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2014 (11) TMI 343 - AT - Income TaxMatter remanded by CIT to AO for ascertainment of the nature of land - Leviability of capital gain Agricultural land situated within 8 km from a Municipality or Panchayat or not Held that - The assessee is not exigible to capital gains as the land was situated in an area in the village Kakunur where the population is only 1537 and not within 8 km from a Municipality or Panchayat - The assessee has also offered as income from other sources a sum of ₹ 8,45,000 which only shows that the AO has thoroughly verified the transaction of the assessee with respect to the sale of agricultural land and has taken a conscious view after application of his mind hence, the order of the AO is neither erroneous nor prejudicial to the interests of the revenue by invoking the provisions of section 263 of the Act - Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer who passed the order, unless the decision is held to be erroneous - An order to be termed as prejudicial to the interests of the revenue, there must be some prima facie material on record to show that tax which was lawfully eligible has not been imposed relying upon Commissioner Of Income-Tax Versus Gabriel India Limited 1993 (4) TMI 55 - BOMBAY High Court - the AO applied his mind to the facts of the case and after necessary enquiry, he had passed the assessment order revenue has not brought any material on record contrary to the facts brought out by the AO - decided in favour of assessee.
Issues Involved:
1. Validity of the order passed under Section 263 of the Income-tax Act, 1961. 2. Taxability of income from the sale of agricultural land. 3. Application of mind by the Assessing Officer (AO) during the assessment proceedings. Detailed Analysis: 1. Validity of the order passed under Section 263 of the Income-tax Act, 1961: The appeal by the assessee was directed against the order passed under Section 263 of the Income-tax Act, 1961 by the Commissioner of Income-tax-III, Hyderabad. The Commissioner set aside the assessment order and remanded the issue back to the AO to examine whether the land in question was agricultural land and not liable to capital gains. The Tribunal found that the AO had already verified the details and taken a conscious view after applying his mind. The Tribunal cited the principles laid down by the Hon'ble Bombay High Court in Gabriel India Ltd. (203 ITR 108) (Bom) and the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. (243 ITR 83) (SC) which state that an order cannot be termed erroneous unless it is not in accordance with law, and if the AO has taken one of the plausible views, it cannot be treated as erroneous. Therefore, the Tribunal concluded that the order of the AO was neither erroneous nor prejudicial to the interests of the revenue, thus quashing the order of the Commissioner. 2. Taxability of income from the sale of agricultural land: The assessee had shown an advance of Rs. 13,00,000 received on 30.03.2009 towards the sale of agricultural land in the balance sheet filed with the return of income for A.Y. 2009-10. The balance sale consideration of Rs. 2,00,000 was received in the subsequent year (A.Y. 2010-11). The total advance of Rs. 15,00,000 was admitted in the balance sheet, and no capital gain was admitted as the land sold was rural agricultural land. The AO verified the details and accepted the claim of the assessee, considering that the land was situated in a village with a population of 1537 and not within 8 km of a Municipality or Panchayat, thus exempting it under Section 2(14) of the Act. The assessee also offered the excess amount received over the sub-registrar value as income from other sources in A.Y. 2010-11, which the AO assessed accordingly. 3. Application of mind by the Assessing Officer (AO) during the assessment proceedings: The Tribunal noted that the AO had verified the details filed by the assessee to prove that the land sold was rural agricultural land and had taken cognizance of the agricultural income shown in the return of income. The AO had applied his mind to the facts of the case and after necessary enquiry, passed the assessment order. The Tribunal referenced several cases, including Antala Sanjaykumar Ravjibhai v. CIT, Roshan Lal Vegetable Products (P) Ltd. v. ITO, Fine Jewellery (India) Ltd. v. ACIT, and Bharat Overseas Bank Ltd. v. CIT, where it was held that proper enquiry and examination of accounts by the AO invalidated the action under Section 263. The Tribunal further cited CIT v. Hindustan Lever Ltd. [2012] 343 ITR 161 (Bom), where it was held that proceedings under Section 263 are not valid in areas where the AO had applied his mind. Conclusion: The Tribunal upheld the assessment order passed by the AO and quashed the order of the Commissioner, thereby allowing the assessee's appeal. The Tribunal concluded that the AO had thoroughly verified the transaction and taken a conscious view, and the order was neither erroneous nor prejudicial to the interests of the revenue. The judgment emphasized that for the Commissioner to exercise power under Section 263, the order must be both erroneous and prejudicial to the interests of the revenue, which was not the case here.
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