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2024 (12) TMI 555 - AT - Income TaxLTCG - adoption of cost of acquisition of the property sold by the assessee during the year - agricultural land sold by the assessee was ancestral land and the assessee had filed a report from the approved valuer in respect of the cost of the property as on 01.04.1981 - HELD THAT - As rightly pointed out by the Revenue there was a wide variation in the rate as per the four methods adopted by the approved valuer, which made his report unreliable. The assessee had adopted a conservative rate of Rs.70/- per sq.mtr. as on 01.04.1981, which was less than the minimum value determined by the approved valuer. If the AO was not satisfied with the report of the approved valuer and the rate as adopted by the assessee, he should have referred the matter to the DVO to find out the correct value of the property as on 01.04.1981. AO being not an expert, his suo motto adopting the value of the property at Rs.6.20/- per sq.mtr. cannot be held as correct. In the interest of justice, the matter is, therefore, set aside to the file of the Jurisdictional AO with a direction to refer the matter to the DVO to find out the correct market value of the property as on 01.04.1981. The report of the DVO should be confronted to the assessee and the objection, if any, of the assessee in this respect should also be taken into account, before arriving at the correct value of the property as on 01.04.1981. The ground taken by the assessee is allowed for statistical purposes. Deduction u/s.54F - denial of deduction as house was located on a small portion of the total land area - CIT(A) confirming the disallowance u/s.54F on the ground that the new property purchased on 09.05.2018 was beyond the two years time limit from the date of sale of original property - HELD THAT - There is no built up residential house on the land purchased by the assessee. Further, no evidence of house tax payment by the seller has been brought on record. Since, the assessee has failed to establish that it had purchased any residential house, the deduction u/s.54F of the Act was rightly denied by the AO. In fact, the AO had been generous in considering the open structure area as fit for residence and allowed proportionate deduction u/s.54F of the Act. The ground of the assessee that 780 sq. mtrs. of land for which deduction u/s.54F of the Act was disallowed was land appurtenant to the house cannot be accepted as the existence of any house on the said land has not been established. The disallowance as made by the AO in respect of deduction u/s 54F claimed by the assessee is, therefore, confirmed. Accordingly, the Ground No.2 as taken by the assessee is rejected. Date of acquisition of the new property - contention of the assessee that investment date in the new property should be taken as 26.07.2017 when the agreement to sale/banakhat was entered and the payment was made by the assessee - Considering the fact that the banakhat was made on 26.07.2017 and the assessee had also made the entire payment on the same day, the contention of the assessee is acceptable. The delay in registration of the sale deed was due to factors beyond the control of the assessee, as explained. Therefore, the ground no.-3 as taken by the assessee is allowed. Addition in respect of cash deposited in the bank account - AR submitted that the assessee was having agricultural land and it has been disclosing agricultural income in all the years - HELD THAT - It is not the case that the assessee had inflated its agricultural income during the current year. Even though, the AO has disputed the nature of income from sale of firewood, the correctness of the sale transaction has not been challenged. On the other hand, the assessee also has not explained as to why all the cash was kept in the house and why those were deposited in the bank account mostly after demonetization. In fact, the total cash deposit during the demonetization period is to the extent of Rs.23,54,000/-. Apart from the contention that cash was available with the assessee in respect of agricultural income, no explanation has been given in respect of excess cash as deposited in the bank account. Taking into account the opening cash balance of Rs.3,04,049/- available with the assessee as on 01.04.2016 and also the quantum of agricultural income of Rs.12,53,920/- derived by the assessee during the year, it will be reasonable to treat the cash deposits to the extent of Rs.15.48 Lakhs as explained. The balance addition of Rs.9,00,000/- in respect of unexplained cash deposits in the bank account is confirmed. The ground taken by the assessee is allowed in part.
Issues Involved:
1. Valuation of agricultural land as of 01.04.1981. 2. Restriction of deduction under Section 54F of the Income Tax Act. 3. Date of acquisition of new property for Section 54F deduction. 4. Addition of cash deposits in the bank account as unexplained income. 5. Denial of opportunity for a hearing through videoconferencing. Issue-wise Detailed Analysis: 1. Valuation of Agricultural Land as of 01.04.1981: The primary issue revolved around the determination of the cost of acquisition of ancestral agricultural land sold by the assessee. The assessee relied on a valuation report from an approved valuer, which calculated the land's value using four alternate methods, resulting in a range between Rs.76/- and Rs.366/- per sq.mtr. The assessee adopted a conservative value of Rs.70/- per sq.mtr. The Assessing Officer (AO) rejected this report and independently determined the value at Rs.6.20 per sq.mtr. The Tribunal found the AO's rejection of the valuer's report without referring the matter to the Departmental Valuation Officer (DVO) to be unjustified. The Tribunal directed the AO to refer the matter to the DVO for an accurate valuation of the property as of 01.04.1981, allowing the assessee's ground for statistical purposes. 2. Restriction of Deduction under Section 54F of the Income Tax Act: The assessee claimed a deduction of Rs.2.51 Crore under Section 54F for purchasing a residential house. The AO limited this deduction, arguing that the purchase was primarily land, with only a small portion (27 sq.mtr.) being constructed. The Tribunal examined the sale deed and found that the property acquired was predominantly land with minimal construction, which was not a residential house. The Tribunal upheld the AO's decision to restrict the deduction, as the assessee failed to establish the purchase of a residential house. Consequently, the Tribunal confirmed the disallowance of the deduction under Section 54F, rejecting the assessee's ground. 3. Date of Acquisition of New Property for Section 54F Deduction: The assessee contended that the investment date for the new property should be considered as 26.07.2017, the date of the agreement and payment, rather than the registration date of 09.05.2018. The Tribunal accepted the assessee's argument, noting that the delay in registration was due to circumstances beyond the assessee's control. The Tribunal allowed this ground, recognizing the earlier date as the investment date for Section 54F purposes. 4. Addition of Cash Deposits in the Bank Account as Unexplained Income: The AO treated the entire cash deposit of Rs.24,48,000/- as unexplained income. The assessee argued that the cash was derived from agricultural income, which had been consistently reported in prior years. The Tribunal acknowledged the assessee's agricultural income but noted the lack of explanation for the significant cash deposits, especially post-demonetization. The Tribunal allowed a portion of the cash deposits to be treated as explained, considering the opening cash balance and agricultural income, but confirmed an addition of Rs.9,00,000/- as unexplained. Thus, the Tribunal partially allowed this ground. 5. Denial of Opportunity for a Hearing Through Videoconferencing: The assessee's ground regarding the denial of a hearing through videoconferencing was not pressed. Therefore, the Tribunal dismissed this ground. Conclusion: The Tribunal's decision resulted in a partial allowance of the assessee's appeal, providing relief on certain grounds while upholding the AO's decisions on others. The Tribunal emphasized procedural fairness, particularly in the valuation of property, and acknowledged the assessee's arguments regarding the date of acquisition for Section 54F purposes. The judgment reflects a balanced approach, ensuring that the assessee's rights are protected while maintaining the integrity of the assessment process.
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