2024 (9) TMI 854 - AT - Income Tax

Revision u/s 263 - PCIT who found that assessee had claimed wrong deductions u/s 54B and 54F - HELD THAT - Though the payment is claimed to have been made out of sale consideration but the Ld. AR has not submitted any documentary evidence i.e., copy of sale deed, details of mode and source of payment etc. in respect of purchase of both properties to prove that purchase of land for claiming deduction u/s 54B of the ACt was genuine. The assessee has submitted copy of sale deed of agricultural land at Kholwad but no copies of purchase deed have been submitted before us. In absence of such primary evidence, the claim of assessee of new investment for the purpose of deduction u/s 54B is not established. It was because of the same fact i.e., failure to furnish documentary evidence to prove purchase of these two agricultural lands that the Ld. PCIT and his predecessor had set aside the assessment orders. Before us also, the assessee has not supported his claim of payment with necessary documentary evidence. Therefore, it is a clear case of assessment order, passed by AO, without proper verification, inquiry and application of mind to the fact and relevant law on the impugned issue. We have clearly found that the assessee was not eligible for deduction u/s 54B in respect of both properties for the reasons stated above. We find that the Hon ble Rajasthan High Court in case of CIT vs. Emery Stone Mfg. Co. 1994 (7) TMI 36 - RAJASTHAN HIGH COURT held that the powers of revision u/s 263 can be exercised by the CIT if he considers that any order passed by AO is erroneous in so far as it is prejudicial to the interests of revenue. Allowing certain deductions without proving the claim or without proper verification or in ignorance of the provisions of law are the various instances on the basis of which the order can be considered as prejudicial to the interests of revenue and can be set right in revisional jurisdiction. In a case where there is non-application of mind with regard to any particular provisions of law, the proper course is to set aside the assessment order and sent back to the AO for determining the said issue, in accordance with provisions of law, so that the necessary evidence come on record. The facts of the present case are clearly covered by the ratio of the above decision. The other decisions relied upon by the Ld. PCIT also furthers the cause of revenue. In view of the above factual and legal positions, we find no merit in the argument of the Ld. AR of the assessee and dismiss the appeal of the assessee.

Issues Involved:
1. Legality of the Principal Commissioner of Income-tax's (PCIT) order under section 263 of the Income-tax Act.
2. Jurisdiction of the PCIT under section 263.
3. Validity of the PCIT's direction to re-verify the deduction claimed under section 54B.
4. Adequacy of the Assessing Officer's (AO) verification and inquiry regarding the deduction under section 54B.

Detailed Analysis:

1. Legality of the Principal Commissioner of Income-tax's (PCIT) order under section 263 of the Income-tax Act:
The appellant contended that the PCIT erred in setting aside the AO's order under section 143(3) read with section 263 and directing the AO to verify the deduction under section 54B for the purchase of new agricultural land. The appellant argued that the conditions of "erroneous" and "prejudicial" were not met, and thus, the PCIT's order should be quashed.

2. Jurisdiction of the PCIT under section 263:
The appellant argued that the PCIT assumed jurisdiction under section 263 by substituting his opinion for that of the AO, who had already conducted detailed examinations and inquiries. The appellant maintained that this substitution of opinion was not permissible under the law.

3. Validity of the PCIT's direction to re-verify the deduction claimed under section 54B:
The PCIT found that the AO failed to disallow the deduction of Rs. 7,96,020/- under section 54B despite the lack of documentary evidence proving the purchase of agricultural land. The PCIT noted that the property purchase was made before the sale of the agricultural land, thus not fulfilling the conditions of section 54B. The PCIT directed the AO to re-verify the deduction, citing the erroneous and prejudicial nature of the AO's original order.

4. Adequacy of the Assessing Officer's (AO) verification and inquiry regarding the deduction under section 54B:
The Tribunal reviewed the facts and submissions and found that the AO had not conducted sufficient verification or inquiry into the deduction claimed under section 54B. The AO allowed the deduction without proper documentation or evidence, rendering the order erroneous and prejudicial to the interests of revenue. The Tribunal highlighted that the assessee failed to furnish necessary documentary evidence to substantiate the purchase of the agricultural lands, thereby justifying the PCIT's direction for re-verification.

Conclusion:
The Tribunal upheld the PCIT's order under section 263, agreeing that the AO's original assessment was erroneous and prejudicial to the interests of revenue due to insufficient verification and inquiry. The appeal of the assessee was dismissed, reaffirming the PCIT's jurisdiction and the necessity for re-verification of the deduction claimed under section 54B.

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