RAJENDRAKUMAR R PANDYA,SURAT V. ITO, WARD 3(1)(3), SURAT

ITA 432/SRT/2024

AI Insights

The case involves Rajendrakumar R Pandya, who appealed against the order of the National Faceless Appeal Centre (NFAC) and the Commissioner of Income Tax (Appeals), which confirmed the reassessment of his income for the assessment year 2011-12. The reassessment was based on the sale of agricultural land, which the Assessing Officer treated as a capital asset, leading to the addition of capital gains to the assessee's income. The primary legal issues revolved around the validity of the reopening of the assessment under Section 148, the applicability of Section 50C concerning the sale of land, and the denial of deduction under Section 54B for reinvestment in agricultural land. The Tribunal's decision focused on the correct valuation of the property and the legal interpretation of the relevant sections of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35097 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Other Referred Cases: Vithalbhai G Prajapati Vs ITO, Pruthvi Brokers and Shareholders, ITO Vs. Smt. Uma Dnyanoba Bhitande, CIT Vs Mitesh Impex, Goetze India Limited Vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVISH BHATT
• Assessee Lawyers: SAPNESH R SHETH
• Keywords: Capital asset; Revised return; Sale consideration of property below Jantri Value; Fair market value; Cost of acquisition; Capital Gains; Principle of natural justice
• Section: 148; 144; 143(3); 143(2); 201; 54; 139(1); 54B; 54F; 13; 50C

Judgement Text

"`आयकर अपीलीय अिधकरण, सूरत Ɋायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 432/SRT/2024 (AY 2011-12) (Physical court hearing) Rajendrakumar R Pandya Kharvasa Choryasi, Surat-394 201 [PAN : AAAHU 6298 L] बनाम Vs Income Tax Officer, Ward-3(1)(3), Surat, Room No.109, 1st Floor, Anavil Business Centre, Adajan Hazira Road, Adajan, Surat-395 009 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Sapnesh R Sheth, CA राजˢ की ओर से /Revenue by Shri Ravish Bhatt– Sr-DR अपील पंजीकरण/Appeal instituted on 17.04.2024 सुनवाई की तारीख/Date of hearing 14.11.2024 उद ्घोषणा की तारीख/Date of pronouncement 23.01.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals) [for short to as “NFAC/Ld.CIT(A)] dated 29.02.2024 for assessment year (AY) 2011-12, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) 24.12.2018. The assessee has raised the following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals), NFAC has erred in ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 2 confirming the action of Assessing Officer in reopening assessment by issuing notice u/s 148 of the I.T. Act,1961. 2.On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals), NFAC has erred in partly confirming the action of Assessing Officer by sustaining the addition to the extent of Rs.7,86,2336/- as capital gain although impugned rural agricultural land is not a capital asset. 3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals), NFAC has erred in confirming the action of Assessing Office in not giving deduction of Rs.6,52,500/- u/s 54B of the Act. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. Brief facts of the case are that assessee is an individual filed his return of income declaring income of Rs.3,04,150/-. The Assessing Officer received information that during the relevant financial year, assessee has sold immovable property at Moje Gam Kharvasa, S.No.241, Block No.286, Taluka Choryasi with five other co-owners vide sale deed No.7834 executed on 03.06.2010 for a sale consideration of Rs.40,00,000/-. The said sale deed was registered with Sub-Registrar, Udhna, Surat. The Stamp Valuation Authority determined the fair market value of the property at Rs.2,34,46,500/- for the purpose registration of transaction, since there was a difference vis-à-vis the sale consideration shown by the assessee and the value determined by Stamp Valuation Authority, the Assessing Office was of the view that provision of Section 50C attracts. The Assessing Office after recording the reasons and obtaining permission from Principal Commissioner of Income-tax-3, Surat issued notice under section 148 of the Act on 29.03.2018. In response to notice under section 148, assessee filed ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 3 his return of income on 12.10.2018 declaring same income as declared under section 139(1) of the Act. The Assessing Officer recorded that reasons of reopening were provided to assessee and after serving statutory notice under section 143(2) proceeded for reassessment. The Assessing Officer also served show cause notice as to why the difference vis-à-vis the sale consideration declared by assessee and his co-owners and the value determined by Stamp Valuation Authority should not be made under section 50C of the Act. The assessee has having 1/5th share, therefore the addition of Rs.58,61,624/- was propose against the assessee. The assessee filed his reply dated 14.12.2018. In the reply, assessee stated that he has sold agricultural land bearing Survey No.241 & 46 which do not fall within meaning of capital asset as land is situated outside limit of 8 kilo meter from municipal limit of Surat city, in the year 2010. The rural agricultural land does not attract any kind of capital gains. The assessee also furnished certificate showing distance from Surat city limit issued by Sarpanch of Gram Panchayat Kharvasa as well as Talati-cum-Mantri of village Kharvasa, District Surat. The assessee in alternative and without prejudiced his submission, submitted that even in case, the Assessing Officer was of the opinion that land falls within the definition of capital asset, made a reference to Departmental Valuation Officer for ascertaining the cost of land for the purpose of acquisition as it is inherited by him and were acquired prior to 1981. Such facts were mentioned in the sale deed. The assessee also made another prayer to allow the assessee exemption under section 54B of the Act for purchasing another agricultural land of Rs.12,00,000/- as well as ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 4 other necessary charges including the stamp expenses and incidental expenses of Rs.1,05,000/- i.e., aggregating Rs.13,05,000/-. The assessee has got one by two shares in the land, which was purchased. Therefore, the assessee is allowed exemption to the extent of Rs.6,52,500/-. The reply of assessee was not accepted by Assessing Officer and Assessing Officer noted that he has obtained certificate from Surat Municipal Corporation dated 17.12.2018 wherein land situated in Moje Kharvasa in block No.286 is situated at 2.97 kilo meter from Surat Municipal limit. A copy of such certificate dated 21.12.2018 was also scanned on page-6 of assessment order. The Assessing Officer recoded that assessee has not furnished any cost of acquisition of property to allow indexation cost. So indexation cost for the purpose of acquisition was treated as nil. The Assessing Officer further noted that claim made under section 54B was not claimed in his original returned of income as well as in the return of income filed in response to notice issued under section 144 of the Act. Thus, such claim of assessee was rejected. The Assessing Office ultimately made addition of Rs.58,61,625/- as proposed in the show cause notice. The Assessing Officer in para-3.7 of page-8 recorded that report of DVO is awaited and that assessment was getting time barred. Therefore, assessment was completed on the basis of jantry value and in case of DVO’s report is received, necessary action is would be taken. Aggrieved by the addition made in the assessment order as well as validity of reopening, assessee filed appeal before Ld.CIT(A). ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 5 3. Before Ld.CIT(A) assessee also raised his plea against the rejection of claim for deduction under section 54B of the Act on all issues/ground of appeal. The assessee filed his detailed written submission. On the validity of notice under Section 148 of the Act, the assessee stated that reasons recorded are not correct. In the reasons recorded, the Assessing Officer acknowledged that assessee has filed return of income on 30/11/2011, while in para 8 of assessment order, the Assessing Officer mentioned that no return was filed for the year under consideration despite having more than maximum amount of income which is not chargeable to tax. Thus, the reasons recorded are not correct. Reasons are fallacious. Thus, reasons recorded are not correct, therefore, notice issued under Section 148 is not valid. To support such view, the assessee relied upon the decision of Hon’ble Gujarat High Court in Vithalbhai G Prajapati Vs ITO 85 taxmann.com 249. On merit of the addition, the assessee stated that assessee has sold agricultural land which was beyond 8 Km from municipal limit of Surat city in 2010. The assessee furnished certificate of Sarpanch of gram panchayat Kharvasa as well as Talati-cum-mantri of village Kharvasa. The land does not fall within the meaning of capital asset. The assessee before Assessing Officer made a request to refer the matter to DVO for ascertaining cost of land as on 01/04/1981 as it was inherited/acquired prior to 1981. The assessee also requested to ascertain the fair market value by DVO on the date of sale. The report of DVO was not received, therefore, the Assessing Officer made the addition on the basis of value adopted by Stamp Valuation Authority. The DVO has submitted his report on 18/01/2019. The DVO in his report ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 6 has estimated/determined fair market value at Rs. 1.20 crore. The DVO also estimated value of land as on 01/04/1981 at Rs. 12.50 lacs. On the basis of report of DVO as on 01/04/1981 as well as on the date of sale, the assessee prepared a fresh working of capital gain on the share of assessee. Such working is mentioned by Assessing Officer at page No. 6 of impugned order. The assessee worked out capital gain of his share at Rs. 7,86,236/-. The assessee further stated that he has purchased another agricultural land and part of capital gain of Rs. 6,58,605/- was invested. Thus, after claim of deduction under Section 54B, the taxable capital gain is left only 1,27,361/- . The assessee stated that neither the claim of Section 54B was considered nor cost of acquisition was allowed and the Assessing Officer made addition on the basis of value adopted by Stamp Valuation Authority. The assessee submitted that as per decision of Hon’ble Bombay High Court in Pruthivi Brokers and Shareholders 349 ITR 336 (Bom), the assessee can claim exemption under Section 54B during assessment. The assessee also relied upon decision of Puna Bench in ITO Vs. Smt. Uma Dnyanoba Bhitande ITA No. 1485/Pun/2017 wherein similar claim of deduction under Section 54B was allowed on the basis of decision of Bombay High Court in Pruthivi Brokers and Shareholders (supra). The assessee reiterated that his land is not a capital asset, therefore, no addition is liable to be made. For the purpose of measurement of location of distance, the assessee stated that provisions regarding measurement of distance “aerially” was introduced for the first time by Finance Act, 2013 which is applicable w.e.f. 01/04/2015 and also relied on CBDT Circular No. 17/2015 dated 06/10/2015. ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 7 4. The ld. CIT(A) on considering the submission of assessee upheld the validity of reopening and issuance of notice by simply holding that decision of Hon’ble Gujarat High Court in Vithalbhai G Prajapati Vs ITO (supra) is distinguishable on facts and hence not applicable on this case. The Assessing Officer was having reasonable belief at the stage of initiation of reopening which is sufficient and not a conclusive finding of fact is required. On the other grounds on merit as well as deduction under Section 54 and cost of indexation, the ld. CIT(A) by considering the fact that the DVO has estimated value of land as on 01/04/1981 at Rs. 12,50,500/- and value estimated as on date of sale by DVO in his report dated 18/01/2019, directed the Assessing Officer to verify the calculation of DVO and recompute the capital gain, thereby accepted the fact that capital gain on the share of assessee is of Rs. 7,86,236/-. However, on deduction under Section 54B, the ld. CIT(A) held that the assessee has not claimed deduction under Section 54B in the original return as well as return in response to notice under Section 148 of the Act nor filed revised return. The Hon’ble Supreme Court in Goetze India Limited Vs CIT 284 ITR 323 (SC) has held that the assessee can make a claim for deduction only by filing revised return within time allowed, which has not been claimed in the return, therefore, the Assessing Officer was justified in rejecting the claim of deduction under Section 54B of the Act. Further, aggrieved, assessee has filed present appeal before the Tribunal. 5. We have heard the submission of Ld. Authorized Representative (Ld.AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr-DR) for ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 8 the Revenue. The ld. AR of the assessee submits that in the present appeal, a very short issue but crucial and legal issue are involved. The assessee has challenged the validity of reopening on the ground that the reasons recorded by the Assessing Officer are not correct. The Assessing Officer at one place recorded that no return of income was filed by assessee, however, at the same time, the Assessing Officer mentioned that return of income was filed, thus, the Assessing Officer was not sure at the time of recording reasons of reopening. Reasons were recorded without verification of facts and application of find. The reasons recorded are inconsistent, therefore, the reopening is liable to be quashed as has been held by the Hon’ble Jurisdictional High court in Vithalbhai G Prajapati Vs ITO (supra). Secondly, the land sold by assessee and other co-owners were purely rural agricultural land, situated beyond 8 Km from the boundary of Surat Municipal Corporation. The distance of land had to be measured by road distance. To substantiate such fact of road distance, the assesse furnished certificate of Talati. The concept of measurement of distance by aerial distance was introduced by Finance Act, 2013 and is applicable from 01/04/2015 only and to support such contention, the assessee relied on CBDT Circular No. 17/2015 dated 06/10/2015. The Assessing Officer relied on the certificate issue by Surat Urban Development Authority dated 21/12/2018 wherein the distance of village Kharvasa is mentioned as 2.97 KM. The ld. AR of the assessee disputed such measurement of distance and submits that boundary of Surat Municipal Corporation was extended in A.Y. 2014-15 and its distance has to be seen at the time of transaction of land. And thirdly in ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 9 alternative, the assessee claimed that in case, action of Assessing Officer in reopening is upheld and/or again the land is treated as capital asset, the capital gain on the share of assessee is only of Rs. 7,86,236/-, which is based on the working on the basis of report of DVO with regard to the value of land as on 01/04/1981 as well as on the date of sale. In case, capital gain is computed/added, the assessee claimed deduction under Section 54B. It is settled land that Assessing Officer cannot be accept revised claim in absence of revised return of income, however, such restriction is not applicable on the power of appellate authorities as has been held by the Hon’ble Jurisdictional High court in CIT Vs Mitesh Impex (2014) 46 taxmann.com 30 (Guj). The ld. AR of the assessee submits that before Assessing Officer as well as before the ld. CIT(A), the assessee furnished complete details of agricultural land purchased by assessee from the sale proceed of his ancestral land. Such facts are not disputed by the lower authorities. The lower authorities simply rejected the claim on the ground that the Assessing Officer was not empower to entertain fresh claim in absence of revised return. The ld. AR of the assessee reiterated that in the event, if assessee is not allowed relief on his primary or secondary submission, since all facts regarding claim of Section 54F was available on record, therefore, the Assessing Officer may be directed to allow deduction under Section 54B of the Act. 6. On the other hand, the ld. Sr.DR for the revenue by referring the fact that the assessee alongwith his co-owner sold land for a consideration of Rs. 40.00 lacs, out of which the assessee has 1/4th share. The Stamp Valuation ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 10 Authority valued the market value of land at Rs. 2.34 crore. The assessee made a request to refer the matter to DVO. At the time of passing of assessment order, the report of DVO was not received, thus the Assessing Officer made addition on the basis of legal fiction under Section 50C of the Act. Now the report of DVO has been received and the ld. CIT(A) has already directed Assessing Officer to recompute capital gain on the basis of his report. So far as deduction under Section 54B for purchase of another agriculture land, the Assessing Officer rightly not allowed the claim of assessee in absence of revised return as per decision of Hon’ble Supreme Court in Goetze (India) Limited (supra). On the validity of reopening, the ld. Sr.DR submits that at the time of reopening, reasonable belief of Assessing Officer is sufficient. On the issue of distance of land from boundaries of Surat Municipal Corporation, the ld. Sr.DR for the revenue submits that distance of village Kharvasa from Dindoli is about 5.00 K.M. as per Google Maps, copy of which was downloaded on 14/11/2024 and filed before the Bench. On the issue of deduction under Section 54B, the ld. Sr. DR for the revenue submits that for claiming such deduction, various conditions are required to be satisfied for such deduction, the Tribunal is a last fact finding authority and it is difficult to ascertain at this stage that assessee fulfilled all the conditions for claiming such deduction. Thus, in alternative, ld. Sr. DR prayed to restore the matter to the Assessing Officer for verification of eligibility of deduction under Section 54B. 7. In the rejoinder submission, the ld. AR of the assessee submits that the land sold by assessee is agriculture land and this fact is mentioned in the sale ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 11 deed itself. There is no evidence that land has been put to non-agriculture use. More than 13 years passed as matter relates to A.Y. 2011-12 and expeditious resolution would serve the principle of natural justice instead of restoring matter back to the file of Assessing Officer. 8. We have considered the rival submissions of both the parties and have gone through order of lower authorities carefully. We have also deliberated the case laws relied upon by Ld. AR of the assessee. On considering the entire facts and circumstances of the case, we find that once the DVO has given his report on the value of asset as on 01/04/1981 as well as on the date of sale of asset, in absence of any objection or adverse material on record, such valuation needs to be accepted as it is. We find that the ld. CIT(A) has already directed the Assessing Officer to recompute the capital gain on the basis of valuation of DVO with regard to cost of acquisition as well as on the value of sale. We also find that on the basis of such values, the assessee has given his own working which seems to be correct as the same is not disputed either by ld. CIT(A) except for verifying nor by the ld. Sr. DR at the time of his submission. On the basis of such working we find that the assessee has earned capital gain of Rs. 7,86,236/- on the sale of such land. We further find that the assessee has claimed deduction under Section 54B for purchase of another agricultural land. No doubt, that the Assessing Officer was not entitled to admit such claim in absence of revised return of income, however, such restriction are not applicable on the power of appellate jurisdiction. Therefore, keeping in view the said decision of Hon’ble High Court in CIT Vs Mitesh Impex (supra), the additional claim of assessee is accepted. Further ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 12 considering the fact that the assessee has raised his claim before Assessing Officer as well as before the ld. CIT(A), therefore, the Assessing Officer is directed to verify the fact and allow relief to the assessee for the claim of Section 54B of the Act. Thus, ground No. 3 of appeal is allowed for statistical purpose. 9. So far as reopening is concerned, we find that at the time of reopening in the present case, the Assessing Officer was having sufficient reason to believe that income of assessee has escaped assessment, therefore, we do not find much convincing force in the submission of ld. AR of the assessee. 10. We further find that parties have also locked their horn on the issue of distance of location of land whether it was more than 8 KM or less than 8 KM. The ld. Sr. DR for the revenue filed the evidence of Google Map which was not the case of Assessing Officer, though, before Assessing Officer, the assessee furnished certificate of Talati and Gram Panchayat. On the other hand, the Assessing Officer relied on the certificate issue by Surat Urban Development Authority dated 21/12/2018 wherein the distance of village Kharvasa is mentioned as 2.97 KM. Though, such fact was strongly disputed by the ld. AR of the assessee on the ground that boundaries of S.M.C. was increased from time to time and various areas was included in A.Y. 2014-15. Considering the aforesaid fact that more than 14-15 years have passed from the date of transaction and due to rapid development of area, all geographical position have been changed, therefore, at this stage, we are not inclined to give any direction to the Assessing Officer for extracting such fact which may consume much more time. Hence, the submission of ITA No.432/SRT/2024 (A.Y.11-12) Rajendrakumar R Pandya 13 assessee is not acceptable at this stage. At the time of submission, ground No. 2 of appeal was not pressed, thus, the same is dismissed as not pressed. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 23/01/2025. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) लेखा सद˟/Accountant Member Ɋाियक सद˟/Judicial Member सूरत / Surat Dated: 23/01/2025 *Ranjan आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "