TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 453
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....t following the Principles of Natural justice in as far as not providing adequate opportunity to the appellant to place its cards. 3. The Pr. CIT has erred in passing order u/s. 263 without going through the assessment record which contained all evidence in support of the income claimed as exempt. 4. The Pr. CIT has erred in passing order u/s. 263 holding the order passed by the AO to be erroneous and prejudicial to the interest of Revenue, observing that here is nothing on record to show that the land under acquisition was not a capital asset, particularly when the Acquisition order clearly mentions the alleged land as CHAHI situated in Village - Ullawas, tehsil - Sohna, distt. - Gurgaon, which is further fortified by the Tehsildar's certificate as to distance from Municipal limits, was annexed with the assessee's reply dated 04/12/2017. 5. The Pr. CIT has erred in passing the order completely ignoring the mandate of sub-section 1 of section 263 which envisages making of inquiry or causing to be made such inquiry as it deems fit. Since no such inquiry was made, or caused to be made, the order passed is void-ab-initio. 6. The Pr. CIT has erred in exercising jurisdic....
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....oss account as other income. While computing book profit u/s. 115JB of the Act it is seen that the assessee reduced sum of Rs. 90,64,691/- from the profit as per the profit and loss account exempt income which also included compensation received on compulsory acquisition of land amounting to Rs. 88,98,605/-. The ld. PCIT further observed that the assessee had claimed compensation received as exempt. The ld. Pr. CIT further noted that there is nothing on record to show that the land under acquisition was agriculture land and not a capital asset in terms of provision of section 2(14) of the Act. Therefore, the ld. Pr. CIT noted that it appears that compensation received on acquisition of land which was claimed as exempt under normal provision and so reduced while computing book profit was not in order. 7. The show cause notice based on this observation was issued u/s. 263 of the Act by the ld. Pr. CIT and further notice was issued vide letter dated 09.02.2020 nobody attended. In response that notice no submission were filed in these regards. Therefore, the ld. Pr. CIT based on the assessment records hold a view that the order passed by the Assessing Officer is erroneous and prejudic....
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....income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section.]" It is clear from the above that income arising from the transfer of any land as mention in item (a) or (b) of sub-clause (iii) of clause (14) of section 2 shall not be included or treated as revenue derived from land and therefore the same shall not be agricultural income. Further sub-section (37) of section 10 deals with the exemption granted in respect of transfer of agricultural land. Sub-section (37) of section 10 is reproduced below: "in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "capital gains" arising from the transfer of agricultural land, where (1) Such land is situate in any area referred to in item (a) or item (b) of sub clause (iii) of clause (140 of section 2; (ii) Such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his; (iii) Such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for w....
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....al land owned by it. Return of Income for the year under consideration was filed on 29.03.2017 declaring total income at Rs. 41,17,990/- under normal provisions of the Act (APB 2-5) and book profit of Rs. 69,65,538/- u/s. 115JB of the Income Tax Act (APB 2-5). Case of assessee was selected for scrutiny assessment for the reason that it has shown large exempt income. Ld. AO called for various details and information which were submitted. After examination of details and being satisfied from details vis-à-vis the income shown in the return, ld. AO passed order u/s. 143(3) of the Income Tax Act dated 14.12.2017 at Returned Income. Subsequently, ld. Pr. Commissioner of Income Tax-2, Jaipur on the observation that while computing Book profit, assessee has reduced a sum of Rs. 90,64,691/- from profit as per Profit & Loss Account as exempt income which includes compensation received on compulsory acquisition of agricultural land amounting to Rs. 88,98,605/- and treated the Assessment order passed u/s. 143(3) as erroneous and prejudicial to the interest of the revenue. Accordingly, ld. PCIT vide order dated 26.02.2020 issued directions for Revision of the Assessment completed u/s.....
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....t the compensation received on compulsory acquisition of land was allowed to be reduced while computing income under normal provisions and also while computing book profit u/s. 115JB of the Act and without verifying if the said compensation was exempt u/s. 10 or not. In this regard, it is submitted that during the course of assessment proceedings, ld. AO specifically sought documentary evidences for acquisition of Agriculture land and interest paid on compensation. In response to such query, assessee vide letter dated 04.12.2017 (APB-17) submitted copy of notice of land Acquisition officer (APB 18-25) as per which the land was acquired u/s. 4 of the Land Acquisition Act, 1894 and since the land was used as agriculture. It is thus submitted that issue was thoroughly examined by ld. AO that said land was agricultural land in terms of provisions of Section 2(14)(iii). Ld. CIT at para 5 of her order has observed that: ".....................Agricultural income is defined in sub-section 1A to section 2 of the Act. The explanation 1 to this sub-section provides that the revenue derived from land shall not include any income arising from the transfer of any land referred to in item (a)....
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....ch land is exempt from tax. Moreover, ld. PCIT has not doubted the assessment done under the normal provisions of Income Tax where such income was claimed as exempt. Once the income is admitted as exempt for the purpose of levy of normal tax than how it could be taxable for the purpose of MAT u/s. 115JB. In this regard reliance is placed on the decision of hon'ble ITAT, Vizag branch in the case of M/s. Agri Gold Foods and Farms Products Ltd. Vs. CIT in ITA No. 451/JP/2012 dt. 30.7.2014 wherein the hon'ble bench in para 7 of the order has observed as under: (case law compilation pages 34-37) 7. After hearing rival submissions, we hold as follows : The undisputed fact in the case of the assessee is that, the land transferred is agricultural land. This is so because the assessing officer has not assessed the income arising out of those lands under the regular provisions of Income-tax Act. In fact, the Ld. CIT Vijayawada has accepted the correctness of computation of total income under the regular provisions of the Act. Consequently, the profit on sale of agricultural land would become agricultural income u/s. 2(1A) of the Act and hence not part of total income as per prov....
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.... Tea Estate Ltd. Vs ACIT [TS-345-ITAT-2014 (COCH)], (case law compilation pages 19-24) has held that capital profit on sale of rural agricultural land had to be excluded for computing minimum alternate tax (MAT), having observed that section 115JB contained in Chapter XII-B did not extend to cover section 5 of the Income Tax Act, 1961 (the Act). Chapter XII-B only provided an alternate mechanism for computation of tax and could not be invoked to cover transactions which were not intended to be taxed. Hon'ble Cochin bench of the Tribunal in the case of Harrisons Malayalam Ltd. Vs. ACIT [2009] 32 SOT 497 (case law compilation pages 25-33) and hon'ble ITAT Mumbai Bench in the case of Shivalik Venters Pvt. Ltd. in ITA No. 208/Mum/2012 dt. 19.08.2015 (case law compilation pages 7-18) also expressed the same view. In view of the above factual background of the case, it is humbly submitted that essential conditions necessitated for invoking section 263 are not fulfilled. The basic ingredients to be fulfilled before invoking section 263 have been explained by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83 (SC) in the foll....
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.... it means that assessing officer should conduct necessary enquiries or verification which a reasonable and prudent officer shall carry out in normal circumstances. This phrase in no way means that enquiries should have been conducted in the manner Principal Commissioner wishes the same to be. In this regard reliance is placed on the following decisions: (1) Shri Narayan Tatu Rane vs ITO ITA No. 2690 & 2691/Mum/16 dated 06.05.2016 "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld. Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order afte....
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....ned order under s. 263, two views were inherently possible on the word "profits" occurring in the proviso to s. 80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263." In view of the above proposition, and respectfully following principle laid down by the Hon'ble courts and keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly." In view of above, it is submitted that: 1. The Order of Ld. AO is not erroneous: It has already been established above that Ld. AO had made inquiry regarding nature of land compulsorily acquired and complete details as asked for by the Ld. AO were submitted by assessee during the course of assessment proceedings and, as submitted above, the Ld. AO passed the assessment order after taking into consideration all those details and evidences. It is therefore, subm....
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....e Tax Act. Thus, the action of the Ld. AO was not at all prejudicial to the interest of revenue. Section 263 cannot be permitted to be brought into play unless both the conditions are satisfied i.e. the order has to be prejudicial as well as erroneous both, meaning thereby that the twin conditions are to be cumulatively satisfied before proceeding to revise an assessment order. In the instant case it is submitted as above that the order of ld. AO is neither erroneous nor it is prejudicial to the interest of revenue and thereby none of the conditions are satisfied, what to talk about twin conditions to be cumulatively satisfied. In view of above facts and in the circumstances and various judicial pronouncements which are directly on the issue, it is submitted that compensation received by assessee on compulsory acquisition of Rural Agriculture land (which is not a Capital Asset) is also Agriculture income and is thus outside the purview of taxability under normal provisions as well as of section 115JB of the Income Tax Act. Therefore order passed by ld. AO u/s. 143(3) after due examination of documentary evidences in support of such facts, is neither erroneous nor prejudicial to....
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....bove para 1, the assessee company has received compensation of Rs. 88,98,605/- on acquisition of agriculture land which is exempted under income tax act and thus the assessee has correctly shown the same in their return of income. As regards the supporting documents and power of attorney are concern, we will submit the same in next date of hearing; as the directors of the company are presently out of station. Extract from the letter dated 04.12.2017 During the course of assessment proceedings, you have asked us to submit documentary evidence for acquisition of agriculture land and interest paid on compensation. In this regard, we are submitting copy of notice of Land Acquisition officer, with copy of award and details of interest payment made on compensation with details of TDS deducted. 10. The ld. AR further argued that the contention of ld. Pr. CIT is only about the compensation received by the assessee company for consideration of the tax as per provision of section 115JB of the Act. Here also, the ld. Pr. CIT accept that while considering the show cause in the proceeding before him, the said income is not chargeable to tax in lieu of the compensation paid on account of co....
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....ion of the Act does not include the compensation received on land. Therefore, while computing the profit u/s. 115JB of the Act same is wrongly excluded by the assessee and there upon by the AO. This provision are alternative taxation provision they requires seriously attention so as to achieve the object behind such alternative taxation scheme under the Act. These all provisions are deeming provisions and are required to be treated separately from the normal provision of the Act. Section 115JB specifically gives certain exclusion and not which the income of the assessee which specifically does not fall under that provision of law are not required to be excluded. Therefore, ld. Pr. CIT has rightly invoked provision of section 263 of the Act. Even the law considered that in case of the corporate assessee profit is required to be determined under the Companies Act and that profit is to be adjusted as per the provision of section 115JB of the Act strictly and in that process no further adjustment which are not prescribed is to be considered. The ld. AO cannot remove any provision or alter them while assessing the income of the assessee for this view, the ld. AR of the assessee brought ....
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....that the Profit arising on sale of agricultural land, which does not fall in the category of "Capital Asset" as defined under sec. 2(14) of the Act does not come under the purview of the Income tax Act at all. For example, the profit arising on sale of personal effects is not exigible to Income tax Act. In the similar manner, the profit arising on sale of agricultural land, which is not a Capital asset, is also not exigible to Income tax. Hence, in our view, an item of income which does come under the purview of Income tax cannot be subjected to tax under any of the provisions of the Act. Hence, the Tribunal, in the assessee's own case referred above, has expressed the following view:- "The provisions of Chapter XII-B of the Act do not, in our view, operate to extend the scope of 'total income' per section 5 on which the charge to tax u/s. 4 is attracted, but is only toward providing an alternative basis for computing the same." Accordingly, we are of the view that the profit from sale of agricultural land, which is not a "Capital Asset", cannot be included for the purpose of computing book profit u/s. 115JB of the Act. Accordingly, we uphold the decision taken by....
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.... book profit u/s. 115JB of the Act. The bench notes that the prerequisite exercise of jurisdiction by the learned Principal CIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Principal CIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, then the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudi....