AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 170
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....upon perusal of the record for the Asst. Year 2009-10, there was an assessment order passed under section 143(3) of the Act by the AO on 22.12.2011, vide which the ld.AO had accepted the returned income by the assessee of Rs.3,92,440/-. On perusal of the assessment record, the ld.CIT noticed that the assessee had sold a capital asset viz. a land bearing Survey no.56/1/8, paiki/6 of Village Haripar Pal, and earned long term capital gain of Rs.2,94,27,541/-. The assessee claimed deduction of Rs.1,35,30,171/- under section 54F of the Act on account of construction of a new residential property from the sale of the above land. The assessee also claimed deduction of Rs.1,58,97,370/- under section 54B on account of purchase of new agricultural land. A perusal of the assessment order has revealed that the AO has not made any inquiry and passed a cryptic assessment order and accepted the returned income of the assessee as follows: "2. In response to the said notices, Shri Hitesh Bhatt, Advocate and Authorised Representative of the assessee attended from time to time on behalf of the assessee and the case was discussed with him. The details called for having furnished and the submission f....
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..... were also verified. It is also stated in para 3 of the order that the returned income was accepted after considering the details available on record and after due verification thereof. In short, a speaking order has been passed. Thus it would clearly transpire that the income was assessed and accepted after due verification process and obviously that would include the verification of the claim of deduction under capital gains. In other words, the A.O. can be said to have satisfied himself and arrived at a conscious view that the capital gain was properly computed accordingly the deduction claimed u/s 54F and 54B were examined and endorsed by the A.O. It may also state that nothing comes out from your aforesaid notice as to how it is believed by you that the records do not show any agricultural income at least in two years prior to the date of transfer of agricultural land. Nothing is pointed out in your notice as to which record shows that the impugned land was not cultivated in the last two years. In absence of any evidence substantiating your said belief, in my humble submission, this would amount to mere suspicion or surmise or at best a change of view from that already ta....
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....tivation on the land is concerned it is abundantly clear that the said land was very much under cultivation, and the crop of "Urad" was taken during the concerned years. (ii) There is no requirement in law that agricultural produce must be converted to income by the assessee himself. There is also no such requirement laid down in Sec. 54B. Hence, not showing such income in the return of income does not make one ineligible for the said deduction. (iii) It has been stated in the notice that the agricultural land purchased during F.Y. 2008-09 and claimed as a deduction U/s. 54F should be used for agricultural purpose. There is no such requirement U/s. 54F, but without prejudice to the same I herewith submit the copies of the Form No. 12 showing that cultivation on the said land was carried out (Annexure Page Nos 6 to 15) (iv) In view of the above, it may kindly be held that deduction u/s 54B was correctly granted and that there cannot be said to be an error in this regard in the assessment order. C. As far as conditions of Sec. 54F are concerned, I have to submit as follows: (I) The Vajdi Agricultural Farm House referred to in your notice and in my balance sheet is an agricu....
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....granted for the residential house. The requirements of Section 54F are that the amounts claimed exempt should be spent within the stipulated time frame as provided in the section. (II) A total amount of Rs.1,35,30,171/- was deposited by me with Bonk of Maharashtra, Rajkot. The said amount was retained therein itself and thereafter the spending for construction has taken place from the said bank. The capital gain account scheme referred to by you is administered by banks. I have carried out the task of ensuring that the amount not spent before due date of filing the return of income (30-9-2009 in my case) was set aside in a bank account. In other words, the said amount has not been utilized by me or deployed anywhere other than with a bank. In view of above, both on law and on merits, the claims u/s 54B and 54F were rightly eligible and have been granted accordingly. Therefore, it is prayed that the proceedings initiated u/s 263 may kindly be dropped." 4. After considering the above reply the ld.CIT passed 263-order observing as follows: "4. In nutshell, since the Assessing Officer has allowed the deduction of Rs.1,35,30,171/- under section 54F of the Act and the deduction of....
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....nces." 6.2 The assessee vide letter dated 4.8.2011 in response to query no.5, stated as follows: "5. In response to your query no.(5) of your letter, copies of purchase deed, sale deed of suncity land at Haripar and new purchase deed of Koindh agriculture land are attached herewith (Page Nos.20 to 112)." To the query No.4, assessee's response is as follow: "7. In response to your query no.(7) of your letter, details of deduction of Rs.2,94,27,541/- are attached herewith (Page Nos.114 to 227). 6.3 The ld AR for the assessee, Shri Deepak Rindani further brought to our notice the letter dated 27-11-2012 by the ld AO to the CIT [audit] in reply to the objections raised by the Internal Audit Party, [available at page number 24 to 26 of the Paper Book] which is self-explanatory and reads as follows: "... Facts of the case is that the assessee is an individual deriving income from salary, share of profit from Firm and capital gain for the year under consideration [assessment year 2009-10]. Moreover he had sold agricultural land, based on which the case was selected for scrutiny under the AIR category with the remark "AO should examine the source of investment in property as appea....
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....nce the matter was getting time-barred by limitation on 31.12.2011, the AO has not insisted of capital gains deposit scheme [account opening form] and taking other submission and material on record accepted the computation of LTCG and very specifically and catalytically mentioned in the office note how the assessment order that the assessee case selected for scrutiny and that the AIR category to verify the sources of investment in property as appearing in AIR & taxability of sale of property as reported in AIR, was duly verified. Details of sale of property [agricultural land], purchase of land [agricultural land], reply under section 133[6] from government records, computation of LTCG, copy of ledger [expense] of construction of house along with relevant bills produced during the course of assessment proceedings. Considering the above facts the audit objection prized by the IAP is not acceptable and a kindly be dropped." 6.4 Thus the ld AR pleaded the assessing officer had made through enquiry by calling for information under section 133[6] from the office of the Sub- Registrar's, got replies dated 24-11-2011 and 07- 09-2011 with documents. After going through the same and repl....
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.... am inclined to agree with the appellant that there is no compulsion to declare agricultural income to prove that the land in question is agricultural land. Only requirement of law is that agricultural activities should be done which according to Land Revenue record 7/12, is proved. The A.O. has doubted the authenticity of the very record 7/12 of Land Revenue to deny the exemption. In my considered view such exemption cannot be denied unless one has some authentic evidence contrary to the record of a Government Authority. The A.O. has not brought any such evidence on record which is contrary to 7/12 record of Land Revenue Department as submitted by the appellant. Therefore, the disallowance/addition made on this account is deleted and the ground of appeal is allowed. ...... ..... ...... ...... 7. I have gone through assessment order as well as the submissions of the appellant. I am inclined to agree with the appellant that there is no need to deposit in the specified account if the money is intended to spend within stipulated time (1 year before sale of land and 2 years after the sale or 3 years from the date of sale) as mentioned in section 54F. Here the appellant has already ....
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....d the Sub-Registrar, Gondal vide his letter dated 24.11.2011 submitted copies of the details of sale deed and Sub- Registrar, Dhangandra vide his office letter dated 7.9.2011 submitted details called for by the AO relating to the purchase of agriculture land at Village Kandh. However, in the assessment order passed by the AO, there is no whisper on these inquiries made by him, before passing regular assessment order. Probably for this reason, the ld.CIT has reopened the assessment under section 263 of the Act. 9. Further, we find that the ld.CIT also has not verified assessment record properly and simply carried out the objections made by the Internal Audit Party of the department, and thereby initiated the Revision proceedings. It can be seen from the show cause notice issued under section 263 of the Act, wherein the ld.CIT has categorically mentioned that the AO did not verify the facts and allowed the deduction under section 54B & 54F of the Act. This observation by the ld.CIT is not correct, for the reason that the ld.AO has called for the details from the Sub-Registrar and received reply from Sub-Registrar on 24.1.2011 and 7.9.2011 respectively. Thus, the ld.AO though made in....