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�नधा�रती क� ओर से /Assessee by Shri Nehal R Rana, C.A राज�व क� ओर से /Revenue by Shri H.P.Meena, CIT-DR सुनवाई की तारीख/Date of hearing 15.06.2022 उ�घोषणा क� तार�ख/Date of 25.07.2022 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of learned Principal Commissioner of Income tax-3, Surat [for short to as ‘Ld. PCIT’] passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 12.03.2018 for assessment year (AY) 2012-13. The assessee has raised the following grounds of appeal:- “1.On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has (A.Y 12-13) Sh. Aiyubkhan Y Pathan grievously erred in initiating the proceedings u/s 263 of the Act, 1961.
2. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has grievously erred in assuming jurisdiction u/s 263 of the Act, 1961.
3. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has erred in violating the principles of natural justice by not the mentioning the grounds for initiating action u/s 263 of Income Tax Act, 1961 in the show cause notice issued. As such the order passed u/s 263 is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for the bad in law.
4. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has erred in not passing a speaking order against the submissions of your appellant. As such, the order passed u/s 263 is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for the bad in law.
5. On the facts and in the circumstances of the case as well as law on the subject, that the order of u/s 263 is merely ‘change in opinion’. The order u/s 143(3) passed by the Ld AO does not in any way represent erroneous order. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law.
6. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has grievously erred in assuming that the Assessing Officer had not verified the chargeability of ‘capital gain’ during the course of proceeding and not made proper inquiry or verification finalized the (A.Y 12-13) Sh. Aiyubkhan Y Pathan order of dropping the proceedings initiated u/s 147 of the I.T. Act is contrary to the fact of the case.
7. On the facts and in the circumstances of the case as well as law on the subject, the entire proceedings are bad-in-law and invalid as assessment order u/s 143(3) r.w.s.147 of the Act and rectification order u/s 154 of the Income Tax Act for the same year were framed, wherein due inquiry was made. 8. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has grievously erred in setting aside the assessment ordered framed u/s 143 r.w.s. 147 of the Act without pointing out as to how the order is erroneous and prejudicial to interest of revenue. 9. It is therefore prayed that the above proposed proceedings may please be revoked as learned members of the tribunal may deem it proper.” 2. Brief facts of the case are that no return of income was filed by assessee for assessment year 2012-13. The case of assessee was re-opened under section 147 on the basis of information received by Assessing Officer that assessee has sold two pieces of land. The Assessing Officer after recording the reasons of re- opening issued and served notice under section 148 dated 25.09.2014. In response to under section 148, the assessee filed his return of income on 20.03.2015 declaring “nil” income. The Assessing Officer after serving notice under (A.Y 12-13) Sh. Aiyubkhan Y Pathan section 143(2) proceeded for finalizing the assessment order. The Assessing Officer in para-2 & 3 recorded that assessee attended hearing through his representative from time to time and required details as per various questionnaires were furnished during the course of assessment proceedings furnished, after examination of such required information, the Assessing Officer accepted the return of income in the assessment order dated 30.03.2016 passed under section 143(3) r.w.s. 147 of the Act. Subsequently, Ld. PCIT revised the assessment order by invoking his jurisdiction under section 263 vide order dated 12.03.2018. 3. Before revising the assessment order, the Ld. PCIT issued show cause notice to the assessee vide show cause notice dated 16.02.2018. In the show cause notice, Ld. PCIT recorded that on examination of assessment record, it was noted that the assessee has sold two immovable properties during the year under consideration, out of Block No.146, Village Palod, Taluka-Mangrol, Surat vide sale deed dated 20.05.2011 for a sale consideration at Rs.2.553 crores, wherein the assessee has 1/3rd share. And other land out of Block No.147 of same 4 (A.Y 12-13) Sh. Aiyubkhan Y Pathan revenue village on same date for sale consideration at Rs.1.266 crores, wherein the assessee has 100% share. As per the registered documents, the assessee sold these two pieces of land to ‘Surya Food and Agro Ltd’. (non farmer/ non Khedut). The Ld. PCIT was of the view that the said land was does not within the ambit of agricultural land comes under the definition of “capital asset” under section 2(14) of the Act. The Sub-Registrar office (SRO), Mangrol Surat valued the properties for the purpose of stamp valuation at Rs. 4.547 crores and Rs.2.255 crores respectively. Thus, on such transactions, Capital Gain is chargeable under section 48 r.w.s. 50C on the difference amount of Rs.5.299 crores. The ld PCIT took his view that it appears that the Assessing Officer has not verified chargeability of capital gains during the assessment proceedings and finalized the assessment order. The Assessing Officer passed assessment order under section 143(3) r.w.s. 147 without making proper enquiries or verification, which should have been made on the issue and that the assessment order is prima facie erroneous in so far as (A.Y 12-13) Sh. Aiyubkhan Y Pathan prejudicial to the interest of revenue within the meaning of Explanation-2(a) of section 263 of Income-tax Act.
The show cause notice under section 263 was replied by assessee vide reply dated 08.03.2018. The assessee in reply to show cause notice stated that the contents of show cause notice that Assessing Officer has not verified the chargeability of capital gains during the course of assessment proceedings is contrary to the fact. During the year under consideration, the assessee sold two agricultural land in Block No.146 &147 in Village Palod, Taluka-Mangrol, Surat. In first piece of land the assessee has 1/3rd share and second land in Block No.147, he is having 100%. Both the plots of land was sold to Surya Food & Agro Ltd. (nor farmer) and the agreement to sale was executed on 08.10.2010 as the purchaser was a non- agriculturist and land has to be converted into non- agricultural land for the purpose of transfer. As per agreement, the conversion charge was borne by said purchaser. The status of land sold vide agreement dated 08.10.2010 was of agricultural land and later on it was converted into non-agricultural land for the purpose of sale 6 (A.Y 12-13) Sh. Aiyubkhan Y Pathan deed. The seller (assessee) has sold the agricultural land as the purchaser cannot get the land transferred in its name due to the fact that purchaser (Surya Food & Agro Ltd.) was not an agriculturist, hence, the user of land was transfer. The land for the purpose of record and transferred as per the Transfer of Property Act, 1882. The stamp duty was charged on the basis of subsequent use of land and not on the past use of land. Hence, exact stamp duty was charged as per rate of non- agricultural land. The assessee also stated that as per Income tax only real income can be taxed and not on the fiction or on assumption basis. The assessee has received consideration of Rs.2.553 crores for Block No. 146 and Rs.42,20,385/- for Block No.147 on account of sale consideration. Since the agricultural land was situated beyond 8 km. of Municipal boundaries having population of 10,000 and therefore it is not a capital asset within the meaning of section 2(14) of Income Tax Act. The assessee also furnished the certificate of Talati Mantri of Gram Panchayat. The assessee in his reply also relied on certain case law and finally submitted that the Assessing Officer examined the fact in his reply filed during 7 (A.Y 12-13) Sh. Aiyubkhan Y Pathan the assessment and accepted the same being legal, valid, based on law and judicial pronouncement and no revision is permissible and requested to quash the proposed proceedings under section 263 of the Act.
The reply of assessee was considered by Ld. PCIT, but same was not found accepted by him on account of three reasons viz; (a) assessee during the course of assessment proceedings as well as in revisional proceedings took plea that the agreement to sale was executed between him (assessee) and purchaser on 08.10.2010, but there is no such reference of agreement to sale in the registered sale deed, (b) there is enclosure in the registered sale deed in the form of resolution passed by Board of Directors by the purchaser, wherein Mr. Manoj Kumar Agarwal, Director of the purchaser was authorized to purchase non-agricultural land situated at Block No.146 & 147,Village Palod, Taluka Mangrol, Dist. Surat and empowered to sign and execute necessary papers and (c) the order of conversion of land from agriculture to non-agriculture was passed on 02.05.2011 and above lands were sold on 20.05.2011, and at the time of execution of registered deed, 8 (A.Y 12-13) Sh. Aiyubkhan Y Pathan the title of lands were “non-agricultural land” and that intention of seller was to transfer non-agricultural land, which fall in the purview of ‘capital asset’. The Ld. PCIT also referred the judgment of Hon'ble Apex Court in the case of Smt. Sarifabibi Mohamed Ibrahim Vs CIT (1993) 70 Taxman 301 (SC) and held that the ratio of this decision is completely applicable on the case in his hand. On the basis of his aforesaid observation, Ld. PCIT took his view that Assessing Officer passed the assessment order without making inquiries which should have been made in the present case. And the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. As the consequential effect of verification of working of capital gains may result to the interest of revenue, hence, he believed that assessment order passed by Assessing Officer is also prejudicial to the interest of revenue. Accordingly, the ld. PCIT set aside the assessment order with the direction to the Assessing Officer to look into the issue of capital gains earned by the assessee and fresh assessment on this issue after calling the specific details and giving reasonable opportunity of 9 (A.Y 12-13) Sh. Aiyubkhan Y Pathan hearing to the assessee. Aggrieved by the order of Ld. PCIT passed under section 263, the assessee has filed present appeal before this Tribunal.
We have heard the submission of Ld. Authorized Representative (AR) for the assessee and Ld. Commissioner of Income-tax Departmental Representative (CIT-DR) and have gone through the order of lower authorities carefully. The ld. AR for the assessee submits that for revising the assessment order the twin condition to be satisfied before as held in the case of Malabar Industries Vs CIT (2000) 243 ITR 83 (SC). The twin conditions are that assessment order passed by Assessing Officer must be erroneous and in so far as prejudicial to the interest of revenue. The twin conditions must be satisfied altogether, if one of the conditions is missing, the order cannot be revised. The Ld. AR for the assessee further submits that assessment was re-opened to examine the transaction of transfer of land on the basis of information received from sub-registrar office Mangrol. The reasons recorded itself were on the issue of transfer of land at village Palod. On recording the reasons of re-opening notice 10 (A.Y 12-13) Sh. Aiyubkhan Y Pathan under section 148 of the Act dated on 25.09.2014 was served upon the assessee. In response thereto, the assessee filed his return of income. The assessee in compliance of notice under section 148 filed his return of income. During the scrutiny assessment, the Assessing Officer issued notice under section 142(1) on 28.07.2015, wherein the assessee was asked to furnish copy of all bank statements, details of purchase and sale of immovable properties (land). The assessee filed his reply along with documentary evidence on 26.10.2015. Along with reply of assessee furnished copy of purchase deed of immovable properties, sale deed of the property sold during the year and submitted that assessee has sold agricultural land which situated in beyond the 8 Km from the Municipal limit having population of less than 10,000 and that same is not covered in the definition of capital asset under section 2(14) of the Act and copy of certificate of Talati Mantri of Gram Panchayat was furnished along with copy of From 7/12 and 8A of the said agricultural land. The Assessing Officer again vide his letter dated 18.10.2016 raised specific queries that on the date of transfer /registration of the land it was shown as 11 (A.Y 12-13) Sh. Aiyubkhan Y Pathan non-agricultural land as per registered sale deed 21.05.2011 and that issued show cause notice as to why the land should not be treated as “Capital Asset”. The assessee again in his reply to the Assessing Officer submitted that assessee has sold agricultural land and that as per terms & conditions of the satakhat, copy which was enclosed; the purchaser paid the expense to convert the agricultural land to non-agricultural land which is clearly mentioned in the sale deed. Thus, the assessee sold the agricultural land which is situated in an area outside the local limit of more than 8 KM, having population of 10,000. The Ld AR for the assessee submits that assessee was again asked about the applicability provision of section 50C as the land was shown as much higher than registration value and the applicability of capital gains in notice dated 18.02.2016. The assessee again vide his reply dated 16.03.2016 furnished complete details on non the applicability of Section 50C and explained that the consideration is received more than jantry value of agricultural land in assessment year 2010-11. The stamp duty was paid by purchaser on capital asset, after converting the impugned land 12 (A.Y 12-13) Sh. Aiyubkhan Y Pathan into non-agricultural land. The Assessing Officer after considering the submission of assessee has accepted the reply furnished by assessee and has not made any addition. The Assessing Officer has taken a reasonable plausible and legally sustainable view. The order passed by Assessing Officer is not erroneous order as the Assessing Officer was fully satisfied about the nature of land on the date of agreement to sale and the fact that assessee sold agricultural land and convergent from agricultural land to non-agricultural land was that reasons for conversion of agricultural land to non-agricultural land as the purchaser was non-agriculturist and is not entitled to purchase agricultural land. Mere change of user of land for the purpose of transfer to non-agricultural land would not change the nature of land sold by the assessee.
The Ld. AR for the assessee submits that it is a matter of fact that the Assessing Officer while passing the assessment order has not discussed the issue in details after taking all the details on record, however, that would not mean that order passed by the Assessing Officer is erroneous. The assessment order passed by assessing officer in accordance of law. The 13 (A.Y 12-13) Sh. Aiyubkhan Y Pathan assessment order is not passed without initiating proper inquiries or is not a case of lack of enquiry. The Ld. AR for the assessee submits that if the Assessing Officer has took one of plausible view, to which ld. Commissioner does not agree, cannot be treated as erroneous order so as to exercise the jurisdictional power under section 263 unless the order /view taken by Assessing Officer is unsustainable in law.
The ld. AR for the assessee submits that the ratio in case law relied by Ld. PCIT in his order in Smt. Sarifabibi Mohammed Ibrahim (supra) is not applicable on the facts of the present case as the fact of said case is quite differ. In the said case the land was situated at one kilometre from Surat Railway Station, however, the land of assessee is situated outside the purview of 25 kilometre from the limit of Surat Municipal Corporation. Sarifabibi Mohammed Ibrahim sold his land to a Housing Co- Operative Society for construction of housing & building thereon, however, in his the land was sold to a company for agricultural purpose. In the said case the land was 3085 square yard out of 2607 square yard was sold, however, in assessee’s case the assessee has sold a plot of 65,105 square 14 (A.Y 12-13) Sh. Aiyubkhan Y Pathan meters. In the said case the buyer started construction of housing project within 3 days from the dated of sale deed, but in case of assessee the land is used for agricultural activities, which is shows in the report of DVO. In the said case no agricultural activities were carried out in land, however in the case of assessee land was used for farming of sugarcane. Finally, in the said case the plot of land was surrounded by fully built up properties and in case of assessee the land is surrounded by agricultural land.
The ld. AR for the assessee further submits that Ld. PCIT is a quasi judicial authority and is require to pass a speaking order by giving his own reason about being satisfied that order passed by Assessing Officer was erroneous and prejudicial to the interest of revenue. The order of Ld. PCIT is without specifying any reason and is liable to be vitiated as held by Hon'ble Allahabad High Court in the case of CIT Vs Sunder Lal (1974) 96 ITR 310 (All). The ld. AR for the assessee further submits that order passed by Ld. PCIT under section 263 is merely “change in opinion’ which is wholly unreasonable, uncalled for and bad in law, as the Assessing Officer passed 15 (A.Y 12-13) Sh. Aiyubkhan Y Pathan order 143(3) after calling for details on the issue after considering the reply of assessee and the evidence furnished and after verification and after due application of his mind. The Assessing Officer passed his assessment order which cannot be termed as erroneous and prejudicial to the interest of the revenue. To support his contention, Ld. AR for the assessee relied on the following case laws; CIT Vs Mehsana District Co-Operative (2005) 282 ITR 24(Guj) CIT Vs Mahendra Kumar Bansal (2008) 297ITR 99 (All) CIT Vs. Late Sundarlal (1974) 96 ITDR 310 (All) The Malabar Industrial Co. Vs CIT (2000) 243 ITR 83 (SC), Shri Harsadbhai L Patel vs. PCIT in Mrs. Khatiza S Oomerbhoy Vs ITO (2006) 101 TTJ (Mum.Trib.) 10. On the other hand, Ld. CIT-DR for the Revenue supported the order of Ld. PCIT. The ld. CIT-DR for the Revenue submits that the Assessing Officer in the assessment order has not specify as to what type of enquiry was conducted and the reply furnished, if any, by assessee or not. The Assessing Officer is totally silent on the examination of the issue of capital gains. Thus, the Assessing Officer was passed assessment order without making proper enquiries, which should have been made by Assessing Officer during assessment proceedings.
(A.Y 12-13) Sh. Aiyubkhan Y Pathan Since the assessment order is silent on various aspects therefore the order passed by Assessing Officer is erroneous. The Assessing Officer has not examined and verified the applicability of capital gains on the transaction of sale of land, which is undoubtly, is prejudicial to the interest of revenue. Therefore, the twin condition as enunciated in section 263 is clearly available in the present case. On the reference of various case laws the ld CIT-DR for the revenue submits that the applicability of ratio of various decision will be seen, when the assessing officer has given basic facts in the assessment order. The ld. CIT-DR for the Revenue prayed before bench for dismissal of the appeal of assessee.
We have considered the rival submission of both the parties and have gone through the order of lower authorities. We have also deliberated on the various case laws relied by ld. PCIT as well as by ld AR in his submissions. Before, discussion on the facts of the case, we may mentioned that the assessee has raised as many as 10 grounds of appeal
, however, in our considered view, most of the grounds of appeal are narrative of facts and does not required specific adjudication. Thus, we 17 (A.Y 12-13) Sh. Aiyubkhan Y Pathan shall consider the validity of order under section 263 of the Act only, instead of discussing each and every specific grounds of appeal.
12. We find that in the assessment order, the Assessing Officer has mentioned that during the period, the assessee sold immovable property out of which Block No.146 & 147, Village Palod, Taluka Mangrol, District Surat with two other parties. After making reopening, the assessing officer served notice under section 148 on 25.09.2014. The assessee filed his return of income on 20.03.2015 declaring nil income. During the assessment the details were called from time to time assessee. The assessee furnished by assessee and after discussing the material fact Assessing Officer accepted the return of income declared by assessee as nil. We find that Ld. AR for the assessee placed on record, the copies of the notices issued under section 142(1) and the reply filed by the assessee in response thereto. We find that in the notice date 28.07.2015, the Assessing Officer asked the assessee to furnish the copy of all bank statements along with details of purchase and sale of immovable properties. We find that the 18 (A.Y 12-13) Sh. Aiyubkhan Y Pathan assessee submits the complete details with regard to the questions raised by Assessing Officer in his notice under section 148 dated 25.09.2014. The assessee also furnished the copy of sale deed of immovable property along with his reply and explained that assessee has sold two piece of land which is not a capital asset that the reasons the land is situated outside limit of 8 kilometres from the Municipal limit of population less than 10,000. The assessee furnished the copy of Taluka Mangrol, Surat about the nature of land. We find that the Assessing Officer again issued show cause notice dated 18.02.2016 and raised following questions:- 3. On observation of your case it was observed that on the date of transfer/registration of both the above mentioned land, it had entitlement of ‘Non-agricultural land (N/A)’ as per registration deed dated21.05.201, the same mentioned at page no. 3 & 8 of the registration deduction dated 21.05.2011. The word ‘non-agricultural land’ has clearly been mentioned in the registration deed at page No.3 & 8 of the deed dated 21.-5.2011.Therefore,it is requested to show cause as to why above mentioned land should not be treated as Capital Asset for F.Y 2011-12.
4. On observation of the registration deduction and stamp duty paid for registration, it was observed that value of land for sale as per 4.9% of the value of the property is as follows:
(A.Y 12-13) Sh. Aiyubkhan Y Pathan Sr.N Land details Amount (Rs) Value (Rs) as Share of o. per 50C assessee (Rs) 1 Block no. 146, Revenue Survey 2,55,30,570/ 4,54,75,000/ 4,54,75,000/ No.132/4, Moje- - - - P)alod,Sub District Taluka Mangrol, Dist. Surat 2 Block no 147, Revenue Survey 1,26,61,155/ 2,25,52,100/ 75,17,367/- No.132/5, Moje- - - (for 3 Palod, Sub District parties) Taluka Mangrol, Dist-Surat 4.1 In view of the above chart it is very clear that as per section 50C of the Act deemed receipt of the land is much higher than the registration value. The same has been cross- examined by the sub-registrar office, Mangrol, Surat. Hence, in view of the above, it is requested to show cause as to why capital gain of both the property should not be computed as Rs.4,54,75,000/- for Block No.146 and Rs.75,17,367/- for block No.147 of Palod, Mangrol, and total capital gain of Rs.5,29,92,367/- and added to your total income.” * (* under lined and highlighted by us) 13. The assessee in his reply dated 16.03.2016 submitted that the assessee possessed agricultural land since 1981 and the lands were never put to any other purpose except agricultural purposes. The assessee sold his lands situated in Village Palod, Taluka Mangrol, Surat, which is outside limit of Municipal area and does not fall in the definition of capital asset. The conversion of agricultural land to non-agricultural (A.Y 12-13) Sh. Aiyubkhan Y Pathan land has been done by purchaser and all expense were incurred by the said purchaser. The assessee also furnished the reply on the applicability of section 50C. We note that this reply was furnished by assessee in response to specific question raised by Assessing Officer. Admittedly, there is no reference in the assessment order about the reference of various questions and reply thereof.
The ld. AR for the assessee during the hearing of appeal vehemently argued that the Assessing Officer has not only examined all the facts during the assessment, but took a reasonable & plausible and legal sustainable view, which cannot be branded as erroneous. The Ld. AR for the assessee also relied on the decision of Hon'ble jurisdictional High Court in the case of Mehsana Dist. Co-Op (supra), wherein it was held that from the Assessing Officer when two possibilities and Assessing Officer has taken one of the view which is commission does not agree cannot be prejudiced to the interest of revenue. So far as applicability of ratio in the case of Smt. Sarifabibi Mohamed Ibrahim (supra), we are in agreement with the Ld. AR for the assessee that the ratio of 21 (A.Y 12-13) Sh. Aiyubkhan Y Pathan said decision is absolutely is not applicable on the facts of the present case, as the land sold by assessee is admittedly far away from the Municipal limit and soon before transfer it was used for agricultural. The permission for user of land use was obtained from competent authority on 02.05.2011 and sale deed was executed on 20.05.2011. Such permission was obtained as the purchaser in not agriculturist.
We find that Jurisdictional High Court in CIT Vs Madhabhai Patel [1995] 81 TAXMAN 473 (GUJ.), while considering the question of law “whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the land in question was agricultural in character and the assessee was not liable to be taxed in respect of the surplus arising on the sale of the land in question as capital gains, held, what is required to be considered is: Was it agricultural land when it was sold? If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land has not taken any step, which would indicate his intention to exploit the 22 (A.Y 12-13) Sh. Aiyubkhan Y Pathan land thereafter as non-agricultural land, then such a piece of land will have to be regarded as agricultural even though it is included within the municipal limits or it is sold on a per square yard basis and not acreage basis. The purpose for which such a land is sold, though not relevant, will not have that much importance and weight as it would have been in a case where the land has remained as padatar or idle or is used for agricultural purposes only by way of a stop-gap arrangement. So far as the facts of this case are concerned, there is no dispute that the land, till it was sold, was classified as agricultural land in the revenue records. In the village Form Nos. VII and XII, popularly known as 'record of rights', it is mentioned that the whole of the land was cultivated till the year 1967-68. The land was cultivated personally by the assessee. The said land belonged to the family and he got it by way of inheritance and not by way of purchase from some other party. There is no material which discloses that an attempt was made by the assessee either to purchase or sell any other land in the past. He had not, at any point of time, applied for permission to use the land for non-agricultural 23 (A.Y 12-13) Sh. Aiyubkhan Y Pathan purposes. All these factors have been taken into consideration along with the other relevant factors, viz., that the land was sold to a co-operative housing society; that it was sold at Rs. 20 per sq. yard, and that it was situated within the corporation limits of Ahmedabad city. It is, therefore, not possible for us to say that the view taken by the Tribunal is unreasonable or erroneous in law. Even if we have to consider the intention of the assessee as to when he decided to sell the land, it becomes clear that he wanted to sell the land as agricultural land. In the agreement dated 18-12-1963, it is in terms stated that the assessee was selling the land as agricultural land only and, therefore, was not going to sign any application or plan for a non-agricultural use of the said land. (Emphasis added by us).
We find that Hon’ble Jurisdictional in CIT v. Siddharth J. Desai [1983] 139 ITR 628(Guj), after considering all its previous decisions, held that the factors which are required to be taken into consideration for determining the question as to whether the land can be said to be agricultural land are (at page 638):
(A.Y 12-13) Sh. Aiyubkhan Y Pathan "1. Whether, the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? 2. Whether, the land was actually or ordinarily used for agricultural purposes at or about the relevant time? 3. Whether, such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement? 4. Whether, the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? 5. Whether, the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date? 6. Whether, the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent or temporary nature? 7. Whether, the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes?
(A.Y 12-13) Sh. Aiyubkhan Y Pathan 8. Whether, the land was situate in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? 9. Whether, the land itself was developed by plotting and providing roads and other facilities? 10. Whether, there were any previous sales of portions of the land for non-agricultural use? 11. Whether, permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user? 12. Whether, the land was sold on yardage or on acreage basis? 13. Whether, an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield?"
The Hon’ble High has made emphasised that if the land is classified in the revenue records as agricultural land, then it would raise a rebuttable presumption and would furnish good prima facie evidence to show that it is an agricultural land. It was emphasised that if the land is also used for agricultural purpose till the date of the sale, then, unless there is some 26 (A.Y 12-13) Sh. Aiyubkhan Y Pathan cogent evidence to indicate otherwise, the land should be treated as agricultural land.(emphasis added by us) 18. The Supreme Court in celebrated/ leading case of Malabar Industrial Co. Ltd. Vs CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. It cannot be exercised only when an order is erroneous, the section 263 will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 27 (A.Y 12-13) Sh. Aiyubkhan Y Pathan The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. (emphasis added by us)
(A.Y 12-13) Sh. Aiyubkhan Y Pathan 19. The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd. Vs PCIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. In CIT Vs Nirma Chemical Works (P) Ltd ([2009] 182 Taxman 183 (Gujarat) the Hon’ble High Court also held that when assessing officer after making due inquiries had adopted one of the view and granted partial relief, merely because Commissioner took a different view of the matter, it would not be sufficient to permit commissioner to exercise his powers under section 263. The Hon’ble Court in para 22 of its order on the objection of the revenue that there is no discussion of the issue in the assessment order held that the contention on behalf of the revenue that the assessment order does not reflect any application of mind as to the eligibility or otherwise under section 80I of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order 29 (A.Y 12-13) Sh. Aiyubkhan Y Pathan and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order, an appeal lies, would be filed, and only against disallowances which an assessee feels aggrieved with.
Further, Hon'ble Madras High Court in CIT Vs Mepco Industries Ltd., (2007) 207 CTR 462 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in law, the learned Commissioner cannot invoke his jurisdiction under section 263 of the Act. (emphasis added by us).
Now again adverting to the facts of the present case, as recorded in earlier paras of this order that the assessing officer during the assessment not only examined the issue of capital gain but examined the scope of section 50C and took a reasonable and possible view. The view adopted by the assessing officer was in accordance of the decision of Hon’ble 30 (A.Y 12-13) Sh. Aiyubkhan Y Pathan Gujarat High Court in CIT Vs Siddharth J. Desai (supra) and Madhabhai Patel (supra), so such assessment order cannot be branded as erroneous. Thus, the twin conditions as enunciated in section 263 cannot be said to be fulfilled in the present case. Again retreating the principal as laid down in Malabar Industrial Company Ltd (supra) that when an assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the assessing Officer has taken one view with which the learned Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. Thus, in view of the aforesaid factual and legal discussion, we are of the considered opinion that the revision order passed by ld. PCIT under section is not legally sustainable as the same is based on mere change of opinion, which we set aside. In the result, the substantial ground of appeal
raised by the assessee is allowed. No contrary facts or law is brought to our notice to take other view.
22. In the result, the appeal of the assessee is allowed. 31 (A.Y 12-13) Sh. Aiyubkhan Y Pathan Order pronounced in the open court on 2507/2022 and the result was also placed on the Notice Board.