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2022 (7) TMI 118 - AT - Income TaxRevision u/s 263 - distinction between lack of enquiry and inadequate enquiry - As per PCIT claim for deduction u/s 54B came to be allowed by the AO without verification and enquiries - HELD THAT - If there was enquiry even an inadequate that would be itself give no occasion to the Commissioner to exercise the power of revision u/s 263 as held by the Hon ble Bombay High Court in the case of CIT vs. Gabriel India Ltd 1993 (4) TMI 55 - BOMBAY HIGH COURT Pr.CIT had not brought on record any material to show that the claim made for deduction u/s 54B is not allowable to the assessee. The power of revision u/s 263 cannot be exercised with a view to initiate a roving and fishing enquiry in the matters which we have already concluded - See PARASHURAM POTTERY WORKS CO. LIMITED VERSUS INCOME-TAX OFFICER, CIRCLE I, WARD A, RAJKOT 1976 (11) TMI 1 - SUPREME COURT We are of the considered opinion that the AO had allowed the claim for deduction u/s 54B of the Act after due verification and examination of the details filed before the AO and it cannot be said that there is total lack of enquiry on the part of the AO while allowing the claim of the assessee. Therefore, the assessment order cannot be termed as erroneous . There is no material on record indicating that the appellant had not satisfied the conditions laid down under the provisions of the Act for claiming exemption u/s 54B - Therefore, the assessment order cannot be branded as erroneous and prejudicial to the interests of the revenue . CIT is not justified in exercising the power of revision u/s 263 of the Act and order passed u/s 263 by the ld. Pr.CIT is hereby set-aside. Accordingly, the grounds of appeal raised by the assessee stand allowed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Classification of agricultural land as a capital asset under Section 2(14). 3. Applicability of Section 54B for exemption on capital gains. 4. Adequacy of the Assessing Officer's enquiry and verification. 5. Validity of the Principal Commissioner of Income Tax's (Pr.CIT) revision order. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The appellant contested the jurisdiction of the Pr.CIT under Section 263, arguing that the conditions precedent for assumption of jurisdiction were absent. The appellant claimed that the assessment order was neither erroneous nor prejudicial to the interest of the revenue, as the Assessing Officer (AO) had conducted necessary verifications before allowing the deduction under Section 54B. 2. Classification of Agricultural Land as a Capital Asset under Section 2(14): The appellant argued that the agricultural land transferred as stock-in-trade was not a capital asset within the meaning of Section 2(14) of the Income Tax Act, 1961. Therefore, no capital gains arose from its sale. The appellant maintained that the land was situated beyond 8 kilometers from the municipal limits of Pune, thus not qualifying as a capital asset. 3. Applicability of Section 54B for Exemption on Capital Gains: The appellant contended that the Pr.CIT erroneously held that the capital gains arose on the date of conversion of the capital asset, thereby barring the deduction under Section 54B by limitation. The appellant argued that the long-term capital gains from the transfer of agricultural land were exempt from taxation and that the provisions of Section 54B were applicable, allowing for the deduction. 4. Adequacy of the Assessing Officer's Enquiry and Verification: The appellant asserted that the AO had conducted a thorough enquiry and verification of the claim under Section 54B. The AO had examined the details of the purchase and sale of the immovable property, the nature of the transactions, and the reinvestment in new agricultural land. The appellant provided evidence of compliance with Section 54B, including the balance sheet, purchase deeds, and 7/12 extracts showing agricultural use of the land. 5. Validity of the Principal Commissioner of Income Tax's (Pr.CIT) Revision Order: The Tribunal examined whether the Pr.CIT's revision order under Section 263 was justified. The Tribunal noted that the power of revision could only be invoked if the assessment order was both erroneous and prejudicial to the interests of the revenue. The Tribunal found that the AO had conducted necessary enquiries and verifications, and had taken a plausible view in allowing the deduction under Section 54B. The Tribunal distinguished between "lack of enquiry" and "inadequate enquiry," stating that even if the enquiry was inadequate, it would not justify revision under Section 263 unless there was a complete lack of enquiry. The Tribunal cited relevant case law, including the Supreme Court decisions in Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Max India Ltd., to support its conclusion that the assessment order was not erroneous. The Tribunal emphasized that the Pr.CIT had not provided any material evidence to show that the claim under Section 54B was not allowable. Conclusion: The Tribunal concluded that the AO had allowed the claim for deduction under Section 54B after due verification and examination of the details provided by the appellant. Therefore, the assessment order could not be termed as "erroneous" or "prejudicial to the interests of the revenue." Consequently, the Tribunal set aside the Pr.CIT's order passed under Section 263 and allowed the appeal filed by the assessee. Result: The appeal filed by the assessee was allowed, and the order pronounced on June 30, 2022.
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