SHRI MANSHUKH K. KUMBHANI,AMRELI vs. THE PR.CIT-3, RAJKOT

This assessee’s appeal for A.Y. 2015-16, arises from order of the PCIT 3, Rajkot dated 28-02-2020, in proceedings under section 263 of the Income Tax Act, 1961; in short “the Act”.

The assessee has taken the following grounds of appeal:

At the outset, we observe that the appeal is time-barred by 49 days. Before us, the counsel for the assessee submitted that the order sought to be appeal against was received on 28-02-2020. Therefore, since evidently the period of filing of appeal against the aforesaid order was falling within the corona pandemic period, the appeal could not be filed in time by the Page No 3 Shri Manshukh K. Kumbhani vs. Pr. CIT assessee. Accordingly, looking into the facts of the case and the circumstances which caused a delay of 49 days in filing of the present appeal, we are hereby condoning the delay in filing of the present appeal. In the result, delay in filing of the present appeal is hereby being condoned.

The brief facts of the case are that the assessment was completed under section 143(3) of the Act by making an addition of � 1,14,69,025/- under section 50C of the Act and � 20 lakhs was disallowed from the deduction claimed under section 54B of the Act. The Principal CIT observed that on examination of records it is seen that the assessee sold Urban agricultural land, Rajula to APMC, Rajulafor a sale consideration of � � 1.37 crores and claimed LTCG of 1.24 crores. The Principal CIT observed that during the assessment proceedings, the assessee only produced copy of 7/12, which could not show actual use of land for agricultural purposes. As per section 54B, the assessee must establish that the land should be used for agricultural purposes for a period of 2 years prior to the date of transfer. However, the assessee has not produced any documentary evidence to substantiate the claim under section 54B that the land was used for agricultural purposes. Further, the Principal CIT observed that the assessee had purchased the land on 16-09-2010 and thereafter, the land use was converted into non-agricultural use on 02-01-2014 and the land was sold to a non-agriculturalist by way of sale deed dated 07-04-2014 as a non- agricultural land. Accordingly at the time of registration of sale deed, the land was not an agricultural land. However, in the assessment proceedings the assessing officer has not gone beyond documentary evidence produced by the assessee viz. 7/12 and only disallowed a sum of � 20 lakhs towards Page No 4 Shri Manshukh K. Kumbhani vs. Pr. CIT deduction under section 54B of the Act. Accordingly, in light of the above facts the Principal CIT held that the assessment order is erroneous and prejudicial to the interests of the Revenue, since the assessing officer did not make adequate enquiries into the eligibility of claim of deduction under section 54B of the Act.

The assessee is in appeal before us against the aforesaid order passed by the Principal CIT. The counsel for the assessee drew our attention to notice issued by the assessing officer under section 142(1) of the Act dated 02-05-2017 and assessee’s reply to the same vide letter dated 15-11-2017. The counsel for the assessee further drew our attention to notice dated 20- 11-2017, wherein the assessing officer made inquiries relating to addition under section 50C of the Act. Further, the counsel for the assessee drew our attention to pages 13, 10, and 16 of the paper book i.e. returns of income filed by the assessee and submitted that the assessee has shown agricultural income for various assessment years, which establishes that the aforesaid land was used for agricultural purposes. Accordingly, it was submitted that the assessing officer had made due enquiries during the course of assessment proceedings, and the Principal CIT is not permitted to supplant its own opinion with regards to taxability or claim of deduction u/s 54B, by taking recourse to proceedings under section 263 of the Act.

In response, the Ld. DR pointed out that the assessee had submitted reply to the queries raised by the assessing officer only at the fag end of the close of assessment proceedings i.e. on 15-11-2017 and again on 05-12-2017 and the assessment order was passed on 27-12-2017. Accordingly, it was Page No 5 Shri Manshukh K. Kumbhani vs. Pr. CIT submitted by the Ld. DR that the assessing officer did not get adequate time or opportunity to make detailed enquiries during the course of assessment proceedings, since the assessee has filed the details only at the fag end of the assessment proceedings. Therefore, on perusal of the assessment records, it is evident that the assessing officer did not make due enquiries as to the use of land prior to it’s date of sale, so as to ascertain whether the assessee is eligible for deduction under section 54B of the Act. Further, it was submitted by DR that even in 263 proceedings, the assessee did not cause appearance despite several opportunities, and therefore, the assessee has not been able to establish that the aforesaid property was used for agricultural purposes prior to its sale so as to be eligible for claiming deduction under section 54B of the Act.

We have heard the rival contentions and perused the material on record. On going to the facts of the case, it is observed that the assessee was in possession of two properties, one of which was sold during the impugned year under consideration. Further, it is observed that the counsel for the assessee has contended that the assessee has shown agricultural income as is evident from the return of income for the past assessment years, however, no enquiry was made whether such agricultural income was with respect to the land which was sold by the assessee during the impugned year under consideration, against which the assessee has claimed deduction under section 54B of the Act. Further, it is observed that the assessee has not made any specific enquiry with regard to the land use prior to its date of sale i.e. whether the land which was sold was used for agricultural purposes or not. Further, on perusal of the assessment records, it is seen that no specific Page No 6 Shri Manshukh K. Kumbhani vs. Pr. CIT details regarding the land use was submitted before the assessing officer during the course of assessment proceedings. Therefore, we are of the considered view that adequate enquiries were not made by the assessing officer during the course of assessment proceedings in respect of satisfaction of the conditions of eligibility to claim of deduction under section 54B of the Act. We are of the considered view that’s Principal CIT has correctly observed that during the course of assessment, the assessee only produced copy of 7/12, which does not establish the actual use of land for agricultural purposes, so as to claim benefit of deduction under section 54B of the Act. Accordingly, looking into the facts, we find no infirmity in the order of Principal CIT so as to call for any interference.

In the result, the appeal of the assessee is dismissed.