TaxTMI 
TaxTMI 
2020 (11) TMI 470
X X X X Extracts X X X X
X X X X Extracts X X X X
....oder as passed by the assessing officer by invoking the provisions of section 263 of the Act even when the order was passed by the assessing officer under section 143(3) of the Act after conducting necessary enquiries and after due application of mind. 3.That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed y the assessing officer by invoking the provisions of section 263 of the Act without properly appreciating the facts of the case and submissions made before him even when amount of investment in agricultural land of Rs. 1,40,18,850/- claimed as deduction under section 54B of the Act was legal and proper. 4. The assessee craves leave to add, alter modify the grounds of appeal as taken by him. 2. The facts giving rise to the present appeal are that the in this case assessment was completed by the assessing officer u/s 143(3) of the Income Tax Act 1961 (hereinafter referred as the Act) on 27.03.2017, assessing the income at Rs. 2,98,060/-. Subsequently, the Ld. Pr. CIT on going through assessment records found that certain points which were mentioned in the selection of the case for scrutin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before this Tribunal. Ld. counsel for the assessee vehemently argued that the Ld. Pr. CIT has not applied his mind on the facts of the case and preceded against the assessee mechanically. He further reiterated the submissions as made in the written submission for the sake of clarity submission of the assessee are reproduced as under: A.1] The present appeal is filed by the appellant against the order as passed by the Ld Pr. Commissioner of Income Tax - 2 on 29-03-2019 under section 263 of the Income Tax Act. A.2] The assessee filed his return of income for AssessmentYear 2015-16 declaring total income of Rs. 2,98,060/- on 28-08-2015. A.3.1] The assessing officer issued noticedated 12-01-2017 under section 142(1) of the Income Tax act to the assessee calling for the information and explanation in respect of sale of agricultural land situated at Halka No. 19 [New No. 38], Khasra No.284,Gram BalyaKheda, Indore for the consideration of Rs. 1,60,65,000/- and the purchase of new agricultural land at Rs. 1,40,18,850/- claiming exemption under section 54B of the Income Tax Act. A.3.2] The assessee in response to the said notice under section 142(1) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the case and submissions made before him even when amount of investment in agricultural land of Rs. 1,40,18,850/- claimed as deduction under section 54B of the Act was legal and proper GROUND No 2- ON MERIT - CHALLENGING THE DENIAL OF DEDUCITON AS CLAIMED UNDER SECTION 54B OF THE INCOME TAX ACT IN RESPECT OF PURCHASE OF AGRICULTURAL LAND 1.1]The assessee had sold his inherited agricultural landsituated at Halka No. 19 [New No. 38], Khasra No.284,Gram BalyaKheda, Indore admeasuring 1.215 Hectares for the consideration of Rs. 1,60,65,000/- on 30-06-2014. 1.2] Copy of sale deed as executed by the assessee is enclosed. In Para 2 of the said deed it was stated that the said Agricultural land as sold by the assessee was not actually purchased from his own funds but was inherited to him. Hence the said Land was sold with the consent of his sons and brother of the assessee. The name of the consentor as mentioned in the sale deed as under: S.no. Name of the Consentor Relation with the assessee 1.1 Shri Prem Narayan s/o Shri MangilalPatidar Brother of the assessee 1.2 Shri Ganesh S/o Shri Prem Narayan Patidar Son of Brother ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1,49,060 22,60,060 5 Divya Nitesh Patidar Sons' wife 51,66,000 3,64,230 55,30,230 1,40,18,850 1.7.2] The amount of deduction under section 54B of the Income Tax Act is restricted to the extent of capital gain of Rs. 1,36,25,585/-. 1.8] That in the following decisions it was held even if the investment was made in the name of his wife and also in the name of his son and son's wife are eligible for deduction under section 54B of the Income Tax Act. S.No Citation Reference 1.8.1 CIT vs Kamal Wahal Appeal No. ITA 4/2013 1.8.2 CIT Vs Natarajan 154 Taxmann 399 1.8.3 CIT Vs BalmukundMeena Appeal no. ITA 118/2016 1.8.4 Shri Raja Ram Patidar Appeal no. 371/Ind/2015 1.8.5 DIT Vs Mrs Jennifer Bhide 252 CTR 444 [Karnataka] 1.8.6 CIT Vs Gurnam Singh 327 ITR 278 1.8.7 CIT vs Ravindra Kumar Arora (2012) 342 ITR 38 (Del) 1.8.8 CIT Vs V Natarajan 154 Taxmann 399 Relevant extracts from the judicial rulings that highlight the above discussed principle are reproduced as under for your kind reference: 1.9.1] That....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In our opinion, from the impugned order, no substantial question of law is arising for consideration of this Court as the ITAT while recording a pure finding of fact has dismissed the appeal of the revenue. Undisputedly, in this case the assessee had sold the agricultural land which was being used by him for agricultural purposes. Out of sale proceeds of the said sale, the assessee has purchased other piece of land (land in question) in his name and in the name of his only son, who was bachelor and dependent upon him, for being used for agricultural purposes within the stipulated time. Further, it is not the case of the revenue that from the sale proceeds of the agricultural land earlier owned by the assessee, the land in question was purchased for any other purpose than the agricultural purpose. Undisputedly, the purchased land is being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, the ITAT has rightly come to the conclusion that it does not make any difference because the purchased land is being used by the assessee for agricultural purposes. It is not the case of the revenue that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....name of his son and daughter at Rs. 49,86,085/- and Rs. 12,50,175/- respectively. We accordingly set aside the findings of both the lower authorities and direct the Ld. Assessing Officer to give the benefit of exemption u/s 54B of the Act to the assessee at Rs. 62,36,260/- which is over and above the benefit of Rs. 91,18,190/- already allowed by Ld.CIT(A) u/s 54B of the Act. In the result the issue No.3 raised by the assessee under Ground No.2 of the appeal is allowed. 1.10]That in view of the above, it is submitted that deduction as claimed under section 54B of the Income Tax Act was legal and proper and the same was rightly allowed by the then assessing offficer at the time of passing of the original assessment order. 2] GROUND No 1 - TREATING THE ASSESSMENT ORDER AS PASSED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE 2.1] The appellant had filed his return of total income for this Assessment Year on 28-08-2015 declaring total income at Rs. 2,98,060/-. 2.2] The case of the above assessee was selected in scrutiny and notice was issued under section 143(2) of the Act. In compliance to the notices as issued from time to time, detailed s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 2.3.1] That on analysis of provisions of section 263 of the Act, it is clearly evident that Ld CIT can assume jurisdiction under section 263 of the Act when the order passed by the assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. The order of the assessing officer shall be deemed to be erroneous in so far also prejudicial to the interest of the revenue only on the fulfillment of certain conditions as prescribed. 2.3.2] In pursuant to above, One of the criteria to assume jurisdiction u/s 263 is that if the Ld Commissioner or Pr. Commissioner is of the opinion that the order passed by the assessing officer was without making inquiries or verification which should have been made, said order is deemed to be erroneous and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....justified in setting aside the assessment order as passed by the assessing officer by invoking the provisions of section 263 of the Act, when the order was passed by the assessing officer under section 143[3] of the Act after conducting necessary enquiries and after due application of mind. 2.6.1] That Hon'ble Supreme Court in the case ofMalabar Industrial Co. Ltd. CIT [2000] 243 ITR 83 (SC) after considering the decisions of Rampyari Devi Saraogi (supra) and Smt. Tara Devi Aggarwal (supra):- [Page No. 52 of the compilation] "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer;it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law willsatisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue 'has to be read in conjunction with an erroneous order passed by the Assessing Officer. Eve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open". [ Emphasis supplied ] 2.6.3] Hon'ble Ahmedabad Bench of ITAT in the case of M/s Jay Agriculture Test Vs Pr CIT [ Appeal No ITA No 605/ Ahd /2015 dt 01-01-2015 has held that :- "20. On due consideration of these facts, we are of the view that the AO has examined the issue, though not discussed elaborately in the assessment order. But on record, he has called for information from the assessee and thereafter accepted. It is the prerogative of the AO what to discuss in the assessment order and the assessee cannot force the AO to draft the assessment order in a particular manner. The assessment order cannot be termed erroneous as well as prejudicial to the interest of the Revenue on the ground that inqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the jurisdiction by the Pr.CIT u/s 263 of the Act was invalidly assumed. Accordingly we set aside the proceedings u/s 263 of the Act as being invalid and also consequent order of PCIT u/s 263 of the Act. [ Emphasis supplied ] 2.6.5] These principles have been re-iterated by the Apex Court in its judgment in Commissioner of Income Tax vs AmitabhBaccahan[2016(3) KLT SN.4 (C.No.3) SC], where the court inter alia held thus:- "There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under S.263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from." [Emphasis supplied ] 2.6.6] That Hon'ble High Court of Andhra Pradesh in the case of Spectra Shares and Scrips (P) Ltd. Vs Commissioner of Income Tax - III, Hyderabad as reported in 2013 36 Taxmann.com 348 has held that:- It may be th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 184 Bighas agricultural land. The AO examined those documents and on being satisfied, framed the assessment under s. 143(3) of the Act vide order dt. 16th Sept., 2011. Therefore, a possible view was taken by the AO. So it cannot be said that the AO had not examined the issue on the basis of which the learned CIT has held that the assessment order dt. 16th Sept., 2011 passed by the AO was erroneous or prejudicial to the interest of the Revenue. In the present case, it is noticed from the copy of the order sheet of the AO during the assessment proceedings (placed at page No. 14 of the assessee's compilation) that on 7th Sept., 2011 the assessee furnished copy of bank account, evidence for land holding, agricultural income and interest income. Thereafter, on 12th Sept., 2011, the AO asked the assessee to explain the source of deposit amounting to Rs. 15,59,000 on 8th April, 2008 in SBBJ savings account. The AO again noted in the order sheet entry dt. 15th Sept., 2011 that the assessee filed the source of deposit in the bank account. He again asked the assessee to furnish the copy of bank account No. 85940 for further verification and ultimately the AO noted in the order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law." [ Emphasis supplied ] 2.7.3] That Hon'ble Jurisdictional High court in the case of CIT vs Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: - [Page No. 59- 60 of the compilation] 10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee' used in Income Tax Act needs to be given a legal interpretation and not a liberal interpretation. If the word 'assessee' is given a liberal interpretation, it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit. Ld. counsel for the assessee submitted that the facts in the present case are distinguishable as in the present case he sold his ancestral property. No objection was obtained from the assessee in respect of his rights to be transferred by father of the assessee. Ld. counsel for the assessee further submitted that the jurisdictional High Court in the case of the Principal Commissioner of Income Tax vs. Balmukund Meena (ITANo.118/2016 dated 16.02.2017 wherein the Hon'ble High Court has held as under: "9. It thus appears to us that the predominant judicial view, including that of this Court, is that for the purposes of section 54F, the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. It is moreover to be noted that the assessee in the present case has n....