2018 (10) TMI 1342 - AT - Income Tax

Eligibility for deduction u/s.54B - non fulfillment of mandatory conditions laid down - capital gain on transfer of land used for agricultural purposes not to be charged in certain cases - land should have been used for agricultural purposes at least from 24/03/2011 to 25/03/2013 but the land was not used for the agricultural purposes as the same was converted in to non agricultural land - assessee explained that 25% of undivided share of agricultural land was sold to Sanjay Keshavlal patel misused the power of attorney and converted agricultural land into nonagricultural and when it is come to notice to the assessee it was subsequently cancelled Held that - It is undisputed fact that Sanjay K Patel was one of the confirming parties of sale of the land on 26th March 13 which demonstrate that Sanjay K Patel was one of the stakeholders along with the assessee and fully associated with the use and sale of the land. The assessee along with Sanjay Patel and other member of group were engaged in the business of colonization and they have placed scheme Dolphin in the land sold by assessee. The assessee has neither substantiated with any relevant material that that co-owner Sanjay K Pate has misused the power of attorney nor filed any evidence of any legal action taken against him for any unauthorized using of the power of attorney. Discrepancies were also noticed in the revenue records as evident from the letter dated 22nd March, 2016 of Mamlatdar affirming that the impugned land was a non-agricultural land and the Talati had inadvertently made entry of agricultural crop as jwar in the record. The assessee has been regularly filing income tax return but he has not reported any agricultural income in the return of income to prove that any agricultural income was earned by him. The aforesaid land was converted to non agricultural land on 26/05/2011 and the NA was cancelled only on 15/03/2013 just 11 days before its sale on 25/03/2013. In view of the above facts we observe that as per record the impugned land in question remained non agricultural land for the period 26/05/2011 to 15/03/2013. After considering the above facts, we are inclined with the findings of the Ld.CIT (A) that assessee has failed to fulfill the condition laid down in the provision of section 54B of the act pertaining to capital gain on transfer of land used for agricultural purposes not to be charged in certain cases. Therefore, we consider that Ld. CIT(A) has correctly disallowed the claim of exemption u/s 54 B - decided against assessee

Issues Involved:
1. Eligibility for Deduction under Section 54B of the Income Tax Act, 1961.
2. Validity of Agricultural Use of Land Prior to Sale.
3. Misuse of Power of Attorney by Co-owner.
4. Discrepancies in Revenue Records and Agricultural Income Reporting.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 54B of the Income Tax Act, 1961:
The primary issue in this case is whether the appellant is eligible for a deduction under Section 54B of the Income Tax Act, 1961. The appellant claimed an exemption of ?1,21,15,480/- under Section 54B, which allows for capital gains exemption on the sale of agricultural land used for agricultural purposes for at least two years immediately preceding the date of sale. The assessing officer and CIT(A) both rejected this claim, stating that the land was converted to non-agricultural use and was not used for agricultural purposes during the required period.

2. Validity of Agricultural Use of Land Prior to Sale:
The appellant argued that the land was used for agricultural purposes and provided sale bills of agricultural produce, copies of 7/12 extracts, and a certificate from the Talati as evidence. However, the assessing officer and CIT(A) found discrepancies in these records. The land was converted to non-agricultural use on 26/05/2011 and the conversion was canceled only on 15/03/2013, just 11 days before the sale. The Mamlatdar's letter dated 22/02/2016 confirmed that the land was non-agricultural during the period in question, and the Talati had erroneously recorded an agricultural crop.

3. Misuse of Power of Attorney by Co-owner:
The appellant claimed that a co-owner, Mr. Sanjay K Patel, misused the power of attorney to convert the land to non-agricultural use without their consent. However, the assessing officer and CIT(A) noted that Mr. Patel was a confirming party in the sale and was fully associated with the use and sale of the land. The appellant did not provide any evidence of legal action taken against Mr. Patel for unauthorized use of the power of attorney.

4. Discrepancies in Revenue Records and Agricultural Income Reporting:
The assessing officer and CIT(A) found further discrepancies in the revenue records. The appellant did not report any agricultural income in their income tax returns, which contradicted their claim of agricultural use. The appellant's argument that the land was used for agricultural purposes since 2009 was not supported by Form 12, which indicated no agricultural produce for the fiscal years 2008-2009 to 2010-2011.

Conclusion:
After considering all the facts and evidence, the tribunal upheld the findings of the CIT(A) and concluded that the appellant failed to meet the conditions under Section 54B for claiming the exemption. The land was not used for agricultural purposes for the required period, and the discrepancies in the records further weakened the appellant's case. Therefore, the appeal of the assessee was dismissed.

Order:
The appeal of the assessee is dismissed, and the order was pronounced in the open court on 01-08-2018.

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