2022 (6) TMI 643 - AT - Income Tax

Deduction u/s 54F - non-disclosure of capital gain arising out of sale of agricultural land in her return of income - controversies revolve around the two major issues being exempt income from sale of agricultural plots and deduction u/s 54F for capital gain earned from the sale of non-agricultural plots which has been decided by the CIT(A) in favour of the appellant - HELD THAT - As it is a fact that none of the document has been considered by the Ld. AO to whom the remand report was sought for. It is also acceptable by us that 20 days time is not sufficient enough to give a comment on the set of additional documents submitted by the assessee before the Ld. CIT(A) by the Ld. AO and to prepare a remand report upon due application of mind to enable the Ld. CIT(A) come to a valid conclusion. We find that reasonable opportunity has not been provided to the Ld. AO on this aspect which goes to the root of the matter and therefore, in the absence of such compliance as mandated in the statute the impugned order passed by the Ld. CIT(A) cannot be given a stamp of approval by us. Hence, in our considered opinion the matter required to be remanded to the file of the Ld. AO for proper adjudication of the issues. We, therefore, set - aside the order passed by the CIT(A) and restore the issue to the file of the Ld. AO to decide the same afresh upon giving an opportunity of being heard to the assessee and upon considering the additional evidences so adduced by the assessee or any other evidence which the assessee may choose to file at the time of hearing of the matter. We also make it clear that the assessee would also not seek for any unnecessary adjournment before the Ld. AO and would cooperate with best of his abilities to get the issue resolved. Revenue s appeal is, therefore, allowed for statistical purposes.

Summary

Issues Involved:
1. Deduction under Section 54F of the Income Tax Act, 1961.
2. Long Term Capital Gain (LTCG) on the sale of agricultural lands.

Detailed Analysis:

1. Deduction under Section 54F:

The Revenue appealed against the order granting the assessee a deduction under Section 54F amounting to Rs. 7,28,85,153/-. The assessee had sold five non-agricultural lands and claimed this deduction. The AO questioned the validity of the deduction, arguing that the agreement to sell the new property was unregistered and not notarized, and thus had no evidentiary value under Section 17 of the Registration and Other Related (Amendment) Act, 2001, and Section 53A of the Transfer of Property Act. The AO also noted that the scheme was not completed within three years and that the nature of the property (residential vs. commercial) was not substantiated.

The CIT(A) admitted additional evidence and ruled in favor of the assessee, noting that the investment in the new residential property was genuine and that the delay in project completion was beyond the assessee's control. The CIT(A) also emphasized that the entire amount of capital gain was invested in the new property, thus fulfilling the conditions for deduction under Section 54F.

2. Long Term Capital Gain on Agricultural Lands:

The AO added Rs. 2,00,14,765/- to the total income of the assessee, arguing that the sale proceeds from two agricultural lands were not disclosed in the return of income. The AO observed that these lands were in the vicinity of other non-agricultural lands sold by the assessee and concluded that no agricultural activities were carried out on these lands, thus treating them as non-agricultural.

The assessee contended before the CIT(A) that the lands were agricultural and beyond 8 km from the local limits of the municipality, thus not qualifying as capital assets under Section 2(14) of the Act. The CIT(A) accepted this argument, supported by a certificate from the Palodiya Gram Panchayat and Google Maps evidence, which confirmed the lands were beyond 8 km from the Ahmedabad Urban Area.

Final Judgment:

The ITAT found that the AO was not given sufficient opportunity to consider the additional evidence submitted by the assessee. The ITAT noted that the CIT(A) admitted these additional evidences without a proper remand report from the AO. Consequently, the ITAT set aside the order of the CIT(A) and remanded the matter back to the AO for fresh adjudication, ensuring that the AO is given a reasonable opportunity to review the additional evidence and provide a thorough report. The appeal by the Revenue was allowed for statistical purposes.

Conclusion:

The ITAT emphasized the need for a thorough review by the AO, considering all additional evidence submitted by the assessee, to ensure a fair and just resolution of the issues regarding the deduction under Section 54F and the LTCG on agricultural lands. The case was remanded to the AO for a fresh decision, with instructions to provide the assessee with an opportunity to be heard and to avoid unnecessary adjournments.