M/S. R.K. INVESTMENTS,CHENNAI vs. DCIT, NCC-3(1),, CHENNAI

The PCIT ought to have appreciated that there was no sale but only an agreement to sell which was subsequently cancelled and hence there was no income on sale of land for the year under appeal.

Without prejudice, even if it is assumed as a sale, as the land was agricultural land, any deemed profit arising from the transaction is exempt from tax.

PCIT ought to have appreciated that when the issue regarding the nature of the impugned land after the facts were thoroughly examined by the assessing officer at the time of reassessment as explained in the order under section 147, the proceedings under section 263 is without jurisdiction and would constitute super imposition of the conclusions of the PCIT on the assessing officer's view. 15. PCIT ought to have appreciated that the view of the assessing officers at the time of making regular assessment under section 143(3) as well as reassessment under section 147 on the basis of submissions and evidence holding that the land to be an agricultural land, constitute an acceptable view based on records and hence the orders of regular assessment as well as reassessment does not suffer from any error and PCIT erred in assuming jurisdiction under section 263 to super impose his views on the views of the assessing officers and which are not unsustainable in law. 16. PCIT ought to have appreciated that the jurisdictional High Court in the case of Sakunthala Vedachalam (Mrs.) v. ACIT (2014) 369 ITR 558 Mad HC and CIT vs P Ashok Kumar TCA 268/2011 on 2 Jan 2019 Mad have held that once the lands are classified as Agricultural lands in the land records, profit on sale of such land is not subject to capital gains. 17. PCIT also ought to have appreciated the jurisdictional courts verdict through The High Court of Madras in the case of Principal Commissioner of Income Tax-I, Coimbatore v. K.P.R. Developers Ltd. Where assessee sold agricultural land and claimed capital gain from sale as exempt, since Tahsildar while submitting report to Assessing Officer had enclosed copies of computerized patta, which showed that land was wet land and deemed to be agricultural land, merely because an agriculture activity could not be done on said land for various reasons including natural causes, it did not cease to be an agricultural land, thus, same could not be considered as capital asset as per section 2(14) and capital gain arising from same was exempt from tax. The High Court of Madras in the case of Mr P 5 Raghupathy [2018] 96 taxmann.com 200. The High Court of Madras in the case of Mr. N Rangabhasyam - [2017] 84 Taxmann.com 303 SUPREME COURT OF INDIA - SLP Dismissed - Commissioner of Income-tax v. Venkateswara Hospital [2019] 106 taxmann.com 283 (SC) - Where High Court upheld Tribunal's order that land sold by assessee did not fall within meaning of capital asset under section 2(14) as it was classified as dry land for which Kishtu had been paid and, moreover, mere fact that adjacent land was divided into plots for sale could not a ground to conclude that land sold by assessee was for purpose of development, SLP filed against order of High Court was to be dismissed. The Apex Court has emphasized the classification in revenue records, which squarely applies in assessee's case, therefore, it is once again reiterated that lands were agricultural in nature. 18. PCIT has not brought on record any new fact or finding to dislodge the conclusions arrived at by the two assessing officers in the course of making assessment as well as reassessment to enable him to assume jurisdiction under sec 263. 19. The PCIT ought to have appreciated that for claiming exemption under Section 2(14)(iii), provisions are clear and once they are satisfied, the relief under section 45 read with section 2(14)(iii) would have to be granted and there is no ambiguity in the claim of the appellant in view of the supporting documents filed and accepted by two assessing officers independently. Hence the decisions relied on by PCIT are not relevant to the issue on hand.

The PCIT having not found any fault with any of the claims or submissions made by the appellant and had not pointed out any error in the orders of the AO accepting the claim of the Appellant that what was sold was agricultural land, erred in setting aside the assessment, particularly when the AO had examined the issue and had accepted the submissions and claim of the Appellant.

The PCIT on the basis of the document filed ought to have accepted that the land sold was Agricultural land.

When two views possible and the AO has taken one possible view, order not erroneous. Appellant relies on the following decisions: Malabar Industrial Co Ltd v CIT 243 ITR 83 SC. CIT v Max Inda Ltd 295 ITR 282 SC. CIT Vs Mepco Industries Ltd 294 ITR 121 (Mad). 23. [2023] 147 taxmann.com 469(Orissa) HIGH COURT OF ORISSA Commissioner of Income-tax v . Dhaneswar Rath Institute of Engineering & Medical Sciences • Where Assessing Officer during scrutiny proceeding had allowed assessee's claim of exemption under section 11 in regard to depreciation as application of income after conducting adequate enquiry and considering all documentary evidence furnished by assessee, impugned revisionary proceedings initiated by Commissioner (Exemptions) under section 263 on mere statement that no documentary evidence was submitted by assessee in support of its claim was liable to be quashed. 24. [2019] 110 taxmann.com 109 (Madras) HIGH COURT OF MADRAS, Kumar Rajaram v. Income-tax Officer (International Taxation 2(1)), Chennai, Where a property belonging to assessee's father was sold as per his father's Will and assessee computed capital gain after reducing payments made to charitable institutions and certain expenditure incurred towards execution of sale of property, since said payments were made as per Will, same were correctly excluded while computing capital gain on sale of property by assessee. Whether, on facts, Assessing Officer was justified in accepting sale consideration declared by assessee and, thus, impugned revisional order was to be set aside - Held, yes [Paras 5,8,10 and 12] [In favour of assessee.

The Ld. AR advanced arguments by submitting that the assessee’s case was specifically reopened to examine the impugned issue and it was duly considered by Ld. AO and therefore, revision was bad-in-law. Reliance has been placed on various judicial decisions as narrated in the grounds of appeal. The Ld. CIT-DR supported the directions given by Ld. Pr. CIT in the revisionary order. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident firm was assessed u/s 143(3) on 28- 12-2016. Subsequently, the case was reopened and notice u/s 148 was issued on 31-03-2021 for the reason (Page 19 of the paper-book) that the assessee sold certain land and claimed exemption from capital gain stating that the lands sold was used for agricultural activities. However, the said land was not under cultivation up-to 31-03-2012. If the land was put into agricultural activities, the assessee must have incurred expenditure and claimed the deduction of the same from the agricultural income. No such claim was made by the assessee. It was evident that the land was not used for agricultural activities for the last two years prior to the date of transfer of land. The exemption was allowed to the extent of Rs.815.73 Lac without any supportive documents. Therefore, the exemption was to be disallowed and the income was to be brought to tax as Long-Term Capital Gains. Accordingly, the reasons were recorded and the case was reopened wherein various details were called from the assessee in this regard during the course of re-assessment proceedings. 3.2 The assessee, vide its reply dated 10-03-2022, inter-alia, submitted that the land remained agricultural land throughout the period of holding which was evident from revenue records and other documents. The assessee consistently reflected agricultural income in the earlier years for which necessary amendment was made in the partnership deed. The allegation that no expenditure was claimed was factually incorrect since the assessee duly mentioned the agricultural income as well as expenses. The assessee also enclosed revenue records like Patta and evidence that the land was classified as Dry Maanavari Type wet lake single crop type etc. The assessee also referred to various judicial decisions to support its claim. 3.3 Considering assessee’s submissions and documentary evidences, Ld. AO framed an assessment u/s 147 r.w.s.144B on 28-03-2022 wherein Ld. AO rejected assessee’s objections to reopen the assessment proceedings. In para-9 of the order, Ld. AO took cognizance of assessee’s reply dated 10-03-2022 and held that assessee’s claim of LTCG was correct. The Ld. AO also examined the issue whether the land was held as stock-in-trade or not. In para-13, Ld. AO concurred that the subject land was sold as an agricultural land only. Accordingly, no addition was made and income assessed u/s 143(3) at Rs.71.96 Lacs was accepted. The assessment was accordingly finalized vide order dated 28-03-2022. Revisionary Proceedings 4.1 This order was subjected to revision u/s 263 by Ld. Pr. CIT vide impugned order dated 08-03-2024. In this order, it has been alleged that the issue whether the land sold was agricultural land or not was not at all examined by AO nor was any evidence submitted by the assessee to that effect. Moreover, whether the land satisfies the provisions of Sec. 2(14)(iii) was not examined by Ld. AO. It was noted by Ld. Pr.CIT that two basic issues were there for consideration of Ld. AO i.e., whether the land in question could be held to be an agricultural land and secondly, if the said land was agricultural in nature, then as to whether it satisfied the provisions of Sec. 2(14)(iii) or not? However, this issue was not at all examined by Ld. AO. 4.2 Considering the same, the assessee was show-caused. The assessee assailed the revision of the order and submitted that the case was reopened specifically on the ground that the assessee claimed exemption u/s. 2(14)(iii) on sale of agricultural land. During the course of reassessment proceedings, various replies were furnished on the basis of which Ld.AO concluded that land sold was an agricultural land.

The assessee furnished documents evidencing the fact that the land remained agricultural land throughout the period of holding which was evident from revenue records and other documents. It was also stated that the assessee consistently reflected agricultural income in the earlier years. The allegation that no expenditure was claimed was also refuted. The assessee also enclosed revenue records like Patta and various evidences that the land was classified as Dry Maanavari Type wet lake single crop type etc. The assessee also referred to various judicial decisions to support its claim. All these details were furnished vide reply dated 10-03-2022, a copy of which has been placed in the paper book. In this reply, the assessee relied on various decisions of Hon’ble High Court of Madras which include the decision in K.P.R.Developers Ltd. (117 Taxamnn.com 822); Sakunthala Vedahalam (53 Taxmann.com 62); P.S.Raghupathy (96 Taxmann.com 200); Dr. N.Rangabhasyam (84 Taxmann.com 303).

Considering assessee’s submissions and documentary evidences, Ld. AO framed an assessment u/s 147 r.w.s.144B on 28-03-2022 accepting the claim of the assessee. In para-9 of the order, Ld. AO took cognizance of assessee’s reply dated 10-03-2022 and held that assessee’s claim of LTCG was correct. The Ld. AO also examined the issue whether the land was held as stock-in-trade or not and relied on a decision of Hyderabad Tribunal in this regard. In para-13, Ld. AO concurred that the subject land was sold as an agricultural land only. Accordingly, no addition was made and income assessed u/s 143(3) at Rs.71.96 Lacs was accepted.

In the light of above stated factual matrix, the inevitable conclusion would be that the assessee’s case was specifically reopened to examine the claim of deduction with respect to agricultural land and the assessee furnished sufficient documentary evidences in support of the same. After due consideration, Ld. AO accepted the claim of the assessee which was in line with settled judicial precedents as cited by the assessee which clearly supported the case of the assessee. Therefore, it could not be said that the impugned issue was not examined by Ld. AO and necessary enquiries were not made by Ld. AO while framing the assessment. The Ld. AO, in our considered opinion, duly considered the submissions of the assessee, perused various case laws and finally accepted the claim of the assessee with due application of mind. The Ld. AO, having satisfied with assessee’s claim, thought it fit not to make any further enquiries in this regard. The same was one of the possible views which is not shown to be contrary to any law. We do not find any lack of enquiry as alleged in the impugned order. Therefore, Explanation-2 to Sec.263 would not apply in the present case. Another factor to be noted is that the assessee has offered agricultural income of Rs.3.50 Lacs in the return of income which has duly been accepted by Ld. AO and no disturbance thereof has been made by Ld. Pr. CIT to that effect in the impugned order. Therefore, considering the facts and circumstances of the case, the revision of the order could not be held to be justified. Therefore, we quash the impugned order and allow the appeal of the assessee.

The appeal stand allowed in terms of our above order. Order pronounced on 12th August, 2024 Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) �ाियक सद" /JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER चे5ई Chennai; िदनांक Dated :12-08-2024 DS आदेशकीGितिलिपअ'ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु>/CIT Chennai. 4. िवभागीय�ितिनिध/DR 5. गाडCफाईल/GF