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2016 (8) TMI 1225 - AT - Income TaxCapital gain - transfer - selection of assessment year - Held that - As relying on Shri Rajiv Kumar, Shri Banarsi Lal, Shri Tejinder Kumar Versus The ITO, Jagadhri 2016 (7) TMI 184 - ITAT CHANDIGARH there is no transfer of capital asset in assessment year 2007-08. There is no accrual or receipt of any income in favour of the assessee on account of capital gains in assessment year 2007-08, therefore, whole of the addition in assessment year under appeal i.e. 2007 08 is unjustified. We, accordingly, set aside the orders of authorities below and delete the entire addition on account of capital gains in assessment year under appeal. The Revenue is at liberty to consider the issue of capital gain in assessment year 2009-10 in accordance with law. The appeal of the assessee is, thus, allowed. Disallowance of deduction under section 54B - protective addition - Held that - Since we have deleted the similar addition on account of capital gain in assessment year 2007-08 and directed to consider this issue in assessment year 2009 10, therefore, the orders of authorities below are set aside and matter in issue is restored to the file of Assessing Officer with direction to consider issue of long term capital gain in assessment year 2009-10 alongwith claim of deduction under section 54B of the Income Tax Act alongwith issue of agriculture income of ₹ 2,67,022/-. The Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee.
Issues Involved:
1. Addition of long-term capital gain on sale of agricultural land. 2. Denial of deduction under Section 54B of the Income Tax Act. 3. Charging of interest which is consequential and mandatory. 4. Protective addition for the subsequent assessment year. 5. Disallowance of agricultural income and its treatment as income from undisclosed sources. Issue-wise Detailed Analysis: 1. Addition of Long-Term Capital Gain on Sale of Agricultural Land: The assessee challenged the addition of ?2,68,43,750/- as long-term capital gain for the assessment year 2007-08. The Assessing Officer (AO) noted that the assessee sold land for ?2,95,28,125/- through a registered sale deed dated 20.03.2007, receiving part of the consideration immediately and the balance through a post-dated cheque encashed in June 2008. The AO held that the entire sale consideration should be taxed in the year of the sale deed's execution (2007-08), citing Section 54 of the Transfer of Property Act, which deems the property transferred upon execution and registration of the sale deed if possession is given. The assessee argued that the capital gain should be recognized in the year the post-dated cheque was encashed (2009-10). The Tribunal referenced a similar case (Shri Rajiv Kumar Vs ITO) where it was held that no capital gain accrues until the cheque is encashed, thus favoring the assessee's position. 2. Denial of Deduction Under Section 54B of the Income Tax Act: The assessee's claim for deduction under Section 54B was denied by the AO on the grounds that the capital gain was taxable in the assessment year 2007-08. Since the Tribunal ruled that the capital gain should be considered in the assessment year 2009-10, the issue of deduction under Section 54B was rendered moot for the year 2007-08 and directed to be reconsidered in the year 2009-10. 3. Charging of Interest: The issue of charging interest was deemed consequential and mandatory by the Tribunal, hence, it was not a point of contention. 4. Protective Addition for the Subsequent Assessment Year: For the assessment year 2009-10, the AO made a protective addition of ?2,68,43,750/- due to the primary addition being made in 2007-08. The CIT(A) deleted the protective addition following the confirmation of the primary addition in 2007-08. However, with the Tribunal's ruling that the capital gain should be considered in 2009-10, the protective addition issue was directed to be reconsidered for the year 2009-10. 5. Disallowance of Agricultural Income and Its Treatment as Income from Undisclosed Sources: The AO disallowed the agricultural income of ?2,67,022/- for the period from April to August, treating it as income from undisclosed sources, based on the assumption that the possession of the land was transferred in March 2007. The Tribunal, considering the ruling that the capital gain should be recognized in 2009-10, directed the AO to reconsider the issue of agricultural income for the year 2009-10. Conclusion: The Tribunal ruled in favor of the assessees, holding that no capital gain arises in the assessment year 2007-08 due to the post-dated cheque being encashed in 2009-10. Consequently, the issues of deduction under Section 54B, protective addition, and agricultural income were directed to be reconsidered for the assessment year 2009-10. The appeals for the year 2007-08 were partly allowed, and the appeals for the year 2009-10 were allowed for statistical purposes.
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