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2021 (7) TMI 485 - AT - Income TaxRevision u/s 263 - deduction under section 54B - HELD THAT - The perusal of assessment order reveals that AO allowed the exemption/ deduction of capital gain under section 54, without discussing the nature of asset (agriculture land). There is no dispute about the location of the land/ impugned land sold by the assessee, which was situated in the heart of Surat City. Surat City is Metropolitan City. Further there is no discussion about the nature of land where further investment is made in agricultural land or not. The assessment is silent on the various questions raised by the AO. From the questionnaires raised by the AO, we find that very nature of asset was not examined by AO. No doubt the assessee declared capital gain but, whether its exemption can be claimed on purchase of other agriculture land, is not at all examined by the assessing officer. The question, whether the particular land is agriculture land has to be decided on considering the facts and circumstances of each case. The Superior Courts have laid down certain guideline having regards to certain guideline having regard to the following frequently occurring factors sale of land for housing purpose; obtaining permission to sell the land for non-agriculture purpose; absence of cultivation prior to sale, absence of intention to cultivate land in future, location of land within in municipal area, the nature of the surrounding area; the price at which the land was sold within the municipal area and entry in municipal record. All these factors were not considered by the AO while passing the assessment order. We are of the prima facia view that the ld. PCIT validly assumed his jurisdiction for exercising his power under section 263 of the Act by taking view that the order passed by assessing officer is erroneous and in so far as prejudicial to the interest of justice. No doubt, that ld. Pr.CIT invoked the jurisdiction under section 263 of the Act on 23.03.2021, just before seven days of expiry of period of limitation for passing revision order. We find, though, the assessee filed its reply; however, it could not be re-opened and considered by ld. PCIT, due to glitch in the ITBA system. Facts remained that the ld. PCIT passed the impugned order without considering various pleas of the assessee raised in its reply. It is also a fact that the hands of ld. Pr CIT were tied by the period of limitation which was expiring on 31.03.2021 and ultimately the order was passed on 31.03.2021 - We are of the view that the matter require fresh adjudication as the same is passed in a hasty manner. Hence, we remit the case to the file of ld PCIT to consider the reply filed by the assessee and pass order under section 263 of the Act, afresh in accordance with law, without being influence by our observation. The ld. PCIT is further directed to give reasonable opportunity to the assessee. Appeal of the assessee is allowed for statistical purpose.
Issues Involved:
1. Validity of the order under section 263 of the Income Tax Act. 2. Assumption of jurisdiction under section 263. 3. Merits of the case regarding the nature of the land sold and eligibility for deduction under section 54B. 4. Miscellaneous grounds of appeal. Detailed Analysis: 1. Validity of the Order under Section 263: The appellant argued that the Principal Commissioner of Income Tax (Pr.CIT) did not provide adequate opportunity for hearing and did not consider the submissions made by the assessee. The Pr.CIT issued a show cause notice on 23.03.2021, close to the expiry of the limitation period on 31.03.2021. The notice was received by the assessee on 26.03.2021, and due to subsequent holidays and technical issues, the assessee could not submit the reply in a proper format. The Tribunal noted that the Pr.CIT passed the order without considering the assessee’s submissions due to a technical glitch, which violated the principles of natural justice. Therefore, the Tribunal remitted the case back to the Pr.CIT for fresh adjudication, ensuring reasonable opportunity for the assessee to present their case. 2. Assumption of Jurisdiction under Section 263: The appellant contended that the Pr.CIT was not justified in assuming jurisdiction under section 263 without satisfying the necessary conditions. The Pr.CIT assumed jurisdiction on the grounds that the assessment order was erroneous and prejudicial to the interests of the Revenue because the nature of the land sold was not properly examined by the Assessing Officer (AO). The Pr.CIT observed that the assessee frequently traded in land, indicating a business activity rather than holding the land as a capital asset. The Tribunal upheld the Pr.CIT's jurisdiction, noting that the AO did not adequately examine whether the land was agricultural and eligible for deduction under section 54B, thus making the assessment order erroneous and prejudicial to the interests of the Revenue. 3. Merits of the Case: The appellant argued that the land sold was agricultural, and the transaction should be classified under "Capital Gains" rather than as a business transaction. The Pr.CIT noted that the assessee sold the land for commercial development and did not provide sufficient evidence of agricultural activities on the land. The Tribunal found that the AO did not properly investigate the nature of the land or the agricultural activities, which are crucial for determining eligibility for deduction under section 54B. The Tribunal directed the Pr.CIT to re-examine the issue, considering the assessee's submissions and evidence. 4. Miscellaneous Grounds of Appeal: The appellant reserved the right to add, alter, or vary the grounds of appeal. However, these grounds were not specifically addressed in the judgment. Conclusion: The Tribunal remitted the case back to the Pr.CIT for fresh adjudication, ensuring that the assessee is given a fair opportunity to present their case. The Pr.CIT is to re-examine the nature of the land and the eligibility for deduction under section 54B, considering all submissions and evidence provided by the assessee. The appeal was allowed for statistical purposes, and the order was announced on 10th June 2021.
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