INCOME TAX OFFICER WARD 4(2)(3) AHMEDABAD, AHMEDABAD vs. NITINBHAI KANUBHAI PATEL, AHMEDABAD

PER ANNAPURNA GUPTA, AM:

The present appeal has been filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)”) dated 11.11.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 2 – 2. The appeal was earlier heard and order passed by the ITAT dated 14.10.2025, which was subsequently, recalled on the Miscellaneous Application filed by the assessee, considering that the order passed was an ex parte order, and the assessee had made out a bona fide case for not being present on the specific date, for final hearing of the case. The assessee’s Miscellaneous Application in MA No.105/Ahd/2025, recalling the order originally passed by the ITAT in ITA No.183/Ahd/2025 dated 14.10.2025 was pronounced on 28.11.2025. Accordingly, the case was fixed for hearing before us. However, on the appointed date, none appeared for the assessee, and the matter was proceeded to be decided ex parte. 3. The grounds raised by the Revenue read as under:- (a) The learned CIT(A) has erred in law and on facts in allowing the exemption claimed u/s. 54B of the IT Act on LTCG of Rs 2,95,92,616/- without appreciating that as per revenue records, there was no mention of any agricultural produce on the land for FY 2015-16 and the assessee has not filed any corroborative evidence with regard to the agricultural land on which agricultural activities were being carried out. (b) Whether in the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in allowing the assessee exemption of the capital gain on transfer of land not used for agriculture purpose u/s 54B of the IT Act, 1961, which was denied by the AO since the assessee did not satisfy the conditions for availing said exemption? (c) Whether in the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in holding that the revenue has failed to discharge its onus when all possible corroborative evidences have been collected by AO and made part of the order? (d) Whether in the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in completely ignoring all the evidences, collected by AO and stating that the AO has rejected documents without assigning sensible reasons and corroborative evidences on record when there is substantial evidence to prove that agricultural operations were not carried on? (e) Whether in the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in allowing the claim of the assessee for deduction u/s 54B of the IT Act, 1961 completely ignoring the facts that the basic condition for claiming deduction u/s 54B of the Act is that the land in respect of which deduction u/s 54B of the Act is claimed is required to

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 3 – be used for agricultural activities but the assessee has failed to prove with valid documentary evidence that the land in question was used for agricultural activities? (f) Whether in the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in allowing the claim of the assessee for deduction under section 54B of the IT Act 1961 completely ignoring the fact that it is the assessee who has claimed deduction u/s 54B of the Act and, therefore, the onus is on the assessee to prove with valid documentary evidences that the land in respect of which deduction u/s 54B of the Act is claimed is not a barren land and the same was used for agricultural activities thereby fulfilling the basic condition for claiming deduction u/s 54B of the Act but the assessee has failed to do so? (g) Whether in the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in ignoring the judgment of Hon'ble Supreme Court in the case of Commissioner of Wealth Tax vs. Officer in charge (Court of Wards) reported in 105 ITR 133, when onus to prove that land in disputed was not used for agricultural purpose has been completely discharged by the AO? (h) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal. 4. The solitary issue in the present appeal pertains to the claim of exemption of capital gains earned by the assessee u/s 54B of the Act, on account of investment of the consideration received on the sale of original asset in the purchase of an agricultural land. The facts relating to the issue are that, the assessee had sold immovable property being agricultural land in co- ownership of his family members during the year under consideration, his share being 1/3rd in sale of property, which was sold for Rs.7.24 crores. While calculating Long Term Capital Gain, the assessee had claimed deduction of Rs.2.95 crores u/s 54B of the Act, claiming investment to have been made in another agricultural land to the said extent. The assessee’s claim of deduction u/s 54B of the Act, however, was denied for the reason that the assessee was unable to substantiate the mandatory condition for claiming deduction u/s 54B of the Act, of the immovable property sold having been used for agricultural purposes in the preceding two years.

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 4 – 5. The Ld. CIT(A), however, allowed the claim of the assessee noting that, in the case of co-owner, the identical disallowance of Section 54B of the Act, had been allowed noting that the assessee had furnished sufficient evidences to prove that the land sold was used for agricultural purposes, and relevant finding of the Ld. CIT(A) in this regard, is contained at para 6.1 to 6.6 of the order as under:- “6.1. These ground of appeal no. 1 & 2 are related to the disallowance of claim u/s.54B of the Act of Rs.2,95,92,616/- by the AO and questioning the legitimacy of re-opening of the assessment proceeding. As the similar addition was made by in the appellant's brother case as well and relief was granted by the Hon'ble ITAT, the same is discussed at first on the merits of the case. As noticed from the Assessment Order, the appellant filed the return of Income for the AY 2016-17 on 22.05.2023 declaring Income of Rs. 13,08,330/-. Subsequently information received from DCIT (Int. Tax)-1, Ahmedabad vide letter dated 01.06.2021 that appellant alongwith Sh. Ashok Kanu Bhai Patel (PAN ARRPP4895J) co- owned properties which were sold during the year and exemption U/s 54B was claimed on the same.

6.2 In order to verify the true facts of the case, notice u/s. 148 of the IT Act was Issued on 30.06.2021. However, the case was subject matter of litigation before the Hon'ble Supreme Court in the Civil Appeal No 3005 of 2022, Union of India Vs Ashish Agarwal. Hon'ble Apex Court, vide its order dated 04.05.2022 has directed, inter alia that all such notices are to be treated as notices u/s 148A(b) of the Income-tax Act, 1961. Further, underlying information, on the basis of which such notices were issued, has to be shared with the Assessee, and after duly considering the reply of the assessee, order u/s 148A(d) has to be passed. Therefore, fresh notice u/s 148 of the Act has to be issued after following directions issued by the court.

6.3 In view of the direction of the Hon'ble Supreme Court, order u/s 148A(d) of the IT Act on 29.07.2022 after issuing the notice to the appellant. Accordingly, notice u/s. 148 of the IT Act was issued to the appellant for which the appellant failed to file any ITR. During the course of the assessment proceeding, the appellant submitted the clarification in regard to the claim made u/s. 54B of the IT Act of Rs. 2,95,92,616/-however the same was not accepted by the AO and assessment was conclude by disallowing the same. Aggrieved by the same the assessee has preferred this present appeal.

6.4 In the instant case, the AO noticed that the agricultural income is very nominal considering the measurement of land. In this regard, the appellant submitted that "the most of agricultural product used for household/distributed amongst friend and relatives and subsequently sold in open market in a few quantities. The fact is the agricultural product

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 5 – depends up on natural factors. Many times, the crop is not as per expectation of farmer as there may be some natural reasons. The AO also observed that the sale bill of agriculture pertains to F.Y. 2015-16 and as per revenue records there is no agriculture activities and also the land should be used for agricultural purpose. In respect of this, the appellant's contention is that it is not relevant whether the appellant has earned income from the agricultural activity or not. However, the income from agricultural activity proves that the land sold was used for agricultural activity and therefore, the appellant is entitled for the deduction u/s 54B of the I.T.Act, 1961."

6.5. During the course of the appellate proceeding, the Appellant has also stated that In the case of Sh. Ashok Kanu Bhai Patel assessment was also completed u/s 143(3) on 26.12.2018 and addition of Rs.6,64,83,153/- on account of disallowance of deduction u/s. 54B of the IT Act was made which was also confirmed in first appeal by Ld. CIT(A) vide order no. CIT(A)-13/Intl. Taxn/Ahd/2018-19 dated 13.03.2020. However, Sh. Ashok Kanu Bhai Patel preferred appeal before the Hon'ble ITAT against the order of Ld. CIT(A). The Hon'ble ITAT passed order on 31.05.2021 allowing the appeal of the appellant and deleted the addition made AO. The main reliance of the Hon'ble ITAT was made on the fact that the Revenue failed to prove that the land in dispute was not used for the purpose of agricultural operations by bringing tangible material on record which can be used against the assessee and against the form 7/12 along with form 8 available on record. Relevant portion of the ITAT order is re-produced as under:

*...11.10 However, the onus is upon the revenue to prove that the land in dispute was not used for the purpose of agricultural operations by bringing tangible material on record which can be used against the assessee and against the form 7/12 along with form 8 available on record. In the case on hand, the assessee has furnished the necessary details such as affidavit of the party who carried out the agricultural operations as well as form 7/12 along with form 8 which have rejected by the authorities below but without assigning sensible reason and bringing any corroborative evidence on record. Accordingly, we are inclined to reverse the order of the authorities below and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.

6.6. On perusal of the order of the Hon'ble ITAT, it is seen that the case of the Appellant is identical on facts with the case on which the Hon'ble ITAT has adjudicated. In the instant case also, the AO could not bring sufficient material to establish that the appellant's income has escaped assessment in the relevant assessment year. Moreover, the appellant submitted the Google earth photos along with the Revenue Records towards the claim of agricultural activities being carried out on the said land. Onus was on the Assessing Officer to bring enough evidence to rebut the appellant claim and also prove that the Land was not used for agricultural activities which he failed to discharge in the instant case. In view of the same and also respectfully following the jurisdictional binding decision of the Hon'ble ITAT, the

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 6 – AO is directed to deleted the addition of Rs.2,95,92,616/-. Thus, the ground no.2 filed by the appellant is allowed. 6. Before us, Ld. DR was unable to point out any distinction in the case of co-owner with that of the assessee, though he relied on the order of the AO. 7. We have heard both the parties. The denial of claim u/s 54B of the Act to the case of the assessee is for the reason that the assessee was unable to establish that its land had been used for agricultural activities in the preceding two years, which was mandatory condition for being entitled to claim deduction u/s 54B of the Act. The ITAT, in the case of co-owner of land, has categorically noted the fact of the land having been used for agricultural purposes being sufficiently established with Form 7/12 along with Form 8 of the said land. In the case of the assessee before us the same evidences have been filed to prove user of land sold for agricultural purposes. The Ld.CIT(A) has noted that the Revenue has not been able to controvert with tangible material, the fact of the assessee having demonstrated, the user of land for agricultural purposes. The aforesaid fact has remained uncontroverted before us. In the light of the same we hold that the Ld. CIT(A) has rightly applied the decision of the ITAT in the case of co-owner of the land rendered in identical facts and circumstances while granting relief to the assessee. 8. In view of the same, we see no reason to interfere with the order of Ld. CIT(A), allowing assessee’s claim of deduction u/s 54B of the Act. Thus, the grounds raised by the Revenue are accordingly, dismissed. 9. The assessee, we have noted has filed an application under Rule 27 of the Appellate Tribunals Rules 1963, on behalf of the assessee, raising the legal ground vide his application dated 18.03.2026, the contents of the same are, as under:-

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 7 – APPLICATION UNDER RULE 27 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 ON BEHALF OF RESPONDENT - ASSESSEE 1) The Appellant in the above appeal has challenged the order dated 11.11.2024 passed by the Id. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre for the A.Y.: 2016-17. 2) The Respondent submits that the Appellant had issued notice to the Respondent beyond the surviving period as stated in the decision of the Hon'ble Supreme Court of UOI v/s Rajeev Bansal. Therefore, the notice issued to the present Respondent u/s 148 dated 29.07.2022 is beyond the surving period. 3) In view of the above, the Respondent craves leave of this Hon'ble Tribunal to raise additional grounds in the above appeal:- "Whether, in fact and circumstances of the case, the notice dated 29.07.2022 issued u/s 148 of the Income Tax Act, 1961 for A.Y.: 2016-17 is beyond the period of limitation? 4) Thus, the Respondent prays to admit the above additional ground of appeal in the interest of justice. 10. In the absence of any assistance, on behalf of the assessee for adjudicating the impugned ground raised before us, we dismiss the same. 11. In effect, the appeal of the Revenue is dismissed, and also the assessee’s application under Rule 27 raising the legal ground is also dismissed.

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 15.07.2026

Sd/- sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 15/07/2026 Mittali आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent.

ITA No.183/Ahd/2025 Nitinbhai Kanubhai Patel - 8 – 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad