2020 (11) TMI 470 - AT - Income Tax

Revision u/s 263 - exemption u/s 54B - Investment in / purchase of agriculture land in the name of son - as per CIT AO passing of the order without making requisite enquiry/investigation in respect of deduction u/s 54B - HELD THAT - It is settled position of law that the provisions of section 263 of the Act can be invoked when twin conditions i.e. the assessment order is erroneous and prejudicial to the interest of Revenue are satisfied. In the present case under the identical facts in BALMUKUND MEENA 2017 (2) TMI 1103 - MADHYA PRADESH HIGH COURT has ruled in favour of the assessee regarding availability of deduction u/s 54B of the Act where the investment in new asset is made in the name of son of the assessee. The revenue has not brought to our notice any contrary judgment by the Hon'ble jurisdictional High Court or Hon'ble Supreme Court as a binding precedence. Therefore, under these facts, it cannot be construed that the order passed by the assessing officer is prejudicial to the interest of the revenue. As the assessment order is in accordance with the ratio laid down by the Hon'ble jurisdictional High Court, thus, we are of the considered view that in the light of the judgment of the Hon'ble jurisdictional High Court, Ld. Pr. CIT was not justified in invoking the provision of section 263 - Decided in favour of assessee.

Issues Involved:
1. Validity of invoking Section 263 by the Principal Commissioner of Income Tax (Pr. CIT).
2. Legality of the deduction claimed under Section 54B of the Income Tax Act.
3. Whether the assessment order was erroneous and prejudicial to the interests of the revenue.

Issue-wise Detailed Analysis:

1. Validity of Invoking Section 263 by the Principal Commissioner of Income Tax (Pr. CIT):

The Pr. CIT invoked Section 263 of the Income Tax Act, setting aside the assessment order passed under Section 143(3). The Pr. CIT found that the Assessing Officer (AO) did not consider certain points during the scrutiny, specifically the purchase of agricultural land not in the assessee's name but in the names of his sons and daughter-in-law. The Pr. CIT deemed the assessment order erroneous and prejudicial to the interests of the revenue due to lack of requisite investigation.

The assessee contested this, arguing that the AO conducted necessary inquiries and applied due mind before passing the order. The assessee provided detailed submissions and documents justifying the claim under Section 54B, which the AO accepted.

The Tribunal noted that for Section 263 to be invoked, the order must be both erroneous and prejudicial to the revenue. The Tribunal emphasized that the AO had indeed conducted inquiries and accepted the claim based on the documents provided. The Tribunal cited various judicial precedents, including the Supreme Court's ruling in Malabar Industrial Co. Ltd. vs. CIT, which held that an order is not erroneous if the AO adopts a permissible view, even if it results in revenue loss.

2. Legality of the Deduction Claimed Under Section 54B:

The assessee sold inherited agricultural land and claimed a deduction under Section 54B for purchasing new agricultural land in the names of his sons and daughter-in-law. The Pr. CIT argued that the deduction should be disallowed as the land was not purchased in the assessee's name.

The assessee contended that the land sold was ancestral, and his sons had a rightful interest. Hence, purchasing new land in their names was valid. The Tribunal referenced multiple judicial rulings, including those from the Delhi High Court and the Madras High Court, which supported the view that purchasing property in the names of close family members (like spouse or children) does not invalidate the deduction under Section 54B.

The Tribunal noted that the investment was made from the sale proceeds of the ancestral land, and the new land was used for agricultural purposes. Therefore, the deduction under Section 54B was legal and proper.

3. Whether the Assessment Order was Erroneous and Prejudicial to the Interests of the Revenue:

The Tribunal examined whether the AO's order was erroneous and prejudicial to the revenue. The AO had accepted the assessee's claim after conducting inquiries and verifying documents. The Tribunal highlighted that the AO's decision was based on a permissible view supported by judicial precedents.

The Tribunal cited the Supreme Court's ruling in CIT vs. Max India Ltd., which stated that if the AO adopts one of the permissible views, the order cannot be deemed erroneous or prejudicial to the revenue. The Tribunal also referenced the Delhi High Court's distinction between lack of inquiry and inadequate inquiry, emphasizing that the AO had conducted inquiries.

The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the revenue. The Pr. CIT's invocation of Section 263 was unjustified, as the AO had taken a permissible view supported by judicial rulings.

Conclusion:

The Tribunal set aside the Pr. CIT's order invoking Section 263, ruling in favor of the assessee. The Tribunal held that the AO had conducted necessary inquiries and the deduction under Section 54B was valid. The assessment order was not erroneous or prejudicial to the revenue, and the Pr. CIT's action was unjustified. The appeal filed by the assessee was allowed.

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