TaxTMI 
TaxTMI 
2025 (4) TMI 2195
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....sessment proceeding even when the AO had conducted thorough enquiries and also most importantly the Pr. CIT failed to carry our any enquiry himself and also failed to demonstrate which most necessary enquiry the Ld. AO failed to carry out. 1.3. The Worthy Pr. CIT failed to appreciate that inadequate inquiry does not amount to lack of inquiry so as to assume valid jurisdiction u/s 263. 1.4. The Worthy Pr. CIT, vide Para 11 of her order, has erred in holding that the assessment order requires to be revised u/s 263 since the Girdawari of agricultural land furnished by the assessee was not signed / stamped by the competent authority and it was never subjected to verification even when the facts are otherwise. 1.5. The Worthy Pr. CIT has erred in holding that the deduction u/s 54F has been wrongly computed by the assessee and by allowing the same Ld. AO has also erred, even when the same was correctly computed and the issue was outside the ambit of s. 263. 1.6. The Worthy Pr. CIT has erred in holding that the deduction u/s 54B cannot be allowed in respect of agricultural land purchased from advance received against sale of agricultural land and the pe....
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....ut of the advance amount of Rs. 1,47,66,375/- received in September 2013 against his share in the sale portion of land, the assessee invested Rs. 1,35,08,500 in the purchase of agricultural land prior to the execution of the sale deed on 14.08.2014. Additionally, he purchased agricultural land worth Rs. 1,43,60,310 after the execution of the sale deed on 14.08.2014 and incurred development expenses amounting to Rs. 4,37,900 on the land. The assessee claimed deduction under Section 54B in respect of both categories of agricultural land purchases against the capital gains arising from the sale of land, for which the deed was executed on 14.08.2014. The capital gain was duly declared in the ITR for Assessment Year 2015-16. 3.3 The assessments for AY 2015-16 and AY 2016-17 for both the assessee and his father were scrutinized under Section 143(3). Notably, for AY 2015-16, a notice under Section 143(2) for limited scrutiny was issued by the non-jurisdictional AO, Ward-2(3)(1), Kanpur. The case was later transferred to the jurisdictional AO, Circle 6(1), Mohali, on 04/10/2016, without an order under Section 127 or providing the assessee a reasonable opportunity to be heard, violating ....
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.... shows that it was a composite sale and not 2 separate sales. Therefore, the transaction of sale deed happening in Aug 2014 started much earlier with receipt of advance in Sep 2013 and that receipt of advance can not be viewed as only for sale deed executed in Feb 2016. Further, the buyer had also confirmed these facts via his duly sworn and attested affidavit. Copy of the same is at the page no 34 of Vol-I of PB. 1.1.3. Factually, based on above, the Worthy PCIT has erred in holding that the 2 sale deeds are not composite and advance received in Sep 2013 can not be linked with sale deed executed in Aug 2014 which is in question in year under consideration. This finding of the Ld. PCIT deserves to be reversed. 1.1.4. Another question, which is purely legal, that was raised by the Ld. PCIT was that deduction u/s 54B can not be allowed in respect of land purchased prior to execution of sale deed. For this, she held that s. 54B permits deduction in respect of land purchased "after" sale. Now the question is whether such investment made after the agreement to sell and receipt of advance but prior to the formal sale deed, qualifies u/s 54B. It is sett....
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....fore formal execution of the transfer deed. This interpretation has received judicial recognition in multiple cases, including: * DCIT v Assa Singh in ITA No. 26/Asr/2015 dated 11.3.2016, ITAT Amritsar. * Ramesh Narhari Jakhadi Vs. ITO in (1992) 11 CCH 0081, ITAT Pune. * ACIT Vs. Dr. S. Balasundarm in (2013) 36 CCH 107, ITAT Chennai. * CIT-II Pune Vs. Subhash Vinayak Supnekar in Income Tax Appeal No. 1009 of 2014 dated 14.12.2016, Bombay HC. * Ms. Parveen P. Bharucha v. DCIT, 348 ITR 325, Bombay HC 1.1.7. Hence, the investment in agricultural land made by 'A' after the receipt of advance consideration but prior to the execution of the sale deed was eligible for deduction u/s 54B and the Worthy PCIT has erred in objecting on the same in the order u/s 263. 2. Investment Prior to 14.08.2013 in Residential Plot claimed u/s 54F 2.1. Through para 10 of page no. 14 of the order passed u/s 263, the Worthy PCIT raised question about the advance received in regard to sale of property made on 14.08.2014 and deduction claimed u/s 54F for the purchase of residential property before the date of execution of sale deed. Copy o....
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....ng that the said land in question was being used for agriculture purpose. 3.4. Similar issue was raised in the case of the 'A's father in revisionary proceedings u/s 263 and the same was challenged before the Hon'ble ITAT and order was passed in the favor of the assessee's father (Copy of ITAT order of Daljit Singh Bassi (assessee's father) is appended at the page no. 23 to 38 of Vol-1 of compilation of Judgements) wherein it was held that: "We have also gone through the various documents filed by the assessee before us and we agree with the contention of the Ld. AR that the assessee had filed voluminous evidences in support of his claim of exemption u/s 54B of the Act by filing the copies of the purchase deeds, sale deeds as well as copies of Girdawari and Sarsai. There is also a certificate of 'Patwari' on record and from the said documents, it is very much evident that the lands in question were of agricultural in nature." 3.5. It is evident from the above that the land sold by the 'A' was agricultural land and was being used for agricultural purposes 2 years prior to sale. The Hon'ble Tribunal confirms the genuineness of agricultur....
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....uction not supported by bills The 'A' has made investment in the residential house and claimed the deduction u/s 54F for the purchase/construction of property on a proportionate basis. Thereafter, 'A' carried out the construction on the property purchased and the map was also approved for the construction. The investment in construction was modest, and 'A' submitted sufficient documentary evidence including construction bills and approved building map. Copy of construction bills are appended at page no 82 to 121 of Vol-1 of PB and Copy of map is appended at page no. 49 to 52 of Vol-I of PB. The ld. AO, after examining the above documents, accepted the construction cost as genuine. Further, it is submitted that there is no finding that any claim was inflated, fictitious, or unsupported. Even if some portion of the construction expenditure involved cash payments (as is common in local construction), the same does not disqualify the claim as long as the investment is genuine. In absence of any specific finding of misrepresentation, the disallowance of the deduction on this ground is unwarranted. Arguments on Legality of assessment: 6. Transferring t....
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....w that serving of notice u/s. 143(2) of the Act is a sine qua non for an assessment to be made u/s 143(3) of the Act. In this case, notice u/s. 14.3(2) of the Act was issued on 06.09.2013 by ITO, Ward-1, Haldia when he did not have the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice he duly transferred the file to the ACIT, Circle-27, Haldia on 24.09. 2014 when the ACIT issued statutory notice which was beyond the time limit prescribed for issuance of notice u/s. 143(2) of the Act. We note that the ACIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, the issuance of notice by the ACID, Circle 27. Haldia after the limitation period for issuance of statutory notice u/s 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law and consequential assessment order passed u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the....
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....that when the issue is thoroughly enquired and examined by the Ld.AO in the original assessment framed u/s 143(3) revisionary proceedings are not maintainable. For this proposition we, rely upon the following judgements: * Malabar Industrial Co. Ltd. vs CIT (2000) 243 ITR 83 (SC) * CIT vs Sunbeam Auto Ltd. 332 ITR 167 (Del HC) * ITO vs DG Housing Projects Ltd. 343 ITR 329 (Del HC) 10. In view of above, it is therefore prayed that the impugned order passed u/s 263 may please be quashed. We shall be highly obliged. 6. Per contra, the Ld. DR relied on the order of the Ld. PCIT. 7. We have heard the rival contention of both the parties and also perused the material available on the record. We find that the Ld. PCIT has set aside the assessment order passed under section 143(3) assuming jurisdiction under section 263 on the ground that the deduction under section 54B cannot be allowed in respect of agriculture land purchased from advance received against sale of agriculture land. He also held that the period of one year prior has to be reckoned / counted from the date of execution of sale deed of land sold by the Assessee. 7.1 During the proc....