2023 (1) TMI 36 - AT - Income Tax

Tribunal partially allows appeal, directs AO to adopt valuer's report, reconsider deductions

The Tribunal allowed the appeal partly, directing the Assessing Officer to adopt the registered valuer's report for the indexed cost, reconsider the ... Capital gain - AO made a reference under Section 55A - reference to DVO and not allowing indexed cost as per valuation of registered valuer - HELD THAT:- There is no dispute that the assessee has sold two non-agricultural land. The transaction of sale took place on 02/03/2012 and 15/03/2012. Admittedly, the transaction of transfer of land took place prior to 01/07/2012, thus it is now settled position under law by various decisions of superior courts, amended provisions of Section 55A(a) of the Act wherein the word “is at variance” was substituted, is not applicable for A.Y. 2012-13. We find that on similar issue, the combination of this Bench in Ranchod Bhai C Patel [2020 (12) TMI 171 - ITAT AHMEDABAD] by following the decision of Gauragiben S Shodhna [2020 (12) TMI 171 - ITAT AHMEDABAD] and the decision of Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] held Amendment brought in section 55A(a) with effect from 1-7-2012 by Finance Act, 2012, according to which reference could be made by Assessing Officer to DVO if value of immovable property determined by assessee was lesser than FMV of property, is applicable prospectively. Thus, the reference made by the assessing officer under section 55A(a) is not competent and report received in such reference cannot be relied. Thus we direct the Assessing Officer to adopt the value of land as per registered valuer’s report and computed the capital gain accordingly. In the result, grounds No. 1 to 4 of this appeal are allowed. Disallowance of deduction u/s 54B - no relevant information and documents were furnished to substantiate such claim - HELD THAT:- CIT(A) recorded contradictory finding on one hand, the ld. CIT(A) recorded that the claim of assessee is in order and on the other hand, confirmed the action of Assessing Officer by holding that the land sold by assessee was not agricultural land. We find that the order of ld. CIT(A) is self contradictory and not liable to be sustained. We find that on the similar issue, in CIT Vs Siddarth J Desai [1981 (9) TMI 48 - GUJARAT HIGH COURT] has determined 14 principals to ascertain the nature of land on the date of transfer and two determine whether the land was agricultural land or not, therefore, keeping in view the binding decision above we remit the issue back to the file of Assessing Officer to consider the decision and pass the order in accordance with law. In the result, this ground of appeal is allowed for statistical purposes. Treatment of agricultural income as income from unexplained sources - CIT(A) confirmed the action of Assessing Officer by holding that the land was not used for agricultural purpose in year 2010-11 and 2011-12, hence, there cannot be any agricultural income - HELD THAT:- We find that it is an undisputed fact that the assessee converted the nature of lands from agricultural to non-agricultural lands. The size of agricultural land was more than 11,000 square meters. It is not the case of revenue that the assessee has sold entire agricultural holdings. On perusal of Form 7/12 for A.Y. 2012-13, the assessee was growing sugarcane. However, we find that the assessee has not furnished any evidence for sale of sugarcane. The facts remained the same that the assessee is still holding some agricultural land, therefore, we deem it appropriate to restore this issue to the file of Assessing officer to consider various evidences and in the event the assessee is allowed deduction under Section 54B of the Act, this issue be adjudicated thereafter. In the result, this ground of appeal is allowed for statistical purposes. Issues Involved:1. Reference to Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act.2. Disallowance of indexed cost of acquisition and improvement.3. Disallowance of deduction under Section 54B of the Income Tax Act.4. Treatment of agricultural income as income from undisclosed sources.Issue-wise Detailed Analysis:1. Reference to Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act:The assessee contested the reference to the DVO, arguing that the amended provisions of Section 55A(a), effective from 01/07/2012, were not applicable to the Assessment Year (AY) 2012-13. The assessee relied on several judicial precedents, including CIT Vs Gauragiben S Shodhna and CIT Vs Puja Prints, to support the claim that the reference to the DVO was without jurisdiction. The Tribunal, agreeing with the assessee, concluded that the reference made by the Assessing Officer under Section 55A(a) was not competent and directed the Assessing Officer to adopt the value of land as per the registered valuer's report. Consequently, grounds No. 1 to 4 of the appeal were allowed.2. Disallowance of indexed cost of acquisition and improvement:The assessee claimed indexed costs based on a Government Registered Valuer's report, which the Assessing Officer deemed to be on the higher side. The DVO's report, which came later, suggested a lower valuation. The Tribunal noted that the reference to the DVO was not valid for AY 2012-13 and directed the Assessing Officer to adopt the value as per the registered valuer's report. Regarding the cost of improvement, the Tribunal allowed the deduction of Rs. 20.00 lacs paid to SUDA but did not find sufficient evidence for the remaining claimed amount. Partial relief was granted by the ld. CIT(A) based on the DVO's confirmation of the charges paid to SUDA.3. Disallowance of deduction under Section 54B of the Income Tax Act:The assessee argued that the land sold was used for agricultural purposes and provided supporting documents, including certificates from local authorities and cooperative societies. However, the Assessing Officer and the ld. CIT(A) disallowed the deduction, questioning the agricultural use of the land. The Tribunal found the ld. CIT(A)'s order contradictory and remitted the issue back to the Assessing Officer to reconsider in light of the Hon'ble Jurisdictional High Court's decision in CIT Vs Siddarth J Desai. The Assessing Officer was directed to provide a fair opportunity to the assessee to present evidence of agricultural activities and the acquisition of new agricultural land.4. Treatment of agricultural income as income from undisclosed sources:The assessee claimed agricultural income, which the Assessing Officer treated as income from undisclosed sources due to a lack of supporting evidence. The Tribunal noted that the assessee did not file returns for the preceding years, claiming only agricultural income. Given that the assessee still held some agricultural land, the Tribunal restored the issue to the Assessing Officer to reconsider the evidence. The Tribunal instructed that this issue be adjudicated after considering the deduction under Section 54B.Conclusion:The Tribunal allowed the appeal partly, directing the Assessing Officer to adopt the registered valuer's report for the indexed cost, reconsider the deduction under Section 54B, and re-evaluate the treatment of agricultural income based on further evidence. The order was pronounced in the open court on 29 December 2022.