SMT. INDERMEET BAINS W/O SH. D.S. BAINS,BATHINDA vs. PR. COMMISSIONER OF INCOME TAX , BATHINDA

Per Dr. M. L. Meena, AM:

This appeal has been filed by the assessee against the order dated

28.03.2019 passed by the Ld. Pr. Commissioner of Income Tax, Bathinda in respect of Assessment Year 2011-12.

ITA No. 250/Asr/2019 2 Indermeet Bains v. Pr. CIT “1. That the learned Principal Commissioner of Income Tax (PCIT), Bathinda has erred in assuming jurisdiction under section 263 of the Income Tax Act (the act) and thereby setting aside the order of Assessing Officer (AO) made under section 143(3) read with section 263 of the Act with direction to frame the assessment de novo.

ITA No. 250/Asr/2019 3 Indermeet Bains v. Pr. CIT 3. Briefly, facts are that assesse filed return of income for the

assessment year 2011-12 on 31.03.2012 declaring income of

Rs.43,49,622/- (including STCG Rs.26,72,454/-) + agricultural income of

Rs. 14,50,000/-. The Assessing Officer (in short “the AO”) completed

assessment u/s 143(3) on 04.03.2014 at an income of Rs.44,49,622/-.

Subsequently, the Principal Commissioner of Income Tax (in short “the

PCIT”) by Order u/s 263 dated 27.04.2015 set aside the assessment order

dated 04.03.2014 with the directions to the AO to decide the case afresh

after giving due opportunity of being heard to the assessee. Thereafter, in

compliance to notice u/s 263, scrutiny assessment u/s 143(3) of the Income

Tax Act, 1961 was completed by the DCIT, Circle-I, Bathinda vide his order

dated 30.12.2016 at the income already assessed at Rs.44,49,622/-+

Agricultural income of Rs. 14,50,000/-.

This is 2nd time, the PCIT, Bhatinda set aside the assessment order, 3.1

invoking the provisions of section 263 of the Act, in respect of the

assessment made u/s 143(3) r.ws. 263 of the act. He observed that perusal

of records revealed that there were some deficiencies and irregularities in

the said assessment order. Therefore, a notice u/s 263 of the Income Tax

Act, 1961 was issued for the assessment year 2014-15 on 14.03.2019. The

relevant observations are reproduced as under:-

ITA No. 250/Asr/2019 4 Indermeet Bains v. Pr. CIT “(i) Assessment u/s 143(3) of the Act in this case was completed on 04.03.2014 on the total income of Rs. 44,49,622/- plus agriculture income of Rs. 14,50,000/-. This order was set aside u/s 263 of the Act by the Pr. Commissioner of Income Tax, Bathinda with directions to decide the issues mentioned in the order afresh on merits and in accordance with the law. As per this order, the AO inter-alia was required to examine nature of land on which capital gain has been claimed exempt and as to whether the sale transaction of land is in nature of trade as per order of Hon’ble Gujrat High Court in the case of Commissioner of Income Tax Vs. Siddarth J. Desai (1983) 139 HR 628 (Guj.). For this purpose, the Pr. CIT noted 13 criterias. In compliance to the directions, assessment u/s 143(3)/263 of the Act was framed on 30.12.2016 at the returned income.

(ii) Brief facts of the case are that the assessee purchased 39 Kanal 7 Marlas land for Rs. 2,99,10,000/- for the financial year 2008-09 and out of which land measuring 29 Kanal 6 Marlas was sold for Rs. 5,12,75,000/- to Sh. Kamal Singh, Sh. Ranjeet Singh and Sh. Rabir Singh, H.No.407, Guru Teg Bahadur Nagar, Jalalabad. Thus, the capital gain on the sale of this land comes at Rs. 2,90,04,020/-. However, the capital on sale of land was claimed exempt stating the sale of agriculture land. As per report of State Govt. Authorities, the land in question is located at a distance of 3 Kms. From the municipal area of Mohali, which clearly means the land in question is clearly capital asset as per provisions of section 2(14). As per provisions of section 2(14) of the Act read with Notification No.9447 dated 06.01.1994, agriculture land situated within area falling within 1 kilometer on either side of Mohali Kakar upto distance of 6 kilometers from Municipal limit on that road falls within the definition of capital asset.

(iii) The land in question is located near Chandigarh Airport. In the assessment order passed in compliance of order u/s 263 on 30.12.2016, these issues do not seem to have examined as to whether the land is question is capital asset within the meaning of section 2(14) of the Income Tax Act and no findings on the same have been given. Thus, the assessment order seems to be erroneous and prejudicial to the interest of revenue. (iv) As per order of Pr. CIT, Bathinda 13 criterias/test has been mentioned in this order and the tests seem to be applicable in assessee’s case for treating the transaction in nature of trade as per Giijrat High Court decisions are as under:

ITA No. 250/Asr/2019 5 Indermeet Bains v. Pr. CIT (a) The land was actually purchased ordinarily was not used for agriculture purposes during the year under reference. The assessee disclosed agriculture income of Rs. 14,50,000/- and that pertains to 86 acres land in village Khudian and out of which 60 acres was under Kinwoo cultivation and assessee has also filed necessary details for this agriculture income where in the agriculture income of land proposed to be sold is not appearing.

(b) The user of land is not a agriculturist and this is clearly a stop gap arrangement and actual purpose was to earn income from sale of land as within 2 years, the land is question is sold.

(c) The income derived from agriculture land operations is only in namesake as no income disclosed from said land and investment in the land comes at Rs. 2,99,10,000/- during financial year 2008-09.

(d) The intention of the purchaser of the land is not for agriculture purpose but the same was to earn profit from sale of land as evident from the facts of the case.

(e) The land was situated is developed area s nearby A irocity and Airport.

(f) The land was purchased by the assessee and the same was not purchased for agriculture purposes. Thus; the issue in the light of 13 parameters mentioned in the order u/s 263 as envisaged in the order of the Hon’ble Gujrat High Court does not seem to have been examined.”

ITA No. 250/Asr/2019 6 Indermeet Bains v. Pr. CIT the agricultural operations carried on in the land bore any rotational proportion to the investment made in purchasing the land. For claiming exemption, it was also a condition that the said land was required for agricultural purpose for a long period whereas the said land was with the assessee for two years. Therefore apparent motive of the assessee for purchase of land was to earn profit rather than of doing any agricultural activities. AO did not make necessary enquiries and application of mind on the entire facts and law on the issue. This basic issue involved has thus not been inquired into by the AO.”

order, invoking the provisions of section 263 of the Act, in respect of the

assessment made u/s 143(3) r.ws. 263 of the act. He contended that the

learned PCIT, Bathinda has erred in assuming jurisdiction under section

263 of the Income Tax Act (the act) and thereby setting aside the order of

Assessing Officer (AO) made under section 143(3) read with section 263 of

the Act with direction to frame the assessment de novo; that he has failed

to appreciate the various replies and submissions supported with

documentary evidences filed by the appellant assesse during the course of

proceedings before him as well as during the first and second assessment

proceedings u/s 143(3) read with section 263 of the Act; that he has failed

to consider the fact that the assessment was made u/s 143(3) read with

section 263 of the Act after due application of mind and verification made

by the concerned AO and, therefore, the finding of the learned PCIT,

ITA No. 250/Asr/2019 7 Indermeet Bains v. Pr. CIT Bathinda that the assessment having been framed without application of

mind by the AO is against the facts and circumstances of the case; that the

Ld. PCIT, Bathinda has erred on facts and in law by holding that the AO

has not brought on record evidence regarding classification of land as

agriculture land without appreciating the explanations/evidence furnished

by the assessee and independent enquiry made through Inspector by the

AO and certificate issued by the Revenue Authority during the first

assessment proceedings and second round of assessment in response to

order u/s 263 of the Income Tax Act; that he has erred on facts and in law

by holding that the apparent motive of the assessee for purchase of land

was to earn profit without appreciating that the land purchased and sold

has been used only for agricultural purpose till date i.e. 28-03- 2019 the

date on which order u/s 263 of the Act has been passed and that the

learned PCIT, Bathinda has erred on facts and in law by invoking the

provisions of section 263 of the Act again in respect of the assessment

which has been made in response to assessment cancelled earlier u/s 263 of the Act. The counsel stated before the bench that a detailed reply was

submitted to the PCIT, placed in the ‘Paper Book’ at pages 25 to 31 and

submitted that the Assessing Officer had passed the order after due

application of mind and considered all the issues, which were there in the

ITA No. 250/Asr/2019 8 Indermeet Bains v. Pr. CIT earlier order of the PCIT u/s 263, dated 28.04.2015. However, the Ld. PCIT

being not satisfied with the reply of the assessee, again set aside the order

as passed by the Ld. Assessing Officer vide order, dated 30.12.2016 and

directed the Assessing Officer to frame the assessment again after

examining all the relevant issues vide order, dated 28.03.2019.

order u/s 263/143(3), dated 30.12.2016 has taken into consideration all the

directions as issued by the Ld. PCIT and also done complete verification

and enquiries as directed by the Ld. PCIT in the first order u/s 263, dated

28.04.2015 which are borne out from the facts on record.

5.1 At the time of hearing, the Ld. Counsel of the assessee referred to a

certified copy of ‘order sheet entries’, depicting the ‘sequence of events’ in

framing the assessment (‘Paper Book-II,’ pages 83 to 84), and it was

argued that the assessment proceedings were initiated on 04.10.2016 by

issuing a questionnaire, dated 11.10.2016 and concluded on 30.12.2016

where the assessee’s counsel appeared on various dates, and filed

requisite details and the case was discussed. The Ld. Counsel particularly

referred to ‘order sheet entries’ to substantiate the fact that detailed

ITA No. 250/Asr/2019 9 Indermeet Bains v. Pr. CIT verification/enquiries were made before completing the assessment and

some of the order sheet entries, the Ld. Counsel relied upon are as under:-

“02.12.16 Appeared Sh. PK Singla, Advocate, filed reply, which has been examined w.r.t. facts of the case. Case partly discussed. A/R is requested to produce latest Jamabandi/Gurdwari of the land in question. Next date given is 14.12.2016.

05.12.2016 Inspector was deputed to make field enquiries, who submitted his report, which is placed on record.

14.12.2016. On request of the A/R, case is adjourned to 21.12.2016.

30.12.2016 Present Sh. P.K. Singla, Advocate, A/R of the “A”. Filed certificate of the Tehsildar SAS Nagar, alongwith latest Jamabandi and Girdwari. Case discussed.”

5.2 It was also argued by the Ld. Counsel that during assessment

proceedings, the Assessing Officer had also looked into the notification,

dated 06.01.1994 of Central Govt., about the ‘agricultural land’ in the

vicinity of urban areas, (copy placed at pages 77 to 82 of the ‘Paper Book’

and at page 80 to 81), wherein it has clarified by the ‘Central Govt.’ about

the agricultural land, situated on the outskirt of Mohali and that no ‘capital

gain’ is chargeable, if the agricultural land is located within ‘one kilometer

on the either side of Mohali-Kharar Road, upto the distance of 6 kilometers

from ‘Municipal limits’ on that Road’ and, accordingly, it was pleaded that

ITA No. 250/Asr/2019 10 Indermeet Bains v. Pr. CIT since the ‘agricultural land’ was not located in that notified area, the capital

gain is exempt on sale of agricultural land by the assessee.

5.3 The Ld. Counsel of the assessee explained from the above ‘order

sheet entries’, that the ‘latest Jamabandhi and Gardavari’ was obtained by

the Assessing Officer in order to substantiate that land before sale was

being used for agricultural purposes and further, the Inspector was deputed

to make the enquiries about the status of land before and after sale of land and a detailed report was given by the Inspector, from the ‘State Land

Revenue Department’, confirming the fact that the agricultural land, is

located beyond 6 Kms from ‘Municipal Committee Limits’ as per copy

placed in the ‘Paper Book’ at pages 85 to 85A. Copies of the ‘Jamabandhi’

‘Gardavari’ had also been placed during assessment proceedings to

substantiate the fact, that the land was still being used for agricultural

purposes as per pages 86 to 92 of the ‘Paper Book’ and the report of

Inspector, who was deputed to make on the spot verification, referred

hereinabove reads as under:-

“Sir,

Sub: Submissions of report in the case of Smt. Indermeet Bains W/o Sh. D.S. Bains, Bathinda [ACZPB9945L] w.r.t. assessment proceedings for the A.Y. 2011-12.

ITA No. 250/Asr/2019 11 Indermeet Bains v. Pr. CIT As directed, I visited Vill: Bakarpur to make field enquiries in respect of land owned/sold by the assessee. On my visit, it transpires that the land sold in question was agricultural land and is still under agricultural operations. Printouts of the photos taken through mobile are enclosed herewith for your kind perusal.

This is for your kind information.

Submitted Sir,

Sd/- 5/12/16 (Supreme Kothari) Inspector O/o the DCIT, Circle-1, Bhatinda” 5.4 It was vehemently argued, on the strength of above said documents,

that the report of Inspector alongwith photographs, as verified by the

Inspector, copies of which have been placed in the ‘Paper Book’ at pages

93 to 97, clearly prove that the land was being used for the purposes of

agricultural and, further the AR placed reliance, on the detailed replies filed

before the Assessing Officer as placed in the ‘Paper Book’ pages 98 to 101

during assessment proceedings. Thus, all such replies, verifications, as

made had been considered by the Ld. Assessing Officer, while framing the assessment under consideration and the directions as contained in the 1st

Revision Order u/s 263 of the Ld. PCIT, dated 27.04.2015.

5.5 It was further argued by the Ld. Counsel that before assumption of

jurisdiction u/s 263, the Ld. PCIT sought a report from the Assessing

ITA No. 250/Asr/2019 12 Indermeet Bains v. Pr. CIT Officer, who had framed the assessment, about the nature of enquiries

made by him, consequent to the first order u/s 263, dated 27.04.2015

passed by the then PCIT and a detailed reply, dated 07.06.2018, both on

facts and on law, was submitted by the AO demonstrating that the case

was, thoroughly, examined and complete verification was made as per the

report of the then DCIT, Bathinda, placed at paper book pages 42 to 48

and thus, the Ld. Counsel relied upon the said report of the then DCIT, for

the preposition that the AO had made in depth enquiries as desired by Ld. PCIT in his 1st Revision order passed under section 263 of the act, dated

28.04.2015.

part of the record for the purposes of 263 and after taking into

consideration, the replies filed by the assessee, during assessment

proceedings, detailed examination/verification as made by the DCIT and all

the issues, which were directed by the then PCIT in his order u/s 263,

dated 28.05.2014, were examined and thus, the Assessing Officer had duly

applied his mind and taken a plausible view. Further, the counsel relied

upon on number of judgments as per separate ‘paper book’ filed before us,

that if the Assessing Officer had examined each and everything and

detailed enquiries have been made, then assumption of jurisdiction u/s 263

ITA No. 250/Asr/2019 13 Indermeet Bains v. Pr. CIT cannot be upheld. A list of the some adjournments, relied upon by the Ld.

Counsel is reproduced hereunder:-

i). Copy of judgment of ITAT, Chandigarh Bench, Chandigarh in the case of M/s. Venus Texspin Ltd. in ITA No. 793/Chd/2017 vide order dated 12.12.2017 on the issue of u/s 263. ii). Copy of the judgment of ITAT, Chandigarh Bench, Chandigarh in the case of Surinder Pal Singh in ITA No. 57/Chd/2021 vide order dated 31.01.2022 on the issue of u/s 263. iii). Copy of the judgment of ITAT, Chandigarh Bench, Chandigarh in the case of Sanjay Jain & Others in ITA No. 140/Chd/2021 vide order dated 23.03.2022 on the issue of u/s 263. iv). Copy of the judgment of ITAT, Chandigarh Bench, Chandigarh in the case of Surinder Kaur in ITA No. 86/Chd/2021 vide order dated 06.05.2022 on the issue of u/s 263. v). Loil Continental Foods Ltd. vs. Pr. CIT in ITA No. 577/Chd/2019 Chd-Trib. vi). CIT vs. Hindustan Marketing & Advertising Co. Ltd. 341 ITR 180 Delhi-HC vii). Commissioner of Income Tax vs. Anil Kumar Sharma 335 ITR 180 Delhi- HC.

of Hon’ble Bombay Court, in the case of ‘Sh. Nirav Modi’ reported in 71

Taxmann.com 273, wherein the order u/s 263 was set aside, since the Ld.

Assessing Officer had examined the issue in depth and that judgment has

been upheld by the Hon’ble Apex Court in a decision, reported in 77

Taxmann.com 15 and it was held that, where the view has been taken by

the Assessing Officer, after making proper/requisite enquiries, the order u/s

263 cannot be sustained. Copy of the said judgment has been placed in

ITA No. 250/Asr/2019 14 Indermeet Bains v. Pr. CIT Paper Book at pages 217 to 226 of Paper Book. The assessee also relied

upon the judgement of Hon’ble Apex Court in the case of PCIT, Surat Vs

Shreeji Prince Pvt. Ltd., wherein, it was held that if the Assessing Officer

had made the requisite enquiries and, then, the invoking explanation-2 to

section 263 cannot be taken into consideration and the Assessing Officer

having taken a plausible view, the assessment as framed by the Assessing

Officer cannot be considered to be erroneous and prejudicial to the interest

of revenue.

Bench of ITAT Amritsar Bench, Amritsar in the case of Sh. Jaswinder Singh

(Copy filed) in ITA No.115/Asr/2016 for Asstt. Year 2011-12, dated

21.02.2022, wherein, it was held that the Assessing Officer had made

requisite enquiries and called for the detailed information and relying upon

the decision of Hon’ble ‘Apex Court’ in the case of Nirav Modi, as cited

supra, cancelled the order as passed by the Ld. PCIT u/s 263. Further,

reliance was made on another order of the jurisdictional ‘Amritsar Bench’ in

the case of KBB Nuts Private Ltd. n ITA No. 217/Asr/2019 vide order, dated

20.09.2021 (Copy filed), wherein on similar facts and circumstances, the

order u/s 263 was set aside as the Assessing Officer has taken a plausible

view after requisite enquiries having been made.

ITA No. 250/Asr/2019 15 Indermeet Bains v. Pr. CIT 9. The Ld. Counsel also relied on the judgment of ‘Nagpur Bench’ of the

ITAT in the case of ‘Kalpa Construction Co.’, the copy has been placed at

pages 227 to 243 of Judgement Set-II, for the preposition, that where the

order u/s 143(3)/263 was passed by the Assessing Officer, consequent to

the directions as given by the Ld. PCIT u/s 263 as in the present case of

assessee and since, the later order has been passed by the Assessing

Officer u/s 143(3)/263 is in accordance with the directions of the Ld. PCIT

in his order u/s 263, dated 04.03.2014, therefore, in such an order, there

could possibly be no error, since it was an order consequent to the order of

the ‘superior authority’ and under such circumstances, such an order can

never be erroneous order. It was further argued that the ITAT in the above

case relied upon the judgment of ‘Bombay High Court in the case of ‘Brihan

Mahasrashtra Sugar Syndicate Ltd. & Another’, reported in [1987] 165 ITR

the case of A. Kannan Vs ITO in ITA No.31/Mds/2017, which copy of the

order has been placed before us at pages 244 to 253 of Judgement Set-II, in which, it was held that in the 2nd round after the 1st 263, the Ld.

Assessing Officer had made proper enquiries and, thus, it was held that,

when the Ld. Assessing Officer examined the matter as instructed by the

Commissioner, then it can be said that the Assessing Officer has made the

ITA No. 250/Asr/2019 16 Indermeet Bains v. Pr. CIT requisite enquiries and taken a plausible view and Hon’ble Court set aside the 2nd revision order passed by Ld. PCIT.

High Court decision in the case of S.K. Kainthal, copy of which has been

placed at pages 205 to 210 of ‘Judgment Set’ and, in which, it has been

held that if the agricultural land has been sold at substantial profit at a

higher price and the fact that the such land was being used as agricultural

land in the earlier years and at the time of sale also, no such capital gain

could arise. The counsel prayed that in view of the factual matrix and

judicial precedents, the order as passed by the Ld. PCIT, both on legal and

on merit was liable to be set aside.

nothing is borne out from the order of the Assessing Officer as passed u/s

143(3)/263 vide order dated 30.12.2016, as to what enquiries/verifications

have been made and it appears that, whatever, was submitted by the

assessee during the course of assessment proceedings was accepted,

without due application of mind or any verification as desired by the Ld.

PCIT in the earlier order u/s 263, dated 27.04.2015. The order as passed

by the Ld. AO was cryptic and the Ld. PCIT has very rightly set-aside the

same. It was further argued by the Ld. CIT (DR) that no compliance has

ITA No. 250/Asr/2019 17 Indermeet Bains v. Pr. CIT been made by the Ld. AO to the directions of the Ld. PCIT as contained in

the order as passed u/s 263 vide order dated 27.04.2015. He relied upon

the impugned order of the Ld. PCIT u/s 263 that no apparent enquiries as

required have been made.

and everything cannot form part and parcel of the assessment order and he

referred the order sheet entries to substantiate that the detailed enquiries

have been made by deputing Inspector and calling of information from the

Revenue Department about the status of the land sold and, therefore, the

AO has taken a conscious decision, that the land was agriculture land. The

Ld. Counsel relied upon the judgment of the Bombay High Court in the

case of CIT vs. Gabriel India reported in (1993) 203 ITR 108 for the

preposition that, merely because the assessment order in question is not a

detailed order and the Assessing Officer has not mentioned item-wise

finding, regarding the claim of the assessee, that itself, does not mean that

the Assessing Officer had not made enquiries in this respect. The Ld.

Counsel also relied upon the judgment in the case of Loil Continental

Foods Ltd. in ITA No. 577/Chandi/2019, copy of which have been placed at

page 64 to 100 of the ‘judgment set’ and at page no. 99 of Paper Book,

wherein it has been held that, it is the discretion of the AO, how to pass an

ITA No. 250/Asr/2019 18 Indermeet Bains v. Pr. CIT assessment order and if, not much have been discussed in the order of the

Assessing Officer, then the same can be verified from the replies and other

evidences as per the record of the Assessing Officer and, thus, it was

pleaded that the order of the Ld. PCIT be set-aside.

order of the Ld. PCIT u/s 263, the brief synopsis, paper book and

arguments as advanced by the Ld. Counsel of the assesse, and the

arguments of the Ld. CIT (DR). From the above said arguments of both the sides, the admitted sequence of events in respect of the passing of the 2nd

263 order (impugned order) by the PCIT are as under:

SEQUENCE OF EVENTS: Sr. No. Date Event 1. 31.03.2012 Income Tax Return Filed at an income of 43,49,622+14,50,000 Agriculture income 2. 04.03.2014 Assessment order passed u/s 143(3) of The Act, wherein addition of Rs. 1,00,000 was made to the returned income of assessee on account of low household expenses, copy placed at pages 1 to 3 of Paper Book-I. 3. 28.05.2014 Notice issued u/s 263 of the Act against the order passed, dated 04.03.3014 on following issues: � Issue of claim of exemption of Rs. 5,12,75,000 as exempt capital gain on sale of agriculture land � Issue of nature of land on which capital gain has been claim exempt and evidence of agricultural activity carried on such land

ITA No. 250/Asr/2019 19 Indermeet Bains v. Pr. CIT � Issue of source of purchase of land under consideration way back in 2008 � Issue of source of earnings to the tune of Rs. 6,70,000 and Rs. 2,52,897 on account of interior designing and other professional receipts respectively � Issue of substantial investment made by assessee in a trust namely Athena Education Trust, Chandigarh. � Issue of short term Capital gain of Rs. 26,72,454 on account of trading in shares � Issues of evidences related to agricultural income

Copy of the notice u/s 263 is placed at pages 4 to 5 of the Paper Book. 4. Copy of the reply submitted to the PCIT u/s 263 ( Ist Revision) is placed at pages 6 to 8 of Paper Book. 5. 27.04.2015 Order passed u/s 263 of the Act, wherein case of the assessee was set aside to the file of the AO to verify the issues mentioned in above notice. Copy is placed at pages 9 to 16 of the Paper Book. 6. 30.12.2016 Copy of assessment order passed u/s 143(3)/263 wherein income already assessed vide original assessment order dated 04.03.2014 was accepted by the Ld. AO after making requisite enquiries as per directions of the PCIT u/s 263 vide order, dated 27.04.2015 as per copy placed at pages 19 to 21 of the Paper Book. 7. 24.08.2017 Order passed by Hon’ble ITAT in the case of assessee against the order dated 27.04.2015u/s 263 of the Act (Ist order) wherein appeal filed by the assessee stands withdrawn. Copy placed at pages 17 to 18 of the Paper Book. 8. 07.06.2018 Copy of report from the O/o DCIT-Circle 1, Bathinda to JCIT wherein, it has been stated that issue of taxability of land sold by assessee has

ITA No. 250/Asr/2019 20 Indermeet Bains v. Pr. CIT been discussed in detail. Copy placed at pages 42 to 48 of the Paper Book. 9. 10.07.2018 Comments of JCIT on the report of DCIT-Circle 1, Bathinda stating that the order of AO dated 30.12.2016 is as erroneous and prejudicial and it was recommended to PCIT to revise the said order u/s 263. Copy placed at pages 49 to 50 of the Paper Book. 10. 14.03.2019 One the basis of report of JCIT, Notice issued u/s 263 of the Act against the assessment order passed u/s 143(3)/263 on following issues: � Issue of claim of exemption of Rs. 5,12,75,000 as exempt capital gain on sale of agriculture land � Issue of nature of land on which capital gain has been claim exempt and evidence of agricultural activity carried on such land � Issue of source of purchase of land under consideration way back in 2008

Copy placed at pages 22 to 24 of the Paper Book. 11. 26.03.2019 Reply to the notice issued u/s 263 of the Act in continuation to the notice dated 14.03.2019. Copy placed at pages 25 to 36 of the Paper Book. 12. 28.03.2019 Order passed by PCIT u/s 263 of the Act wherein case of the assessee was set aside to the file of the AO. Copy placed at pages 37 to 41 of the Paper Book.

42 to 48 filed before us that before the action u/s 263, could be taken, the

CIT(E) had called for a detailed report from the AO, who examined and

ITA No. 250/Asr/2019 21 Indermeet Bains v. Pr. CIT clarified at length that each and every issue as was required to be verified

by the Ld. PCIT vide order u/s 263 dated 27.04.2015, had been verified by

way of enquiry through the Inspector and from the Revenue department. It

is noted that the AO has categorically certified during the course of

assessment proceedings, that the land was sold as agriculture land and is

located beyond 1km on the side of Mohali-Kharar Road, and beyond the

distance of 6kms from the Municipal Limits on that road, duly supported

even with the photographs of the land in question, the Inspector clicked

which proved that the land was still being used for agricultural purposes.

Thus, the report of the Ld. Assessing Officer as placed before us, is self-

explanatory and as submitted to the Ld. PCIT before issue of ‘Show Cause

Notice’ u/s 263, confirms to the fact that, detailed/requisite enquiries were

made during the assessment proceedings. For further clarity, the relevant

portion of the aforesaid report of the Ld. Assessing Officer dated

07.06.2018, prior to the issue of the notice u/s 263, is being reproduced as

under:

“The issue involved in this case was that the assessee purchased 39 Kanal 7 Marlas land for Rs.2,99,10,000/- in the financial year 2008-09 (On 17.03.2008 and 13.04.2008) and out of which land measuring 29 Kanal 6 Marlas was sold for Rs.5,12,75,000/- on 07.07.2010 to Shri Kewal Singh, Ranjeet Singh and Ranbir Singh, Jalalabad. The assessee has claimed exemption of Rs.5,12,75,000/- as non-taxable capital gains. The Pr.CIT, Bathinda in its order u/s 263 has interalia observed that the purchase and

ITA No. 250/Asr/2019 22 Indermeet Bains v. Pr. CIT sale of land transactions are regular business transactions of the assessee in the real estate business. The Pr.CIT, Bathinda in its order has also discussed the case of Hon'ble Gujrat High Court in the case of CIT Vs. Siddarth J.Desai(1983) 139 ITR 628 (Guj.)

the business of the real estate and the transaction in question is an isolated

transaction as the assessee is not doing business of real estate

Accordingly, the ratio of judgment of Hon'ble Gujarat High Court in the case

of CIT vs. Siddarth J. Desai (1983) 139 ITR 628 (Guj.), is not applicable to

the facts of the present case. The Gujrat high court has laid down 13 tests

which are required to determine whether the land in question is an

agricultural land or not. The said queries and answers are as under:

(i) Whether the land was classified in Yes, the land in question was an the revenue records as agricultural agriculture land. Asper and whether it was subject to the registered, the nature of land payment of land revenue was mentioned as chahi land. Further the revenue office has issued certificate that land in question was an agriculture land. Hence, in the revenue record, the nature of land was agriculture land on the date of transfer. (ii) Whether the land was actually or Yes, the land was actually used ordinarily used for agricultural for agriculture purpose at that purposes at or about the relevant time. The copy of registered time? deed certificate from and state revenue office shows the land

ITA No. 250/Asr/2019 23 Indermeet Bains v. Pr. CIT was agriculture one. Further the report of the inspector regarding land that, it is still under agriculture operation also supports the fact (iii) The assessee was holding this land The assessee was holding this for a period of more than 2 years. land for a period of more than 2 Thus it was not a temporary years. Thus it was not a character or by way of a stop-gap temporary character or by way arrangement. of a stop-gap arrangement. (iv) Whether the income derived from No. the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? (v) Whether, the permission under s. 65 N.A. of the N.A 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 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? (vi) Whether the land, on the relevant No. The land was agriculture date, had ceased to be put to land and in fact till date of agricultural use? Whether it was put assessment, it was still to an alternative use? Whether such agricultural land, as it is seen cesser and/or alternative user was from the report of the inspector. of a permanent or If temporary nature? (vii) Whether the land, though entered in No,it is used for agricultural revenue records, had never been purpose. actually used for agriculture, that is, it had never been ploughed or tilled?

ITA No. 250/Asr/2019 24 Indermeet Bains v. Pr. CIT Whether the owner meant or intended to use it for agricultural purposes? (viii) Whether the land as was situated in As per photo graph taken by the a developed area? Whether its inspector, it is seen that the physical characteristics, surrounding physical characteristics, situation and use of the lands in the surrounding situation and use of adjoining area where such as would the lands in the adjoining area indicate that the land was where such as would indicate agricultural? that the land was agricultural. (ix) Whether the land itself was developed by plotting and providing roads and other facilities? (x) Whether there were any previous sales of No portions of the land for non-agricultural use? (xi) Whether permission under s. 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? (xii) Whether the land was sold on No. yardage or on average basis? (xiii) 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?

ITA No. 250/Asr/2019 25 Indermeet Bains v. Pr. CIT 16. Thus it is proven fact that it was agriculture land, and the land was

used for agricultural purpose and thereby attracts no capital gain on the

sale thereof. Also on the facts, the case of CIT vs. Siddarth J. Desai (1983)

139 ITR 628 (Guj.) is distinguished as the land in that case was sold to a

Housing society.

No.9447 dated 06.01.1994, which prescribes limit of municipalities etc. for

considering the land as agricultural land, as per provisions of section 2(14).

The Village Bakarpur is situated in SAS Nagar (Mohali) district and as per

notification of Mohali, the limb has been prescribed as under:

Mohali (SAS Nagar) Area falling within 1 Km. on either side of Mohali Kharar Road up to a distance of 6 Km. from Municipal Limit on that road.

would not be treated as exempt agricultural land for the purpose of capital

gain u/s 2(14) of the Act and thus any sale of such land would attract

capital gain taxes liability. In the present case, the land in village –

Bakarpur, does not fall under this criterion and hence it is an exempted

ITA No. 250/Asr/2019 26 Indermeet Bains v. Pr. CIT agricultural Land from capital gain. In our view, no capital gain was liable

on the sale of agriculture land by the assessee.

ITR 594 (SC), the Hon'ble Supreme Court held that If a person invests

money in land intending to hold it, enjoys its income for some time, and

then sells it as a profit, it would be clear case of capital accretion and not

profit derived from an adventure in the nature of trade.

37- (Madras HC), the Hon'ble High Court held that-

"One of the essential elements in an adventure in the nature of trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show an intention to trade at the inception."

Harjit Singh Sangha’, (2013) 37 taxmann.com 63 upheld the finding of the

Tribunal as follows:

In the totality of the above said facts and circumstances and the evidence perused by us, the nature of land being agricultural land stands established;

ITA No. 250/Asr/2019 27 Indermeet Bains v. Pr. CIT a) as the said land was part of notified forest area where admittedly no other activities except agricultural, if allowed, could be carried out; b) Girdawari of the landholdings of the assessee proves the stand of the assessee that it was agricultural land and also the notification issued for the urban usage/non-agricultural activities certifies that [11:33 am, 07/10/2022] nick jones: prior to its notification the said land was used for agricultural -purposes. The land being registered In Land Revenue Records as Agricultural land, then there is no basis for holding the said land and as not agricultural land. We find support from the ratio laid down by the Chandigarh Bench of the Tribunal in DCIT v. A.P. Paper Mills Limited (supra). Accordingly, we hold that the nature of the land was sold by the assessee as on the date of its sale was agricultural land, which was acquired by the assessee in the year 1995 and was sold during the year under consideration. The said asset being held by the assessee cannot be said to be a business asset and its sale in small plots of land to different purchasers is not adventure in the nature of trade, in the absence of the assessee having floated the same or having developed its land for the purposes other than agricultural land. Further for converting the usage, prior permission is required from the authorities and in the absence of any permission being obtained by the assessee from PUDA authorities in respect of the land sold, merely because of land is sold in small plots to persons who intended its residential use, does not change the nature of land sold in the hands of the assessee and its taxability. We find support from the ratio laid down by the Hon'ble Patna High Court in the cases of Addl. CIR v. Tarachand Jain, 123 ITR 567 (Pat), which has been referred to by the Chandigarh Bench of the Tribunal in DCIT v. M/s A.P. Paper Mills Limited (supra). The relevant extract of the said judgment is as under: ‘the land may lie near an urban area and the land may have fetched a good price, may hold good in cases of agricultural land also. Since the land has been recorded in the official records as agricultural land, if department wanted to show that the entry was wrong, it should have given concrete facts in that direction. For example, it could have shown that the land lay within the municipal limits of the town of Ranchi or that the assessee had made his entire plot of land into parcels and was selling each one of them for the purpose of constructing a house thereof. The facts that the purchaser has purchased It for the purpose of constructing his house has no relevance because so far as the seller is concerned, he

ITA No. 250/Asr/2019 28 Indermeet Bains v. Pr. CIT will be deemed to have parted with the agricultural land in the form of agricultural land, unless it is proved otherwise. The department has not brought up any such material on the record by which it could be said that the criteria adopted by the Tribunal for determining the character of the agricultural land was wrong. In view thereof we hold that the gain arising on the sale of the aforesaid agricultural land cannot be taxed as income from business. Considering the above facts, the assessment u/s 143(3) was made vide order dated 30.12.2016 after providing proper opportunity to the assessee in the assessment order, the income already assessed at Rs.44,49 622/- (including STCG Rs.26,72,454/-) + agriculture income of Rs. 14,50,000/4s accepted.

Sons, Bathinda in ITA No. 140/Chandi/2021 vide order dated 23.03.2022

and Surinder Kaur in ITA No. 86/Chandi/2021 vide order dated 06.05.2022,

observed and held that, if there is due application of mind, and the

Assessing Officer has taken a conscious decision, based on the adequate

enquiries and other details furnished, then the order as passed by the Ld.

Assessing Officer cannot be set-aside.

assessment order as passed by the Ld. Assessing Officer does not have

elaborate discussion, we have through the judgment of the Hon’ble

Bombay High Court, in the case of ‘Gabriel India Ltd.’ as cited ‘supra’ is

quite relevant to the issue in hand, and further, the relevant findings in the case of ‘Loil Continental Foods’ in ITA No. 577/Chandi/2019, para 17 of

ITA No. 250/Asr/2019 29 Indermeet Bains v. Pr. CIT that order is being reproduced as under for the preposition, that even if the

assessment order is silent on the various issues, the facts can be borne out

from the questionnaire and replies filed during the course of assessment

proceedings and the following relevant findings of the coordinate bench in

the above case is being reproduced as under:

“17. The ld.CIT made reference to the Explanation-2 to Section 263and also decision of Hon’ble Supreme Court in the case of CIT Vs. Amitabhachan, 384 ITR 200. It is pertinent to note that Explanation-2of section 263(1) would help the ld. Commissioner to take cognizance under section 263 of the Act, if no inquiry was conducted by the AO before finalizing the assessment order. No doubt the assessment orders are very brief, and did not have elaborate discussion on these issues, but it is pertinent to bear in mind that assessee have no control over the AO and cannot persuade him to draft the assessment order in a particular manner. It is the discretion of the AO, how to pass an assessment order. Had an elaborate discussion available, then that would be an ideal situation for the higher appellate authorities to appreciate, what has operated in the mind of the AO while passing the assessment. But in the absence of such discussion, it has to be ascertained from the questionnaire and the replies submitted by the assessee. Explanation-2can be invoked when no inquiry was conducted by the AO. In the present case, he has issued a questionnaire calling for details on 37counts. Those details were submitted. Some of the issues raked up by the ld. Commissioner in the impugned order were between the group concerns, and their accounts were open before the AO in simultaneous proceedings. He was satisfied with these accounts. Thus, it is a case of inquiry and Explanation-2 cannot be invoked in the present case. In view of the above discussion, we are of the view that the Ld. Commissioner is not justified in exercising powers under section 263,and setting aside the assessment orders. We allow all these appeals and quash the impugned orders passed under section 263 of the Income Tax Act in each case of the appellants.”

ITA No. 250/Asr/2019 30 Indermeet Bains v. Pr. CIT 24. On comparing the facts of the earlier order of the Ld. PCIT u/s 263

vide order dated 27.04.2015 and the present impugned order u/s 263 vide

dated 28.06.2019, it is revealed that there is a similarity of the facts and

issues and that the same issues have been sought to be examined again,

athough, the records and the appellants paper book clearly substantiate the

stand of the assessee that, adequate and due enquiries have been made

by the concerned Assessing Officer, while passing the order u/s 143(3)/263

and the Assessing Officer did not only relied upon the replies of the

assessee during the course of assessment proceedings, but made detailed

enquiries as well, through the Inspector and the Revenue Department as

evident from the order sheet entries and the report of the AO, before the issue of notice u/s 263 for initiating the 2nd revisionary proceedings. In view

of the matter, we are of the considered view that, there has been due

application of mind by the AO, as he had made adequate and due

enquiries before passing the order and once, the Ld. AO had made due

enquiries and applied his mind, during the assessment proceedings, the

assessment cannot be set-aside u/s 263 of the Act.

Marketing & Advertisement Co. Ltd. reported in 341 ITR 180 and Anil

Kumar Sharma reported in 335 ITR 180 and Surinder Pal Singh reported in

ITA No. 250/Asr/2019 31 Indermeet Bains v. Pr. CIT [2022] 94 ITR (Trib) 458 (Chd.) and also the judgment of the Amritsar

Bench as relied upon by the Ld. Counsel of the assessee in the case of Sh.

Jaswinder Singh and M/s. KBB Nuts Pvt. Ltd. as cited supra which are

quite apt and relevant to the facts and the circumstances of the case. We

have also gone through the judgment of the ‘Apex Court’ in the case of Sh.

Nirav Modi, Shreeji Prints as cited ‘supra’ as these are squarely applicable

to the facts & circumstances of the present case. Thus, we have no

hesitation in holding that adequate and detailed enquiries have been made

by the Ld. Assessing Officer at the time of framing the assessment and it is

not the case where the directions of the Ld. PCIT in the earlier order us 263

dated 27.04.2015 has not been followed, while framing the assessment as

framed by the Ld. AO u/s 143(3)/263 dated 30.12.2016.The judgments of

the coordinate benches in respect of ‘Kalpa Construction Co.’ of Nagpur

Tribunal and of ‘Sh. A. Kannan’ as cited ‘supra’ are quite relevant to the

issue in hand that, where the Ld. Assessing Officer has passed the order in

accordance with the Directions of the Ld. PCIT u/s 263, then there could be

no possibility of any error, since it was an order in consequence to the

order of the superior authority.

ITA No. 250/Asr/2019 32 Indermeet Bains v. Pr. CIT to the facts on record and against the spirit of law as much as the

assessment as framed by the Ld. Assessing Officer vide order dated

30.12.2016 was neither erroneous nor prejudicial to the interest of revenue.

Accordingly, the impugned order passed u/s 263 of the Act, is quashed.

assessee that, the Ld. PCIT has not formed his independent opinion before

issuance of notice u/s 263, as there was a proposal by the Joint

Commissioner of Income Tax, Bathinda as per the copy placed before us at

pages 49 to 51 and on merits of the case. Since, we have quashed the

impugned order passed u/s 263 of the Act, for the reasons hereinabove

paragraph, we are not inclined to adjudicate on the issue of the Ld. PCIT

having initiated the impugned proceedings on the proposal sent by the Ld.

JCIT, Bathinda.

assessee is disposed of in the term indicated as above.

Order pronounced in the open court on 19.10.2022

Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to:

ITA No. 250/Asr/2019 33 Indermeet Bains v. Pr. CIT (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order