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2024 (12) TMI 690 - AT - Income TaxRevision u/s 263 by CIT - eligibility of deduction u/s 54EC - PCIT noted that the assessee purchased REC Bonds in the year 2015 i.e., two years before the said transaction. Thus exemption claimed under section 54EC of the Act is said to be not allowable to the assessee - HELD THAT - As is apparent from the order passed under section 263, the learned PCIT himself has noted that 7/12 extract for the financial year 1980 81, 2011 12, 2016 17 and from 2017 18 to 2019 20, was available. The plot of land was sold on 22/03/2017 and the copy of 7/2 extract dated 18/03/2017, was a part of sale deed. Thus, it is crystal clear that the land was used for agricultural purpose for the financial year 2016 17. The land is consistently used for agricultural purpose. It is beyond the scope of wildest imagination that usage of land is ambulatory even when character of land is agricultural. As in the past assessment years agricultural activities were carried out is not disputed by PCIT as is evident from the order under section 263 of the Act at Para 4. The agricultural land can be reasonably said to have been used for agricultural purpose in between the years in the absence of anything contrary on record. In view of above conclusion of Assessing Officer at the time of original assessment that agricultural land was used for preceding two years is reasonable conclusion and cannot be said to be an erroneous decision. We also find that the issue in hand is covered in favour of the assessee by the judgment of the Hon ble Jurisdiction High Court rendered in CIT v/s Mr.Subhash Vinayak Supnekar 2017 (1) TMI 58 - BOMBAY HIGH COURT Reference to the Valuation Officer - The entire details of expenditure amounting to Rs. 1.12 crore, was placed on record before the Assessing Officer. The fact was also mentioned in registered sale deed. Reference to the Valuation Cell is not compulsory as it is left to discretion of the Assessing Officer under section 142A of the Act. Thus no reference to Valuation Officer by Assessing Officer. It is worthwhile to note that in order under section 155(15) of the Act, the Assessing Officer has accepted the claim of assessee at Rs. 112 lakh in set aside proceedings. The learned PCIT has no authority to direct reference to the Valuation Cell, because he does not have the power. A.O. while passing the regular assessee u/s 143(3) has made due enquiries before accepting the claim of assessee. AO has made appropriate enquiry by issuing notice u/s 142(1) and after obtaining compliances of the same and having verified as noted in the assessment order that it is verified at Para 2 of assessment order. Thus, it cannot be said that there is no enquiry or lack of inquiry made by Assessing Officer before accepting the claim of assessee. It is equally seen that learned PCIT has not carried out any independent enquiry by herself to show that the conclusion made by Assessing Officer after making due enquiry is not in accordance with law. On the facts and record it cannot be said that order passed by Assessing Officer under section 143(3) on 21/09/2019 is erroneous or prejudice to the interest of Revenue. PCIT has pathetically failed to invoke the twin conditions an absolute sine qua non for triggering the provisions of section 263 of the Act. Thus, we have no hesitation in quashing down the impugned order passed by the learned PCIT under section 263 of the Act in its entirety, as the necessary grounds are absent. Accordingly, grounds raised by the assessee are allowed.
Issues Involved:
1. Legality and validity of the order passed under Section 263 of the Income Tax Act, 1961. 2. Adequacy of inquiry conducted by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. 3. Eligibility of exemptions claimed under Sections 54B and 54EC of the Income Tax Act, 1961. 4. Verification of the cost of improvement claimed by the assessee. Issue-wise Detailed Analysis: 1. Legality and Validity of the Order Passed Under Section 263: The assessee challenged the legality of the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263, arguing that it was illegal, invalid, and bad in law. The Tribunal examined whether the order was erroneous and prejudicial to the interests of the Revenue. The PCIT had invoked Section 263 on the grounds that the Assessing Officer (AO) had not conducted a proper inquiry into the exemptions claimed under Sections 54B and 54EC, and the cost of improvement. The Tribunal found that the PCIT failed to specify the nature of inquiries to be made and did not conduct any independent inquiries before remanding the matter back to the AO. The Tribunal concluded that the PCIT's order did not satisfy the twin conditions necessary for invoking Section 263, as the AO had conducted adequate inquiries and the order was neither erroneous nor prejudicial to the Revenue. 2. Adequacy of Inquiry Conducted by the Assessing Officer: The Tribunal assessed whether the AO had conducted adequate inquiries during the assessment proceedings under Section 143(3). The AO had issued notices under Section 142(1) and verified the details provided by the assessee regarding the exemptions claimed and the cost of improvement. The Tribunal noted that the AO had made appropriate inquiries and had taken a possible view based on the facts and evidence on record. The Tribunal emphasized that the PCIT did not conduct any independent inquiry to demonstrate that the AO's conclusions were incorrect. Thus, the Tribunal held that the AO's order was not erroneous or prejudicial to the Revenue. 3. Eligibility of Exemptions Claimed Under Sections 54B and 54EC: The Tribunal examined the eligibility of the exemptions claimed by the assessee under Sections 54B and 54EC. The assessee had sold agricultural land and claimed exemptions for purchasing new agricultural land and REC Bonds. The Tribunal found that the land was used for agricultural purposes, as evidenced by the 7/12 extracts and other documents. The Tribunal also referred to judicial precedents supporting the assessee's claim that the land was used for agricultural purposes, satisfying the conditions under Section 54B. Regarding Section 54EC, the Tribunal relied on the judgment of the jurisdictional High Court, which allowed the benefit of Section 54EC when investments were made from advance sale consideration. The Tribunal concluded that the AO had correctly allowed the exemptions under Sections 54B and 54EC. 4. Verification of the Cost of Improvement: The Tribunal addressed the issue of the cost of improvement claimed by the assessee, amounting to Rs. 1.12 crore. The AO had verified the details of the expenditure, which were supported by bank statements and bills. The Tribunal noted that the reference to the Valuation Cell was not mandatory and was at the discretion of the AO. The Tribunal found that the PCIT did not have the authority to direct a reference to the Valuation Cell. The Tribunal highlighted that the AO had accepted the claim of cost of improvement in the set-aside proceedings, further supporting the conclusion that the AO's order was not erroneous. In conclusion, the Tribunal quashed the order passed by the PCIT under Section 263, as the necessary conditions for invoking the provision were absent. The appeal filed by the assessee was allowed, affirming the AO's original assessment order.
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