2024 (5) TMI 96 - AT - Income Tax

Revision u/s 263 - claim of deduction u/s. 54B not properly verified - assessee s case before us was that the relevant enquiry had been made by the AO, who though did not write an elaborate order, and which should not therefore prejudice the assessee - HELD THAT - Apart from a clear absence of pertinent enquiry into the several specific aspects of the matter, the assessment is not per a speaking order, a sine qua non for a judicial order. We, accordingly, find the impugned order as valid in principle We are, though, not in agreement with the ld. Pr. CIT, where he expresses an apprehension as to the fitness of the land sold for agricultural purposes. The only aspect relevant, even as pointed out by him, is if it was indeed put to use for agricultural purposes in the two-year period prior to sale (s. 54B(1)). The requirement being stricter than of the subject land being agricultural, and which would require being positively satisfied, subsumes the requirement of the land being fit for agriculture. The other infirmity we observe in the impugned order is that it is not proper for the ld. Pr.CIT to have held that the assessee is not eligible for a claim u/s. 54B of the Act, followed by direction for a de novo examination and adjudication in accordance with law per a speaking order. This is dichotomous. Accordingly, the first sentence in para 7 of his order the words is not eligible be read as may not be eligible . The material gathered by the Revenue may though; rather, ought to be, put across to the assessee, who is to establish his claims, leading evidence. See SMT. ASHA GEORGE 2013 (1) TMI 545 - KERALA HIGH COURT The ensuing assessment would accordingly be sustainable only on the basis of finding/s of fact, i.e., as to whether the facts admit of, or not, a claim u/s. 54B. We may also clarify that we may not be construed as having expressed any opinion in the matter, except that the AO s enquiry is seriously wanting, and there had thus been no proper verification and examination of the assessee s claim by him, finding each of the several objections as highlighting the various aspects of the matter which ought to have been, but were not, examined by the AO, who shall though make an assessment afresh, uninfluenced by any finding/s by the ld. Pr. CIT, inasmuch as it is a de novo assessment.

Summary

Issues Involved:
1. Validity of the revision order u/s 263 of the Act.
2. Compliance with conditions for exemption u/s 54B of the Act.
3. Adequacy of the Assessing Officer's (AO) inquiry and examination.
4. Maintainability of the stay application.

Summary:

1. Validity of the revision order u/s 263 of the Act:
The Principal Commissioner of Income Tax (Pr.CIT) invoked section 263 of the Income Tax Act, 1961, to revise the assessment order dated 15.03.2021 for AY 2018-19. The Pr.CIT found that the AO had not verified whether the land sold was used for agriculture for two years preceding the transfer and whether the properties purchased were agricultural and used exclusively for agriculture. The Pr.CIT's order was based on the lack of inquiry and non-application of mind by the AO, rendering the assessment order erroneous and prejudicial to the interest of the Revenue.

2. Compliance with conditions for exemption u/s 54B of the Act:
The Pr.CIT highlighted several infirmities in the assessee's claim for exemption u/s 54B, including:
- The land purchased for Rs. 1.18 crore was not fit for agricultural use.
- The agreement for the second land purchase was not per registered Deed but on a stamp paper of Rs. 100, and there was non-compliance with s. 54B(2) regarding the utilization of capital gains.
- Non-completion of the purchase agreements and the land not being fit for agricultural use.

3. Adequacy of the Assessing Officer's (AO) inquiry and examination:
The Tribunal noted that the AO failed to conduct a proper inquiry and verification process as required. The AO did not examine the satisfaction of conditions u/s 54B(2) or the fitness of the land for agricultural purposes. The Tribunal emphasized that the AO must ascertain the truth of the facts stated in the return, especially when circumstances call for further inquiry. The Tribunal found the assessment order sub silentio on critical aspects germane to the assessee's claim, validating the Pr.CIT's revision order.

4. Maintainability of the stay application:
The stay application filed by the assessee was dismissed as not maintainable since the impugned order did not result in any demand against the assessee.

Conclusion:
The Tribunal partly allowed the assessee's appeal, directing a de novo assessment by the AO, uninfluenced by the findings of the Pr.CIT, and dismissed the stay application. The AO is to make an assessment afresh, ensuring proper verification and examination of the assessee's claim u/s 54B.