TaxTMI 
TaxTMI 
2019 (10) TMI 649
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....r passed by the ld. Pr.CIT, Ajmer u/s 263 of the Act deserves to be vacated and the assessment order framed by the ld. AO be restored. 4. That the case laws relied upon by the ld. Pr. CIT, Ajmer are not relevant to the case of the appellant and deserve to be ignored." 2. The assessee is an Individual and filed his return of income on 23rd July, 2014 declaring total income of Rs. 16,31,000/-. The assessment was completed under section 143(3) on 21st December, 2016 at the total income of Rs. 16,51,000/-. Subsequently, on examination of the record, the ld. Pr. CIT observed that the assessee has purchased agricultural lands of Rs. 4,22,409/- on different dates and later on sold the same after plotting to 19 (nineteen) persons for Rs. 44,70,802/- and availed exemption under section 54B of Rs. 41,01,137/- against the long term capital gain which is not allowable as the assessee has carried out purchase and sale of land as business venture after plotting of the same. Accordingly, a show cause notice under section 263 of the IT Act was issued to the assessee on 26.10.2018 whereby the assessee was asked to show cause as to why the claim of exemption under section 54B should not ....
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.... years and, therefore, the assessee is holding the land in question as capital asset and not stock-in-trade, merely because the assessee sold the land by dividing into plots will not change the nature and character of the land being capital asset. In support of his contention, he has relied upon the judgment of Hon'ble Jurisdictional High Court in case of CIT vs. Sohan Khan & Mohan Khan, 304 ITR 194 (Raj.) and submitted that the Hon'ble High Court has held that mere fact that there was a series of transactions of sale only, by selling the part of the whole land purchased in one go, would not render the activity of sale to be an adventure in the nature of trade. The ld. A/R has thus submitted that in the case in hand, the assessee has purchased the land in one go and merely because the land was sold after dividing the same into plots will not amount to activity in the nature of adventure and trade. He has also relied upon the decision of Hon'ble Madras High Court in case of CIT vs. Kasturi Estates Pvt. Ltd., 62 ITR 578 (Madras) and submitted that the Hon'ble High Court has held the sale of immovable property being land converted into a house site with a view to get a better price fo....
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....come of the assessee is computed as under:- Total income as per return of income Rs. 16,31,000/- Add: (i) disallowance out of expenses debited to P&L account Rs. 20,000/- Total assessed income Rs. 16,51,000/- Assessed at Rs. 16,51,000/-. Issued demand notice. ITNS 150 attached to this order which is forming part of the assessment order." It is manifest from the assessment order that it does not reveal any enquiry conducted by the AO or any thought process of the AO on the issue of deduction under section 54B of the Act. Thus there is a complete lack of enquiry on the part of the AO particularly on the claim of deduction under section 54B of the Act. It is pertinent to note that the deduction under section 54B is available only when the long term capital gain is derived from sale of agricultural land which is being used by the assessee for agricultural purposes in the two years immediately preceding the date on which transfer took place. For ready reference, we quote section 54B as under :- "54B. [(1)] [Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer of a capital asset being land which, in....
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.... amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then,- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid." Thus the deduction under section 54B on the capital gain on transfer of agricultural land used for agricultural purposes is allowed if the assessee has within the period of two years from the date of sale, purchased another land being used for agricultural purposes. There are two significant conditions mandatory for allowing the claim under section 54B viz. (1) that the existing asset must be an agricultural land used for agricultural purposes at least for two years prior to the date of sale and (2) the assessee within a period of two years after the date of sale has purchased another land to be used for agricultural purposes. These two conditions are factual in nature and it is incumbent upon the AO to ver....