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2020 (1) TMI 724 - AT - Income TaxRevision u/s 263 - lack of inquiry into certain vital aspects concerning eligibility of deduction claimed u/s 54B - deduction claimed u/s 54B has not been properly examined by the AO and the deduction claimed u/s 54B has been allowed without meeting the pre-requisites of Section 54B and the amount of capital gains claimed as exemption u/s 54B has not been kept deposited in specified capital gains accounts scheme and the AO has also failed to make any proper inquiry in this regard - HELD THAT - First part deals with exemption of capital gains from transfer of land (original asset) used for agricultural purpose in the two years immediately preceding the date on which the transfer took place. The second part deals with the manner of utilization of gains arising from transfer of such land used for agricultural purposes. Pr.CIT has impugned the eligibility of deduction u/s 54B. It is an admitted fact that on the date of transfer of land (which is broadly the legislative expression used in Section 54B of the Act) the land in question was neither agricultural land nor was used for agricultural purposes. The land has been admittedly declared as fallow land on which no agricultural produce is plausible. Thus as per the certificate of Talati as produced by the assessee himself the viability of carrying out agricultural activity was quite dismal. We also find that the assessee has not declared any worthwhile agricultural income in the earlier years from such a large track of land (9286 sq.mtr.). Some expenses voucher produced for expenditure incurred on Tractor does not inspire any confidence. Such material was not produced before the lower authorities as well. The assessee has failed to adduce any satisfactory evidence that the land was subjected to any systematic agricultural operation in last two years immediately preceding the date of transfer as required in law indeed. The reply of the assessee and evidence relied thereupon appears to be cosmetic. AO has failed to make any inquiry on this vital aspect while admitting the claim of the assessee and allowed the claim summarily. Pr.CIT in our view correctly appreciated the facts and applied the law in perspective to draw an adverse conclusion on eligibility of deduction. We see no error in the conclusion drawn by the Pr.CIT to hold that the claim u/s 54B has been allowed without fulfillment of prescribed conditions. We thus decline to interfere with the revisional order of the Pr.CIT on this score. Notwithstanding that claim of deduction u/s 54B is found to be in contravention with law and therefore the second aspect of the assessee need not to be gone into we would however deal with the second aspect of controversy as well for the sake of completeness. The assessee claims to have transfer an amount of 30, 45, 500/- from capital gains saving scheme to capital gain deposit scheme on same stipulations and claims to have not diverted the money for the purposes other than specified under s.54B(2) of the Act. However it is the admitted position that no evidence in this regard was filed before the AO to substantiate the assertions being made. The AO has accepted the claim without looking into this aspect which has direct bearing on maintainability of deduction. The Pr.CIT in the circumstances has rightly remitted the issue back to the file of the AO for requisite verification action of Pr.CIT has shunned prejudice to Revenue without any perceptible prejudice to assessee. - Decided against assessee. Disallowance towards brokerage in the second round of proceedings - HELD THAT - AO in second round of proceedings pursuant to Section 263 of the Act has however also disallowed brokerage of 3, 12, 500/- which is not seen to be emanating from the direction given by the Pr.CIT u/s 263. In the second round of proceedings the AO was governed by the revisional order of the Pr.CIT and in view of the specific directions given therein the AO could not expand the scope of inquiry while passing the order under s.143(3) r.w.s. 263. Therefore the AO was in error in making disallowance towards brokerage in the second round of proceedings. AO has clearly travelled beyond the scope of inquiry under s. 263 of the Act guided to him by the Pr.CIT. The action of the CIT(A) confirming the addition is therefore set aside and the AO is directed to delete the disallowance of brokerage - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Eligibility of deduction under Section 54B of the Income Tax Act. 3. Validity of capital gains deposit under Section 54B(2) of the Income Tax Act. 4. Disallowance of brokerage. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The assessee challenged the jurisdiction of the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act, 1961. The Pr.CIT invoked this section, claiming the assessment order dated 30.09.2010 was erroneous and prejudicial to the interest of the Revenue due to lack of inquiry into the eligibility of the deduction claimed under Section 54B. The Tribunal upheld the Pr.CIT's jurisdiction, noting that the Assessing Officer (AO) failed to make requisite inquiries, and thus, the conditions for invoking Section 263 were satisfied. 2. Eligibility of Deduction under Section 54B of the Income Tax Act: The Pr.CIT found that the land sold by the assessee was not used for agricultural purposes immediately before the transfer, as required under Section 54B. The Tribunal noted that the land was converted to non-agricultural use before the sale and was classified as "fallow land," meaning it was not used for agricultural purposes. The assessee's evidence of agricultural use, such as the Talati certificate and crop records, was deemed insufficient. Consequently, the Tribunal agreed with the Pr.CIT that the AO erroneously allowed the deduction under Section 54B without proper inquiry. 3. Validity of Capital Gains Deposit under Section 54B(2) of the Income Tax Act: The Pr.CIT also questioned whether the capital gains amount deposited in the capital gains savings account was properly utilized for purchasing new agricultural land. The assessee claimed the funds were transferred between designated accounts, but no evidence was provided to the AO. The Tribunal upheld the Pr.CIT's decision to remit this issue back to the AO for further verification, as the AO had not conducted any inquiry into this aspect. 4. Disallowance of Brokerage: In the second round of proceedings, the AO disallowed brokerage expenses amounting to ?3,12,500/-, which was not directed by the Pr.CIT under Section 263. The Tribunal found that the AO exceeded the scope of the Pr.CIT's directions by disallowing the brokerage. Therefore, the Tribunal directed the AO to delete the disallowance of the brokerage amount. Conclusion: The Tribunal dismissed the appeal regarding the jurisdiction under Section 263 and the eligibility of the deduction under Section 54B, affirming the Pr.CIT's order. However, it partly allowed the appeal concerning the disallowance of brokerage, directing the AO to delete the disallowance. The combined result was that the appeal in ITA No. 1226/Ahd/2013 was dismissed, and the appeal in ITA No. 651/Ahd/2016 was partly allowed.
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