Shri Shailendra Kumar Yadav and Shri N. S. Saini, JJ.

For the Petitioner : Shri O. P. Vaishnav, CIT D.R.
For the Respondent : Shri Anil Kashatriya, A.R. 

ORDER

SHAILENDRA KUMAR YADAV, J.M: -These cross appeals are arising out form the order of CIT(A)-I, Ahmedabad, dated 16.09.2014 for the assessment year 2011-12. So, they are being disposed of by way of this common order for the sake of convenience. 

2. In IT(SS)A No. 377/Ahd/2014, assessee has filed the appeal on the following grounds: 

1) In law, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred in not considering the appellant’s submissions made before him as such the order is against principle of natural justice, bad in law and deserves to be cancelled. 

2) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred in allowing the legitimate exemption u/s 54B to the extent of Rs. 39,38,100/- being the sale consideration received as per registered sale deed only. She has not allowed the legitimate deduction u/s 54B on the ‘on money’ received on sale of agriculture land. The same may kindly be directed to be allowed legitimate deduction of Rs. 92,47,100/- claimed u/s 54B on full sale consideration i.e. as per ‘registered sale deed’ + ‘on money’ received on sale of said agriculture land. 

3) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred in confirming the charging of interest u/s.234A, 234B, 234C & 234D of the Act. He may be directed to withdraw the same. 

4) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred in confirming the initiation of penalty proceedings u/s. 271(1)(c) & 271AAA r.w.s. 274 of the Act. He may be directed to withdraw the same.  

2.1 In IT(SS)A No. 24/Ahd/2015, Revenue has filed the appeal on the following grounds: 

“1. The C.I.T.(A) has erred on facts and law in allowing exemption u/s. 54B of the Act amounting to Rs. 39,38,100/- as the basic condition of Section 54B of the Act clearly state that the land should be used by “the assesse being an individual or his parents.” which has not been fulfilled in this case.”  

3. Assessee is engaged in business of construction of Housing Projects. During previous year relevant to assessment year under consideration, assesse has sold various agricultural lands in which he was having co-ownership and claimed exemption u/s.54B of the Act. The details of such land on which assesse claimed exemption is given as under:

As against the sale consideration of Rs. 95,25,836/- received in respect of above lands sold, assesse purchased another piece of agricultural land at Vastral, Survey No.24 and 642/1 and claimed exemption u/s.54B of the Income Tax Act, 1961 to the extent of investment made amounting to Rs. 90,90,582/-. Assessing Officer rejected the claim u/s.54B of the Income Tax Act, 1961 by stating as under: 

“……..If the above provisions are made applicable to the facts of the case of the assessee, it clearly emerges from the records that the assessee has not satisfied the condition no. (i) (supra). The basic requirement for claiming the exemption u/s 54B of the Act is that the land should be used by the assessee being an individual or his parent, or a HUF for agricultural purposes (hereinafter referred to as the original asset)], and the assessee must within a period of two years after that date, purchased another land for agricultural purposes. 

Moreover, the assessee has not declared any agricultural income in the return of income filed by him Thus, it is even further evident that the land was not used by the assessee for agricultural purposes. 
During the course of assessment proceedings, the authorized representative of the assessee was given opportunity to prove that agricultural activities were being carried out on the land in respect of which the assessee has claimed the exemption. The assessee was asked to furnish complete details of the crops cultivated and the income generated therefrom alongwith the copies of bills for purchase of seeds, fertilizers, pesticides, etc., details of irrigation facility and also the copies of 7/12 extract and complete bills in respect of the crops sold. The A R. has not been able to produce any details / evidence in respect of the agricultural activities carried out by the assesses on the land sold in respect of which exemption is claimed despite given adequate opportunity. 

Further, the assessee has submitted an agreement with Shri Dalpatsinh Abhaysinh Chauhan, who is claimed to be an agriculturist. As per this agreement, Shri Dalpatsinh A. Chauhan has the right to carry out agricultural activity on the land and is obliged to share part of the produce. Thus, primarily the assessee deriving agricultural income, if any, in the form of rent rather than by carrying out agricultural activities. The assessee, thus, has not cultivated the land personally, but it has been cultivated, if at all, by a third person. Further, the assesses has not even furnished any evidence as discussed supra to prove that any agricultural activity has been carried out on the land in the two years immediately preceding the date on which transfer of such agricultural land took place irrespective of who carried it out. 

As stated above, the assessee to support his contention has submitted the aforesaid agreement for carrying-out cultivation on agricultural land. This clearly established that agricultural activity, if any, was not carried out by the assessee or his parents. According to one of the terms of this agreement, the agricultural activities have to be carried out on the land in question up to five years from the date of agreement i.e. 15/03/2006. However, the assessee has not been able to furnish any evidence to prove that cultivation on the said land was being carried out since the date of agreement. Further, the assessee along with his submission has furnished 7/12 extracts issued by the Talati as on 07/05/2010. On perusal of these extracts, it is seen that the crops were grown on the land during the F.Y.2006-07. However, no details of crops grown during any of the subsequent years i.e. F.Ys.2007-08, 2008-09 & 2009-10 appear in the document. Therefore, it is evident that, in fact, no agricultural activity was carried out even by the tenant, Shri Dalpatsinh A. Chauhan in the two years preceding the sale of the land by the assessee. Under the circumstances, the assessee is not eligible for availing the benefit of exemption u/s.54B of the Act. 

Accordingly, the exemption claimed to the extent of investment made by the as which works out at Rs. 90, 90,582/- is disallowed and added to the total income. "  

4. Aggrieved by the same, matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) allowed exemption u/s. 54B of the Act amounting to Rs. 39,38,100/- but has not allowed the deduction u/s.54B on the on money received on sale of agricultural land. Before us, stand of Revenue is that CIT(A) erred in allowing the legitimate exemption u/s 54B to the extent of Rs. 39,38,100/-. As basic condition of Section 54B of the Act clearly state that there should be land used by assesse being an individual or his parents which is not fulfilled in this case. Accordingly, order of CIT(A) on this issue be set aside and that of Assessing Officer should be restored. On other hand, learned Authorized Representative submitted that CIT(A) has grossly erred in not allowing the legitimate deduction u/s.54B on full sale consideration i.e. as per registered sale deed + on money received on sale of said agricultural land and supported the order of CIT(A) to the extent relief granted by him as opposed by Revenue in its appeal. 

5. After going through rival submissions and material on record, we find that assesse being co-owner has sold various agricultural land and claimed exemption u/s.54B as detailed above. Question before us are that: 

i. Whether assesse is eligible to that relief u/s.54B of the Act, 1961 while computing capital gain. 

ii. Whether relief in computation u/s.54B of the Income Tax Act,1961 can be claimed against unaccounted additional sale receipt in the form of on money not reflected in sale consideration. 

It is not in dispute that assessee’s relevant record for agriculture i.e. 7/12 reveals the crops at the said land at relevant point of time. Assessing Officer has disallowed the claim of assesse on the ground that assesse or his parents were not cultivator of the said land. So, according to Assessing Officer, assesse was not eligible to get exemption u/s.54B of the Income Tax Act,1961. For the sake of convenience, we reproduce the provision of Section 54B(1) of the Income Tax Act which reads as under:   

“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 assesse being an individual or his parent, or a Hindu undivided family ] for agricultural purposes [(hereinafter referred to as the original asset)], and the assesse 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 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 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years 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 a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain.]”  

The word in Section 54B is “was being used by [the assesse being an individual or his parent, or a Hindu undivided family] for agricultural purposes”. The word in Section 54 B of the Income Tax Act is “was being used for agricultural purpose”. It means use of land. In case before us, assesse used the land for agricultural purpose through an agreement or otherwise through Shri Dalpatsinh Abhaysinh Chauhan. The relevant revenue record reveals that during two years immediately preceding to the relevant year, the crops were grown at the land in question. Assessing Officer rejected the claim u/s.54B of the Act, 1961 on the ground that assesse was not in cultivatory possession of the land in question and he did not produce the evidence of expenditure on agriculture and has not shown agricultural income in his return and revenue record i.e. Form No.7/12 is beyond two years immediately preceding year to the relevant assessment order. 

5.1 As per Section 54B of the Income Tax Act, assesse has to establish the fact that land in question is being used by assesse for agricultural purpose in two years immediately preceding the relevant two assessment years. So, agricultural activity on the land in question cannot be negated on the basis of not shown agricultural income it its return of income. It does not affect assessee’s claim u/s. 54B of the Income Tax Act, once, it is established that land was being used for agricultural purpose, assessee becomes entitled for claim u/s.54B of the Income Tax Act. In case before us, assesse has proved beyond doubt on the basis of relevant revenue record that he was in cultivator possession of the agricultural land in question. Even this fact has not been disputed in the remand report by Assessing Officer. In appeal, CIT(A) verified the same and found that as per revenue record, land in question was used for agricultural purpose. The explanation used for agricultural purpose in Section 54B can only be description of agricultural land which is subject matter of transfer and not condition precedent for granting relief u/s.54B. Even if, assesse is not in cultivator possession himself but getting it cultivated in his supervision even then it will remain agricultural land until proves otherwise. It will be no more agricultural land in case assesse has changed the use with permission or without permission for residential purpose or otherwise. It is not material whether residence activity is done legally or illegally on land in question. There are different laws which take care for same but the moment assesse allowed to raise permanent residential structure authorized or unauthorized said land, it seized to be agricultural one. In case before us, there is nothing like this. There is nothing on record to suggest that assesse was not engaged in agricultural activity on the land in question which is evident from relevant revenue records as well. Burden is on assessee to establish that land is agricultural one. At the same time, onus is on department to establish otherwise that land was nonagricultural one. In case before us, as per revenue record, land in question is agricultural land. In view of above, CIT(A) was justified in directing to allow the claim of exemption u/s.54B of the Act, 1961 to assesse in respect of agricultural land in question. Same is upheld. This reasoned finding of CIT(A) needs no interference form or side. 

6. Coming to the claim of relief in computation of capital gain u/s.54B of the Income Tax Act, 1961 against unaccounted additional sale receipts declared in form of on money during search, not reflected in sale register. In this case, assesse group was subject to search and seizure proceedings on 28.07.2011 Mr. Motibhai Revabhai Prajapati in his statement u/s.l32(4) of Income Tax Act, 1961 recorded on that day stated on page 5, "On the basis of papers found and seized from my and my partners' residence and office, I disclose following unaccounted income; I and my partners have earned capital gain income from sale of Gatrad land. Out of this income Rs. 8 crore is out of books. I have accepted this in my statement given at my residence and I will disclose this income in F.Y. 2010-11". As shown in chart of sale consideration and amount of exemption claim u/s.54B of the Income Tax Act, 1961 on capital gain, Assessing Officer has taken sale consideration including on money disclosed by assessee. Assessing Officer has rejected the claim u/s.54B of the Act, 1961 for the reason mentioned in his order mainly the reason that land was not used by assessee personally and use of land for agriculture purpose. Condition to claim 54B claim was not fulfilled as stated above. Assessing Officer has fully rejected claim u/s. 54B of Income Tax Act, hence, he has not discussed the treatment of on money for the purpose of claim u/s. 54B of the Act, 1961. 

6.1 At the appellate proceeding, assessee was asked to explain that claim u/s. 54B of Income Tax Act, 1961 be allowed against on money received by him out of books. He explained that after disclosure u/s. 132(4) of Income Tax Act, 1961, money so received has become part of his sale consideration and was eligible for claim u/s. 54B of the Act. Assessee has not disclosed the payment of on money in his books before purchase of new land. According to assessee, bifurcation of disclosure made during course of search proceeding was as under:

On going through above tabular date of disclosure, it may be observed that disclosure of Rs. 8 crore was made on account of on money received on sale of agriculture land situated on Village: Gatrad, Taluka/District: Ahmedabad. The disclosure on account of on money received in lieu of sale consideration of agriculture land has bifurcated in various group persons hands as under:

On going through above table, it may be seen that assessee has received Rs. 1,90,88,759/- (including on money) (Assessing Officer has taken Rs. 95,25,836/- only on which the exemption u/s.54B was claimed) on account of sale consideration of of Gatrad land. The said sale consideration includes mount of sale consideration shown in sale deed and on money received thereon. Out of sale consideration received, assessee has invested Rs. 92,47,100/- (Assessing Officer has mistakenly taken as Rs. 90,90,582/-) in another new agriculture land within the prescribed period. Assessee is entitled for relief of exemption u/s.54B to the extent of his contribution of Rs. 92,47,100/- (which has been mistakenly taken by Assessing Officer as Rs. 90,90,582/-) towards purchase of new agriculture land out of sale consideration received of Rs. 1,90,88,759/- (including on money) (Assessing Officer has taken Rs. 95,25,836/- only) on account of sale of Gatrad agriculture land. Assessing Officer has not allowed the exemption u/s.54B on the ground that basic requirement of claim of exemption u/s.54B is that first condition of land should be used by assessee being an individual or his parent or HUF for agriculture purpose has not been complied with. We have decided this issue in preceding favour in favour of assessee. 

6.2 Regarding allowability of claim of claim of ‘’on-money’’ the ld. AR drew our attention to the decision of Hon’ble Gujarat High Court in the case of CIT vs. Suman Paper & Boards Ltd. (2009) 221 CTR 0781 wherein it was held that in view of amendment on the provisions of section 158BB by the Finance Act, 2002 with retrospective effect from 1st July, 1995 the assessee was entitled to claim deduction under sec.80-I or section 80-IA in block assessment of the block period. The Revenue has acknowledged the benefit of deduction with regard to undisclosed income of the block period. 

6.3 In the case before us the issue is with regards to the benefit of exemption under section 54B with regard to the on money. Both are beneficial provisions in their own spheres so drawing the same analogy, we are of the view that assessee is entitled for getting benefit of exemption under section 54B with regard to the ‘on money’. This view is fortified by decision of Hon’ble Bombay High Court in the case of CIT vs. Sheth Developers (P) Ltd. in ITA No.3724 of 2010, wherein it was held that assessee was entitled to the benefit of section 80IB and accordingly directed the AO to recomputed the tax payable for the block period 1.4.1995 to 21-2-2002 under section 158BB after giving benefit of section 80IB. Thus it was held that for block period assessee was entitled to claim deduction in its income under section 80IB. In view of above decision, we hold that the assessee is entitled in claiming exemption on total income including on money. The AO is directed accordingly. 

7. In the result, appeal of Revenue is dismissed while appeal of assessee is allowed as indicated above.