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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Annapurna Gupta & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee’s appeal for A.Y. 2011-12, arises from order of Principal Commissioner of Income Tax PCIT, Rajkot-1 dated 29-02-2016, in proceedings under section 263 of the Income Tax Act, 1961; in short “the Act”.
Page No 2 Smt. Lilaben Babubhai Sakhiya vs. Pr. CIT
The assessee has raised the following grounds of appeal:
“1. The grounds of appeal mentioned hereunder are without prejudice to one another:
2. The order u/s 263 of the Income-tax Act, 1961 passed by the learned Pr. Commissioner of Income Tax-I, Rajkot (hereinafter referred to as the "CIT") is without jurisdiction and bad in law as also on facts.
The learned CIT erred on facts as also in law in alleging that the Assessing Officer (AO) has not verified the Short Term Capital Gain of Rs.80,54,870/- arising on conversion of capital asset into stock in trade and deduction claimed u/s. 54B of the Act though all the requisite details were furnished at the time of assessment proceedings and verified by the AO.
4. The ld. CIT erred on facts as also in law in holding that an agricultural land cannot be converted into stock in trade and the land converted into stock in trade could not have been agricultural.
5. The Id. CIT erred on facts as also in law in directing the AO to make a fresh assessment without either establishing the specific errors or prejudicial finding from the assessment order under review. The order passed u/s 263 of the Act, without discussing and establishing two basic conditions as to erroneous and prejudicial to the interest of revenue is totally unjustified on facts as also in law and deserves to be quashed, may kindly be cancelled.
6. Your Honor's appellant craves leave to add, amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.”
3. The brief facts of the case are that PCIT, on examination of assessment records, observed that during the year, assessee had transferred a capital asset which was an agricultural land at survey number 138/5 of Page No 3 Smt. Lilaben Babubhai Sakhiya vs. Pr. CIT village Vavdi resulting in capital gains under section 45(3) of the Act. As per the working given by the assessee in the statement of total income, the land was acquired on 31-07-2008 for � 9,45,130/- and this capital asset was transferred on 02-04-2010 for a consideration of � 90 lakhs. A short-term capital gain of � 80,54,870/- was worked out by the assessee and the assessee claimed deduction under section 54B of the Act of � 78,74,530/- out of the same and net capital gain of � 1,80, 340/- has been offered to tax. However, PCIT observed that the transfer of capital assets on 02-04-2010 was due to conversion of land to stock in trade. However, since an agricultural land cannot be converted into stock in trade, the land converted into stock-in-trade could not have been agricultural land. Therefore, deduction under section 54B of the Act cannot be allowed on the gain arising from transfer of such asset, which does not qualify as an agricultural land.
3.1 Before the PCIT, the assessee made several contentions and one of contentions was that there was an inadvertent error in the computation made by the assessee and the actual date of sale of said land was 02-08-2010 and not 02-04-2010. In response to that, the PCIT observed that if the date of transfer were to be taken as 02-08-2010, then in that case exemption under section 54B was not allowable to the assessee in respect of property at survey number 32 of village Kanagshiali (which was purchased by the assessee on 30-01-2010) for consideration of � 21,04,400/- and also in respect of property at survey number 74 of village Kanagshiali (which was purchased by the assessee on 17-07-2010) for a consideration of � 34,45,000/-. This was for the reason that both the above properties were Page No 4 Smt. Lilaben Babubhai Sakhiya vs. Pr. CIT purchased by the assessee prior to the date of sale of land on 02-08-2010, and section 54B of the Act requires that the assessee should have purchased the new land after the date of transfer of such agricultural property. Therefore, even in this case as well, the complete benefit of section 54B of the Act was not available to the assessee, even if the alternate contention of the assessee that the land was sold on 02-08-2010, were to be accepted. Therefore, as per the PCIT, in either of the cases, the AO failed to examine the claim of the assessee under section 54 of the Act from correct perspective. Accordingly, in light of the above observations, the PCIT held that the order passed by the AO is erroneous and prejudicial to the interests of the revenue.
The assessee is in appeal before us against the aforesaid order passed by the Principal CIT under section 263 of the Act. Before us, none appeared on behalf of the assessee and the power attorney filed by the counsel for the assessee has also been withdrawn. In response, the DR primarily relied upon the observations made by the Principal CIT in the 263 order.
On going through the records of the case, and the order of the Principal CIT, we are of the considered view that there is no infirmity in the order passed by the Principal CIT in the instant facts. Even if the alternate contention of the assessee were to be accepted, then also, we observe that in the instant facts the AO has not examined the claim of the assessee for exemption under section 54B of the Act from correct perspective. Accordingly, we are of the considered view, that there is no infirmity in the order of the Principal CIT in holding that the assessing officer has not Page No 5 Smt. Lilaben Babubhai Sakhiya vs. Pr. CIT carried out proper examination of the facts of the case and has not carried out the necessary verification at the time of passing of the assessment order in respect of the assessee’s claim of deduction u/s 54B of the Act and, therefore, the assessment order is erroneous and prejudicial to the interests of the revenue.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 19-04-2023