2020 (2) TMI 89 - AT - Income Tax

Disallowance u/s 54B - assessee has sold ancestral agriculture land admeasuring 10117 sq.meters situated at village Ambli together with other co-owners for a consideration by registered sale deed - assessee was having 50% share in that property - HELD THAT - CIT(A) has come to the conclusion that assessee has utilised sales consideration of old land for purchase of new agriculture land, and prima facie complied with requirements of section 54B, and therefore, purchase price i.e. investment in new land of ₹ 2,70,00,000 being more than the sale consideration received of ₹ 2,67,50,000/-, there would not be any necessity to furnish evidence to prove cost of improvement. The Ld.CIT(A) observed that there was no bar on the appellate authorities to entertain claim of the assessee in the course of appellate proceedings, which the AO denied on account of non-filing of revised return. While holding so, the Ld.CIT(A) relied upon various authoritative judgments as mentioned in his above finding. We find that Ld.CIT(A) has considered the issue from factual as well as legal angle and arrived at a just conclusion, which cannot be said to be incorrect or unjustified. In view of the above, our interference is not called for on this issue. It is upheld. Ground no.1 of Revenue is thus dismissed. Addition invoking provisions of section 56(2)(vii)(b) - difference between the value adopted by the stamp valuation authority, and purchase consideration shown by the assessee - HELD THAT - After considering comparable instance furnished by the assessee and also remand report submitted by the AO, the Ld.CIT(A) found that the rate for the transactions in the area registered subsequent to that of the assessee s transaction should have been at higher rates as per normal circumstances, and therefore, there is no possibility of payment in cash in excess of purchase price shown by the assessee. It was also recorded by the CIT(A) that comparable cases furnished by the assessee has not been disputed by the AO in his remand report, and therefore, no case has been made out by the AO on this count. Secondly, it has been observed by the Ld.CIT(A) that when the assessee disputed the value of the property as per the stamp valuation authority, which was considered by the assessee as purchase consideration, then the Ld.AO ought to have referred the matter to the DVO for determination of fair market value as contemplated under section 50C(2) of the Act. We find that the Ld.CIT(A) has made detailed analysis of the matter and based on the evidence furnished by the assessee and also remand report submitted by the assessee, arrived at a just conclusion that the impugned addition was not justifiable in the eyes of law. There is no other material before us to better the case of the Revenue and to take a different view than the view taken by the Ld.CIT(A). Therefore, we find no infirmity in the order of the Ld.CIT(A) on this issue - Appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition made by AO under section 54B of the Income Tax Act.
2. Deletion of addition made by AO under section 56(2)(vii)(b) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 54B:
The primary issue was the deletion of an addition of ?1,60,09,128 made by the Assessing Officer (AO) under section 54B of the Income Tax Act. The assessee sold ancestral agricultural land and claimed a deduction for the cost of improvement. The AO disallowed this claim due to a lack of supporting evidence and because the transaction of purchasing new agricultural land occurred before the sale of the original land. The AO argued that, as per section 54B, the purchase must occur after the sale of the original land. The Commissioner of Income Tax (Appeals) [CIT(A)] admitted additional evidence and allowed the claim, stating that the assessee had complied with the requirements of section 54B. The CIT(A) also noted that the AO should have considered the substance of the transaction and the practical realities of the rural economy. The Tribunal upheld the CIT(A)’s decision, noting that the assessee had utilized the sale proceeds to purchase new agricultural land and had made the claim during the remand proceedings. The Tribunal found no reason to interfere with the CIT(A)’s conclusion.

2. Deletion of Addition under Section 56(2)(vii)(b):
The second issue involved the deletion of an addition of ?77,86,500 made by the AO under section 56(2)(vii)(b) of the Income Tax Act. The AO added the differential amount between the purchase consideration of agricultural land and the jantri rate (stamp duty value) as income from other sources. The assessee explained that an additional payment was agreed upon to clear an encumbrance on the property. The CIT(A) found that the AO did not refer the matter to the District Valuation Officer (DVO) despite the assessee’s objection to the jantri rate. The CIT(A) also noted that the comparable instances provided by the assessee were not disputed by the AO. The Tribunal upheld the CIT(A)’s decision, stating that the AO should have referred the matter to the DVO and that the CIT(A) had made a detailed analysis based on the evidence provided.

Conclusion:
The Tribunal dismissed the Revenue’s appeal, upholding the CIT(A)’s decisions on both issues. The Tribunal found that the CIT(A) had correctly analyzed the facts and applied the law, and there was no need for interference. The order was pronounced on 31st January 2020 at Ahmedabad.