2021 (12) TMI 689 - AT - Income Tax

Revision u/s 263 by CIT - Eligibility of claim of deduction u/s 54B - CIT directing assessing officer to make fresh investigations with regard to claim of deduction u/s 54B - HELD THAT - We note that in assessee s case under consideration, the assessee has received part payment in advance in the financial year 2011-12, and the said part payment so received in advance, was utilized by the assessee in purchasing another agricultural land therefore assessee is entitled to claim exemption under section 54B - These facts were examined by the assessing officer while making the assessment under section 143(3) of the Act, therefore, assessment framed by the assessing officer should not be erroneous. We are very much conscious of landmark decision of Malabar Industries Ltd. 2000 (2) TMI 10 - SUPREME COURT wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 - it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. We are of the view that none of the reasons set out by the ld PCIT for invoking the jurisdiction u/s 263 of the Act are sustainable. The impugned order of the ld PCIT has to be quashed for the reason that order of the Assessing Officer sought to be revised in the impugned order was neither erroneous nor prejudicial to the interest of the revenue for the reason of any lack of inquiry that the Assessing Officer ought to have made in the given facts and circumstances of the case - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the Principal Commissioner of Income Tax's (PCIT) revisionary order under section 263 of the Income Tax Act, 1961.
2. Eligibility of the assessee's claim for deduction under section 54B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legitimacy of the PCIT's Revisionary Order under Section 263 of the Income Tax Act, 1961:

The assessee challenged the PCIT's revisionary order under section 263, arguing that the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The PCIT had exercised jurisdiction under section 263 after noticing that the Assessing Officer (AO) had not specifically verified the eligibility of the assessee's claim for deduction under section 54B during the assessment finalized under section 143(3).

The PCIT issued a show cause notice to the assessee, who responded with detailed submissions and supporting documents. Despite this, the PCIT rejected the assessee's contentions and held that the AO's order was unsustainable in law, directing the AO to re-examine the deduction claim under section 54B.

The Tribunal noted that the AO had indeed raised specific queries regarding the agricultural land and the exemption claimed under section 54B during the assessment stage. The assessee had submitted the required documents and explanations, which the AO had considered before finalizing the assessment. Therefore, the Tribunal concluded that the AO had applied his mind and the assessment order was neither erroneous nor prejudicial to the interest of the revenue.

2. Eligibility of the Assessee's Claim for Deduction under Section 54B of the Income Tax Act, 1961:

The PCIT contended that the assessee was not eligible for the deduction under section 54B because the new agricultural land was purchased before the sale of the original agricultural land. The PCIT also argued that the assessee did not show any agricultural income in the relevant assessment year, thereby not fulfilling the condition that the land should be used for agricultural purposes in the two years preceding the transfer.

The assessee countered by stating that the sale deed was executed on 20.03.2012, and the registration was done on 28.06.2012. The part payment received from the sale was used to purchase the new agricultural land on 20.04.2012, which was within the prescribed time limit under section 54B. The assessee also cited relevant case laws and CBDT circulars supporting the claim that investment made from advance received on sale qualifies for exemption under section 54B.

The Tribunal agreed with the assessee, noting that the AO had examined the relevant documents and allowed the deduction after applying his mind. The Tribunal also referred to precedents where it was held that investment made from advance received on sale qualifies for exemption under section 54B. Therefore, the Tribunal concluded that the assessee was entitled to the deduction under section 54B and the AO's order was not erroneous.

Conclusion:

The Tribunal quashed the PCIT's order under section 263, holding that the AO's original assessment was neither erroneous nor prejudicial to the revenue. The assessee's appeal was allowed, affirming the eligibility for deduction under section 54B. The Tribunal emphasized that the AO had conducted a proper inquiry and applied his mind before allowing the deduction, thus the revisionary order was not justified. The decision relied on established legal principles and precedents, ensuring that the assessee's rights were upheld in accordance with the law.