2019 (12) TMI 40 - HC - Income Tax

Revision u/s 264 - benefit u/s 54B denied - HELD THAT - Revisional Authority while rejecting the revision under Section 264, has stated so, perusal of the order passed by the AO would show that he was carried over by the fact that the land was sold to a person, who is a developer and therefore, the petitioner is not entitled to benefit under Section 54B. Apart from saying so, the AO has given a finding that the assessee could not show that there has been an agricultural activity. The first respondent has also reiterated the very same contention. On the other hand, it is stated by the petitioner that he has produced chitta, adangal etc., for the relevant period in support of his contention that the subject matter land were used for agricultural purposes two years immediately preceding the date on which the transfer took place. This Court is of the view that the factual aspects raised in this writ petition, need to be considered once again by the first respondent and to decide the matter as to whether the petitioner has satisfied the requirement contemplated under Section 54B, while seeking deduction. Certainly, the reason stated by the Assessing Officer that the purchaser is the builder and therefore, the land is not an agricultural land, cannot be a reason which is in consonance with the requirement made under Section 54B of the said Act. Therefore, it is for the first respondent to consider and decide the matter afresh. Accordingly, this writ petition is allowed and the order passed by the first respondent is set aside. Consequently, the matter is remitted back to the first respondent to consider the matter afresh by giving an opportunity of hearing to the petitioner and pass fresh order on merits and in accordance with law.

Summary

Issues:
1. Dismissal of petition under Section 264 of the Income Tax Act.
2. Claim for deduction under Section 54B of the Income Tax Act, 1961.
3. Rejection of documents supporting agricultural activities.
4. Interpretation of requirements under Section 54B for deduction eligibility.

Analysis:
1. The petitioner challenged the order of the first respondent dismissing the petition under Section 264 of the Income Tax Act, which was based on the rejection of the petitioner's claim for deduction under Section 54B. The petitioner had purchased agricultural lands and carried out agricultural activities but did not report the income in tax returns due to its meager nature. The petitioner sold the lands and reinvested the proceeds in other agricultural lands, claiming deduction under Section 54B. However, the authorities rejected the claim citing lack of proof of agricultural activities, leading to the dismissal of the petition.

2. The petitioner contended that he had indeed conducted agricultural activities on the sold land and submitted relevant revenue records to support his claim for deduction under Section 54B. On the other hand, the Revenue argued that without substantial evidence, the claim cannot be allowed. The court examined the requirements of Section 54B, which necessitate the use of the land for agricultural purposes two years before the sale and the purchase of other agricultural land within two years after the sale.

3. The dispute primarily revolved around the petitioner's usage of the land for agricultural purposes immediately preceding the sale. While the authorities focused on the buyer being a developer and the lack of evidence of agricultural activity, the petitioner provided documents like chitta and adangal to prove agricultural usage. The court emphasized the importance of reevaluating these factual aspects to determine the petitioner's eligibility for deduction under Section 54B.

4. The court concluded that the Assessing Officer's reasoning regarding the buyer being a developer not aligning with Section 54B's requirements was crucial. The first respondent was directed to reconsider the matter, allowing the petitioner to resubmit supporting documents within eight weeks for a fresh decision. The judgment highlighted the necessity of a thorough review to ascertain compliance with the statutory provisions, emphasizing the importance of factual verification for tax deductions under the Income Tax Act.