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2017 (11) TMI 1206 - AT - Income TaxBenefit of deduction u/s.54B - alternate claim u/s.54F - Whether assessees are the owners? - Held that - Assessees purchased the land at Survey no 75/1 in the year 2000 along with his wife with 50% share in it. Shri Kuldeep Singh was the previous owner of these lands. In the year 2006, Assessee and his wife sold the said land which gave rise to the impugned capital gains. These are undisputed facts. Therefore, the ownership of the property is undisputed and the Assessee along with his wife are the owners of it. Of course, the entries in the revenue s records, which shows Shri Kuldeep Singh as owner or cultivator, created unnecessary suspicion in the mind of the AO, who took an adverse view in the matter and against the assessees. These observations demonstrate, how poorly and casually, the revenue s records are maintained by the revenue s authorities of the State Government. Otherwise, we perused the title deeds of land at S.No.75/1 and the correction deed and found the name of the assessees appeared in the title deeds. Therefore, the ownership of the lands vests with assessee and his wife only. Whether assessees are the cultivators? - We have already discussed that the 7/12 extracts are the creation of Revenue Officers/Talati etc., and the assessees have no role in maintenance of the records. Considering the fact lands at S.No. 75/1 is the possession of the Assessee since the year 2000 along with the undisputed fact that the assessees never leased the lands to Shri Kuldeep Singh, we are of the opinion that all is not well with records maintained by the MRO/Talati etc., It is likely that the Shri Kuldeep Singh, being the previous owner-cum-cultivator on records, continues to be shown by the Revenue authorities as the cultivator erroneously even after he sold the lands to the assessees. Otherwise, it is not possible that Shri Kuldeepsingh cultivated the land of the assessee legally. Thus, from this point of view, the said records of the revenue are not fool-proof so far as the 7/12 extracts of lands at S.No. 75/1, are concerned. Therefore, it is not possible that the Assessees are not the cultivators at the relevant point of time and, therefore, Shri Kuldeep Singh is the cultivator in the said lands. Hence, we dismiss the conclusions drawn by the AO on this issue and agree with the CIT(A) on this issue. As such, there was action u/s.132 of the Act on the assessees and it did not result in any incriminating material against the assessees on this claim u/s.54B of the Act. Whether there was agricultural activity on the said land in the 2 A.Ys prior to the date of transfer of lands in 2006? - The original 7/12 extract gathered by the AO indicate barrenness of the lands at S.No.75/1 and therefore, according to AO, the assessees would not have grown crops in A.Yrs 2004-05 and 2005-06. However, assessees filed revised 7/12 extract, which were issued by the revenue authorities after incorporating corrections and on complying with the due process of rules relating to rectification. This revised one indicates growing of dry crops such as Maize, Bajra etc., in the AYs 2004-05 and 2005-06. Of course, the revenue picks up holes in the said 7/12 extracts too by stating that there are some problems with the process of drawing panchanama, panchas etc. AO has exceeded his jurisdiction in suspecting the revised extract which has the basis of the records maintained by the State Govt. It is on record that AO failed to continue to investigate the matter by taking it up with the District Collector to bring the issue to the logical conclusion. Therefore, while rejecting the claim of assessees, the reliance of the AO entirely on the said 7/12 extracts, which suffer from patent imperfections. In our view, the AO has unfairly denied the benefits of deduction u/s 54B of the Act and the same is not sustainable Focusing on the purchase of Gut No.73, it is the legal requirement that the assessee must purchase the Gut No.73. Both assessees, with 50% share, paid the total consideration of ₹ 1,54,75,000/- and obtained the possession of the land at Gut No.73. From the legal point of view, the assessees purchased the said lands. Act of registration and the furnishing of title deeds is a matter of documentation and it is matter of time. Therefore, the assessee should be held as purchased the land at Gut No.73 for the purpose of section 54B of the Act. On this reasoning, Ld.CIT(A) allowed the arguments of the assessees It is requirement of the law of section 54B of the Act that the Assessees should have utilized the gains for purchase of any other lands for being used for agricultural purposes. On all these conditions, the CIT(A) examined and held that the assessees met all the conditions legally. In our view, the order of CIT(A) constitutes a possible view and the same constitutes a fair and reasonable order and therefore we affirm the same.- Decided against revenue Allowability of alternate claim u/s.54F - The claim is made as an alternative ground to claim u/s.54B of the Act. However, AO dismissed the same on the ground of Assessee s failure to discharge onus with respect to furnishing of evidences in support of investment of gains in construction of the residential house. Assessee filed a certificate from Architect only. During the assessment proceedings, AO rejected the said certificate of the Architect cum builder of the said house. However, CIT(A) allowed the claim of the assessee as per his discussion in page 10 of his order. Before us, the AR relied on the respective orders of the AO or the CIT(A) as the case may be. On hearing the parties, we find the adjudication of this issue becomes a necessity only when the relief under the provisions relating to section 54B of the Act, is denied. Therefore, considering the relief granted by us for the detailed reasons given in the paragraphs above, we are of the opinion that the adjudication this ground constitute an academic exercise only. Therefore, we proceed to dismiss the same as an academic Agricultural income allowable to the assessee - Held that - AO examined the Gut wise details and also the Agricultural Income on the strength of the receipts available with the AO. He, accordingly arrived at a scientific output of ₹ 4,46,358/- as net Agricultural Income out of his exercise and the balance of (Rs.9,05,000/- - ₹ 4,46,358/-) is added as income of the assessee. The order of the AO is more analytical and credible on this issue and it has a basis of documents in the form of agricultural receipts. Therefore, we are of the view that the orders of the AO in both the cases on this issue is fair and reasonable. To that extent, the orders of the CIT(A) stand reversed on this issue of Agricultural income for the reasons given above.
Issues Involved:
1. Exemption under Section 54B of the Income Tax Act. 2. Use of land for agricultural purposes prior to sale. 3. Ownership and documentary evidence for land at Gut No.73. 4. Exemption under Section 54F of the Income Tax Act. 5. Addition on account of income from undisclosed sources. 6. Claim of agricultural income. Detailed Analysis: I. Exemption under Section 54B of the Income Tax Act: The Revenue challenged the exemption claimed by the assessee under Section 54B amounting to ?1,18,85,470/-. The Tribunal examined whether the land sold was used for agricultural purposes by the assessee or his parents for the two years preceding the sale. The Tribunal found discrepancies in the original 7/12 extracts, which showed the land as barren, and the revised extracts, which indicated agricultural use. The Tribunal concluded that the revised 7/12 extracts were credible and the land was indeed used for agricultural purposes, thus allowing the exemption under Section 54B. II. Use of Land for Agricultural Purposes Prior to Sale: The Tribunal noted that the original 7/12 extracts obtained by the AO described the land as barren, while the revised extracts showed agricultural activities. The Tribunal found that the AO did not adequately investigate the revised extracts and relied on statements from neighboring landowners without cross-examination. The Tribunal accepted the revised extracts, confirming the land was used for agricultural purposes in the relevant years. III. Ownership and Documentary Evidence for Land at Gut No.73: The AO disputed the ownership and registration of the land at Gut No.73, claiming it was not formally registered in the assessee's name and was an "Inami land" (non-transferable). The Tribunal found that the assessee had paid the consideration and was in possession of the land, thus satisfying the conditions for claiming exemption under Section 54B. The Tribunal upheld the CIT(A)'s decision to allow the exemption. IV. Exemption under Section 54F of the Income Tax Act: The assessee made an alternate claim under Section 54F for investment in a residential house. The AO denied this claim due to a lack of documentary evidence. The Tribunal noted that this claim was academic since the exemption under Section 54B was allowed. Therefore, the Tribunal dismissed the ground as academic. V. Addition on Account of Income from Undisclosed Sources: The AO added ?3,13,642/- as income from undisclosed sources, reducing the claimed agricultural income from ?9.5 lakhs to ?4,46,358/-. The CIT(A) allowed 80% of the claimed agricultural income, disallowing only 20%. The Tribunal found the AO's detailed analysis and estimation more credible and reversed the CIT(A)'s decision, reinstating the AO's determination of agricultural income. VI. Claim of Agricultural Income: The AO verified the agricultural receipts and estimated the net agricultural income at ?4,46,358/-, adding the balance as income from other sources. The CIT(A) partially allowed the assessee's claim, granting relief of ?3,13,642/-. The Tribunal found the AO's approach more systematic and analytical, reversing the CIT(A)'s decision and upholding the AO's estimation of agricultural income. Conclusion: The Tribunal allowed the exemption under Section 54B, confirming the land was used for agricultural purposes and the assessee met the conditions for the exemption. The alternate claim under Section 54F was dismissed as academic. The Tribunal upheld the AO's determination of agricultural income and reversed the CIT(A)'s partial relief on this issue. The appeals were partly allowed in favor of the Revenue.
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