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TMI Blog2025 (1) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... he FMV/stamp duty value of Rs. 55,65,900/- in the backdrop of Section 56(2)(vii)(b) of the Act was not an issue for which the case of the assessee was selected for "limited scrutiny" u/s. 143(2) of the Act. Addition u/s. 56(2)(vii)(b) of the Act with respect to difference in the Fair Market Value (FMV) i.e. stamp duty/segment rate of property - Since the assessee's case was selected for "limited scrutiny" under CASS with respect to certain specific issues, therefore, the jurisdiction of the A.O in the absence of getting the said case converted into complete scrutiny as per the CBDT Instruction No.20 of 2015 dated 29.12.2015, was confined only to the specific reason/issue based on which the case of the assessee was picked up for such scrutiny. Accordingly, on the basis of our aforesaid observations, we are of the considered view that the addition of Rs. 50,65,900/- (supra) made by the A.O u/s. 56(2)(vii)(b) is liable to be quashed for want of valid assumption of jurisdiction by the A.O while framing the "limited scrutiny" assessment vide his order u/s. 143(3) of the Act, dated 15.12.2017. Thus, the addition of Rs. 50,65,900/- made by the A.O. is vacated for want of valid assumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short 'the Act') dated 15.12.2017 for the assessment year 2015-16. The assessee has assailed the impugned order on the following grounds of appeal before us: "1. That the order u/s. 250 as passed by the Ld.CIT (Appeals) is bad in law as well as on facts. 2. On the facts and circumstances of the case the Ld. CIT (Appeal) has grossly erred in not considering the appellants submission before him as such the order is against the principle of natural justice, bad in law and deserves to be cancelled. 3. On the facts and circumstances of the case, the ld. CIT (Appeal) erred in not allowing the legitimate deduction u/s. 54B on sale of agricultural land. The Ld. AO treated the sale of land as non-agricultural. Ignoring the facts that land is cultivated one subject to land revenue and agricultural income shown by the appellant in the ITR was accepted by the A.O. 4. On the facts and circumstances of the case the ld. CIT (Appeal) erred in confirming the disallowance of claim of Rs. 3,90,94,919/- on account of deduction claimed u/s. 54B of the Income Tax Act 1961. 5. On the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee in his return of income for the subject year had claimed deduction u/s. 54D(sic) of the Act aggregating to Rs. 3,90,94,919/- i.e. [Rs.97,09,279/- (+) Rs. 1,01,40,469/- (+) Rs. 1,92,45,171/-] against the Long Term Capital Gain (LTCG) on sale of immovable properties. The A.O observed that the assessee had during the subject year sold three properties, as under: S. No. Transaction Amount Transaction Amt. As per A/c. Transaction dated in Books of A/c. Name of purchaser party 1. 11857000/- 10840100/- 21/07/2014 Balaji Builders 2. 23064000/- 23064000/- 02/09/2014 Zodiac Dealers Pvt. Ltd. 3. 21372000/- 21372000/- 02/09/2014 Zodiac Dealers Pvt. Ltd. The assessee clarified that the claim for deduction was raised u/s. 54B (wrongly mentioned u/s. 54D of the Act in the return of income). 6. Apropos the claim for deduction of Rs. 3,90,94,919/- (supra) u/s. 54B of the Act, the A.O taking cognizance of the fact that no proof was provided by the assessee as regards the agricultural activities that were claimed to have been carried out on the subject land which was a precondition for claiming the aforesaid deduction, thus, called upon him to explain that as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- and the same should considered as the value of land. The AO did not agree with the arguments of the appellant, so they were rejected. As a result, he added Rs. 50,60,990/-, which was the difference between the stamp duty value determined by the stamp duty authority and purchase cost of the land disclosed in return of income by the appellant under section 56(2)(vii)(b) of the Act. 5.3 The appellant's arguments on this issue revolve around two points listed below. (a) The AO, while making addition of Rs. 50,60,900/- under section 56(2)(vii)(b) of the Act, considered the purchase of the land in question in the financial year 2014-15, even though it was purchased in the financial year 2011-12. (b). The land in question was stock in trade of business and was recorded on the balance sheet. 5.4 The appellant contends that the land it question was acquired in the financial year 2011-12 because deed of conveyance was executed and presented for registration, payment was made to the seller, and possession of the land was taken in the financial year 2011-12. The appellant has admitted that deed presented for registration of the land was released in the financial year 2014-15 aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant failed. Thus, the appellant's assertion that the land in question was stock-in-trade is merely an afterthought. 5.7 Based on the discussion above, I am inclined to agree with the AO's view that provisions section 56(2)(vii)(b) are applicable to the present case. As a result, the appellant's arguments in this regard are rejected. Therefore, considering the discussion made above the addition of Rs. 50,65,900/- is upheld. The grounds of appeal on said issue are, thus, dismissed. 5.8 The last issue to discuss is whether the appellant is entitled to a deduction under section 54B of the Act. The AO noted that the appellant did not carry out any agricultural activities as no income was reported in the returns of income filed by the appellant. The AO further observed that submission of (Kisan `Kitab' was not sufficient to prove that agricultural activities were conducted on the land in question by the appellant. Consequently, he rejected the appellant's claim for a deduction of capital gain of Rs. 3,90,94,919/- arising out sale agricultural land under section 54B of the Act because the appellant failed to prove the land in question was used for agricultural pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the A.O had grossly erred in law and facts of the case in wrongly assuming jurisdiction and making an addition of Rs. 50,65,900/- u/s. 56(2)(vii)(b) of the Act. Elaborating on his contention, the Ld. AR submitted that as the case of the assessee was selected for "limited scrutiny" u/s. 143(2) of the Act for examination of specific issues, viz. (i) sale of property mismatch; (ii) mismatch in income/Capital Gain on sale of land or building; (iii) deduction claimed under the head Capital Gains; and (iv) tax credit mismatch, therefore, the A.O had traversed beyond the scope of his jurisdiction and made an addition of Rs. 50,65,900/- u/s. 56(2)(vii)(b) of the Act i.e. an issue which had never formed a basis for selection of the assessee's case for "limited scrutiny". The Ld. AR to buttress his claim that in case of "limited scrutiny", the A.O was divested of his jurisdiction for making an addition which never formed the basis for selection of the case for such scrutiny assessment had relied on the CBDT Instruction No.20/2015, dated 29.11.2015, Page No.117 & 118 of APB and Instruction No.5/2016, dated 14.07.2016, Page 119 to 120 of APB. The Ld. AR had taken us through the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Vs. Commissioner of Income Tax (2015) 372 ITR 83 (Cal.). The Ld. AR submitted that the Hon'ble High Court in the aforesaid case, had held that the valuation by the departmental valuation officer as contemplated u/s. 50C of the Act is required to avoid miscarriage of justice. The Ld. AR submitted that it was further observed that even in a case where no such prayer was made by the advocate representing the assessee, who may not have been properly instructed in law, the A.O, while discharging the quasi-judicial function remained under a bounden duty to act fairly and to give a fair treatment by giving the assessee an option to follow the course provided by law. The Ld. AR submitted that as the "proviso" to Section 56(2)(vii) of the Act was pari-materia to sub-section (2) of Section 50C of the Act, therefore, the A.O as per the ratio of the judgment of the Hon'ble High Court of Calcutta in the case of Sunil Kumar Agrawal Vs. Commissioner of Income Tax (supra) in the present case was obligated to have made a reference to the Valuation Cell instead of summarily triggering the provisions of Section 56(2)(vii)(b) of the Act which, thus, had resulted to a substantial addition in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the same were transferred were being carried out on the same as was required per the mandate of Section 54B of the Act. 15. Per contra, Shri S.L Anuragi, Ld. Departmental Representative (for short 'CIT-DR") relied on the orders of the lower authorities. 16. Controversy involved in the present appeal hinges around three issues, viz. (i) that as to whether or not, the A.O was right in law and fats of the case in assuming jurisdiction for making an addition u/s. 56(2)(vii)(b) of the Act of Rs. 50,65,900/- i.e. an issue which did not form a basis for selection of the assessee's case for "limited scrutiny"? (ii) that as to whether or not, the A.O without making any reference to the valuation cell rightly triggered the provisions of Section 56(2)(vii) r.w.s. 50C(2) of the Act and substituted the FMV of the lands purchased by the assessee as against the actual purchase consideration? AND, (iii) that as to whether or not the A.O is right in law and facts of the case in concluding that the assessee had failed to substantiate his entitlement for claiming deduction u/s. 54B of the Act? 17. Ostensibly, it is a matter of fact discernible on a perusal of the notice issued by the A.O u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction of the A.O in the absence of getting the said case converted into complete scrutiny as per the CBDT Instruction No.20 of 2015 dated 29.12.2015, was confined only to the specific reason/issue based on which the case of the assessee was picked up for such scrutiny. Accordingly, on the basis of our aforesaid observations, we are of the considered view that the addition of Rs. 50,65,900/- (supra) made by the A.O u/s. 56(2)(vii)(b) is liable to be quashed for want of valid assumption of jurisdiction by the A.O while framing the "limited scrutiny" assessment vide his order u/s. 143(3) of the Act, dated 15.12.2017. Thus, the addition of Rs. 50,65,900/- made by the A.O. is vacated for want of valid assumption of jurisdiction. 19. As we have vacated the addition of Rs. 50,65,900/- made by the A.O u/s. 56(2)(vii)(b) of the Act for want of valid assumption of jurisdiction on the part of the A.O, therefore, we refrain from adverting to and dealing with the other contentions raised by the Ld. AR, based on which, he has assailed before us the validity of the impugned addition, which, thus, is left open. Thus, the additional ground of appeal a/w. Ground of appeal No.5 raised by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations in the two years immediately preceding the date on which the same was transferred i.e. on 21.07.2014, therefore, we are unable to concur with the Ld. AR's claim that the aforesaid land transferred by him was an agricultural land which satisfied the pre-condition for claiming deduction u/s. 54B of the Act B. Land admeasuring 1.922 hectare, Khasra No.22/1. 22/4 and 28/2, situated at Mouja : Parsoda, Tehsil : Bilaspur: 23. (i) On a perusal of the record, it transpires that the assessee had sold the subject property vide a registered sale deed, dated 02.09.2014, Page 24 to 55 of APB. On a perusal of the "Form-P-II/Khasra" of the aforementioned agricultural land, Page No.40-41 of APB (translated copy separately placed on record), we find that the same reads as under: As per the aforesaid "Form P-II/Khasra", the aforesaid bifurcated details of usage of the aforesaid 1.922 hectares of land for agricultural operations by the assessee are culled out as under: Land (area) Khasra No. Remarks 0.615 hectare 22/4 (i) agricultural land admeasuring 0.615 hectares owned by Shri Ramkrishna Anant, F/o. Asharam was transferred to the assessee, viz. Shri Rahul Bajpai in F.Y.2012-13 (en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Land (area) Khasra No. Remarks 1.781 hectare 17/2 Agricultural land was being used by the assessee during F.Y.2012-13 and F.Y.2013-14 Total area 1.781 hectare Accordingly, based on the aforesaid facts gathered from the "Form PII/ Khasra" of the aforesaid land (forming part of the registered sale deed) that was sold by the assessee vide a registered sale deed, dated 02.09.2014, the assessee had been carrying agricultural operations on agricultural land admeasuring 1.781 hectares i.e. growing paddy crop in the two years immediately preceding the date on which the aforesaid land was transferred i.e. on 02.09.2014. 25. We, thus, in terms of our aforesaid observations, find that the agricultural lands sold by the assessee during the year under consideration, viz. (i) agricultural land admeasuring 1.424 hectares (out of 1.922 hectares) sold by the assessee vide registered sale deed dated 02.09.2014 i.e. (out of Khasra No.22/1, 22/4 and 28/2) situated at Mauja: Parsoda, Tehsil: Bilaspur; and (ii) agricultural land admeasuring 1.781 hectares (bearing Khasra No.17/1) situated at Mauja : Parsoda, Tehsil: Bilaspur sold by the assessee vide registered sale deed dated 02.09.2014, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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