2019 (1) TMI 536 - AT - Income Tax

Tribunal upholds deletion of addition in Long Term Capital Gain case, directs fresh consideration on deduction

The tribunal upheld the deletion of the addition of Rs. 1,06,00,956 under 'Long Term Capital Gain,' dismissing revenue's appeal. Legal grounds of ... Nature of land sold - Treating the sale of agricultural land as sale of capital asset - Held that:- There is no dispute with regard to the fact that Ld. CIT(A) has considered the certificate of the revenue official who has categorically stated that the land in question do not fall within 4 kms. of the limit of Mhau Cantonment Board. Further, it is noticed that Ld. CIT(A) has duly considered the objections of the AO and rejected the same on the basis of notification. The revenue has not controverted this finding by placing any contrary material. The finding of the CIT(A) is based upon the notifications issued by the competent authority. No infirmity into the finding of the CIT(A) and the same is hereby affirmed. Ground of the revenue’s appeal is dismissed. Allowability of deduction u/s 54B - Held that:- We find that the assessee had raised issue of recording of satisfaction by the assessing officer of the searched person as well as allowability of deduction u/s 54B of the Act. Both these grounds have not been adjudicated by the Ld. CIT(A). We are of the view that the CIT(A) ought to have adjudicated this ground. Therefore, respectfully following the judgement in the case of CIT Vs. Tolaram Hassomal (2006 (3) TMI 136 - MADHYA PRADESH HIGH COURT) we restore both the grounds to the file of the A.O. to decide the case afresh. Issues involved:1. Deletion of addition of Rs. 1,06,00,956 under the head 'Long Term Capital Gain' owing to the sale of agricultural land.2. Adjudication of legal ground of recording satisfaction by the assessing officer of the searched person.3. Allowability of deduction under section 54B of the Income Tax Act.4. Deletion of penalty of Rs. 20,96,410 levied under section 271(1)(c) of the Income Tax Act, 1961.Issue 1: Deletion of addition of Rs. 1,06,00,956 under the head 'Long Term Capital Gain':The appeal and cross objection in quantum proceedings and appeal in penalty proceedings were consolidated. The assessing officer treated the sale of agricultural land as a transfer of capital asset, adding Rs. 1,06,00,956 to the assessee's income. The assessee challenged the proceedings on legal and factual grounds before the Ld. CIT(A). The legal ground was against the non-recording of satisfaction by the assessing officer of the searched person. The Ld. CIT(A) did not adjudicate this ground, giving relief on factual basis. The revenue's appeal against the deletion of the addition was based on the land not falling within the municipal limit. However, the Ld. CIT(A) considered the notification and upheld the deletion, supported by the revenue official's certificate. The tribunal affirmed this decision based on the notifications issued by the competent authority, dismissing the revenue's appeal.Issue 2: Adjudication of legal ground of recording satisfaction by the assessing officer:The assessee raised the issue of recording satisfaction by the assessing officer of the searched person and the allowability of deduction under section 54B of the Act. These grounds were not adjudicated by the Ld. CIT(A). Referring to relevant judgments, the tribunal restored both grounds to the assessing officer for fresh consideration, emphasizing the importance of adjudicating such legal grounds.Issue 3: Allowability of deduction under section 54B of the Income Tax Act:The tribunal directed the assessing officer to decide on the allowability of deduction under section 54B, which was not addressed by the Ld. CIT(A), emphasizing the need for a comprehensive adjudication of all legal grounds raised by the assessee.Issue 4: Deletion of penalty under section 271(1)(c) of the Income Tax Act:The addition made by the assessing officer was deleted by the Ld. CIT(A), leading to the dismissal of the revenue's grounds against the deletion. The tribunal upheld the decision of the Ld. CIT(A) in deleting the penalty, resulting in the dismissal of the revenue's appeals and partly allowing the assessee's cross objection for statistical purposes.In conclusion, the tribunal's judgment addressed various issues related to the assessment of long-term capital gains, recording of satisfaction by the assessing officer, deduction under section 54B, and the deletion of penalty under section 271(1)(c) of the Income Tax Act, providing detailed analysis and directions for further consideration where necessary.