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Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH, DEHRADUN
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M. BALAGANESHSmt. Omwati
ORDER PER M.BALAGANESH, AM: This appeal of the assessee arises out of the order of the Learned Principal Commissioner of Income Tax, Dehradun [hereinafter referred to as ‘Ld. PCIT(A)’] in F. No. Pr.
CIT/DDN/ITO(T&J)/263/2017-18 dated 24/10/2017 against the order passed by Deputy Commissioner of Income Tax, Circle-2, Dehradun (hereinafter referred to as the ‘Ld. AO’) u/s 143(3) of the Page 1 of 12 Omwati vs. Pr. CIT Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 21/03/2016 for the Assessment Year 2010-11.
The grounds raised by the assessee are as under:-
“1 That having regard to facts & circumstances of the case, Ld. Pr. CIT has erred in law and on facts in assuming jurisdiction u/s 263 and has further erred in observing that the assessment order passed u/s 143(3)/147 on 21-03-2016 is erroneous in so far as it is prejudicial to the interest of revenue and that too by recording incorrect facts and findings and without observing the principles of natural justice.
2. That having regard to facts & circumstances of the case, Ld. Pr. CIT has erred in law and on facts in holding as under:- That the assessee has not complied with the conditions enumerated • for claiming deduction u/s 54B of the I.T. Act. That the issue of said deduction has not been examined while • completing the reassessment u/s 143(3)147 dated 21-03-2016. That the re-assessment order is hereby set aside with the direction • to AO to re-examine the issue of claim of deduction u/s 54B afresh. That the deduction u/s 54B was not admissible to the assessee. • 3. That having regard to the facts and circumstances of the case, order u/s 263 is bad in law for the reason that the proceedings u/s 147 initiated itself was bad in law as the order u/s 143(3)/147 dated 21-03-2016 was not maintainable and an invalid re-assessment cannot be set aside u/s 263 of the Act.
4. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal
before or at the time of hearing and all the above grounds are without prejudice to each other.
3. The assessee has raised the following additional grounds :-
“1. That having regard to the facts and circumstances of the case, Ld. Pr. CIT. has erred in law and on facts in assuming jurisdiction u/s 263 which is bad in law inter alia for this reason that the reassessment order dated 21.03.2016 which is sought to be revised u/s 263 itself was invalid on various grounds as mentioned below and thus proceedings initiated u/s 263 against the invalid reassessment order is clearly bad in law.
Omwati vs. Pr. CIT (a) That assumption of jurisdiction u/s 147 is itself is bad in law as the reason recorded would not have led to the formation of belief of escapement of income. (b) That impugned reassessment order was passed without complying with the mandatory conditions of section 147 to 151 of Income Tax Act, 1961.
2. That in any case and in any view of the matter, Ld. Pr. CIT has erred in law in assuming jurisdiction and passing the impugned order u/s 263, is bad in law and against the facts and circumstances of the case. Since the above grounds are purely legal and does not require fresh facts to be investigated and goes to the root of the matter, it is prayed that it may please be admitted in view of the Hon'ble Supreme Court decision in the case of NTPC Limited 229 ITR 383.”
The only effective issue to be decided in this appeal is as to whether the Ld. PCIT was justified in assuming revision jurisdiction u/s 263 of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. The assessee is an individual deriving income from house property and income from business. The return of income for A.Y.2010-11 was filed on 30/09/2010 declaring total income of Rs.20,50,270/- showing capital gains at Nil. The assessee sold an agricultural land along with her husband Sh. Dariyav Singh and Sh. Sanjay Kumar during the year under consideration. The assessee had capital gains of Rs.35,08,250/- and from the sale proceeds of the said land, the assessee purchased another Omwati vs. Pr. CIT agricultural land and claimed deduction u/s 54B of the Act. The Ld. A.O. issued notice u/s 148 of the Act on 08/04/2014 for verification of correctness of the capital gain. In response to such notice, the assessee filed her return of income on 09/05/2014 showing the capital gains on sale of agricultural land to be at Rs.35,08,250/- and consequently claimed deduction u/s 54B of the Act in view of the fact that the assessee had purchased another agricultural land. The nil capital gain reported by the assessee was accepted by the Ld. A.O. in the re-assessment and concluded u/s 143(3) r.w.s. 147 of the Act on 21/03/2016. This assessment was sought to be revised by the Ld. PCIT by invoking revision jurisdiction u/s 263 of the Act on the ground that the Ld. A.O. had not examined the claim of deduction u/s 54B of the Act made by the Ld. AO, thereby making reassessment order erroneous and prejudicial to the interest of the Revenue.
We find that the assessee had claimed exemption u/s 54B of the Act amounting to Rs 37,75,000/- in respect of amount paid to Smt. Sangeeta Singh for purchase of agricultural land vide agreement to sell cum with possession deed dated 30.07.2009. In Omwati vs. Pr. CIT fact, we find that the assessee in the original return of income filed had duly disclosed the capital gains showing the lesser consideration. Therefore, the case was reopened and assessee filed his return in response to notice u/s 148 of the Act offering the correct figure of sale consideration and disclosing the capital gains correctly. In the said return, the assessee had also made the claim of deduction u/s 54B on acquisition of agricultural land which is evident from the computation of income enclosed in page 17 of the Paper Book. The Ld. A.O. in the course of re-assessment proceedings had even issued notice u/s 142(1) of the Act specifically making enquiries particularly into the details of property purchased by the assessee and also calling for making for capital gains on sale of property. The assessee duly replied to the same furnishing all the requisite details together with claim of deduction u/s 54B of the Act. The assessee also enclosed the copy of agreement to sell cum with possession deed dated 30.07.2009 entered into between Smt Sangeeta Singh and assessee which show that it was agricultural land and the payment of which was made through cheques and possession too was delivered to the assessee.
These evidences are enclosed in pages 31 to 34 of the Paper Book. Page 5 of 12 Omwati vs. Pr. CIT The Ld. AO sought details from the assessee vide order sheet noting dated 08/02/2016 seeking certain clarifications on claim of deduction u/s 54B of the Act. The assessee made submission before the Ld. A.O. on 03/03/2016 submitting that the land sold was agricultural land and that deduction u/s 54B of the Act was correctly claimed in view of the evidences filed and the payment for the said purchase is made through proper banking channel. The assessee made further submissions before the Ld. AO on 16/03/2016 giving evidence with regard to cost of acquisition of land so sold in co-ownership basis , copy of sale deed as evidence to claim deduction u/s 54B of the Act and computation of capital gains together with the copy of bank statements evidencing the flow of funds. After being satisfied with the various replies given by the assessee, the Ld. A.O. proceeded to accept the claim of the assessee with regard to computation of capital gain and claim of deduction u/s 54B of the Act. Hence, it could be safely concluded that the Ld. A.O. had indeed made sufficient enquiries with regard to the capital gains and claim of deduction u/s 54B of the Act. Hence, in our considered opinion, the action of the Ld. PCIT invoking the revision jurisdiction u/s 263 of the Act on the ground that no enquiries Page 6 of 12 Omwati vs. Pr. CIT made by the Ld. A.O. is factually incorrect. By placing reliance on the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd. vs. CIT reported in 243 ITR 83 (SC), we hold that when adequate enquiries were indeed carried out by the Ld. A.O., the same cannot be subjected to revision by the Ld. Pr. CIT u/s 263 of the Act. Hence, the revision order passed by the Ld. PCIT deserves to be quashed on this point.
Further, we find on perusal of para-1 at page 1 of the order of Ld. PCIT u/s 263 of the Act, that there was a proposal u/s 263 of the Act dated 05/06/2017 received from Assistant Commissioner of Income Tax, Circle-2, Dehradun duly forwarded by the Addl.
Commissioner of Income Tax, Range-2, Dehradun dated 07/06/2017 to the Ld. PCIT. This fact goes to prove conclusively that revision proceedings u/s 263 of the Act got triggered only based on this proposal sent by the Ld. A.O. through the Addl. CIT and that the revision proceedings were not initiated by the Ld. PCIT on his own and based on the independent examination of records from his side. Keeping in perspective the aforesaid factual position, if we read section 263 of the Act, it becomes clear that learned Pr.
Omwati vs. Pr. CIT CIT or the Commissioner may call for and examine the record of any proceeding under this Act, and if on such examination, he finds that any order passed in such proceedings by the Assessing Officer is erroneous and prejudicial to the interests of the revenue, he may initiate proceedings under section 263 of the Act. Thus, the words used in section 263 of the Act clearly indicate that the revisionary authority has to independently apply his mind to the materials on record before coming to a conclusion that the order sought to be revised is erroneous and prejudicial to the interests of revenue. The decision making process under section 263(1) of the Act has to be that of the revisionary authority and cannot be at the behest of some other subordinate authority. In the facts of the present appeal, it is abundantly clear that the exercise of powers under section 263 of the Act is not due to any independent application of mind by the revisionary authority, but at the behest of the Income- tax Officer. Had the Assistant Commissioner of Income Tax not sent any proposal for initiating proceedings under section 263 of the Act, it is quite probable, the revisionary authority may not have exercised his powers under section 263 of the Act. That being the factual and legal position, in our view, the exercise of powers under Page 8 of 12 Omwati vs. Pr. CIT section 263 of the Act in the present case has to be declared invalid.
In support of our conclusion, we rely upon the following decisions:
(i) Vinay Pratap Thacker (ITA No. 2939/Mum/2011 dated 27.02.2013 (ii) Ashok Kumar Shivpuri (ITA No. 631/Mum/2014 dated 07.11.2014 (iii) Shanti Exim Lt. Vs. CIT (2017) 88 taxmann.com 361(Ahmedabad)
Further, we find that the Ld. PCIT has mentioned that agreement to purchase agricultural land from Smt. Sangeeta Singh cannot be made the basis for deduction u/s 54B of the Act. It is not in dispute that in the instant case, an agreement to sell cum with possession deed was duly executed on 30.07.2009. The observation of the Ld. PCIT gives raise to the legal question whether any right is created in favour of the purchaser on execution of agreement to sell. We find that the Hon’ble Supreme Court in the case of Sanjeev Lal vs CIT reported in 365 ITR 389 (SC) had held as under:- 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, Omwati vs. Pr. CIT belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated. 25. In view of the aforestated peculiar facts of the case and looking at the definition of the term 'transfer" as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house. 26. The appeals are, therefore, allowed with no order as to costs. The impugned judgments are quashed and set aside and the Authorities are directed to re-assess the income of the appellants for the Assessment Year 2005-2006, after taking into account the fact that the appellants were entitled to the relief, subject to fulfilment of other conditions.
Respectfully following the aforesaid decision of Hon’ble Apex Court, we hold that the exemption u/s 54B of the Act is admissible since the assessee sold agricultural land and made payment for purchase of another agricultural land and took possession of land thereon.
In view of our aforesaid observations on the original grounds of appeal filed by the assessee, we do not deem it fit to adjudicate the additional grounds raised by the assessee before us. Hence those additional grounds are hereby left open.
Omwati vs. Pr. CIT 11. Thus, considering the totality of facts and circumstances of the case, we hold that the impugned order passed under section 263 of the Act is unsustainable. Accordingly, the order passed under section 263 of the Act is quashed and the assessment order is restored.
In view of the aforesaid observations, we have no hesitation to quash the revision proceedings u/s 263 of the Act by the Ld. PCIT.
It would also be relevant to mention here that similar view was taken by this tribunal in and ITA No. 2187/Del/2018 in the case of other co-owners Sh. Dariyav Singh and Sh. Sanjay Kumar respectively for Asst Year 2010-11 vide common order dated 28/06/2023.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15th September, 2023.