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The ITAT dismissed the assessee's appeal. It upheld the revisional order passed by the PCIT u/s 263, setting aside the original assessment order which had erroneously allowed deduction u/s 54B. The ITAT observed that the AO failed to inquire whether the capital asset was used for agricultural purposes for two years immediately preceding the transfer, a prerequisite for claiming deduction u/s 54B. The PCIT had obtained a report substantiating that no agricultural activities were carried out during the relevant period on the properties sold and purchased by the assessee. Relying on the precedent in Ramanbhai Bholidas Patel, the ITAT held that s.54B deduction is not applicable if the land was not used for agricultural purposes in the two years preceding the transfer date.
The ITAT dismissed the assessee's appeal. It upheld the revisional order passed by the PCIT u/s 263, setting aside the original assessment order which had erroneously allowed deduction u/s 54B. The ITAT observed that the AO failed to inquire whether the capital asset was used for agricultural purposes for two years immediately preceding the transfer, a prerequisite for claiming deduction u/s 54B. The PCIT had obtained a report substantiating that no agricultural activities were carried out during the relevant period on the properties sold and purchased by the assessee. Relying on the precedent in Ramanbhai Bholidas Patel, the ITAT held that s.54B deduction is not applicable if the land was not used for agricultural purposes in the two years preceding the transfer date.
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