IN THE ITAT AGRA BENCH
Deputy Commissioner of Income-tax
versus
Tej Singh
IT APPEAL NO. 127 (AGRA) OF 2010
C.O. NO. 47 (AGRA) OF 2010
[ASSESSMENT YEAR 2005-06]
MARCH 30, 2012
ORDER
Bhavnesh Saini, Judicial Member
The departmental appeal as well as the cross objection by the assessee are directed against the order of ld. CIT(A)-I, Agra dated 10.02.2010 for the assessment year 2005-06. The Revenue has raised two effective grounds of appeal, which read as under :
“1. That the CIT(A)-1, Agra has erred in law and on the facts of the case in deleting the addition of Rs. 26,31,467/- made on account of long term capital gain without appreciating the facts that the land was acquired by the ADA on 25.08.2000 while the assessee has entered into agreement to sale in A.Y. 2005-06 and has obtained the advance against the transfer of the said land which is the subject matter of long term capital gain assessed by the A.O.
2. That the CIT(A)-1, Agra has erred in law and on the facts of the case in deleting the addition of Rs. 2,50,000/- made on account of income from other sources without appreciating the facts that the assessee was unable to explain the source of deposit of Rs. 7,84,000/- in his bank account.”
1.1 The assessee in the cross objection raised the following ground :
“1. That the Ld. CIT(A)-1, Agra has erred in law and in facts in confirming addition of Rs. 5,34,000/- being unexplained deposit ignoring the cash flow statement submitted by the appellant.”
2. The facts of the case are that the AO received information from AIR that the assessee has deposited Rs. 10,00,000/- in his saving bank account with Indian Overseas Bank. Proceedings u/s. 147 of the IT Act were initiated in respect of such unexplained deposits in the bank account. The AO recorded the statement of the assessee, in which it is stated that the assessee is not assessed to tax and he is a farmer/farm labourer. The assessee along with his two brothers owned 12 bighas of land. This land was sold for Rs. 70,00,000/- through the agreement, in which the assessee has 1/3rd share amounting to Rs. 24,00,000/-. The land was agricultural land and wheat, Bajra and vegetables were grown in the said land. The assessee maintained two bank accounts with Indian Overseas Bank and Oriental Bank of Commerce. The land has neither been registered in the name of the builder nor possession has been handed over to the builder. The impugned land has been acquired by the Agra Development Authority and is in its possession. The assessee has contested the acquisition of the property before the Hon’ble Allahabad High Court, seeking its release from the Agra Development Authority. The money received from the builder has been utilized in purchase of the agricultural land in the name of assessee’s son. The investment in such agricultural land is of about Rs. 15,00,000/- and some amount has been invested in residential house and the balance amount has been given as a gift to the children and spent on marriages etc. Approximately Rs. 10,00,000/- to 20,00,000/- have been invested in residential house.
2.1 In response to the requisition u/s. 133(6), the builder, M/s. Dream Shelters Pvt. Ltd. filed a letter before the AO dated 26.12.2008 and explained that the assessee and his brothers entered into an agreement to sale of the same property on 20.11.2004 and entire consideration of Rs. 70,00,000/- has been paid. The details have been noted in the impugned order and the same amount has been shown by the builder as stock-in-trade in their balance sheet. However, physical possession has still not been received by the builder. With regard to deposit of Rs. 10,00,000/- in the bank account of the assessee, the assessee explained that Rs. 2,16,000/- has been received from the builder in cash and similarly, Rs. 2,17,000/- and Rs. 2,67,000/- in cash have been received by brothers of the assessee, namely Radhey Shyam and Shri Sukh Singh.
2.2 The AO, however, did not accept the contention of the assessee and made addition of Rs. 26,31,467/- on account of capital gains on sale of land in question and also made addition of Rs. 7,84,000/- on account of unexplained deposit in the bank account, treating the same as income from other sources. The AO observed in the assessment order that the assessee and his two brothers entered into an agreement to sale in respect of the land in question and received a sale consideration and the assessee has not shown any long-term capital gains in the return of income. The AO further observed that Chief Development Officer confirmed that the land in question falls within 8 kilometers of the municipal limit. Therefore, the assessee is liable to tax on capital gains arising on account of transfer of impugned urban agricultural land. The AO on examination of the agreement to sale entered into between the assessee and the builder, M/s. Dream Shelter Pvt. Ltd., observed that the assessee has relinquished his right in the impugned land, which amounts to transfer in terms of section 2(47) of the IT Act and hence, there was no merit in the assessee’s claim that the impugned agricultural land has not been conveyed by a registered document and, as such, no sale can be deemed to have taken place. The AO also observed from the reply of the builder that the entire amount has been paid by them to the assessee and copy of their balance sheet reflects the payment made to the assessee in the form of stock-in-trade and not as advance against the purchase of land. The capital gains was accordingly worked out to Rs. 26,31,467/- and the same was taxed accordingly.
2.3 With regard to deposit of Rs. 10,00,000/- in the bank account of the assessee in cash, the assessee explained that the amount received through agreement to sale in cash by the assessee was Rs. 2,16,000/- and the amounts received by his brothers was Rs. 2,17,000/- and Rs. 2,67,000/-. However, the AO noted that no evidence was produced with regard to the fact that the amounts belonging to his brothers were deposited in the bank account of the assessee. The AO, however, gave benefit of Rs. 2,16,000/-, which was received by the assessee of his share in cash through agreement to sale and confirmed the addition of Rs. 7,84,000/-.
2.4 The AO also observed that no claim is made in the return of income if any amount was spent on the agricultural land and further, no evidence was produced for claiming relief u/s. 54B and 54F of the IT Act. It was further observed that since the matter regarding investment in the property was raised and referred to the Departmental Valuation Officer and no report of the DVO has been received, therefore, no benefit could be given to the assessee.
3. Both the additions were challenged before the ld. CIT(A) and the assessee, more or less, reiterated the same submissions made before the Authority below and it was further explained that addition on account of capital gain was wrongly made which was not in accordance with law. Agra Development Authority has already notified the land in question for acquisition for its Shashtri Puram Yojana and an application for release had been filed with the State Government, which is pending. According to the agreement to sale, it was clear at the time of entering into the agreement that the land in question was already acquired by the ADA. Therefore, section 45(5) would not be applicable in this case because the assessee has not received any compensation from ADA. Therefore, the capital gain will arise only when compensation will be received by the assessee. The agreement to sale also contained first clause that the second party, i.e., the builder, shall make all efforts to get released the land from ADA. It was, therefore, submitted that since there was no transfer of land as per agreement, which is yet to be released by the ADA, therefore, the agreement to sale was contingent and was based on future events. It was, therefore, explained that the provisions of section 2(47) would not apply in the case of the assessee. The assessee also emphasized that according to section 51 of the IT Act, in case of advance forfeited which was received through agreement to sale, it would only be a capital receipt. The assessee also explained that the AO has wrongly denied the benefit of deduction to the assessee u/s. 54B and 54F of the IT Act because the assessee made investment in agricultural land on different dates on 12.12.2005 and 29.10.2005 in a sum of Rs. 16,39,500/-. Therefore, deduction should have been allowed u/s. 54B of the Act. Further, the AO has considered the advance money as sale consideration, but no benefit has been given u/s. 54B. The ld. CIT(A) also directed the AO to ascertain the present status of the acquisition of the land of assessee by the ADA. The letter dated 11.12.2009 (page 15 of first paper book) has been received from Land Acquisition Officer, Agra Development Authority stating that the impugned land was acquired on 25.08.2000. Further letter dated 01.01.2010 (page 14 of first paper book) was received from Special Land Acquisition Officer confirming that the land in question was acquired on 25.08.2000. As the matter was pending before the Hon’ble High Court, therefore, no compensation has been awarded in respect thereof. The ld. CIT(A) considering the above facts and explanations held that no capital gain arises for taxation. The ld. CIT(A) further held that without prejudice to the above finding, the long-term capital gains is also exempt as the assessee has made investment in terms of section 54B in agricultural land and 54F in residential house, as is assessed by the DVO vide report dated 30.04.2009 received by the AO after finalization of the assessment. The ld. CIT(A), accordingly, deleted the addition of Rs. 26,31,467/- as long-term capital gains.
3.1 It was further submitted before the ld. CIT(A) that Rs. 10,00,000/- was deposited in the bank account of the assessee out of the amount received from the builder by the assessee and two of his brothers. Cash flow statement was also filed as reproduced in para 4.2 of the appellate order to explain that opening cash in hand and cash withdrawn from IOB apart from amounts received from brothers was also available to the assessee. Therefore, addition should not be made against the assessee. The ld. CIT(A), considering the explanation of the assessee, noted that the amounts of Rs. 2,17,000/- each received by the assessee from his two brothers has not been proved with any cogent evidence. Therefore, Rs. 4,34,000/- remained unexplained. The opening balance of Rs. 2,75,000/- was considered, but the assessee has not furnished any evidence in support thereof. Therefore, in absence of any corroborative documentary evidence, the ld. CIT(A) considered reasonably that the assessee could have saved Rs. 1,75,000/-. Therefore, Rs. 1,00,000/- was treated as unexplained. The ld. CIT(A) out of total addition of Rs. 7,84,000/- considered the following amounts as explained :
