Case Law Details
Ramnarayan Vs Income Tax Officer (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi recently delivered a significant ruling in the case of Ramnarayan vs. Income Tax Officer, addressing the applicability of Section 56(2)(x) of the Income Tax Act. The case revolved around the purchase of agricultural land and whether the deeming provision under Section 56(2)(x) could be invoked. This article provides a detailed analysis of the case, its implications, and the ITAT’s rationale behind the ruling.
Detailed Analysis
Background of the Case
The appellant, Ramnarayan, filed an appeal against the order dated December 22, 2023, by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The case pertained to the assessment year 2018-19. Ramnarayan declared a total income of Rs. 2,98,290 in his return filed on August 28, 2018. The case was selected for scrutiny due to an investment in immovable property where the purchase value was significantly lower than the value determined by the stamp authority.
Scrutiny and Assessment
During the scrutiny, it was observed that Ramnarayan purchased a property for Rs. 20,00,000 while the stamp value was Rs. 44,54,000. Notices under sections 143(2) and 142(1) were issued, requiring Ramnarayan to provide details and explain the discrepancy. Ramnarayan responded by stating that the land was agricultural and situated outside the municipal area, providing payment details. However, he failed to furnish documentary proof of the land’s agricultural status.
Assessing Officer’s Decision
Due to the lack of documentary evidence, the Assessing Officer (AO) adopted the stamp value of Rs. 44,54,000 and added the difference of Rs. 24,54,000 as income under the deeming provisions of Section 56(2)(x). Ramnarayan appealed this decision to the NFAC, arguing that the land was agricultural and not a capital asset as defined under Section 2(14) of the Act.
NFAC’s Stand
The NFAC dismissed the appeal, upholding the AO’s addition. It relied on a handwritten declaration and prior judicial decisions, emphasizing that Ramnarayan had not met the conditions to exclude the transaction from Section 56(2)(x).
ITAT Delhi’s Ruling
Upon further appeal, the ITAT Delhi carefully considered the submissions and evidence. Key points from the hearing included:
1. Agricultural Land Purchase: The ITAT noted that Ramnarayan provided sufficient information indicating the land was agricultural, situated in Jalalabad, and measured 23 bighas.
2. Tehsildar’s Certificate: Although handwritten, the certificate from the Tehsildar supported the claim that the land was agricultural.
3. Section 56(2)(x) Applicability: The tribunal ruled that since the land was agricultural, it did not fall under the definition of a capital asset per Section 2(14). Consequently, the deeming provision under Section 56(2)(x) was inapplicable.
Conclusion
The ITAT Delhi’s ruling in favor of Ramnarayan sets a crucial precedent. The case underscores the importance of distinguishing agricultural land from other immovable properties under tax law. It reaffirms that Section 56(2)(x) cannot be applied to agricultural land transactions, thus providing relief to taxpayers in similar circumstances.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal has been filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short], dated 22/12/2023 for Assessment Year 2018-19.
2. The brief facts of the case are, the assessee filed its return of income on 28/08/2018 declaring total income of Rs.2,98,290/-. Subsequently, the case was selected for limited scrutiny For the reason of investment in immovable property and purchase value of property was less than the value as per stamp authority. In order to verify the same, notices u/s 143(2) and 142(1) were issued and served on the assessee. The Assessing Officer observed that the assessee purchased a property at Rs.20,00,000/- while the stamp value of the said property is Rs.44,54,000/-. Notices u/s 142(1) were duly issued and served on the assessee dated 10/12/2019 to provide details of land purchase along with bank statement and explain the difference in purchase value and stamp value.
3. In response the assessee submitted vide letter dated 20/01/2020 that the land purchased by the assessee is an agricultural land and is situated outside the Municipal Area. He also submitted that the details of the property and mode of payment the same is reproduced by the AO at page 2 of the order. Subsequently, the assessee was asked to provide documentary proof of the above said agricultural land. However, the Assessing Officer not received any documentary evidences and accordingly, he proceeded to adopt the purchase value of Rs.44,54,000/- and the difference of Rs.24,54,000/- was treated as income through other sources and the same was added to the total income of the assessee u/s 56(2)(x) of the Act.
4. Aggrieved with the above order, the assessee preferred an appeal before NFAC Delhi and filed the detailed submissions before him. Further considering the submissions of the assessee and assessment order, the Ld. CIT(A) observed that the assessee has submitted hand written declaration on plain paper by The same was reproduced by him at page 14 of the order. He observed that the assessee has not fulfilled the conditions as laid down in Section 56(2)(x) of the Act and further by relying on the decision of M/s Satluj Credit & Holdings Private Limited vs. ITO, the decision of Hon’ble Madras High Court, he dismissed the appeal filed by the assessee.
5. Aggrieved with the above order, the assessee is in appeal before us raising following grounds of appeal:-
“The Commissioner of Income-tax (Appeals) at National Faceless Appeal Centre (hereinafter referred to as the CIT(A)-NFAC) erred in upholding the action of the Officer at the National e-assessment Centre (hereinafter referred to as the Assessing Officer) in making an addition of Rs.24,54,000 under section 56(2)(x) of the Act, being difference between the consideration paid on acquisition of an immovable property and the stamp duty value of the said property.
The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A)-NFAC ought not to have upheld the action of the Assessing Officer inasmuch as he has not appreciated the facts of the case in its entirety and hence, the impugned addition made by the Assessing Officer is bad in law and needs to be deleted.”
6. At the time of hearing, the Ld. AR submitted that the assessee has purchased agricultural land which is not capital asset as per section 2(14) of the Act and being agricultural land deeming provision of section 56(2)(x) will not apply. Further, he submitting that the transaction entered by the assessee which is the Arms Length Price and there is no relationship with the seller. He brought to our notice the findings of the Ld. CIT(A) from page 12 to 14 of the order.
7. On the other hand, the Ld. DR relied on the findings of the lower authorities and submitted that the Ld. CIT(A) should have referred the issue back to the Assessing Officer instead of dismissing the appeal.
8. Considered the rival submissions and material placed on record, we observed that the assessee purchased agricultural land and paid a sum of Rs.20,00,000/- as purchased consideration. The assessee also filed the relevant information before the Assessing Officer, the same was reproduced by him at page 2 of the order. As per the information available on record, it is clear that assessee has purchased agricultural land of 23 bighas at Village:- Prathvipur, Tehsil:- Jalalabad, Distt:- Shajahnpur. However, the stamp duty value was determined at Rs.44.54 lacs and further assessee also filed a letter from Tehsildar in the hand written form with Tehsil of Jalalabad, Dist Shajahanpur. Since, Tehsildar had issued the relevant certificate with his signature and stamp, even though, it is in written form, the Ld. CIT(A) should not have rejected the same. In our considered view the assessee has submitted the relevant information which shows that assessee has purchased the agricultural land at Jalalabad. Since, the assessee has purchased agricultural land the same is outside the definition of capital asset, therefore, the deeming provision u/s 56(2)(x) cannot be invoked in this case. Accordingly, the addition made by the Assessing Officer is accordingly deleted.
9. In the result, appeal filed by the assessee is allowed.
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