2015 (11) TMI 1195 - AT - Income Tax

Revision u/s 263 - deduction u/s 54B claimed by assessee qua sale of Sohna land was wrongly allowed as one half of the new agriculture land was purchased in the name of the assessee s wife Smt. Anita Rajni - Held that - While examining the record under sec. 263, CIT has to see whether the subordinate authority has considered relevant issues and enquired into the relevant aspect of the claims in the year in question. Since the agricultural income in this year was not shown, the AO before partly accepting the assessee s claim u/s 54B ought to have enquired whether the land in question was used for agricultural purposes in the last two years or not, There is no finding to this effect in the assessment order. From the second page onwards till the end of impugned assessment order, there is only reference to claim of Section 54B of the Act. Thus in our view, this crucial aspect of land in question agriculture or residential plots, it s being sold by way of plots in sq. yards become necessary for allowability of claim. Record does not reveal that these were considered or inquired. Thus there is a total lack of enquiry on these aspects besides whether the agricultural income was earned or not from this very land. In our considered view, the assessment order suffers from lack of enquiry on these crucial aspects and it is not a case of partial inquiry as pleaded to be covered by the judgement of Hon ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2009 (9) TMI 633 - Delhi High Court) and other citations. Thus the order passed by the AO was erroneous and prejudicial to the interest of the Revenue. The ld. CIT has rightly passed the order u/s 263 with the direction that the AO should properly frame the assessment order afresh after making proper enquiries and by affording adequate opportunity of being heard to the assessee. - Decided against assessee.

Summary

Issues:
1. Challenge to the action of the ld. CIT u/s 263 of the Act in setting aside the assessment order dated 23-12-2011 u/s 148 r.w.s. 143(3) of the Act.
2. Disallowance of deduction u/s 54B while computing capital gains due to the sale of a plot claimed as agricultural land.

Analysis:
1. The case involved an appeal by the assessee against the order of the ld. CIT, Alwar, challenging the setting aside of the assessment order dated 23-12-2011 u/s 148 r.w.s. 143(3) of the Act. The basis for reopening the assessment was the alleged erroneous allowance of deduction u/s 54B for the sale of Sohna land. The ld. CIT found that the AO failed to make proper inquiries regarding the nature of the land sold, leading to the issuance of a show cause notice under section 263 of the Act. The assessee contended that the AO conducted a thorough inquiry and correctly disallowed part of the claim u/s 54B, arguing against the jurisdiction of the ld. CIT under section 263.

2. The dispute centered on the eligibility of the assessee for deduction u/s 54B concerning the sale of land claimed to be agricultural. The assessee provided evidence of agricultural activities on the land, including the submission of Jamabandi and an affidavit confirming agricultural operations. The ld. CIT, however, found discrepancies in the documents submitted and raised doubts about the agricultural nature of the land sold. The ld. DR supported the ld. CIT's findings, emphasizing that the land was sold as plots and not as agricultural land, with no disclosed agricultural income for the relevant year. The Tribunal noted the lack of inquiry by the AO into crucial aspects such as the use of the land for agricultural purposes and the nature of the land being sold, leading to a decision upholding the ld. CIT's order under section 263 for fresh assessment proceedings.

3. The Tribunal held that the AO's failure to adequately investigate key aspects related to the claim u/s 54B rendered the assessment order erroneous and prejudicial to the revenue's interest. The ld. CIT's direction for a fresh assessment with proper inquiries and opportunity for the assessee was deemed appropriate. The Tribunal dismissed the assessee's appeal, affirming the ld. CIT's decision under section 263, emphasizing the burden on the assessee to prove eligibility for deductions and exemptions, especially regarding agricultural income and land use for such claims.

This detailed analysis of the judgment highlights the issues raised, the arguments presented by both parties, and the Tribunal's decision based on the legal provisions and factual findings in the case.