2023 (10) TMI 1418 - AT - Income Tax

LTCG - deduction claimed u/s 54B - assessee has purchased all the four lands on 25/11/2014, 09/12/2014 and 30 / 03/2015 at village Dhanelli whereas the assessee has sold the land at Sejbahaar on 31/03/2015 thereby has proved that the land was purchased either before or on the date of transfer of land at Sejbahaar HELD THAT - From the details of advance received for sale of land and cost of investment incurred towards purchase of land, it is evident that all the payments towards investment in new agricultural land were made after receipt of the advances on sale of land, therefore, in terms of the clarification by CBDT in its Circular No. 359 F. No. 207/8/82-IT(A-II) , dated 10-5-1983, respectfully following the various judicial pronouncements, also on perusal of the findings by the Ld. CIT(A) wherein, it is observed that the money on sale of Sejbahaar land was received by the assessee on various dates from 02/09/2014 to 15/09/2016, assessee has also taken loan which is invested in new land and since loan was repaid afterwards out of the sale consideration received therefore deduction u/s 54B cannot be denied. Reliance was placed on case of Inshar Singh Chawada 2010 (3) TMI 1116 - ITAT MUMBAI and Dr. P. S. Pasricha 2009 (10) TMI 898 - BOMBAY HIGH COURT Ld. AO s contention that the Sahmati / Kabja Patra was not notarized can be treated as an irregularity but cannot term the document as false or vain, so as to deny the deduction u/s 54B, dehors any supporting material to prove that the said document was a bogus document, while the assessee s contentions are supported with the fact that advances were received through banking channel duly recorded in the Sahmati / Kabja Patra as well as in the registered sale deed, therefore, we are convinced with the submission of the assessee. Accordingly, as per settled position of law, we are of the considered opinion that assessee has appropriately claimed the deduction u/s 54B and Ld. CIT(A) s decision and deleting the addition made by Ld. AO is found to be a rational conclusion. Resultantly, ground No. 1 to 5 of the revenue are dismissed. Addition u/s 68 - assessee has received on secured loan - HELD THAT - In the present case, the assessee has further substantiated by submitting the information pertaining to repayment of all the loans in the following AY 2016-17 along with copies of bank statement of the assessee showing all such repayments, such facts shows that the doubt of Ld. AO with respect to genuineness of the transaction was excessive, without proper independent enquiries, based on surmises/presumptions, thus, the assessee cannot be penalised for the same. In absence of any contrary decision or material brought on the surface by the department against the contentions of the assessee, respectfully following the principle of law laid down under the various judgments referred to supra, there was no infirmity found in the order of CIT(A) which needs to be corrected. However certain facts pertaining to repayment of the loans are new facts which were not there before the revenue authorities, thus, the same are subject to verification from the corroborative evidence, thus the same needs examination by the AO. Thus, ground of the revenue though have no forceful merits, restored back to the files of Ld AO for the limited purpose of verification of the correctness and veracity of facts pertaining to repayment of loans submitted by the assessee. Ground of the revenue is partly allowed for statistical purposes.

Summary

Issues Involved:

1. Deletion of addition on account of deduction claimed under Section 54B.
2. Deletion of addition under Section 68 regarding unsecured loans.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Deduction Claimed under Section 54B:

The primary issue revolves around whether the CIT(A) was justified in deleting the addition of Rs. 91,80,111/- claimed under Section 54B of the Income Tax Act. The assessee had sold agricultural land and claimed a deduction under Section 54B for purchasing new agricultural land. The AO disallowed the deduction on the grounds that the new land was purchased before the sale of the old land, contrary to the provisions of Section 54B, which require the purchase to be made after the sale.

The CIT(A) observed that the land at Sejbahar was sold on 30/03/2015, and the sale consideration was received on various dates from 02/09/2014 to 15/09/2016. The assessee had taken loans to purchase the new land and repaid these loans from the sale proceeds. The CIT(A) referred to the Mumbai Tribunal's decision in the case of Inshar Singh Chawada vs. DCIT and the Bombay High Court's decision in CIT vs. Dr. P.S. Pasricha, which allowed deductions under similar circumstances.

The Tribunal upheld the CIT(A)'s decision, noting that the advances received from the sale of the old land were used to purchase the new land. The Tribunal also referred to CBDT Circular No. 359, which clarified that investments made from earnest money or advances received before the date of transfer qualify for exemption under Section 54B. Consequently, the Tribunal dismissed the revenue's grounds on this issue.

2. Deletion of Addition under Section 68 Regarding Unsecured Loans:

The second issue pertains to the addition of Rs. 1,25,21,000/- under Section 68, which the AO treated as unexplained credits. The AO doubted the genuineness and creditworthiness of the unsecured loans received by the assessee, despite the assessee providing confirmations, ITR acknowledgments, and bank statements.

The CIT(A) deleted the addition, noting that the AO did not make any inquiries to disprove the documents provided by the assessee. The CIT(A) cited the Delhi High Court's decision in Russian Technology Centre Pvt. Ltd., which held that the AO should have inquired into the veracity of the documents if not convinced. The CIT(A) also referred to the Bombay High Court's decision in Orient Trading Company Ltd. vs. CIT and the Chhattisgarh High Court's decision in Pawan Kumar Agrawal vs. ITO, which stated that the onus to prove the creditworthiness of third parties lies with the department if the assessee has provided sufficient documentation.

The Tribunal agreed with the CIT(A) but remanded the matter back to the AO for verification of the repayment of the loans, as new facts regarding the repayment were presented during the appeal. The Tribunal instructed the AO to verify the correctness and veracity of the repayment details provided by the assessee.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the addition under Section 54B, affirming that the assessee had appropriately claimed the deduction. For the addition under Section 68, the Tribunal remanded the matter back to the AO for limited verification of the repayment details, thereby partly allowing the revenue's appeal for statistical purposes.