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TMI Blog2024 (9) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in brief are that assessee filed on 28.08.2016 declaring total income at Rs. 1,00,19,150/- and agricultural income of Rs. 6,73,150/-. The case was selected for scrutiny and assessment order u/s 143(3) was passed on 29.11.2018 determining total income at Rs. 1,30,19,152/-. The case records were verified by Ld. PCIT who found that assessee had claimed wrong deductions u/s 54B and 54F of the Act. After hearing the assessee, order u/s 263 was passed wherein deduction of Rs. 5,41,696/- and Rs. 7,96,020/- claimed u/s 54B in respect of two properties was found not to be allowable. The Ld. PCIT also found that deduction of Rs. 47,69,576/- claimed u/s 54F is not correct. Therefore, assessment order u/s 143(3) dated 29.11.2018 was set aside to the AO to be decided de novo with a direction to AO to examine, the issue of capital gain and deduction u/s 54B and 54F of the Act. Pursuant to the above direction u/s 263, the AO passed order u/s 143(3) r.w.s. 263 by disallowing deduction of Rs. 5,41,696/- and Rs. 47,69,576/- claimed u/s 54B and 54F respectively. However, deduction of Rs. 7,96,020/- was not disallowed by AO. Therefore, the Ld. PCIT observed that the re-assessment order was passed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that no documentary evidences have been furnished by the assessee to prove the purchase of these two agricultural lands. In absence of documentary evidence, genuineness of claim of Rs. 7,96,020/- u/s 54B is not established. However, AO did not make any disallowance either in the original assessment order or during the order passed u/s 143(3) r.w.s. 263 of the Act. Therefore, AO passed the assessment order without proper verification / inquiry, application of mind and law on the issue. He failed to make the impugned addition to the total income as per law which has rendered the order u/s 143(3) r.w.s. 263 erroneous in so far as it is prejudicial to the interests of revenue within the meaning of section 263 of the Act. Thereafter, the Ld. PCIT has referred to section 263 of the Act and relied on various decisions and stated that both limbs of section 263 are satisfied, i.e., the AO did not make addition of Rs. 7,96,020/- due to which lawful tax of Rs. 2,82,859/- was lost by revenue. The Ld. PCIT has relied on the decisions in the case of (i) Malabar Industries Ltd. vs. CIT, 243 ITR 83 (SC), Paville Projects (P.) Ltd., (2023) 149 taxmann.com 115 (SC), CIT vs. Nagesh Knitwears Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,696/- and Rs. 7,96,020/- discussed above. Deduction u/s 54F was for Rs. 47,69,576/-. In compliance to the above direction, AO has passed order u/s 143(3) r.w.s. 263 on 29.03.2020 wherein he has added Rs. 5,41,696/- and Rs. 47,69,576/- being disallowance of claim of deduction u/s 54B and 54F of the Act. Though, he has disallowed claim of Rs. 5,41,696/- but has not disallowed similar claim of Rs. 7,96,020/- u/s 54B of the Act. Hence, the order is erroneous and prejudicial to the interests of revenue as per the provisions of section 263 of the Act. 6. We have heard rival submission of both the parties and perused the materials available on record. We have also deliberated on the decisions relied upon by both sides. In this case, original assessment order u/s 143(3) was passed on 29.11.2018 by making disallowance of Rs. 30,00,000/- and total income was determined at Rs. 1,30,19,150/-. The order was found to be erroneous and prejudicial to the interests of revenue because AO had not examined the issue of capital gain and deduction u/s 54B and 54F of the Act. The AO subsequently passed order u/s 143(3) r.w.s. 263 on 29.03.2022 by disallowing deduction claimed u/s 54F of the Act. He has, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. Therefore, provisions of section 263 are clearly applicable. Explanation 2 of section 263 enumerates the circumstances under which the order shall be deemed to be erroneous in so far as it is prejudicial to the interests of revenue. The same may be reproduced below for ready reference and clarity: 263. Revision of orders prejudicial to revenue.- .. Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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