit the issue to the AO for verification of the confirmations from the 3 parties and decide the allowability of the claim in accordance with law, after providing opportunity of being heard to the assessee. 15. With regard to landscaping and other expenses claimed, the ld. AR submitted additional evidence before us and prayed for admission of the same on the ground that it could not be produced earlier since the counsel who has handling the assessee’s case was continuously ill and passed away. The ld. DR objected to admission of additional evidence before the Tribunal. After hearing both the parties, we are of the view that the additional evidence now submitted goes to the root of the issue of expenses claimed and therefore in the interest of justice, we admit the additional evidence. 16. The documents now produced in the form of additional evidence in support of the landscaping and other expenses requires verification by the AO and for this purpose, we remit this issue to the AO for ITA No.981/Bang/2019 Page 9 of 11 consideration of the AO and decision in accordance with law, after reasonable opportunity of being heard to the assessee. 17. With regard to expenses at the time of purchase, landscaping and other expenses claimed in the computation of capital gains for the year under consideration, we notice that the assessee has claimed 100% of the above expenses. Since only 50% of the total sale proceeds is offered to income during the current year, the deduction claimed also should be restricted to 50%. Accordingly, we direct the AO to allow only 50% of eligible deduction of these expenses after due verification of the evidence. 18. We will now consider the issue with regard to the addition made towards cash deposits. During the course of assessment proceedings, the AO called upon the ass to explain the source of income for cash deposited into Federal Bank Ltd. of Rs.1,32,73,700 and Kotak Mahindra Bank Ltd. of Rs.26,85,000. The assessee submitted that source is the earlier cash withdrawals from the Banks and furnished a cash book prepared in this regard. The AO rejected the cash book on the ground that it was prepared to suit the bank deposits and does not reflect the true state of affairs. The AO made a month-wise analysis of deposits and withdrawals of cash and made an addition of the entire amount as unexplained cash deposits. The CIT(Appeals) confirmed the addition. ITA No.981/Bang/2019 Page 10 of 11 19. During the course of hearing, the ld. AR submitted that the cash book reflects the transactions corresponding to the bank entries since the cash withdrawals and deposits are through bank. He submitted before us the summary of cash book to corroborate that cash deposits are out of the cash withdrawals made from time to time. 20. We have considered the rival submissions and perused the material on record. We notice that the assessee has prepared and submitted the cash book during the course of hearing before the AO. However, the same cannot be rejected by the revenue authorities stating that it is prepared to reflect only bank entries and does not represent any business transaction. Further, we notice that there is no description as narration of the entries in the cash book and hence it cannot be conclusively said that there is no transaction pertaining to business accounted. The AO/CIT(A) have not done any reconciliation of entries in the cash book with that of bank entries as per bank statement. The summary of cash book transactions submitted by the ld. AR before us also needs to be examined by the revenue authorities. In view of the above, we remit this issue back to the AO for verification of details afresh and decide the issue accordingly in accordance with law. The assessee is directed to submit all the relevant details in support of its claim and cooperate in the proceedings before the AO. It is ordered accordingly. ITA No.981/Bang/2019 Page 11 of 11 21. In the result, the appeal of the assessee is partly allowed for statistical purposes. Pronounced in the open court on this 9 th day of September, 2022. Sd/- Sd/- ( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 9 th September, 2022. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.