Kanwar Pal Rajput, Faridabad vs Department Of Income Tax

I.T.A .No. 1325 /Del/2012(AY-2007-08 )

ITO vs Kanwar Pal Rajput Ward-11 (3), B-Block, D-66, Jalvayu Vihar, Sector, 29 CGOComplex, NH IV Faridabad Faridabad ADIPR8208C (APPELLANT) (RESPONDENT)

Appellant by Sh. Gaurav Dudeja, Sr. DR Respondent by Sh. Salil Agrawal, Adv, Sh. Sailesh Gupta, CA Date of hearing 8/4/2015 Order Pronounced on 17/04/2015

ORDER

PER N. K. SAINI, AM

This is an appeal by the Department against the order dated 20/12/2011 of the Ld. CIT(A) Faridabad. Following grounds has been raised in this appeal.

1. "On the facts and in the circumstances of the case, the Ld. C1T(A) has erred on facts and in law in deleting the disallowance of Rs.18, 00, 0001- made by the Assessing Officer on a/c of non utilization of capital gain before the due date of furnishing of the return i.e 31/7/2007. By this date neither assessee purchased the new agricultural land nor capital gain was deposited into capital gain account with a nationalized bank as was mandatory as per provisions of Section 54B(2) of the Income Tax Act, 1961. "

2. " On the facts and in the circumstances of the case, the Ld. CIT( A) has erred on facts and in law in appreciating the facts that the assessee not having complied with the conditions specified in Section 54B(2) of the Act, was not entitled for exemption and the exemption has been rightly denied by the assessing Officer. The reliance may be placed on the decision of Hon 'ble Delhi Bench of the Tribunal in the case of Tarnbir Singh Sawhney Vs. Dy. CIT (2006) 5 SOT 417 (Del). "

3. " On the facts and in the circumstances of the case, the Ld. CIT(A) has ignored the clear provisions of law while allowing the deduction of Rs.18, 00, 0001-. Ld. CIT(A) 's observation that 'the investment in FDRs instead of capital gain account scheme constituted only a technical breach of provisions as the appellant was not having control over the money deposited in FDRs which consequently stood utilized for specified purpose' is not a relevant criterion to decide-the eligibility of the assessee for exemption having regard to the clear provisions of I aw"

aw.

4. "That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal. "

2.From the above grounds, it is gathered that only grievance of the Department relates to the deletion of disallowance of Rs.18 lakh made by the AO on account of non-utilisation of capital gain before the due date of furnishing of the return .

3. Facts of the case in brief are that that the assessee filed the return of income on 13/7/2007 declaring an income of Rs.1,69,274/- which was processed u/s143 (1) of the IT Act 196 1 (hereinafter referred to as the Act). Thereafter the assessee filed the revised return on 12/3/2008 declaring the same income but revised the long term capital gain to Rs. 26,97,829/- as against Rs.30 lakh declared in the original return and the capital gain was claimed exempt u/s 54B of the Act. Later on the case was selected for scrutiny. During the course of assessment proceedings the AO noted that the assessee sold urban agricultural land situated at Palwal on 7112/2006 for a consideration of Rs.30 lakhs and worked out the long term capital gain at Rs.26,97,829/- after reducing indexed cost of acquisition of Rs.3,41 ,070/-. Against the said long term capital gain assessee claimed deduction of Rs.4,98,500/- u/s 54B on account of investment made on 2017/2006 .

purchase of a farm house at Pune, deduction of Rs.5,05,968/- in respect of purchase of residential House No. K-66, Jalvayu Vihar, Sector 29, Faridabad and deduction of Rs.18 lakh u/s 54B of the Act on account of investment in agricultural land. The AO disallowed the claim of deduction u/s 54B amounting to Rs.18 lakh on the ground that the amount of capital gain was not invested in capital gain account scheme as laid down u/s 54B (2) of the Act but only in FDRs, prior to purchase of agricultural land.

4. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that the investment aggregating to Rs.22,16,080/- had been made on 817/2008 and 2211112008 in purchase of agricultural land and thus entitling for a deduction u/s 54B of the Act. It was stated that apart from above the assessee also invested a sum of Rs.5,05,968 in respect whereof, he was entitled for deduction u/s 54F of the Act. It was stated that the assessee invested Rs.27,22,048 which amount exceeded the amount of capital gains of Rs.26,97,829/-.

5. The Ld. CIT(A) after considering the submissions of the assesses deleted the disallowance made by the AO by observing that for allowability of deduction u/s 54B of the Act the assessee had contended that a new agricultural land was purchased before the due date of filing of return u/s 139( 4) of the Act and that the deposits in FDRs instead of a scheme specified u/s 54B (2) of the Act constituted only a technical breach and the deduction should be allowed by applying a liberal interpretation since those provisions are in the nature of beneficiary provisions. The reliance was placed on the following case laws:-

(i) Motilal Padampt Sugar Mills Co. Ltd. VS State of Uttar Pradesh &

Ors 118 ITR 326 (S C)

(ii) CIT VS Rajesh Kumar Jalan (2006)286 ITR 274 (Gau)

(iii) Shri Jagtar Singh Chawla VS ACIT in ITA NO. 49231Del12010

order dated 30/06/2011

6. The Ld. CIT(A) after considering the submissions of the assesses deleted the addition made by the AO by observing that the assessee filed the original return within the period prescribed u/s 139(1) of the Act and had filed a revised return on 12/3/2008 and the revised return partakes the character of original returns. The Ld. CIT(A) pointed out that the Hon'ble Jurisdictional High Court in the case of CIT VS. Jagirti Agrawal (2011) 15 Taxman.com 146 has held that if investment in new asset is made even before the time

prescribed u/s 139(4) and the return is filed belatedly, the claim of deduction shall be allowable. He also observed that the investment in agricultural land had been made on 8/7/2008 and 22111/2008 within the period of 2 years from the date of sale of original asset. Therefore, the assessee was entitled to claim deduction u/s 54B of the Act. Now, the Department is in appeal.

7. The Ld. DR reiterated the observations made by the AO in the assessment order dated 14112/2009 and further submitted that the assessee to claim the deduction u/s 54B of the Act was required to invest the sale proceed from agricultural land in the purchase of agricultural land within 2 years of the sale and if the amount was not utilised to purchase the agricultural land before filing the return of income, it was to be deposited in the specified bank 5 ITA No.1325/Del/2012

account but the assesses deposited the amount in the FDR and not invested in the agricultural land. It was further stated that the extended period u/s 139 (4) ofthe Act was available upto 3113/2008 but the assessee purchased the agricultural land beyond the extended period on 8/7/2008 & 2211112008. Therefore, the AO rightly denied the deduction u/s 54B of the Act and the Ld, CIT(A) was not justified in deleting the addition made by the AO.

8. In his rival submissions, the Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assesses utilized the sale proceeds of the agricultural land for purchase of the agricultural land within 2 years of the sale which was on 7112/2006. It was further submitted that the extended period of limitation of filing of return u/s 139 (4) of the Act was up to 31/3/2009. Therefore, the Ld. CIT(A) was justified in deleting the arbitrary addition made by the AO.

9. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee sold urban agricultural land situated at Palwal on 7112/2006 and claimed the deduction u/s 54B of the Act on account of

investment made in agricultural land amounting to Rs. 18 lakh. The said investment was made on 8/7/2008 and 2211112008. To resolve the present controversy, it is necessary to discuss the provisions contained in Section 548 of the Act which read as under:-

54B. [(I)] [Subject to the provisions of" sub-section (2). where the capital gain arises] from the transfer of a capital asset being land which. in the two years immediately preceding the date on which the transfer took place. was being used by [the assessee being an individual or his parent. or a Hindu undivided family] for agricultural purposes [hereinafter referred to as the original asse. and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the 6 ITA No.1325/Del/2012

previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,

(i) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45as the income of the previous) 'ear;

and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three ) 'ears of its purchase, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost of the new asset. the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within Cl. period of three years of its purchase, the cost shall he reduced. by the amount of the capital gain.] [(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139,shall be deposited by him before furnishing such return (such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 1397in an account in an)' such hank or institution as may be specified in. and utilised in accordance with. on)' scheme which the Central Government may by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit: and, for the purposes of sub-section (1). the amount, if any. already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or portly for the purchase of the new asset within the period specified in sub-section (I ), then.

(i) the amount not so utilised shall he charged under section 45as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

10. From the above provisions, it is clear that the deduction u/s 54B of the Act is available on the investment made within a period of 2 years after from the date of sale of agricultural land The said investment is required to be made for the purpose of land to be used for agricultural purposes. In the 7 ITA No.1325/Del/2012

present case the assessee sold the urban. agricultural land on 7112/2006 and the investment was made for purchase of the agricultural land on 7/8/2008 and 22/1112008, so the investment made was within the period of 2 years from for the sale of land. Now question arises as to whether the assessee is entitled to claim the deduction even when the investment was made on a date beyond the date of furnishing the return of income u/s 139(1) of the Act. In this regard the Hon'ble jurisdictional High Court in the case of CrT VS. Jagtaar Singh Chawla (2013) ... 215 Taxman 154 observed in para 9 and 10 as under:-

9. A Division Bench of the Gauhati High Court in a case reported as CIT Vs. Rajesh Kumar Jalan [2006J 286ITR 274/157 Taxman 398, held that only Section 139 of the Act is mentioned in Section 54(2) of the Act in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income Tax under section 139 of the Act and that it would include extended period to file return in terms of Sub Section 4 of Section 139 of the Act. It was held as under:-

"From a plain reading of sub-section (2) of Section 54 of the Income-tax Act, 1961, it is clear that only section 139 of the Income-tax Act, 1961, is mentioned in Section 54(2) in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income-tax uls 139 of the Income-tax Act. Section 139 of the Income-tax Act, 1961, cannot be meant only section 139(1), but it means all sub-sections of section 139 of the Income-tax Act, 1961. Under sub-Section (4) of Section 139 of the income-tax Act any person who has not furnished a return within the time allowed to him under sub-

8 ITA No.1325/Del/2012 section (1) of Section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier. "

10. The said judgment was relied upon by a Division Bench of the Karnataka High Court in Fathima Bai Vs. ITO, ITA No. 435 of 2004 decided on 17th October 2008 wherein it was held to the following effect:-

" 11. The extended due date uls 139 (4) would be 31 /3/1990. The assessee did not file the return within the extended due date, but filed the return on 271212000. However, the assessee had utilized the entire capital gains by purchase of a houses property within the stipulated period of section 54(2) i.e., before the extended due date for return uls 139, the assessee technically may have defaulted in not filing the return uls 139(4). But, however, utilized the capital gains for purchase of property before the extended due date uls 139(4). The contention of the revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention. "

11.From the ratio laid down in the aforesaid referred to case, it is clear that the assessee can furnish the return of income at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment whichever is earlier. In the present case, the assessment year assessment year 2007-08 which ends on 3118/2008 . Therefore, the period extended by one year end on to 31 st March 2009 and in the present case the assessee made the investment in the agricultural land before the extended due date for filing the return of income u/s139(4) of the Act i.e. 31/3/2009. Therefore, the Ld. CIT(A) was fully justified in directing the AO to allow the deduction u/s54B of the Act. We do not see any infirmity in the impugned order of the Ld. CIT(A) on this issue.

7. In the result, appeal of the Department is dismissed.

The order is pronounced in the open court on 17th April 2015.

(I. C. SUDHIR) (N. K. SAINI)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 17/04/2015 R. Naheed

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA No.1325/Del/2012 12.

before the extended due date for filing the return of income u/s 139(4) of the

Act i.e 31103/2009 Therefore, the Ld. CIT(A) was fully justified in directing

the AO to allow the deduction uls 54B of the Act. We do not see any

infirmity in the impugned order of the Ld. CIT(A) on this issue.

7. In the result, appeal of the Department is dismissed.

ThJe order is pronounced in the open court on 1-1rM.pril 2015 .. (~~k II'-VI\I/~

(I. .StJDHIR:) (

JUDICIAL MEMB?

Dated: 11-104/2015