Jitendra Patidar Vs Pr. CIT (ITAT Indore)
Conclusion: Provisions of section 263 could be invoked when twin conditions i.e. the assessment order was erroneous and prejudicial to the interest of Revenue were satisfied. Revision under section 263 could not be invoked if assessment order was not prejudicial to the Revenue.
Held: Assessment was completed by AO u/s 143(3) assessing the income at Rs. 2,98,060/-. Subsequently, CIT on going through assessment records found that certain points which were mentioned in the selection of the case for scrutiny under CASS were not taken into consideration by AO while completing assessment u/s 143(3). CIT was of the view that AO passed an order without making required investigation for examination which had resulted the assessment being erroneous in so for as it was also prejudicial to the interest of the revenue. Hence, CIT issued notice u/s 263 calling upon assessee as to why assessment order should not be revised. However, explanation offered by assessee was not found acceptable by CIT, he therefore, held that the assessment order was erroneous in so far as also prejudicial to the interest of the revenue on account of passing of the order without making requisite enquiry/investigation in respect of deduction u/s 54B. He, therefore, set aside the assessment order and directed AO to re examine the issue afresh after causing necessary enquiry/investigation. It was settled position of law that the provisions of section 263 could be invoked when twin conditions i.e. the assessment order was erroneous and prejudicial to the interest of Revenue were satisfied. It was held inthe case of CIT vs Associated Food Products (P) Ltd as reported in 280 ITR 0377 in assessee’s favour regarding availability of deduction u/s 54B where the investment in new asset was made in the name of son of the assessee. Revenue had not brought to notice any contrary judgment by the Hon’ble jurisdictional High Court or Hon’ble Supreme Court as a binding precedence. Therefore, under these facts, it could not be construed that the order passed by AO was prejudicial to the interest of the Revenue. As the assessment order was in accordance with the ratio laid down by the Hon’ble jurisdictional High Court, thus, CIT was not justified in invoking the provision of section 263.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order of ld. Pr. Commissioner of Income Tax(in short ‘Ld. Pr. CIT’,-2 Indore dated 29.03.2019 pertaining to assessment year 2015-16.
The assessee has raised following grounds of appeal:
“1. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer under section 143(3) of the Act by invoking the provisions of section 263 of the Act even when the order as passed by the assessing officer was neither erroneous nor prejudicial to the interests of the revenue.
2. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the roder as passed by the assessing officer by invoking the provisions of section 263 of the Act even when the order was passed by the assessing officer under section 143(3) of the Act after conducting necessary enquiries and after due application of mind.
3.That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed y the assessing officer by invoking the provisions of section 263 of the Act without properly appreciating the facts of the case and submissions made before him even when amount of investment in agricultural land of Rs.1,40,18,850/- claimed as deduction under section 54B of the Act was legal and proper.
4. The assessee craves leave to add, alter modify the grounds of appeal as taken by him.
2. The facts giving rise to the present appeal are that the in this case assessment was completed by the assessing officer u/s 143(3) of the Income Tax Act 1961 (hereinafter referred as the Act) on 27.03.2017, assessing the income at Rs. 2,98,060/-. Subsequently, the Ld. Pr. CIT on going through assessment records found that certain points which were mentioned in the selection of the case for scrutiny under CASS were not taken into consideration by the assessing officer while completing assessment u/s 143(3) of the Act. The Ld. Pr. CIT was of the view that the assessing officer passed an order without making required investigation for examination which has resulted the assessment being erroneous in so for as it is also prejudicial to the interest of the revenue. Hence, Ld. Pr. CIT issued notice u/s 263 of the Act calling upon the assessee as to why assessment order should not be revised. Basis of issuing notice u/s 263 is recorded in para 3 of the show cause notice which is reproduced as under:
“As per the information available on records, it is noted that you have sold immovable property (land) for a total sale consideration of Rs.1,60,65,000/- and shown long term capital gain of Rs.1,36,25,525/-. Furtehr you have claimed deduction u/s 54B of the IT Act amounting to Rs.1,40,18,850/- on purchase of agriculture land and shown capital loss of Rs.(-)3,93,265/-. On perusal of the details of deduction claimed u/s 54B regarding agriculture land purchased, it appears that no agriculture land has been purchased on your name. the said lands have been purchased on the name of your sons and daughter in law. Hence the claimed deduction should have been disallowed as per provisions of Section. 54B of the I.T. Act. The AO has not examined this factor and no enquiry/investigation has been made. Therefore, the assessment order passed by the AO appears to be erroneous in so far as it is prejudicial to the interest of the revenue. You are therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above.”
3. In response thereto, the assessee filed written submissions through its Authorized Representative (AR), CA, Satyanarayan Agrawal. However, explanation offered by the assessee was not found acceptable by the Ld. Pr. CIT, he therefore, held that the assessment order dated 27.03.2017 is erroneous in so far as also prejudicial to the interest of the revenue on account of passing of the order without making requisite enquiry/investigation in respect of deduction u/s 54B of the Act . He, therefore, set aside the assessment order and directed the assessing officer to reexamine the issue afresh after causing necessary enquiry/investigation.
3. Aggrieved against this the assessee preferred an appeal before this Tribunal. Ld. counsel for the assessee vehemently argued that the Ld. Pr. CIT has not applied his mind on the facts of the case and preceded against the assessee mechanically. He further reiterated the submissions as made in the written submission for the sake of clarity submission of the assessee are reproduced as under:
A.1] The present appeal is filed by the appellant against the order as passed by the Ld Pr. Commissioner of Income Tax – 2 on 29-03-2019 under section 263 of the Income Tax Act.
A.2] The assessee filed his return of income for AssessmentYear 2015-16 declaring total income of Rs. 2,98,060/- on 28-08-2015.
A.3.1] The assessing officer issued noticedated 12-01-2017 under section 142(1) of the Income Tax act to the assessee calling for the information and explanation in respect of sale of agricultural land situated at Halka No. 19 [New No. 38], Khasra No.284,Gram BalyaKheda, Indore for the consideration of Rs. 1,60,65,000/- and the purchase of new agricultural land at Rs. 1,40,18,850/- claiming exemption under section 54B of the Income Tax Act.
A.3.2] The assessee in response to the said notice under section 142(1) of the Income Tax Act filed his reply dated 30-01-2017 and 09-03-2017 along with the necessary documents and information as required in the course of assessment proceedings so as to justify the claim of deduction under section 54B of the Income Tax Act.
A.3.3] The assessing officer, thereafter passed an assessment order u/s 143(3) of the Income Tax act on 27-03-2017and accepted the returned income as declared by the appellant at Rs. 2,98,060/- .
A.4] The assessee died on 06-05-2017 and his son Shri JitendraPatidar was appointed as the Legal heir of the assessee.
A.5.1] That subsequently, proceedings u/s 263 were initiated by way of issue of show cause notice dt 17-07-2018 in the name of Late Shri SatyanarayanPatidar for the following reasons:
1 Disallowance of deduction claimed u/s 54B regarding agriculture land purchased, lands have been purchased in the name of son and daughter-in- law of the ass and not inhis in his own name.
A.5.2] However, the legal heir of the assessee vide letter dated 05-09-2018 has objected the issuance of notice u/s 263 of the Act in the name of deceased person. Thereby, fresh notice u/s 263 was issued in the name of legal heir of the deceased Shri Jitendra Patidar dated 31-10-2018.
B] The appellant in the present appeal has taken the following grounds of appeals before the Hon’ble Bench:-
1.1] That on the facts and in the circumstances of the case and in law, the Ld Pr. CIT erred in setting-aside the order as passed by the assessing officer under section 143[3] of the Act by invoking the provisions of section 263 of the Act even when the order as passed by the assessing officer was neither erroneous nor prejudicial to the interests of the revenue.
1.2] That on the facts and in the circumstances of the case and in law, the Ld Pr. CIT erred in setting-aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Act even when the order was passed by the assessing officer under section 143[3] of the Act after conducting necessary enquiries and after due application of mind
2] That on the facts and in the circumstances of the case and in law, the Ld Pr. CIT erred in setting-aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Act without properly appreciating the facts of the case and submissions made before him even when amount of investment in agricultural land of Rs. 1,40,18,850/- claimed as deduction under section 54B of the Act was legal and proper
GROUND No 2- ON MERIT – CHALLENGING THE DENIAL OF DEDUCITON AS CLAIMED UNDER SECTION 54B OF THE INCOME TAX ACT IN RESPECT OF PURCHASE OF AGRICULTURAL LAND
1.1]The assessee had sold his inherited agricultural landsituated at Halka No. 19 [New No. 38], Khasra No.284,Gram BalyaKheda, Indore admeasuring 1.215 Hectares for the consideration of Rs. 1,60,65,000/- on 30-06-2014.
1.2] Copy of sale deed as executed by the assessee is enclosed. In Para 2 of the said deed it was stated that the said Agricultural land as sold by the assessee was not actually purchased from his own funds but was inherited to him. Hence the said Land was sold with the consent of his sons and brother of the assessee. The name of the consentor as mentioned in the sale deed as under:
