S.sundaramurthy v. Principal Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.11.2019CORAM THE HON'BLE MR.JUSTICE K.RAVICHANDRABAABU W.P.NO.26957 OF 2019ANDW.M.P.NOS.26342, 26344 & 32232 OF 2019 S.Sundaramurthy ...Petitioner Vs. 1. Principal Commissioner of Income Tax, 121, Mahatma Gandhi Road, Chennai – 600034. 2. Joint Commissioner of Income Tax, Non-Corporate Range – 22, No.7, Ramakrishna Street, Tambaram West, Chennai – 600045. 3. Assistant Commissioner of Income Tax, Non-Corporate Range – 22, No.7, Ramakrishna Street, Tambaram West, Chennai – 600045....Respondents Prayer : Writ Petition filed under Article 226 of the Constitution ofIndia praying to issue a Writ of Certiorari to call for therecords of the first respondent in C.No.7032(1)/Pr.CIT 7/2018-19and quash the order dated 26.03.2019 passed therein. For Petitioner : Mr.B.RaveendranFor Respondents : Mrs.Hema Muralikrishanan Senior Standing Counsel ORDER The petitioner is aggrieved against the order of the firstrespondent dated 26.03.2019, wherein and whereby, the petitionfiled under Section 264 of the Income Tax Act, was dismissed. 2. The case of the petitioner is as follows:-He purchased an agricultural lands bearing Survey No.123/3A,123/4, measuring 0.62 cents and 0.53 cents respectively in No.17, Thulangum Thandalam Village, Kancheepuram Taluk throughregistered sale deed dated 19.06.2011. The petitioner alsopurchased adjoining agricultural land measuring an extent of 65cents in Survey No.123/1 by way of sale deed dated 27.06.2011.The petitioner had been carrying on agricultural activities bygrowing paddy in the said land. Since the income was meager,the petitioner did not report agricultural income in his IncomeTax returns. The petitioner sold the above lands on 24.09.2014to a third party purchaser and reinvested the sale proceeds inthe purchase of lands bearing Survey Nos.2558/1, 2558/2 and2558/3 at Genguvarpatti Village, Periyakulam Taluk. Thepetitioner filed his return for the Assessment Year 2015-16claiming deduction of Rs.1,73,04,900/- under Section 54B of theIncome Tax Act, 1961. The second respondent issued aproceedings dated 11.12.2017 holding that sufficient proof wasnot produced by the petitioner to prove that agriculturalactivities were being carried on and that the land wasagricultural land. Based on the said proceedings, the thirdrespondent passed an order holding that the petitioner is notentitled for deduction under Section 54B of the said Act, on theallegation that the land was sold not as an agricultural land asthe buyer is a developer. Challenging the said order, thepetitioner filed a revision before the first respondent underSection 264 of the said Act. The first respondent rejected therevision by holding that the petitioner had not produced anyproof that the sold land was used for agricultural purpose fortwo years prior to the same. The petitioner filed copy ofchitta and adangal before the authorities clearly showing thatthe petitioner had harvested crops in the said land. However,the same were not considered by both authorities and therefore,the present writ petition is filed. 3. The respondent filed a counter affidavit wherein, it isstated that the order passed by the first respondent cannot beconsidered prejudicial to the interests of the assessee as thefirst respondent did not give any new finding on the issue orany other issue and the order dismissing the petition, can onlybe considered as an order covered by the Explanation 1 toSection 264. It is also stated therein that the AssessingOfficer found that the land sold by the assessee was not anagricultural land at the time of its sale andhence, disallowed the claim under Section 54B of the Act. It isfurther stated that the first respondent has, after dueconsideration of the materials produced during the course of theproceedings under Section 264, found that the petitioner hadfailed to produce any evidence for carrying out agriculturalactivity, in the land sold by the petitioner. 4. The learned counsel appearing for the petitionersubmitted that the petitioner was carrying on agricultural activities till the date of sale and in support of the same, thepetitioner produced the relevant revenue records before theconcerned authorities. Thus, he submitted that the rejection ofthose documents is not proper, more particularly, when thepetitioner has satisfied the requirement under Section 54B,while seeking reduction. 5. The learned Senior Standing counsel appearing for theRevenue on the other hand submitted that in the absence of thematerial documents in support of the petitioner for seekingdeduction under Section 54B, the Assessing Officer hasdisallowed the claim for deduction, which was confirmed by thefirst respondent. 6. Heard both sides and perused the materials placed beforethis Court. 7. The petitioner purchased the subject matter land in theyear 2011 and sold the same on 24.09.2014 to a third partybuyer. According to the petitioner, the subject matter propertywas an agricultural land and he utilized the land asagricultural land all along till its sale. Therefore, he seeksfor deduction under Section 54B of the Income Tax Act, 1961. 8. Perusal of Section 54B of the said Act, indicates thatthe assessee has to satisfy that the lands were being used byhim for agricultural purposes in the two years immediatelypreceeding the date on which the transfer took place and thatwithin a period of two years after that due date, purchased anyother land for being used for agricultural purposes. 9. Therefore, the requirement is in two part. Firstly, theassessee has to satisfy that two years prior to the sale, he wasusing the land for agricultural purposes. Secondly, he has tosatisfy that within a period of two years from the date of thesale, he has purchased any other land for being used foragricultural purposes. 10. In this case, it is stated that after the sale, thepetitioner has purchased agricultural lands within two years.However, the dispute in this case is not with regard to thesecond condition. On the other hand, the dispute is that thepetitioner did not use the land for agricultural purposes twoyears immediately preceding the date on which the sale tookplace. Though, the Revisional Authority while rejecting therevision under Section 264, has stated so, perusal of the orderpassed by the Assessing Officer would show that he was carriedover by the fact that the land was sold to a person, who is adeveloper and therefore, the petitioner is not entitled tobenefit under Section 54B. Apart from saying so, the Assessing 10. In this case, it is stated that after the sale, thepetitioner has purchased agricultural lands within two years.However, the dispute in this case is not with regard to thesecond condition. On the other hand, the dispute is that thepetitioner did not use the land for agricultural purposes twoyears immediately preceding the date on which the sale tookplace. Though, the Revisional Authority while rejecting therevision under Section 264, has stated so, perusal of the orderpassed by the Assessing Officer would show that he was carriedover by the fact that the land was sold to a person, who is adeveloper and therefore, the petitioner is not entitled tobenefit under Section 54B. Apart from saying so, the Assessing Officer has given a finding that the assessee could not showthat there has been an agricultural activity. The firstrespondent has also reiterated the very same contention. On theother hand, it is stated by the petitioner that he has producedchitta, adangal etc., for the relevant period in support of hiscontention that the subject matter land were used foragricultural purposes two years immediately preceding the dateon which the transfer took place. 11. Therefore, this Court is of the view that the factualaspects raised in this writ petition, need to be considered onceagain by the first respondent and to decide the matter as towhether the petitioner has satisfied the requirementcontemplated under Section 54B, while seeking deduction.Certainly, the reason stated by the Assessing Officer that thepurchaser is the builder and therefore, the land is not anagricultural land, cannot be a reason which is in consonancewith the requirement made under Section 54B of the said Act.Therefore, it is for the first respondent to consider and decidethe matter afresh. 12. Accordingly, this writ petition is allowed and the orderpassed by the first respondent is set aside. Consequently, thematter is remitted back to the first respondent to consider thematter afresh by giving an opportunity of hearing to thepetitioner and pass fresh order on merits and in accordance withlaw. It is open to the petitioner to file necessary documentsbefore the first respondent once again in support of theircontention seeking deduction under Section 54B. The wholeexercise shall be done by the first respondent within a periodof eight weeks from the date of receipt of a copy of this order.No costs. Connected miscellaneous petitions are closed. Sd/- Assistant Registrar(CS VIII) //True Copy// sni Sub Assistant Registrar To 1. Principal Commissioner of Income Tax, 121, Mahatma Gandhi Road, Chennai – 600034. 2. Joint Commissioner of Income Tax,Non-Corporate Range – 22,Non-Corporate Range – 22, No.7, Ramakrishna Street, Tambaram West, Chennai – 600045. Chennai – 600045. 3. Assistant Commissioner of Income Tax, Non-Corporate Range – 22, No.7, Ramakrishna Street, Tambaram West, Chennai – 600045. Chennai – 600045. +1cc to Mrs.Hema Muralikrishanan, Advocate, S.R.No.97032 +1cc to Mr.B.Raveendran, Advocate, S.R.No.96990 W.P.No.26957 of 2019 RR(CO) CS/26/12/2019