TaxTMI 
TaxTMI 
2025 (7) TMI 1500
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....144B of the Act on 19.09.2022 by disallowing the deduction claimed u/s 54B of the Act at Rs. 2,85,69,375/-. 4. Subsequently the Ld. PCIT examined the record and noted that the assessee during the year had sold a land for a consideration of Rs. 13,75,95,200/- on which long term capital gain was offered at Rs. 6,19,31,262/-. From the working of long term capital gain he noted that the assessee has claimed deduction u/s 48 of the Act on 'cost of improvement' on the said land amounting to Rs. 1,88,85,580/- (after indexation). The said 'cost of improvement' has been claimed for financial years 2009-10 to 2019-20. However, no supporting evidence or document in respect of these expenses incurred on the 'cost of improvement' was submitted by the assessee during the course of assessment proceedings. He noted that the Assessing Officer, while passing the assessment order, has allowed these expenses as deduction u/s 48 of the Act. He referred to the amendment to the provisions of section 263 of the Act w.e.f. 01.06.2015 according to which an assessment order which is passed allowing any relief without inquiring into the claim will make such order both erroneous and prejudicial to the interes....
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....vidence was provided to substantiate these expenses. The AO should have demanded complete documentary proof and conducted a thorough examination of whether the "Cost of Improvement" was actually incurred, whether it was capital in nature, and whether it was properly indexed for tax computation. Despite the absence of supporting documents, the AO accepted the claim without making necessary inquiries, thereby allowing a deduction that may not be genuine or fully justified. 6.1 From the discussion above, it is evident that the AO has not done due diligence such as requesting complete supporting documents, examining the nature of improvement, verifying whether the expenses were actually incurred, cross-checking the assessee's bank statements and financial records to ascertain the eligibilities of these "Cost of Improvement" claimed by the assessee. It neither emanates from the order nor from the records that on the issue of "Cost of Improvement" any enquiries were made on the above lines. 07. After the introduction of Explanation 2 to Sec. 263, it has been made clear as to what kind of assessment order shall be deemed to be erroneous in so far as it is prejudicial to the intere....
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....ination of the relevant details or without application of mind. 8.1 The judgment dated November 2, 2020 of the jurisdictional Hon'ble Bombay High Court in the case of Sesa Starlite Ltd. v. Commissioner of Income Tax. Panaji, Goa [(2021) 430 ITR 121 (Bombay)] has dealt with the issue of applicability of the provisions of section 263 in detail. In this case, during the assessment proceedings, the issue of allowability of the claim of exemption under section 10B of the Income Tax Act was explained by an initial submission of the assessee and also thereafter inquired into by the Assessing Officer raising specific queries on that issue. These queries were responded to by the assessee and then the said issue was decided in the assessee's favour. Hon'ble High Court of Bombay has held in this case that the provisions of section 263 were applicable because of non-application of mind by the Assessing Officer. 8.2 In this context, reference may also be made to the decision of the Hon'ble Bombay High Court in the case of Shoreline Hotels Pvt. Ltd. vs. CIT (98 Taxman 234). In this case, it has been held that if there is failure to make inquiry by the AO, then the order of th....
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....fied that the assessment order dated 19.09.2022 passed for the Assessment Year 2020-21 is erroneous in so far as it is prejudicial to the interest of the Revenue. Consequently, the said assessment order dated 19.09.2022 for the A.Y.2020-21 is hereby partly set aside to the file of the A.O for the limited purpose of examining the following issues and passing fresh assessment order in the light of enquiries made: 1. To examine the "Cost of Improvement" claimed by the assesse 11. The Assessing Officer is directed to give adequate opportunity of being heard to the assessee before passing the fresh assessment order." 5. Aggrieved with such order of the Ld. PCIT, the assessee is in appeal before the Tribunal by raising the following grounds: 1. Under the given facts and circumstances of the case and in law, the original assessment was completed based on "Limited Scrutiny" with respect to 'Capital Gains Deduction Claimed'. However, the Ld. Principal Commissioner of Income Tax erred in initiating revision proceedings u/s 263 on an entirely different issue i.e. cost of improvement. Hence, Proceedings u/s 263 is bad-in-law. 2. Under the facts and circumstances of the case and in....
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....arket - I have also developed an Animal stable (GOTHA) in which, I was having cows and other animals As stated, I am enclosing the land acquisition chart marked as Annexure-3. Also enclosing chart of FOUR BOUNDRIES as Annexure-4. Also enclosing chart of cost incurred for acquiring lands marked as Annexure-5. Also enclosing chart of year-wise crops cultivated & sold, revenue therefrom, expenses thereto and net Agricultural income, marked as Annexure-6. The Agricultural income has been declared in each year's Return of Income. Copies of the past three years returns are enclosed and marked as Annexure-7. All these evidences will substantiate that, I was indeed carrying out AGRCULTURAL activity. As such, claim of exemption u/s 54B is valid and rightful." 9. He accordingly submitted that the full details were given before the Assessing Officer regarding the cost improvement, therefore, the Ld. PCIT was not justified in invoking the jurisdiction u/s 263 of the Act. He also relied on the following decisions: i) Sanjeev Garg V. PCIT [2025] 175 taxmann.com 79 (Chandigarh - Trib.) ii) Ajay Agarwal V. CIT [2025] 171 taxmann.com 91 (Jaipur Trib.) iii) Mind Sports League (P.) Ltd....
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....and suitable for agriculture. However, this submission does not justify the incurring of huge expenditure to the tune of more than one crore of rupees just for digging a tube well or bore-well. The Assessing Officer has not made any enquiry on the aspect of cost of improvement. Although the case was selected for scrutiny to verify the capital gain deduction claimed, however, the Assessing Officer without making enquiry for which the case was selected for scrutiny, accepted the submissions of the assessee. Further, the submissions of the Ld. Counsel for the assessee that the Ld. PCIT cannot travel beyond the scope of limited scrutiny is without any merit since cost of improvement is a part of calculation of capital gain. The Assessing Officer was supposed to examine every aspect of capital gain deduction claimed since the case was selected for limited scrutiny to examine the capital gain deduction claimed. 12. So far as the argument of the Ld. Counsel for the assessee that the assessee has opted for the Vivad Se Vishwas Scheme, 2024 and therefore the PCIT cannot invoke 263 proceedings is concerned, we are of the considered opinion that the same is also without any merit. A perusal ....