2015 (11) TMI 1681 - AT - Income Tax

Claim of exemption/deduction u/s 54B - acquisition of possession of purchased land - Held that - In the present case although the assessee could not get the sale deed executed in his name and also could not get possession of the purchased land but it was beyond control and powers of the assessee as there was a requirement of permission of court because the land was purchased from a public trust. We cannot ignore the conduct and intention of the assessee wherein he pays entire sale consideration makes payment for purchase of stamps for execution of sale deed and also pays brokerage and from this we can safely and firmly infer that in fact the assessee had a bonafide and true intention to purchase agriculture land within prescribed period of two years and he used Rs. 26, 84, 000/- towards this intention of purchase and if the sale deed could not be executed in his name and he could not get possession of the purchased land due to the reason beyond his control then he cannot be debarred from claiming deduction u/s 54B of the Act. Hence we are inclined to held that the assessee is entitled for claim of deduction u/s 54B of the Act pertaining to Rs. 26, 84, 000/- which was used / invested towards purchase of agriculture land within prescribed time limit of two years from the date of sale of agriculture land out of which capital gain accrued to the assessee. Accordingly the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for deduction under Section 54B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an application for condonation of delay of 533 days, explaining that the delay was due to a bona fide belief that the previous counsel had filed the appeal. The assessee only realized the appeal had not been filed upon receiving a penalty order under Section 271(1)(c) in March 2012. The assessee then collected the records from the old counsel and engaged a new counsel to file the appeal.

The assessee supported the application with affidavits from both the previous counsel and himself, stating the delay was due to inadvertence, bona fide omission, and communication gap. The Ld. Assessee's Representative (AR) argued that the delay should be condoned based on the precedent set by ITAT Mumbai in the case of M/s Gregory & Nicholas vs ACIT.

The Ld. Departmental Representative (DR) opposed the application, citing that ignorance of law or failure to seek legal advice are not sufficient causes for condonation of delay. However, the Tribunal noted that the affidavits remained unrebutted by the Revenue and concluded that the assessee had shown sufficient cause for the delay. The Tribunal emphasized that the courts should be liberal in considering the sufficiency of the cause shown by the assessee to ensure substantial justice. Consequently, the delay was condoned, and the appeal was admitted for hearing on merits.

2. Eligibility for Deduction under Section 54B of the Income Tax Act, 1961:

The assessee claimed a deduction of Rs. 26,84,000 under Section 54B for the investment in another agricultural land after selling the original agricultural land. The assessee sold the agricultural land on 27.12.2005 and invested the proceeds in purchasing another agricultural land from Shri Dwarkadhish Trust via an agreement dated 23.02.2007. The payment included Rs. 22,00,000 for the land, Rs. 4,40,000 for stamp duty, and Rs. 44,000 for brokerage.

The Assessing Officer (AO) denied the deduction on the grounds that the final registry of the land was delayed due to pending court approval, and thus, the sale deed was not executed within the prescribed time limit. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the assessee did not fulfill the conditions prescribed in Section 54B(2) as the unutilized capital gains were not deposited in the Capital Gains Deposit Scheme before the due date for filing the return under Section 139(1).

The Tribunal noted that the assessee had utilized the capital gains within the prescribed two-year period by entering into an agreement and making the necessary payments. The Tribunal referred to several judicial precedents, including the Hon'ble Supreme Court's decision in the case of Sanjeev Lal vs CIT, which held that execution of the sale deed is not the sole criterion for claiming deduction under Section 54B. The Tribunal also considered the ITAT Mumbai's decision in the case of Kishore H. Galaiya vs ITO, which stated that possession of the purchased property is not a criterion for the deduction under Section 54B.

The Tribunal concluded that the assessee had a bona fide intention to purchase the agricultural land and made all necessary efforts to comply with Section 54B. The delay in executing the sale deed and obtaining possession was beyond the assessee's control due to the requirement of court approval for the trust's property sale. Therefore, the Tribunal held that the assessee was entitled to the deduction under Section 54B for the amount invested.

Conclusion:

The Tribunal allowed the appeal of the assessee, condoning the delay in filing the appeal and granting the deduction under Section 54B of the Income Tax Act, 1961, for the investment made in purchasing agricultural land.