9911796707
TMI Blog2025 (1) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 circumstances of the case the Ld. CIT (Appeal) erred in confirming the addition of Rs. 50,65,900/- on account of difference between stamp value and purchase value ignoring the fact that the land was not purchased during the relevant assessment year but in A.Y.2012-13, hence the addition during the year deserves to be deleted. 6. That the appellant craves leave to add to and/or amend, alter, rescind the grounds taken here in above, before or the time of hearing of this appeal." 2. Also, the assessee has raised an additional ground of appeal which reads as under: "Ld. CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealers 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 to why the same be not declined. 7. As is discernible from the assessment order, the A.O was of the view that the "kisan kitab" produced by the assessee did not substantiate his claim that agricultural activities were carried out on the subject lands that were transferred by him during the year under consideration. It was further observed by the A.O that the assessee had neither disclosed any agriculture income in his return of income nor had filed any proof or evidence supporting his claim that agricultural activities were carried on the aforesaid lands. Accordingly, the A.O based on his aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 after payment of addition stamp duty. It has been argued by the appellant that proviso 2 of section 56(2)(vii)(b) is applicable to his case, so the AO's addition of Rs. 50,65,900/-was not justified. 5.5 The record shows the issue regarding purchase of the land in the financial year 2011-12 was not brought to the notice of the AO during the assessment proceedings. The claim of the appellant that the land in question was bought in the financial year 2011- 12 has not be validated by supporting documentary evidence, such as a copy of agreement for purchase, proof of taking possession of the land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose preceding two years immediately before transfer. 5.9 Both the AO and the appellant reproduced the Section 54B of the Act, which requires following two conditions to be met in order to claim deduction under that Section. (a) The land should have been used for two years immediately before transfer. (b) The land purchased for claim deduction should be utilized for agricultural purpose as well. 5.10 As noted by the Hon'ble Tribunal, Pune, in ITA no.704/PUN/2022, the Hon'ble Supreme Court in the case of Commissioner Customs (Prentive), Mumbai vs Dilip Kumar (69GST239) held that exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 aforesaid CBDT Instructions Nos.20/2015 (supra) and Instruction No.5/2016 (supra), which fortified his contention that in cases under "limited scrutiny", the scrutiny assessment proceedings would initially be confirmed only to issues under "limited scrutiny" and questionnaire, enquiry, investigation etc. would be restricted to such issues. Carrying his contention further, the Ld. AR submitted that as per CBDT Instruction No.5/2016 (supra) it is only where it comes to the notice of the A.O that there is potential escapement of income exceeding Rs. 5 lacs (for non-metro cases) requiring substantial verificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving 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 hands of the assessee. 14. Apropos the observation of the A.O that as the assessee had failed to place on record supporting documentary evidence which would substantiate that the lands sold by him during the year under consideration were either being used by him or his parents for agricultural purpose in the two years immediately preceding the date on which the same were transferred i.e. a pre-condition for claiming deduction u/s. 54B of the Act, therefore, his claim for deduction of Rs. 3,90,94,919/- was liable to be disallowed, the Ld. AR rebutted the same. The Ld. AR submitted that a perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 143(2) of the Act, dated 19.09.2016, Page No.116 of APB that the case of the assessee was selected for "limited scrutiny" for examination of the following issues: (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. Admittedly, the examination of the difference/variance in the purchase consideration of the property i.e. land situated at Mouja : Khapargaunge, Bilaspur (admeasuring 206.143 Aq. Mtrs.) that was purchased by the assessee for a consideration of Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 assessee is allowed in terms of our aforesaid observations. 20. Apropos the declining of the assessee's claim for deduction u/s. 54B of the Act by the A.O, for the reason that he had failed to place on record documentary evidence which would substantiate that the subject lands sold by him during the year under consideration were in the two years immediately preceding the date on which the same were transferred, being used by the assessee or his parents for agricultural purposes, we are unable to fully concur with the view taken by him. We, say so, for the reason that on a bare perusal of the "Form P- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal 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 (entry date 24.06.2012) (ii) agricultural land admeasuring 0.615 hectares was being used by the assessee during F.Y.2012-13 and F.Y.2013-14 for growing paddy crop. 0.498 hectares 28/2 (i) out of the agricultural land admeasuring 0.902 hectares that was earlier owned by Smt. Mantara Bai wd/o. Late Shri Henram, land admeasuring 0.498 hectares was transferred to the assessee, viz. Shri Rahul Bajpai in F.Y.2012-13 (entry date 17.07.2012) (ii) 0.498 hectares of agricultural land was transferred by the assessee, viz. Shri Rahul Bajpai to M/s. Zodiac Dealer Pvt. Ltd. during F.Y.2013-14 (entry date 08.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediately 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, were in the two years immediately preceding the date on which they were transferred i.e. on 02.09.2014, being used by the assessee for agricultural operations i.e. growing paddy crop. Accordingly, we herein conclude that the aforesaid pre-condition contemplated u/s. 54B(1) of the Act i.e. usage of the agricultural lands in the two years immediately preceding the date on which they were transferred is duly satisfied by the assessee in so far the aforesaid agricultural lands admeasuring 1.424 hectares (supra) and 1.781 hectares (supra) ..... 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