2013 (12) TMI 1552 - AT - Income Tax

Addition to capital gain declared by disallowing expenses for transfer - Disallowance of the expenditure related to the land sold - Held that - The payments were made by bank cheques and the fact that the said deeds and confirmation letters were filed the contention of the assessee stands proved even in the absence of affidavits of the payees filed at the appellate stage. In view of the above, the Assessing Officer was not justified in making addition Assessee was entitled to claim deduction u/s.54B

Summary

Issues Involved:
1. Addition on account of inflated cost of land as on 01.04.1981.
2. Disallowance of deduction claimed under Section 54B.
3. Disallowance of expenses for transfer of land.
4. Admission of fresh evidence without satisfying Rule 46A.
5. Denial of reasonable opportunity to the Assessing Officer (AO) for cross-examination.
6. General appeal to uphold the AO's order.

Detailed Analysis:

1. Addition on Account of Inflated Cost of Land as on 01.04.1981
The revenue challenged the deletion of an addition of Rs. 30,78,442/- made by the AO for the inflated cost of land as on 01.04.1981. The AO estimated the land value based on information from the Asst. Sub-Registrar, Nashik, which was Rs. 50,000/- per hectare. The CIT(A) relied on the valuation by a registered valuer, which was Rs. 1,25,000/- per hectare, considering specific land location and physical verification. The Tribunal upheld the CIT(A)'s decision, stating that the AO is not an expert in land valuation and the registered valuer's report is more precise.

2. Disallowance of Deduction Claimed Under Section 54B
The AO restricted the deduction under Section 54B to Rs. 8,73,414/- based on the claim that only 8% of the land was used for agricultural purposes. The CIT(A) allowed the full deduction of Rs. 19,29,190/-, accepting the assessee's claim that the entire land was used for growing fodder grass, supported by affidavits and other evidence. The Tribunal upheld the CIT(A)'s decision, referencing the case of CIT Vs. Smt. Savita Rani, which supported the view that land used for growing fodder grass qualifies for Section 54B deduction.

3. Disallowance of Expenses for Transfer of Land
The AO disallowed Rs. 10,00,000/- claimed as expenses for transfer of land, arguing that the payments to sisters/daughters of the Bhore family for relinquishing their rights were voluntary and lacked proper evidence. The CIT(A) found that the payments were made by bank cheques and were supported by confirmations and affidavits. The Tribunal upheld the CIT(A)'s decision, noting that the payments were genuine and necessary for the transfer.

4. Admission of Fresh Evidence Without Satisfying Rule 46A
The AO contended that the CIT(A) admitted fresh evidence without satisfying Rule 46A. The Tribunal found that the CIT(A) had provided the AO an opportunity to examine the additional evidence through a remand report. Therefore, the Tribunal upheld the CIT(A)'s decision.

5. Denial of Reasonable Opportunity to the AO for Cross-Examination
The AO argued that they were not given a reasonable opportunity to cross-examine the parties. The Tribunal noted that the CIT(A) had considered the AO's remand report and found no merit in this contention. The Tribunal upheld the CIT(A)'s decision.

6. General Appeal to Uphold the AO's Order
The Tribunal found no merit in the revenue's general appeal to uphold the AO's order. The CIT(A)'s decisions were well-reasoned and supported by evidence.

Conclusion
All the appeals filed by the revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions on all issues, including the deletion of additions for inflated land cost, allowance of full deduction under Section 54B, and acceptance of transfer expenses. The Tribunal found that the CIT(A) had followed proper procedures and provided adequate opportunities for the AO to examine the evidence.