2021 (7) TMI 1180 - AT - Income Tax

C apital gain on the sale of agricultural land - computation of capital gain by adopting the rate as on 1.4.1981 - benefit of 54B - HELD THAT - It is the duty of the revenue, which is a state within the meaning of Article 12 of the Constitution of India, to treat the citizens equally, without discrimination and at par. In the present case the lands of Village Bhokhra were acquired and the compensation were granted to various parties, including the assessee before us. Uniform land rate as applicable on 1.4.1981, were required to be applied for the purpose of computing long capital gain, in respect to all the land holders, unless some special rates were shown to be applicable, as the A.O. had not referred the matter to DVO under section 55A of the ACT. No dissimilarity had been brought to the notice by the ld. DR between the assessee before us Sh. Paramjit Singh' and Sh. Mander Singh where in higher rates of ₹ 70,000/- to ₹ 85,000/- per kanal were applied by AO/CIT(A). It was also not disputed that the land of these assessee were also acquired under the same proceedings and was situated in the same village. We set aside the order passed by the CIT (A) and A.O. and remand the matter back the matter to the file of the assessing officer with the direction to apply the average of rates i.e. ₹ 77, 500/- per Kanal as were applied to in the matter of 'Sh. Paramjit Singh' and Sh. Mander Singh(supra) and work out the LTCG and thereafter grant the benefit of 54B to assessee before us, Needless to say this exercise shall be carried out after following the principle of natural justice and affording the opportunity of hearing to the assessee/s. Appeals of the assessee are allowed for statistical purposes.

Issues Involved:
1. Validity of reopening the case under Section 148.
2. Mechanical application of mind by the Principal Commissioner of Income Tax (PCIT) while granting approval under Section 151.
3. Incorrect status of the assessee as an individual instead of Hindu Undivided Family (HUF).
4. Adoption of land rate at ?19,000 per kanal as on 1.4.1981 by the Assessing Officer.
5. Non-reliance on unregistered agreements to sell for deleting additions under Section 54B.
6. Insufficient deduction under Section 54B despite payments made through cheques.

Detailed Analysis:

1. Validity of Reopening the Case under Section 148:
The assessees challenged the reopening of their cases, arguing that there was no "reason to believe" that income had escaped assessment. The Assessing Officer had issued notices under Section 148 based on the need for further enquiry into the land sale transactions. The Tribunal noted that the reasons recorded for reopening were identical across all three cases and relied on judgments from various courts, including the Supreme Court, which held that reopening for the purpose of verification does not constitute a valid "reason to believe."

2. Mechanical Application of Mind by the PCIT:
The assessees contended that the PCIT had given a mechanical approval for reopening the cases, merely stating "YES" without applying his mind. The Tribunal referred to certified copies of the PCIT's sanction, which showed a lack of detailed reasoning. The Tribunal found that the approval was indeed mechanical, as the PCIT did not provide any substantive reasons for reopening the cases, thus violating legal standards set by the Apex Court in similar cases.

3. Incorrect Status of the Assessee as Individual Instead of HUF:
The assessees argued that the notice issued in the status of an individual was void ab initio since the land was ancestral and should have been assessed under HUF status. This issue was not elaborately discussed in the judgment, as the Tribunal focused more on the merits of the case and the procedural lapses in reopening the assessment.

4. Adoption of Land Rate at ?19,000 per Kanal as on 1.4.1981:
The assessees challenged the adoption of ?19,000 per kanal as the land rate, arguing that similar cases in the same village had rates between ?70,000 to ?85,000 per kanal. The Tribunal found merit in this argument, citing previous cases where the CIT(A) had accepted higher rates based on revenue authority reports. The Tribunal directed the Assessing Officer to adopt an average rate of ?77,500 per kanal for computing the long-term capital gain, as applied in similar cases.

5. Non-Reliance on Unregistered Agreements to Sell:
The assessees contended that the CIT(A) erred in not considering unregistered agreements to sell dated 18.02.2009 and 12.03.2009 for deleting additions under Section 54B. The Tribunal did not specifically address this issue in detail, as the primary focus was on the procedural aspects of reopening the assessment and the correct land rate to be adopted.

6. Insufficient Deduction under Section 54B:
The assessees argued that they were entitled to more deductions under Section 54B, as payments for the purchase of agricultural land were made through cheques, even though the sale deed was registered at a lower value. The Tribunal directed the Assessing Officer to recompute the long-term capital gain and grant the appropriate benefit under Section 54B, following the principles of natural justice and providing an opportunity for the assessees to be heard.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, setting aside the orders of the CIT(A) and the Assessing Officer. The cases were remanded back to the Assessing Officer to apply the average land rate of ?77,500 per kanal and to recompute the long-term capital gain, granting the appropriate deduction under Section 54B. The Tribunal did not address the legal grounds related to the reopening of assessment, as these had become academic or infructuous in light of the decision on merits.

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