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TMI Blog2024 (12) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... vident 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Thus order passed cannot be termed as erroneous and prejudicial to the interest of revenue for invoking provisions of sec. 263 of I.T. Act 1961. 5) Any other ground shall be prayed at the time of hearing. 3. The factual matrix is culled out to understand the contour of bone of contention. For the year under consideration, the assessee filed her return of income on 03/07/2017, disclosing total income of Rs. 3,93,980. Assessee s case was selected for limited scrutiny through CASS for examination of issues viz. (i) deduction / exemption from capital gain; and (ii) investment in immovable property. The Assessing Officer after making enquiries and examination concluded assessment under section 143(3) of the Act on 21/09/2019, accepting the income as per return filed by assessee. 4. The learned PCIT invoked jurisdiction under section 263 of the Act. The learned PCIT on a perusal of the record observed that the Assessing Officer had not verified issues during the course of assessment proceedings. The PCIT, noticed that the assessee has sold agricultural land alongwith house thereon for a total consideration of Rs. 4,25,00,000, and claimed exemption under section 54B of the Act on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey received on account of property sold. Claim of New Agricultural land for Rs. 17332940/- is correctly allowable as assessee has sold 1H. 92R Agricultural Land alongwith House constructed on part of land admeasuring of about 58.55 Sq. Mts. Onlyand land sold which is still as on day is a Agricultural Land. As per provision of section 54B of I.T. Act, 1961, exemption is correctly claimed and allowed by the assessing officer. Cost of improvement as claimed as per list is correctly allowed as all the payment are made by account payee cheques and all these transaction are reflected in bank statement and are explained to Assessing Officer at the time of assessment proceedings. The assessee enclosed copies of 07/12 extracts, bank statement and copy of major bills towards cost of construction. 5. The learned PCIT, on analysis of the order passed by the Assessing Officer as well as while considering the submissions of the assessee held that the order passed by the Assessing Officer is erroneous inasmuch as it is prejudicial to the interests of Revenue, hence, deserves to be revised by observing as follows: 4. I have carefully considered the submission of the assessee and perused the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts. 5.1 The Hon'ble ITAT Bench in the case of Apollo Tyres Ltd vs Assistant Commissioner of Income Tax, as reported in the 65 ITD 263 (Delhi) has held as under: It is a well-settled law that where the Assessing Officer fails to make proper inquiries and investigation, such failure on the part of the Assessing Officer will result in prejudice to interests of the revenue and initiation of action under section 263 by the Commissioner under such circumstances will be perfectly valid and justified. 5.2 Rajmandir Estates Private Limited V. Principal Commissioner of Income Tax'-2016 (5) TMI 801-CALCUTTA HIGH COURT- The High Court held that lack of enquiry, where enquiry is necessary, can be treated as prejudicial to the interest of the Revenue so as to justify revisional jurisdiction. It was for non inquiry, the validity of action under Section 263 was held justified in a case of non verification of share capital contribution when there was evidence to suggest that the transaction could not be genuine. 5.3 The Hon'ble ITAT Ahmedabad Bench in the case of M/s. Sonalank Investment Trading Pvt. Ltd. Vs. CIT, (ITA No. 1343/AM/2011) had relied on following observations: An asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther sources, capital gain and deductions claimed u/s 80C; xi) Reply to ITO, Ward 2, Amravati dated 20/09/2018; xii) Copy of bank statements and working sheet to explain payment of cost of improvement; xiii) Copy of sample bills ledger account; xiv) Notice for hearing dated 16/02/2022; xv) Assessment order u/s 143(3) r/w section 263 r/w section 144B in assessee s case for A.Y. 2017 18, order dated 27/03/2023; and xvi) Order u/s 155(15) in assessee s case for A.Y. 2017 18. 7. The learned Counsel for the assessee further placed reliance on the following case laws in support of his arguments: i) CIT v/s Max India Ltd., [2007] 295 ITR 282 (SC); ii) CIT v/s Gabrial India Ltd. [1993] 203 ITR 108 (SC); iii) M/s. Ashok ShrichandDaryani (HUF), ITAno.110/Nag./2018, order dated 27/07/2023 (ITAT Nagpur); iv) PCIT v/s Kanin (India), [2022] 141 taxmann.com 83 (P H); v) VipulModi v/s PCIT [2022] 139 taxmann.com 89 (Mum.); and vi) CIT v/s Mr.Subhash Vinayak Supnekar, Income Tax Appeal no.1009 of 2014, judgment dated 14/12/2016 (Bom.) 8. It is submitted that order passed by A.O. is after proper and adequate enquiries and cannot be termed as erroneous and prejudicial to the interest of revenue. He d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of notice u/s 142(1) seeking information on the issues under examination and same are verified and placed on record D) Notice u/s 142(1) dated 04/06/2019 seeking details on issue of limited scrutiny. E) Notice of hearing u/s 263 dated 16/02/2022 issued indicates three issues for which jurisdiction is sought to be assumed. It has been noted as under: i) Accepted the claim of exemption 54EC of I.T. Act 1961. ii) Allowed exemption u/s 54B in respect to purchase of new agricultural land. iii) Cost of improvement claimed at Rs. 112lacsis considerably on higher side. a) Purchase of agricultural land was verified by A.O. by obtaining Purchase Deed including source of investment in agricultural land. b) Exemption u/s 54EC was granted as earnest money received was deposited for purchase of bond and same is in accordance with judicial view rendered by Hon'ble Jurisdictional High Court in the case of CIT, Pune Vs. Subhash Vinayak Supnekar in ITA No. 1009 of 2014 vide judgement dated 14/12/2016. c) Cost of improvement examined at Rs. 1,12,00,000/- was verifiable from the bank account and bills placed on record. i) P- 60-64 Bank Statement ii) P-85-105) Details of Expenses iii) P 196 134 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en correctly initiated. He submitted that the assessee had miserably failed to comply with the conditions of section 54B and 54EC of the Act and thus the appeal needs to be dismissed. He submitted that in any case, the assessee s case has only been set aside for fresh assessment and he need not be aggrieved since he has got a fresh round of opportunity to prove his case. He submitted a site plan of the plot a copy of which is placed on record. 11. After a thorough analysis of erudite arguments from both sides and a thread bare analysis of humongous materials on record, we deem it fit to adjudicate each ground of revision separately. For better appreciation of facts, provisions of section 54B of the Act are reproduced below: Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases. 54B. (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee being an individual or his parent, or a Hindu undivided family for agricultural purposes (hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the period of two years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Explanation. [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] 12. 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 7/12 extract certified by Talati clearly mentions that 2 hectare of land was used for Soya Been and 1 hectare for Tur for the financial 2016 17. The land was not put to any other use. The assessee was owning agricultural land measuring to 3H2Rwhich comes to 32,000 sq.mtrs. and description of said land is survey no.11/1, Mauja Navsari, Taluka and District Amravati. Out of this, 1H92R i.e., 19,200 sq.mtrs. with construction thereon was sold on 22/03/2017. Description of property as per registered sale deed is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plates user of agricultural land in the two years immediately preceding the date of transfer and therefore, the reference is to the years and not during the whole period of two years as viewed by the authorities. In other words, if the asset has been used for the whole of the immediately preceding year and some days of the year earlier to the preceding year, still the requirement of s. 54B would be satisfied. Applying the definition of short term capital asset with reference to the word held , it could be said that any asset held in the two years immediately preceding the date of transfer would be eligible for relief under s. 54B on the capital gains arising on its sale. Thus, even if the assessee has cultivated only Kharif crop in the immediately preceding two years from the date of sale of land, the condition set out in Section 54B for claiming benefit of exemption is complied with. 13. Decision of ITAT, Pune Bench, in the case of Ramesh Narhari Jakhadi v/s ITO in ITA No.36/Pune/1990 for the assessment year 1986-87 order dated 20/02/1992 reported at [1992] 41 ITD 0368, also supports the submission of assessee in the case of assessee agricultural land is sold on 22/03/2017. In res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. (2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head Capital gains relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money: Provided that in case of long-term specified asset referred to in sub-clause (ii) of clause (ba) of the Explanation occurring after sub-section (3), this sub-section shall have effect as if for the words three years , the words five years had been substituted. Explanation. In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of April, 2018, means any bond, redeemable after five years and issued on or after the 1st day of April, 2018,by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956) or any other bond notified in the Official Gazette by the Central Government in this behalf. 15. 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, Income Tax Appeal no.1009 of 2014, judgment dated 14/12/2016, wherein the Hon ble Court has held as under: 3. The short question that arises for our appeal is whether an amount received on sale of a consideration in capital asset a as an advance as on the basis of Agreement to Sale and the same being invested in specified bonds before the final sale, would entitle the respondent assessee to the benefit of Section 54EC of the Act. 4. The impugned order of the Tribunal records the fact that an Agreement to Sale for the subject property was ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly points out that the Revenue had preferred an appeal against the order of the Tribunal in Bhikulal Chandak HUF (supra) to this Court (Nagpur Bench) being Income Tax Appeal No.68 of 2009. This Court by an order dated 22nd August, 2010 refused to entertain the Revenue's above appeal from the decision of the Tribunal in Bhikulal Chandak HUF (supra). In the above view, the question as proposed for our consideration in the present facts does not give rise to any substantial question of law. Thus, not entertained. 16. Insofar as reference to the Valuation Officer is concerned, 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, as evident from sub section (1) thereof, which is reproduced below: Estimation of value of assets by Valuation Officer. 142A. (1) The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsibility under different heads that runs into several pages. The heads under which the expenses were made towards the Corporate Social Responsibility were specifically mentioned as health, environment, sports, education etc. and for each of the different heads, particulars were given in respect of every minor or major expenses. A detailed note on the expenditure on the Corporate Social Responsibility claim was given in paragraph 8 which runs into more than five pages. It is not disputed that the appellant - assessee is a Government of India undertaking and the Government has a control over the expenses of the undertaking. It is pertinent to note that during the previous assessment years, similar claims were made by the assessee - Company and the assessment orders allowing the claims have attained finality. We have minutely perused the assessment order. The claims for deductions were made by the assessee at least under 20 heads and queries were made in the notice under Section 142 (1) of the Act to the assessee in respect of nearly all of them. We, however, find from the assessment order that the Assessing Officer has dealt with nearly nine claims of deductions. These claims ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry made to it during the assessment proceedings and merely because the assessment order did not mention the same, it would not lead to a conclusion that the Assessing Officer had not applied his mind to the case. In the instant case, we find that the Assessing Officer has applied his mind to the claims made by the assessee and wherever the claims were disallowable they have been discussed in that assessment order and there is no discussion or reference in respect of the claims that were allowed. In view of the law laid down in the judgments in the case of Fine Jewellery (India) Ltd. (supra) and Nirav Modi (supra) it would be necessary to hold that in the circumstances of the case, it cannot be said that merely because the Assessing Officer had not specifically mentioned about the claim in respect of the Corporate Social Responsibility, the Assessing Officer had passed the assessment order without making any enquiry in respect of the allowability of the claim of Corporate Social Responsibility. In our view, the provisions of Section 263 of the Act could not have been invoked by the Commissioner of Income Tax in the circumstances of this case. The Tribunal was not justified in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re- examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustainable. In most cases of alleged inadequate investigation , it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. ii) Pato Builders Ltd. v/s DCIT [2024] ITL 1042 (Ranchi) ITAno.73/Ran./2021, order dated 29/02/2024 7. We find that the issues in the present case considered by the Ld. CIT for exercising revisionary proceedings u/s 263 of the Act are purely on facts which are verifiable from the records of the assessee. Moreover, the same have been examined by the Ld. AO in the course of assessment proceedings for which all the relevant details and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rall consideration of facts and materials on record, we are of the view that the exercise of jurisdiction under section 263 of the Act, in the present case, is invalid, as the assessment order cannot be considered to be erroneous and prejudicial to the interest of Revenue. Accordingly, we quash the order passed under section 263 of the Act and restore the assessment order. 18. Considering the facts and evidence on record and perusal of documents in the paper book of assessee it is seen that A.O. while passing the regular assessee under section 143(3) has made due enquiries before accepting the claim of assessee. The Assessing Officer has made appropriate enquiry by issuing notice under section 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. On the facts and evidence on record 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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