2023 (8) TMI 1578 - AT - Income Tax

Section 54B exemption allowed for two agricultural land purchases without mandatory sale deed completion

Income Tax Officer Versus Shri Badri Prasad

ITAT Jodhpur allowed assessee's claim for exemption under section 54B for purchase of two agricultural lands from different sellers. The tribunal held ... LTCG - exemption claimed u/s. 54B - benefit for purchase of two agricultural land from two different person - HELD THAT:- Payment transaction was not completed by the assessee against the said purchase of land considering that the statement of the seller are contradictory facts and figures as given in the case of laws. The statement submitted in the assessment proceedings to rebut this version of the AO. The assessee submitted that he had duly invested the sale consideration for purchase of agricultural land and therefore, the deduction u/s 54B cannot be denied. Law does not confer condition the assessee should execute sale deed to claim the exemption and therefore, both the claim for purchase of land is allowable. Considering the finding of ld. CIT(A) in detail and argument placed by both the parties and on perusal of the records. We find that it is not under dispute that the assessee has out of the income of capital gain offered it purchase two properties for which the assessee has paid the money. The seller have also been exempted by the Assessing Officer and they have also confirmed that the assessee has purchased the land from them. The source of payment made by the assessee is also proved to be invested in the said agriculture land. As decided in Dharmendra J. Patel [2023 (3) TMI 1045 - ITAT AHMEDABAD] we are of the considered view that the assessee should be allowed the benefit of deduction under section 54B of the Act since the purchase in the new property has been made out of advances received towards sale of agricultural properties held by the assessee.” CIT(A) justification in allowing the indexed cost of acquisition claimed by the assessee - As noted that the assessee has sold the ancestors land which was purchased before 01.04.1981 and therefore, the assessee has worked out the indexed cost of acquisition in respect of agriculture land sold at Rs. 23,34,480/- however, the ld. AO has allowed indexed cost to the extent of Rs. 13,15,488/- only. Thus, the dispute is that the assessee has taken fair market value land at Rs. 2,74,000/- as on 01.04.1981 whereas the AO has computed it without giving proper opportunity to the assessee at Rs. 1,54,000/-. AO has not discussed or provided any evidence of arriving indexed cost. Therefore, considering this fact, the ld. CIT(A) stated that the arbitrarily taking value at Rs. 1,54,000/- by the AO is not justified and not in the interest of principles of natural justice. Not only that we observe that in the present appeal, the ld. AO through, ld. DR did not present any supporting evidence to support the value of Rs. 1,54,000/- whereas the assessee has claimed the fair market value at Rs. 2,74,000/- as on 01.04.1984 for total area of 11 bighas is based on that actual consideration and document executed on that date. DR did not controvert this fact and has not supported the value of furnishing any evidence before us as taken by the ld. AO. Thus, we do not see any infirmity in the finding of ld. CIT(A) so far as to allow the indexed cost of acquisition to the assessee as claimed in the return of income. Thus, the ground No. 3 raised by the revenue is dismissed. Issues Involved:1. Whether the CIT(A) was justified in allowing the benefit of Section 54B to the assessee for two properties purchased.2. Whether the CIT(A) was justified in allowing the indexed cost of acquisition claimed by the assessee.Issue-wise Detailed Analysis:1. Benefit of Section 54B:The primary issue was whether the CIT(A) was justified in allowing the benefit of Section 54B of the Income Tax Act to the assessee. The Revenue challenged the CIT(A)'s decision on the grounds that the agreements for the purchase of two properties were doubtful, the sale deeds were not registered, and there were discrepancies in the cash flow statements.- Property at Chak 14 AS(A), Vijaynagar: The AO disallowed the exemption under Section 54B, arguing that the sale deed was not registered, and the land was still in the seller's name. The AO also noted that the agreement was not signed by the purchaser, and the payment of Rs. 80,00,000/- in cash was not substantiated. The CIT(A), however, found that the assessee had invested the sale consideration in purchasing agricultural land and that the intention to transfer ownership was evident despite the lack of registration. The CIT(A) relied on judicial precedents that emphasize the intention of the parties over formal registration for claiming exemptions under Section 54B.- Property at 1 DJM, Command Area, Vijaynagar: The AO noted discrepancies between the amount mentioned in the agreement and the sale deed and found the agreement to be fictitious. The CIT(A) countered this by stating that the assessee had indeed invested Rs. 2,22,75,000/- as per the sale agreement, and the seller did not deny receiving this amount. The CIT(A) emphasized that the lack of registration did not negate the transfer of ownership for the purpose of Section 54B, as the assessee took possession and used the land for agricultural purposes.The CIT(A) concluded that the AO's denial of the exemption was not justified, as the assessee had met the conditions of Section 54B by reinvesting in agricultural land. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had produced evidence of payment and possession, and the sellers had confirmed the transactions.2. Indexed Cost of Acquisition:The second issue was whether the CIT(A) was justified in allowing the indexed cost of acquisition claimed by the assessee. The AO had allowed an indexed cost of Rs. 13,15,488/- based on a fair market value (FMV) of Rs. 1,54,000/- as on 01-04-1981, whereas the assessee claimed an indexed cost of Rs. 23,34,480/- based on an FMV of Rs. 2,74,000/-.The CIT(A) found that the AO had not provided any basis or evidence for the FMV of Rs. 1,54,000/-. In contrast, the assessee had substantiated the FMV of Rs. 2,74,000/- with information from the Stamp authority and local property dealers. The CIT(A) directed the AO to accept the assessee's claim, as it appeared more reasonable and was supported by evidence.The Tribunal agreed with the CIT(A), noting that the AO had not justified the lower FMV and had not given the assessee an opportunity to explain. The Tribunal found no infirmity in the CIT(A)'s decision to allow the indexed cost of acquisition as claimed by the assessee.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the benefit of Section 54B and the indexed cost of acquisition claimed by the assessee. The Tribunal emphasized the importance of intention and possession over formal registration in property transactions for the purpose of claiming exemptions under Section 54B.