2019 (4) TMI 1420 - AT - Income Tax

Disallowance made u/s.14A - no show cause notice to the assessee before invoking the provisions - HELD THAT - In view of the ratio laid down in the case of Godrej Boyce Manufacturing Company Ltd. Vs. DCIT 2017 (5) TMI 403 - SUPREME COURT OF INDIA and also the clear cut provisions of the Act, i.e. section 14A(3) of the Act, there is no merit in the disallowance made by the AO without giving any show cause notice to the assessee before invoking the provisions of section 14A of the Act. The disallowance made by the Assessing Officer and confirmed by the CIT(A) is reversed. Grounds of appeal raised by the assessee are thus allowed. Deduction u/s 54B - capital gain on sale of one agricultural land - investment made in two agricultural land - AO allowed dedction in respect of one property - HELD THAT - There was no ambiguity in the provisions of section 54B, there was no clarification needed to be given. Accordingly, I find no merit in the plea of the assessee that it could claim the aforesaid deduction in respect of two separate investments in agricultural lands, made by the assessee consequent to selling of one agricultural land. In case, the assessee had sold two pieces of land, i.e. agricultural land, then it could claim the deduction against the aforesaid investments in two separate pieces of land. However, in the present case, it is not so. Hence, I find no merit in the plea of the assessee. Ratio of decisions in SMT. SAVITA RANI. 2002 (5) TMI 6 - PUNJAB AND HARYANA HIGH COURT Anil Bishnoi Vs. ACIT 2017 (10) TMI 868 - ITAT CHANDIGARH are not applicable in facts of assessee.

Summary

Issues Involved:
1. Non-provision of reasonable opportunity of hearing by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)].
2. Disallowance under Section 14A of the Income Tax Act, 1961.
3. Interpretation and application of Section 54B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Non-provision of Reasonable Opportunity of Hearing:
The assessee contended that both the AO and CIT(A) failed to provide a sufficient opportunity of being heard. However, the tribunal found no merit in these grounds as both authorities had allowed reasonable opportunities to the assessee. Consequently, Grounds of appeal No. 1 and 2 were dismissed.

2. Disallowance under Section 14A:
The AO disallowed expenses under Section 14A read with Rule 8D, specifically under Rule 8D(2)(iii), amounting to ?24,585/-. The CIT(A) upheld this disallowance. The tribunal observed that the AO did not record any satisfaction before invoking Section 14A, which is a prerequisite as per the Supreme Court’s ruling in Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2017) 394 ITR 449 (SC). The tribunal noted that the AO did not issue a show cause notice to the assessee before making the disallowance. Therefore, the disallowance made by the AO and confirmed by the CIT(A) was reversed, and Grounds of appeal No. 3 and 4 were allowed.

3. Interpretation and Application of Section 54B:
The assessee claimed deductions under Section 54B for investments in two separate agricultural lands after selling an agricultural land. The AO allowed the deduction for only one of the lands, interpreting the provision to apply to a single new asset. The CIT(A) upheld this view. The tribunal analyzed the language of Section 54B, which specifies the purchase of "any other land" in the singular form. The tribunal found no ambiguity in the provision and concluded that the deduction is allowable for investment in one new agricultural land. The tribunal dismissed the assessee's reliance on judicial precedents and CBDT circulars related to Sections 54 and 54F, as these did not apply to Section 54B. Consequently, Grounds of appeal No. 5 and 6 were dismissed.

Conclusion:
The appeal was partly allowed, with the disallowance under Section 14A being reversed, while the interpretation of Section 54B was upheld, limiting the deduction to one new agricultural land. The tribunal emphasized the necessity of the AO’s satisfaction before invoking Section 14A and clarified the singular application of Section 54B.