2023 (3) TMI 45 - AT - Income Tax

Deduction u/s 54B - AO had concluded that the land which was sold by the respondent-assessee was not used for agricultural purposes in 2 years immediately preceding the year of the sale of land - NFAC admitting the additional evidence and after calling for remand report, allowed the claim of the respondent-assessee u/s 54B - HELD THAT - NFAC extracted the submissions made by the respondent-assessee, thereafter, simply jumped to the conclusion that the Assessing Officer was not justified in denying the claim for deduction u/s 54B without examining in detail the facts and the evidence brought on record by the Assessing Officer in the form of statement of Talathi and the 7/12 extracts etc, in-fact, no reasons whatsoever were given by the NFAC in support of the conclusion reached by it. The order passed by NFAC is bereft of any factual discussion of case nor met the reason given by Assessing Officer while denying claim for deduction u/s 54B of the Act. The Hon ble Supreme Court in the case of Siemens Engg. vs. UOI 1976 (4) TMI 204 - SUPREME COURT held that the rule requiring reasons to be given in support of an order is like the principle of audi alteram partem, a basic principle of natural justice, which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. In M/s Woolcombers of India Ltd. v. Woolcombers Workers Union and others 1973 (8) TMI 158 - SUPREME COURT as well settled by now that reason is the life of law. It is an indispensable component of a decision making process. A nonspeaking and non-reasoned order smacks arbitrary exercise of judicial or quasi-judicial or even administrative power. In the present case NFAC has merely extracted the contention of the assessee and accepted without giving any independent, cogent and convincing reasons for accepting the claim of the assessee.The Hon ble Supreme Court in the case of Pankaj Garg vs. Meenu Garg 2013 (2) TMI 924 - SUPREME COURT reiterated the settled position of law an order which does not contain any reason is no order in the eyes of law. Therefore, the order passed by the NFAC does not meet the requirements of being a reasoned order as enunciated by the Hon ble Supreme Court in the decisions referred to above supra and cannot be sustained in the eyes of law. However, in order to meet the ends of justice, we remit the matter to the file of the NFAC for de novo adjudication of issue in appeal in accordance with law. Thus, the grounds of appeal filed by the Revenue stand partly allowed.

Summary

Issues Involved:
1. Denial of deduction under Section 54B of the Income Tax Act.
2. Evidence of agricultural activity on the land in question.
3. Validity of 7/12 extracts submitted by the assessee.
4. Treatment of income as agricultural income by the assessee.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 54B of the Income Tax Act:
The primary issue revolves around the eligibility of the assessee for deduction under Section 54B of the Income Tax Act. The Assessing Officer (AO) disallowed the claim for deduction of Rs. 24,71,17,100/- under Section 54B, concluding that the land sold was not used for agricultural purposes in the two years preceding the sale. This conclusion was based on multiple pieces of evidence, including satellite images, revenue records, and statements from local authorities.

2. Evidence of Agricultural Activity on the Land in Question:
The AO's investigation revealed that no agricultural activity had been carried out on the land in question. Key evidence included:
- Satellite images from Google Earth showing no green shade indicating agricultural activity.
- Statements from the Talathi and the Income Tax Inspector confirming the land was not used for agriculture.
- The statement of Shri Vivek Gour Brom, who initially claimed to have cultivated the land but later could not provide any proof of agricultural activities.

3. Validity of 7/12 Extracts Submitted by the Assessee:
The AO found discrepancies in the 7/12 extracts submitted by the assessee. The Talathi, whose signature appeared on these extracts, denied issuing them. The AO's summons and subsequent statements from the Talathi suggested that the 7/12 extracts were fabricated. The extracts provided by the assessee mentioned crops like green beans and groundnut, whereas the official records indicated the land was fallow.

4. Treatment of Income as Agricultural Income by the Assessee:
The assessee declared an agricultural income of Rs. 69,344/- for the relevant assessment year but had not shown any agricultural income in previous years. This inconsistency further supported the AO's conclusion that the land was not used for agricultural purposes.

NFAC's Decision:
The National Faceless Appeal Centre (NFAC) allowed the assessee's claim for deduction under Section 54B, admitting additional evidence and calling for a remand report. However, the NFAC's order lacked detailed reasoning and did not address the substantial evidence presented by the AO. The NFAC's decision was criticized for not providing independent, cogent, and convincing reasons for accepting the assessee's claim.

Tribunal's Conclusion:
The Tribunal found that the NFAC's order did not meet the requirements of a reasoned order as per established legal principles. The Tribunal cited several Supreme Court rulings emphasizing the necessity of providing reasons in judicial and quasi-judicial decisions to prevent arbitrariness and ensure fairness. Consequently, the Tribunal remitted the matter back to the NFAC for de novo adjudication, directing the NFAC to provide a detailed and reasoned order.

Final Order:
The appeal filed by the Revenue was partly allowed, and the matter was remitted to the NFAC for fresh adjudication in accordance with the law. The Tribunal emphasized the importance of a reasoned decision-making process, aligning with principles of natural justice and transparency.

Order Pronounced:
The order was pronounced on February 27, 2023.