2023 (4) TMI 1114 - HC - Income Tax

Revision u/s 263 - Admissibility of deduction u/s 54B - whether the twin test which are required to be fulfilled for invoking the power under Section 263 of the Act stands attracted? - HELD THAT - Tribunal has found that the very basis on which the PCIT had invoked its power under Section 263 of the Act was absent. Tribunal took note of the term record occurring in explanation (1)(b) of the Section 263 of the Act and held that the record shall include all documentary evidences which were submitted before the assessing officer and also those submitted before the PCIT in response to the show-cause notice issued u/s 263. PCIT is required to examine all documentary evidences including those which were before the assessing officer and submitted before him. On fact the Tribunal found that the assessee in the return of income as well as the computation of income did not make any claim for exemption u/s 54B - Tribunal found that PCIT did not record any satisfaction based on correct and verifiable set of facts relating to the claim of deduction found u/s 54B and reflect of agricultural income in the return to fulfil the mandatory requirement of Section 54B for the land put to agricultural use. Therefore, the learned Tribunal came to the conclusion that exercise of the jurisdiction under Section 263 of the Act is totally erroneous - No substantial questions of law

Summary

Issues:
1. Delay in filing the appeal.
2. Interpretation of provisions related to agricultural land under the Income Tax Act.
3. Exercise of power under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax.

Delay in filing the appeal:
The High Court of Calcutta considered an appeal filed by the revenue under Section 260A of the Income Tax Act, 1961, against an order passed by the Income Tax Appellate Tribunal. The Court noted a delay of 82 days in filing the appeal. After reviewing the affidavit filed in support of the condone delay application, the Court found sufficient cause shown by the appellant for not filing the appeal within the limitation period. Consequently, the application was allowed, and the delay in filing the appeal was condoned.

Interpretation of provisions related to agricultural land under the Income Tax Act:
The Revenue raised substantial questions of law for consideration in the appeal. These questions included issues related to the establishment of transferred landed property as 'Agricultural Land' under Section 2(14)(iii) of the Act, the implementation of Section 54B concerning the transfer/sale of claimed Agricultural Land by the assessee, and the exercise of power under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax. The Court analyzed whether the Tribunal had committed errors in law in these aspects. The Tribunal examined the facts and found that the PCIT had not correctly invoked its power under Section 263 of the Act. It was observed that the assessing officer would not be able to implement the order as the assessee had not made any claim under Section 54B. The Tribunal emphasized the importance of examining all documentary evidence, including those submitted before the assessing officer and the PCIT. It was concluded that the exercise of jurisdiction under Section 263 of the Act was erroneous due to the lack of satisfaction based on correct and verifiable facts regarding the claim of deduction under Section 54B.

Exercise of power under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax:
The Court further delved into the Tribunal's findings regarding the manner in which the PCIT is required to conduct inquiries before assuming jurisdiction under Section 263 of the Act. The Tribunal highlighted the necessity of a correct and verifiable set of facts relating to the claim of deduction under Section 54B and the reflection of agricultural income in the return to fulfill the mandatory requirement. Ultimately, the Court found no substantial questions of law arising for consideration in the appeal and dismissed it. Consequently, the stay application was also closed.