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Asstt. Commissioner of Income Tax, Circle-1, Meerut Versus Sh. Kulbhushan Gupta and Vica-Versa

Long Term Capital Gains - whether land is agricultural and transferred without sale deed ? - CIT(A) deleted the addition - whether the land was under developed, agricultural and provisions of section 50C of the IT Act, 1961 were in-applicable? - Held that:- CIT(A) has thoroughly gone through the assessment order alongwith the Remand Report and Rejoinder to the Remand Report as well as the other evidences filed by the assessee. Ld. CIT(A) has decided the issue in favour of the assessee by respect .....

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t that in such a situation, position existing prior to Sec. 5OC would apply and onus would be upon revenue to establish that sale consideration declared by the assessee was understated with clinching evidence. The property in question has been transferred by executing an agreement which was not registered with registering authority, therefore, in our view Sec. 5OC could not have come into operation and the addition in dispute has rightly been deleted by the Ld. CIT(A) - Decided against revenue. .....

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on was also made on the basis of assumptions and presumptions only. We also find that the AO examined the complete books of account and found no defect in the same, hence, the action of the CIT(A) for estimation of disallowances are against the principles of Income Tax Act. The assessee has furnished all the details before the AO and the AO has not given sound reason for observing ‘person use’. Therefore, both the additions were rightly deleted by the Ld. CIT(A), which does not need any interfer .....

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s raised in the Revenue s appeal read as under:- I. Whether on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) has erred in law in deleting the addition made by the AO on account of Long Term Capital Gains holding 'that the land is agriculturaI and transferred without sale deed and ignoring the vital facts proving contrary stand. 2. Whether on the facts and circumstances of the case the Commissioner of Incometax( Appeals) was justified in holding the lan .....

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IT Act, 1961 were in-applicable while the facts on record proved otherwise. 4. Whether in the facts and circumstances of the case, the Ld. Commissioner of lncome-tax (Appeals) has erred in deleting the additi9P of ₹ 29,580/- made on account of running expenses inspite of the fact that the assessees had not maintained any log book for the purpose of car running expenses to distinguish between the personal use and business use of Car? 5. Whether in the facts and. circumstances of the case, .....

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Tax Act by ignoring the fact that circle rate on the transfer of 1st Land and was ₹ 2000/- per sq.meter. However, purchaser has wrongly paid ₹ 3800/- per meter. 2. That the assessee has right to add/ delete or modify any grounds of appeal. REVENUE S APPEAL NO. 2269/DEL/2010 4. The facts in brief are that the assessee filed return of income dated 28.10.2005 of ₹ 38,96,057/-. The case was selected for scrutiny and notice u/s. 143(2) of the IT Act dated 14.6.2007 was duly served .....

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a piece of land measuring 748.61 yds. for ₹ 15,00,000/- the circle rate of which as per sale deed is ₹ 23,78,498/-. For the second piece of land measuring 6104.39 sq.yds. agreement was entered into on 23.8.2004. however, no circle rate was mentioned but since the land is situated on same Khasra No. of the same Village, the circle rate can be derived from the first sale deed which then comes to ₹ 1,93,94,984/-. Therefore, total sale consideration comes to ₹ 2,17,73,182/-. .....

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are comes at ₹ 21,34,020/-. In the same ratio, assessee s share comes at ₹ 20,32,258/- in the total sale consideration of ₹ 35,00,000/- received for this land. Therefore, the short term capital loss in the hands of the assessee comes at ₹ 1,01,762/-. After adjusting this loss against the long term capital gain as mentioned above, assessee is in net long term capital gain of ₹ 1,80,40,661/-, in place of ₹ 32,34,921/-. Therefore, the difference of ₹ 1,48,0 .....

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ssessed the total income of ₹ 1,87,66,173/- vide his order dated 28.12.2007 passed u/s. 143(3) of the I.T. Act, 1961. 5. Against the assessment order, assessee filed an appeal before the Id. First Appellate Authority who vide impugned order dated 16/2/2010 has partly allowed the appeal of the assessee. Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal. 6. At the time of hearing Ld. DR relied upon the order of the AO and reiterated the .....

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8,941/- as per copy of computation of total income placed at pages 12-13 of the paper book: b) Agricultural land situated on the main Meerut - Delhi Road, near Amar Ujala Newspaper Office, Meerut (Khasra No. 207) measuring 625.92 Sq. mtrs was sold for ₹ 15,OO,000 vide registered sale deed dated 20/07/2004, copy placed at pages 14-32 of the paper book. From such sale deed, it is evident that stamp duty was paid on circle area rate of ₹ 23,78,498/- which works out to ₹ 3,800/- pe .....

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rking out long term capital gains. However, the AO worked out the long term capital gains for both the above mentioned agricultural lands by estimating sales on the basis of circle area rate i.e. ₹ 3,800/- per sq. mtr. mentioned in the registered sale deed as under: Area of agricultural land sold Sale consideration by the assessee (Rs.) Sale consideration estimated by the AO (Rs.) Addition made by AO (Rs.) Treatment by CIT(A) 625.92 (Sq.mtr.) 15,00,000 23,78,498 on the basis of circle area .....

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a No. 207 measuring 5104 sq. mtr was sold for ₹ 55,00,000 vide Agreement to sell (unregistered) dated 16/08/2004, copy placed at pages 33-36 of the paper book. It is pertinent to point out here that no stamp duty was paid on such land as it was sold through Agreement to sell and not through registered sale deed. The said land was not touching the main Delhi- Meerut road. 3. Copy of Khatauni to prove ownership of the above mentioned agricultural land sold by the Assessee at pages 37-38 of t .....

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at pages 14-32 of the paper book. From such sale deed, it is evident that stamp duty was paid on circle area rate of ₹ 23,78,498/- which works out to ₹ 3,8001- per sq. mtr. 6. The price of agricultural land measuring 5104 sq. mtr situated at the back side of agricultural land measuring 625.92 sq. mtr (touching the main Delhi-Meerut Road) could not be the same as that of land touching the main road as explained before the Ld. CIT(A) and also reproduced in the appellate order: (i) Agr .....

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r sq. mtr as is evident from copy of registered sale deed dated 07/06/2005 placed at pages 39-46 of the paper book in which circle area rate was ₹ 2,000/- per sq. mtr. (ii) Moreover, such agricultural land (back side) had many drawbacks as it was like jungle where maveshies used to through carcasses of dead animals, therefore, the value of such land could not be equated with the value of land measuring 625.92 sq. mtr. which was touching the main Delhi-Meerut Road and had commercial value. .....

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ound No. 4 & 5: are against the deletion of additions of ₹ 29,580/- on account of car running expenses and ₹ 23,916/- on account of telephone expenses. The Assessee relies on the findings recorded by the l.d. CIT(A) vide para 7 to 7.3 at page 18 of the appellate order while deleting the above additions. Consequently, the appeal filed by the Revenue deserves to be dismissed. CO No. 247/Del/2010 As regards Cross Objection, the same is hereby withdrawn. 8. We have heard both the par .....

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ave gone through the relevant facts emanating from the assessment order, the Remand Report & the Rejoinder to the Remand Report carefully. Regarding the 2nd piece of land, the basic reasons for holding the view as the A.O. has done are as under: i) The two plots contained in Khasra No. 204 and 207 constitute one single piece of land & the assessee's contentions that the plot at the front which was transferred by a registered deed was commercial while the plot at the back which was tr .....

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ermined by Stamp Valuation Authority as per Circle Rates vide an unregistered agreement to sell and secondly by declaring a lower full value of consideration which is not in consonance with the provisions of section 50C of the Income Tax Act, 1961. The A.R.' s specific replies to the three points as above are as under: i) Regarding contention of the AO that it is a single piece of land, it has been submitted that the land was purchased through two different bainamas and from two different pe .....

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a residential colony by the purchaser after the same being purchased through a unregistered agreement which was passed as Shyam Nagar Enclave by the Meerut Development Authority. The circle rate of the above said land is itself fixed at ₹ 2000/- sq. yard by the District Authorities after being developed. The above land cut into different residential plots have been sold by the developer on which circle rate of ₹ 2000/- per sq.yard has been applied by the Stamp Valuation Authority. T .....

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and at a particular point of time. ii) According to the AR, section 5OC has no application unless and until the sale registered with the registrar of document and Registrar of Stamp duty. As no registered sale took place, section 50C is not applicable and even if applied, it cannot exceed ₹ 1150/- per sq. yard as explained. In this regard a recent decision of the Jodhpur Bench in the case of Navneet Kumar Thakkar vs. I.T.O. Ward-4 was relied upon and it was argued that it is clearly applic .....

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le consideration declared by the assessee was understated with some clinching evidence. As ruled by the Tribunal in the instant case, the assessee transferred the property in question by executing an agreement which was not registered with the registering authority. In such a case, section 50C could not have come into operation and the resultant application of section 55A, by which the Assessing Officer got the property valued and adopted the report of the Valuation Officer as the sole basis for .....

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valued from the Valuation Officer would in no way make the essence of the order different than that of the case of the assessee and is a clear violation of the decided laws. As argued, in the instant case the Courts even declared the action of the A.O. to value the property from a registered valuer u/s 55A and adopting such valuation as sole basis for making the impugned addition as wholly invalid. Under such circumstances how could the A.O. state the case of the assessee to be different under .....

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as under: a. Sale Through Agreement:- As per instruction 2(47) of Income Tax Act read with section 53A of transfer of Property Act, sale through agreement is a valid transfer. Therefore the assessee transferred the land as per transfer of Property Act. Regarding stamp duty Act, stamp is paid by the purchaser. If any wrong is committed by the purchaser then action can be taken against the purchaser only. Seller cannot be held responsible for this act because seller has right to get the sale cons .....

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tion 50C is not applicable on this issue. The A.O. tried to compare first land which is industrial plot just adjacent to the main road. However, this agricultural land is approximately at ₹ 1100/- per sq. meter behind the main road. Therefore, the circle rate of the rear portion cannot be equated to the main road value. In support of his contentions, the A.R. has adduced following evidences: i. Copy of different Bainamas (Purchase Deeds) ii. Copy of Khatauni showing the land as Agricultura .....

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obligation to press the buyer for entering into a sale deed and no benefit has passed to him by not making a sale deed. Secondly, the provisions of section 50C, as held below, are not attracted in his (ii) Regarding the spirit of section 50C(3) emanating from the word 'assessable' therein, as argued by the AO through oral submissions, I find that even if the SVA had to assess its value of required, it could have assessed it only @ 50,00,000/- per hectare which was the rate as fixed by th .....

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ice. A large piece of land can be sold/transferred in any number of parts depending on the owner's wisdom and choice. In the instant case, I do not find an iota of logic in the AO s observations on this point. As per revenue records the rate of the back portion of land transferred by the assessee by way of an unwritten agreement was ₹ 50,00,000/- per hectare and its use as per Government records was agricultural. Its circle rate was fixed at ₹ 2000/- per sq. yard by the Governmen .....

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of IT AT Jodhpur Bench (2008) 110 ITD 525 Jodhpur quoted by the assessee is clearly applicable on the sale of second land wherein it has been held by the court the unless property transferred has been registered by sale deed and for that purpose value has been assessed and stamp duty has been paid by parties Sec. 5OC inserted by Finance Act, 2002 with effect from 1-4-2003, cannot come into operation. It has been further heldby the Hon'ble Court that in such a situation, position existing pr .....

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ble in respect of the transfer of second land (6103.39 sq.yards) and the addition is deleted. 8.1 We have heard both the parties and perused the relevant records available with us, especially the orders of the authorities below alongwith the Written Synopsis filed by the Ld. Counsel for the assessee, we are of the considered view that Ld. CIT(A) has thoroughly gone through the assessment order alongwith the Remand Report and Rejoinder to the Remand Report as well as the other evidences filed by .....

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3, cannot come into operation. It has been further held by the Hon'ble Court that in such a situation, position existing prior to Sec. 5OC would apply and onus would be upon revenue to establish that sale consideration declared by the assessee was understated with clinching evidence. The property in question has been transferred by executing an agreement which was not registered with registering authority, therefore, in our view Sec. 5OC could not have come into operation and the addition in .....

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