2025 (3) TMI 1365 - AT - Income Tax

Revision u/s 263 - assessee s claim for deduction u/s. 54B was not found in order - validity of the jurisdiction that was assumed by the Pr. CIT for dislodging the order of reassessment that was passed by the A.O u/s. 147 r.w.s. 144B - Satellite data taken by ISRO - HELD THAT - We are of a firm conviction that as the ISRO s report and CCOST report wherein it was stated that no agricultural activities were carried out on the subject land were there before the A.O in the course of the reassessment proceedings and the same were rebutted by the assessee based on his exhaustive submissions and supporting documents filed in the course of the said proceedings which thereafter had been accepted by the AO who had not drawn any adverse inferences on the aforesaid issue which inter alia had formed the very basis for reopening of his concluded assessment therefore it can safely be concluded that the AO had after considering the aforementioned documents arrived at a possible and plausible view that the subject land in the two years immediately preceding the date on which the same was transferred was used for agricultural purposes. We are unable to comprehend that now when the AO had queried the assessee on the aforesaid issue which had a material bearing on his claim for deduction u/s 54B and further deliberated upon the latter s reply and the supporting documents then on what basis the Pr. CIT had observed that the A.O while framing the assessment had failed to examine the said claim for deduction in the backdrop of the aforesaid reports. On the contrary we are of the view that the Pr. CIT in the garb of his revisional jurisdiction had sought to substitute the view that was arrived at by him by analyzing the satellite imageries provided by ISRO and the CCOST report as against the plausible view that was arrived at by the A.O after carrying out necessary verifications inquiries and deliberations. We are afraid that seeking of such substitution of view by the Pr. CIT falls beyond the scope and realm of the revisional jurisdiction vested with him under Section 263 of the Act. CIT in the course of the revisional proceedings had vide his letter sought a fresh opinion of the CCOST Raipur pursuant whereto the latter had vide its letter dated 06.08.2024 filed its fresh opinion/report but a careful perusal of the same does not reveal any new opinion/view but only a reiteration of its earlier view that the subject land was a fallow land on the aforementioned specific dates viz. 23.03.2012 02.10.2011 19.11.2011 29.05.2012 and 23.01.2010. Accordingly the aforesaid report dated 06.08.2024 of the CCOST Raipur cannot be construed as an additional information before the Pr. CIT which was not considered by the A.O while framing the reassessment vide his order passed u/s. 147 r.w.s. 144B of the Act dated 30.05.2023. Land Revenue Records viz. (i) Manual report of the Village patwari dated 03.09.2019; (ii) Form P-II Khasra issued by patwari based on computerized land revenue records; and (iii) Order of Naib Tehsildar District Raipur dated 12.03.2020 - A.O in the present case had after considering the reply filed by the assessee wherein he had in the course of reassessment proceedings rebutted/dispelled the adverse inferences which the A.O had sought to draw as regards his claim of deduction u/s.54B of the Act i.e. inter alia for the reason that as per the patwari report dated 03.09.2019 (supra) no agricultural operations were carried out on the subject land in F.Y.2010-11 had thus arrived at a possible and plausible view therefore the Pr. CIT in the garb of his revisional jurisdiction could not have sought to substitute his view as against that which was arrived at by the A.O based on necessary inquiries and verifications. Physical Verification Report obtained by FAO from the AO (Verification Unit) - A perusal of the A.O(VU) s Physical Verification Report reveals that he had after carrying out necessary physical verification recording the statements of the assessee and Shri Hrithram Nisad i.e. the erstwhile care taker clicking photographs of the site consulting the records as were filed before him and deliberating upon the documents that were filed by the assessee with him had concluded that the subject land was used for agricultural purposes in the two years immediately preceding the date on which the same was transferred. Considering the fact that the A.O(VU) in his Physical Verification Report (supra) had based on his inquiries/verifications reported that the subject land was in the two years immediately preceding the date on which it was transferred used for agricultural purposes we find no reason as to why the view taken by the A.O in his order of reassessment passed u/s. 147 r.w.s. 144B of the Act dated 30.05.2023 by relying on the said report amongst others wherein he had accepted the assessee s claim as regards usage of the land during the relevant period for agricultural purposes is not to be construed as a possible and plausible view arrived at by him while framing the reassessment. We thus based on the judgment of Construction of park at NOIDA near Okhla Bird Sanctuary Vs. Union of India Ors. 2010 (12) TMI 1367 - SUPREME COURT are of a firm conviction that in the case of the present assessee the revenue records which evidence that the subject land in the two years immediately preceding the date on which the same was transferred was used for agricultural purposes ought to have been given credence as against the satellite imageries that have been pressed into service by the Pr. CIT i.e. satellite images obtained from ISRO and CCOST reports (supra) analyzing the said satellite images. Accordingly we are of a firm conviction that as the A.O in the present case before us had arrived at a plausible and possible view i.e. the subject land in the two years immediately preceding the date on which the same was transferred used for agricultural purposes therefore there was no justification for the Pr. CIT to have exercised his revisional jurisdiction for the purpose of substituting his view as against the possible view that was arrived at by the A.O based on the material as was available before him in the course of the reassessment proceedings. Thus as the Ld. Pr. CIT had in exercise of the powers vested with him u/s. 263 dislodged a possible and plausible view that was arrived at by the A.O after carrying out necessary inquiries verifications and deliberations on the issue in hand i.e. the subject land in the two years immediately preceding the date on which the same was transferred was used for agricultural purposes and thus had observed that the assessee s claim for deduction u/s. 54B of the Act was well founded and in order; therefore the Pr. CIT by seeking substitution of his view as against the possible and plausible view arrived at by the A.O based on the same set of documents/material had thus traversed beyond the scope of his jurisdiction u/s 263 of the Act. Accordingly we herein set-aside the order passed by the Pr. CIT u/s. 263 and restore the order of reassessment passed by the A.O u/s. 147 r.w. Section 144B. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core issues considered in this judgment were:

• Whether the reassessment order under Section 147 read with Section 144B of the Income Tax Act, 1961, was valid and within jurisdiction.
• Whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking revisional jurisdiction under Section 263 of the Act to set aside the reassessment order.
• Whether the subject land was used for agricultural purposes in the two years immediately preceding the date of transfer, thereby justifying the claim for deduction under Section 54B of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Reassessment Order

• Relevant Legal Framework and Precedents: The reassessment was initiated under Section 147 based on the claim that the land was not used for agricultural purposes, thus questioning the deduction under Section 54B. The legal framework requires that reassessment notices be issued within specified time limits and based on substantial reasons.
• Court's Interpretation and Reasoning: The Tribunal examined whether the reassessment notice was issued within the statutory time limits and whether the reasons for reopening were valid. The Tribunal found that the reassessment was validly initiated based on the information available with the Assessing Officer (A.O).
• Key Evidence and Findings: The A.O had relied on satellite images and land revenue records to question the agricultural use of the land.
• Application of Law to Facts: The Tribunal found that the A.O had followed due process in issuing the reassessment notice and that the reasons for reopening were substantiated.
• Treatment of Competing Arguments: The Tribunal considered the assessee's argument that the reassessment was time-barred but found it unsubstantiated.
• Conclusions: The reassessment order was held valid and within jurisdiction.

Issue 2: Justification for Revisional Jurisdiction under Section 263

• Relevant Legal Framework and Precedents: Section 263 allows the Pr. CIT to revise an A.O's order if it is erroneous and prejudicial to the interests of the revenue. The courts have held that mere disagreement with the A.O's view does not justify revision.
• Court's Interpretation and Reasoning: The Tribunal emphasized that for Section 263 to apply, the Pr. CIT must demonstrate that the A.O's order was erroneous and prejudicial to revenue. It cannot be used to substitute the Pr. CIT's view for the A.O's plausible view.
• Key Evidence and Findings: The Pr. CIT relied on satellite images and land revenue records to argue that the land was not used for agriculture, thus questioning the deduction under Section 54B.
• Application of Law to Facts: The Tribunal found that the A.O had conducted sufficient inquiry and had arrived at a plausible view based on evidence, including physical verification reports and expert opinions.
• Treatment of Competing Arguments: The Tribunal considered the Pr. CIT's arguments but found that the A.O's view was supported by substantial evidence, including physical verification and expert opinions.
• Conclusions: The Tribunal held that the Pr. CIT exceeded his jurisdiction under Section 263, as the A.O's order was neither erroneous nor prejudicial to the revenue.

Issue 3: Agricultural Use of the Land and Deduction under Section 54B

• Relevant Legal Framework and Precedents: Section 54B allows deduction for capital gains if the land was used for agriculture in the two years preceding its transfer.
• Court's Interpretation and Reasoning: The Tribunal analyzed the evidence, including land revenue records, expert opinions, and physical verification reports, to determine the agricultural use of the land.
• Key Evidence and Findings: The Tribunal found that the A.O had relied on credible evidence, including physical verification reports and expert opinions, to conclude that the land was used for agriculture.
• Application of Law to Facts: The Tribunal held that the evidence supported the A.O's conclusion that the land was used for agriculture, thus justifying the deduction under Section 54B.
• Treatment of Competing Arguments: The Tribunal considered the Pr. CIT's reliance on satellite images but found that the A.O's evidence was more credible and comprehensive.
• Conclusions: The Tribunal upheld the A.O's finding that the land was used for agriculture and allowed the deduction under Section 54B.

3. SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reaffirmed that the Pr. CIT cannot invoke Section 263 to substitute his view for a plausible view taken by the A.O after due inquiry. The A.O's order can only be revised if it is shown to be erroneous and prejudicial to the revenue.
• Final Determinations on Each Issue: The Tribunal set aside the Pr. CIT's order under Section 263 and restored the A.O's reassessment order, allowing the deduction under Section 54B.
• Verbatim Quotes of Crucial Legal Reasoning: "The supervisory jurisdiction of the revisional authority cannot be exercised for seeking dislodging of a possible and plausible view taken by the A.O after carrying out necessary inquiries and verifications."