2024 (2) TMI 157 - AT - Income Tax

CIT revision under section 263 upheld for wrongly allowing section 54B exemption without verifying agricultural land use

Bhogilal Bhailalbhai Patel Versus The Pr. CIT-1 Vadodara.

The ITAT Ahmedabad upheld the CIT's revision order under section 263, dismissing the assessee's appeal. The CIT found that the AO had wrongly allowed ... Revision u/s 263 - as per CIT AO had wrongly allowed the assessee exemption of capital gains claimed u/s 54B - CIT noted from the records that immovable property sold by the assessee was non-agriculture land, and therefore, the capital gains earned thereon were not eligible for exemption under section 54B - assessee contended that the conditions to be fulfilled as per the section 54B of the Act was not with regard to the nature of the land, but with respect to its user i.e. whether it was used for agriculture purpose for two years immediately preceding the date on which the transfer took place. HELD THAT:- As assessee was asked at bar whether this fact noted by the ld.Pr.CIT was correct , that neither any inquiry was made by the AO regarding fulfillment of the basic conditions for eligibility to claim exemption under section 54B of the Act nor any documents were placed by the assessee before the AO establishing the same. To this, the ld.counsel for the assessee categorically affirmed the fact and stated that neither any inquiry was conducted by the AO regarding user of land for agricultural purposes two years preceding the date of sale nor any documents filed by the assessee to the AO demonstrating the same. In the light of the same, we find no infirmity in the order of the CIT, finding the AO to have erroneously allowed the assessee’s claim of exemption under section 54B of the Act, without even conducting basic inquiry regarding fulfillment of conditions prescribed by the section for being eligible to exemption under the said section. Appeal of the assessee is dismissed. Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of the revisionary order under section 263 of the Income Tax Act, 1961.3. Eligibility for exemption under section 54B of the Income Tax Act, 1961.Summary:Condonation of Delay:The appeal was time-barred by 525 days, primarily due to the Covid-19 pandemic, which halted normal activities. The assessee relied on the Hon'ble Supreme Court's decision extending the limitation period for filing litigations. The Tribunal noted the Supreme Court's order extending the limitation period and condoned the delay, allowing the appeal to be adjudicated on merits.Validity of the Revisionary Order under Section 263:The assessee challenged the order of the Pr. Commissioner of Income Tax (Pr. CIT) under section 263, which held that the assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the revenue. The Pr. CIT noted that the Assessing Officer (AO) had wrongly allowed the assessee exemption of capital gains claimed under section 54B. The Tribunal found that the grounds of appeal focused on challenging the validity of the revisionary order and the invocation of section 54B.Eligibility for Exemption under Section 54B:The Pr. CIT observed that the land sold by the assessee was converted from agricultural to non-agricultural land before the sale, making it ineligible for exemption under section 54B. The Tribunal noted that the AO did not conduct any inquiry to verify if the land was used for agricultural purposes for two years preceding the sale, nor did the assessee provide any evidence of such use. The Tribunal confirmed the Pr. CIT's order, stating that the AO had erroneously allowed the exemption without basic inquiry, thus making the assessment order erroneous and prejudicial to the revenue.Conclusion:The Tribunal upheld the Pr. CIT's order under section 263, finding no infirmity in the decision to set aside the assessment order and direct a fresh assessment after proper inquiry and verification. The appeal of the assessee was dismissed.