Facts of the Case

The assessee, Manoj Kumar, filed his return of income for Assessment Year 2016-17 declaring total income of ₹2,20,560. The case was selected for scrutiny and notice under Section 143(2) was issued. During assessment proceedings, the Assessing Officer observed that the assessee had received compensation on compulsory acquisition of land by the Government of Bihar and claimed exemption on long-term capital gains, including deduction under Section 54B of the Income-tax Act. The assessee claimed that the land was agricultural in nature, that the compensation received was exempt under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, and that investment had been made in agricultural land and the Capital Gain Account Scheme. The Assessing Officer, due to alleged non-compliance and lack of documentary evidence, computed long-term capital gain of ₹1,00,35,508 and added the same to income. The CIT(A) dismissed the appeal on the ground that the assessee failed to furnish requisite evidence to substantiate the claims.

Issues Involved

Whether the compensation received on compulsory acquisition of land was exempt under the RFCTLARR Act read with CBDT Circular No. 36/2016, whether the assessee was entitled to exemption under Section 54B of the Act, whether the land acquired was agricultural land, and whether the matter required fresh examination in the absence of proper documentary evidence.

Petitioner’s Arguments

The assessee contended that the compensation received was exempt from tax as it was received under the RFCTLARR Act and covered by CBDT Circular No. 36/2016 dated 25.10.2016. It was submitted that the land acquired was agricultural land and that the assessee had invested in new agricultural land and also deposited amounts in the Capital Gain Account Scheme, thereby fulfilling the conditions of Section 54B. It was further argued that the land was acquired by NHAI and therefore eligible for exemption.

Respondent’s Arguments

The Revenue relied on the orders of the lower authorities and contended that the assessee failed to establish that the land was agricultural in nature or that the compensation was received under provisions granting exemption. It was submitted that the assessee did not furnish documentary evidence as required by the CIT(A) and was unable to demonstrate that CBDT Circular No. 36/2016 was squarely applicable to the facts of the case.

Court Order / Findings

The ITAT Patna observed that the core dispute related to eligibility of exemption under Section 54B and taxability of compensation received on compulsory acquisition. The Tribunal noted that the assessee failed to produce requisite documentary evidence before the lower authorities to substantiate the claims regarding nature of land, acquisition by NHAI, applicability of RFCTLARR Act, investment in agricultural land, and deposit in the Capital Gain Account Scheme. Considering the facts and in the interest of justice, the Tribunal held that the matter required fresh examination. Accordingly, the issue was remitted to the file of the Assessing Officer for de novo consideration after granting reasonable opportunity to the assessee to substantiate the claim with cogent documentary evidence.

Important Clarification

The Tribunal clarified that exemption on capital gains arising from compulsory acquisition and deductions under Section 54B are fact-dependent and can be allowed only upon proper verification of documentary evidence regarding nature of land, manner of acquisition, applicability of RFCTLARR Act and compliance with statutory conditions. Failure to furnish evidence disentitles the assessee from relief.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded to the Assessing Officer for de novo adjudication in accordance with law after providing due opportunity of hearing to the assessee.

 

Link to download order 
https://www.mytaxexpert.co.in/uploads/1769072686_MANOJKUMARPATNAVS.ITOWARD44PATNAPATNA.pdf
 

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