2022 (11) TMI 30 - AT - Income Tax

Appeal partly allowed: LTCG addition deleted, Section 54B deduction allowed; Section 147 proceedings upheld.

The tribunal partly allowed the appeal, deleting the addition on account of LTCG and allowing the deduction under Section 54B. The initiation of ... Deeming fiction of Section 50C for computing full value of consideration for the purpose of section 48 - application of the deeming provision of Section 50C to entitlement of exemption under Section 54B/54F - deduction under Section 54B - investment of capital gain and timing of investment vis-a -vis filing under section 139(1)/139(4) - use of stamp valuation/Stamp Valuation Authority rates as evidence of actual receipt of higher consideration - reopening of assessment - 'reason to believe' threshold for issuing notice under Section 148/Section 147Deeming fiction of Section 50C for computing full value of consideration for the purpose of section 48 - use of stamp valuation/Stamp Valuation Authority rates as evidence of actual receipt of higher consideration - Whether the long term capital gain addition computed by adopting the value estimated by the Sub Registrar (stamp valuation) could be sustained in absence of evidence that assessee received excess consideration. - HELD THAT: - The Tribunal found that the Assessing Officer proceeded solely on the higher value adopted by the Stamp Valuation Authority without any tangible material to show that the assessee actually received consideration in excess of the amount stated in the registered sale deed. Relying on coordinate decisions and principles that the valuation adopted for stamp duty cannot, by itself and without corroborative evidence, be equated to the actual consideration received, the Bench held that there was no justification for making the addition based only on the stamp authority's estimate. The Tribunal accepted the assessee's DLC rate chart and other material before it and concluded that the AO had not brought on record any evidence of receipt of excess sale consideration; therefore the addition confirmed by the CIT(A) was not sustainable and was deleted.Addition on account of long term capital gain computed by adopting the Sub Registrar's value is deleted for want of evidence that excess consideration was actually received.Application of the deeming provision of Section 50C to entitlement of exemption under Section 54B/54F - deduction under Section 54B - investment of capital gain and timing of investment vis-a -vis filing under section 139(1)/139(4) - Whether the assessee was entitled to deduction under Section 54B and whether the amount to be considered for that deduction is the actual sale consideration (sale deed) or the deemed value under Section 50C. - HELD THAT: - The Tribunal followed coordinate bench and High Court authority reasoning that the deeming fiction in Section 50C is enacted for the limited purpose of computation under section 48 and does not, without more, alter the 'net consideration' relevant for claiming exemptions under sections 54B/54F. On the facts, the assessee had invested an amount (supported by purchase deed and stamp duty entries) which exceeded the capital gain computed on the basis of the actual sale consideration in the sale deed. The Tribunal also applied precedents holding that investment made before filing of return under section 139(4) may satisfy the timing requirement where returns are belated. Having found that the assessee actually invested the requisite amount as per the sale deed figures, the Tribunal held that no addition was required and the deduction under Section 54B was allowable.Assessee entitled to deduction under Section 54B; amount to be considered for that purpose is the actual sale consideration as per the sale deed (not the deemed stamp valuation), and the investment made by the assessee satisfied the statutory requirement.Reopening of assessment - 'reason to believe' threshold for issuing notice under Section 148/Section 147 - Validity of grounds challenging initiation of reassessment proceedings (grounds 1 and 2 alleging want of jurisdiction, limitation, absence of approval and denial of opportunity). - HELD THAT: - The Tribunal noted that the assessee filed written submissions on these grounds but did not press oral argument nor produced material to counter the findings of the lower authorities; consequently the Tribunal recorded that no contrary material was placed before it. On that basis the Tribunal dismissed grounds 1 and 2, observing that the assessee had not advanced any argument in support of those grounds during hearing and had not rebutted the observations of the lower authorities concerning non filing of return and other procedural steps.Grounds 1 and 2 are dismissed for lack of contestation and absence of contrary material before the Tribunal.Final Conclusion: The appeal is partly allowed: the long term capital gain addition computed by reference to the Sub Registrar's valuation is deleted and deduction under Section 54B is allowed on the basis of the actual sale consideration and the investment made; the procedural grounds challenging reassessment (grounds 1 and 2) are dismissed as not pressed before the Tribunal; interest issues are consequential. Issues Involved:1. Validity of assessment order under Sections 147/144.2. Adequacy of opportunity provided to the assessee.3. Confirmation of addition on account of Long Term Capital Gain (LTCG) and applicability of Section 50C.4. Denial of deduction under Section 54B.5. Charging of interest under Sections 234A, 234B, and 234C.Detailed Analysis:1. Validity of Assessment Order under Sections 147/144:The assessee challenged the assessment order on the grounds of jurisdiction, limitation, and lack of proper approval. The tribunal noted that the Assessing Officer (AO) initiated proceedings based on information received from the Director of Income Tax (I&CI) regarding the sale of agricultural land and the application of Section 50C. The AO recorded reasons and obtained prior approval from the Principal Commissioner of Income Tax (Pr. CIT). The tribunal upheld the initiation of proceedings under Section 147, as the AO had valid reasons to believe that income had escaped assessment.2. Adequacy of Opportunity Provided to the Assessee:The assessee argued that the ex-parte assessment order was passed without providing adequate opportunity to be heard. The tribunal observed that multiple notices were issued to the assessee, and despite this, there was non-compliance. Hence, the tribunal found no merit in the assessee's claim of inadequate opportunity and upheld the assessment proceedings.3. Confirmation of Addition on Account of LTCG and Applicability of Section 50C:The AO calculated LTCG based on the value adopted by the Sub-Registrar, which was higher than the actual sale consideration. The assessee contended that the land was agricultural and not a capital asset, and the sale consideration mentioned in the sale deed should be considered. The tribunal noted that the Tehsildar confirmed the land was within municipal limits, making it a capital asset. The tribunal also referred to various judicial precedents, concluding that for the purpose of Section 54B, the actual sale consideration should be considered, not the deemed value under Section 50C. Therefore, the tribunal held that the assessee had correctly invested the amount in new agricultural land, and no addition was required on account of LTCG.4. Denial of Deduction under Section 54B:The AO denied the deduction under Section 54B, stating the new agricultural land was purchased after the due date for filing the return. The tribunal referred to judicial precedents, including the Hon'ble Rajasthan High Court's decision in Pr. CIT vs. Shankar Lal Sharma, which held that the extended due date under Section 139(4) should be considered. The tribunal concluded that the assessee had invested the capital gains within the stipulated period and was eligible for the deduction under Section 54B.5. Charging of Interest under Sections 234A, 234B, and 234C:The tribunal noted that the charging of interest under Sections 234A, 234B, and 234C is consequential. Since the primary addition on account of LTCG was deleted, the interest charged would also be adjusted accordingly.Conclusion:The tribunal partly allowed the appeal, deleting the addition on account of LTCG and allowing the deduction under Section 54B. The initiation of proceedings under Section 147 and the ex-parte assessment were upheld, and the charging of interest was deemed consequential.