Shri Kishor Babubhai Sakhiya, RAJKOT-GUJARAT V. The Pr. Commr. of Income Tax-1, RAJKOT-GUJARAT

ITA 145/RJT/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3254 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 01-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Revision of order; Opportunity of being heard; Assessment record; Set aside
• Section: 54; 263; 143(3); 54B; 14A

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, राजकोट 瀈यायपीठ 瀈यायपीठ瀈यायपीठ 瀈यायपीठ, , , , राजकोट IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.145/RJT/2016 Assessment Year : 2015-16 Shri Kisho Babubhai Sakhiya Khodiyar Krupa 3, Tanti Park Corner Rajkot. Vs The Pr.CIT-1 Rajkot. (Applicant) (Responent) Assessee by : None Revenue by : Shri Samir Tekriwal, CIT-DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 2 6 / 0 4 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 2 9 / 0 4 / 2 0 2 2 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER This appeal is filed by the assessee against order dated 29.2.2016 passed by the Pr.Commissioner of Income-tax, Rajkot-1 passed under section 263 of the Income Tax Act, 1961 ("the Act" for short) relating to the Astt.Year 2011-12. 2. When the case was listed for hearing on 25.4.2022, there was a letter for seeking adjournment by stating that appellant’s father was died due to Covid-19 pandemic. Further, appellant’s mother was also not feeling well due to Covid-19 complications, and therefore requested to adjourn the matter to June, 2022. The ld.DR for the Revenue has brought to our notice that such stereo-type ITA No.145/RJT/2016 2 letters seeking adjournment of hearing were being made by the assessee since May, 2021 and even on the last occasions also none remained present on behalf of the assessee. Therefore, the ld.DR seriously objected for grant of further adjournment of the case. 3. On going through the records, it could be seen that such stereo-type letters have been filed by the assessee on 31.5.2021, 8.11.2021, 11.3.2022 and none appeared on behalf of the assessee for the previous hearing also. However, in all fairness, we adjourned the matter to 26 th April, 2022. On 26 th April, 2022 also none appeared, we therefore, having no other option, proceeded to adjudicate the matter ex parte qua the assessee after hearing the ld.DR and considering the material available on record. 4. Brief facts of the case is that the assessee is an individual and trading in real estate and agriculture operation. For the Asst.Year 2011-12, the assessee filed his return of income showing total income at Rs.1,42,79,880/- on 28.9.2011. The return was selected for scrutiny assessment and assessment was completed by making addition under Section 14A of Rs.3,35,389/- and disallowance of car expenses of Rs.11,874/- and determined the assessed income at Rs.1,46,27,143/- by order dated 20-12-2013 passed u/s.143(3) of the Act. 5. On examination of the above assessment order and connected records, it was noticed by the Pr.CIT that during the year the assessee had transferred capital asset which is an agriculture land situated Survey No.71/2, Kangashiyali which resulted in capital gain within the scope of section 45(3) of the Act. As per the working given by the assessee in the statement of income, the land was acquired on 25.7.2008 for Rs.7,32,062/- and this capital asset was ITA No.145/RJT/2016 3 transferred on 15.4.2010 for a consideration of Rs.45,12,000/- and short term capital gain of Rs.37,79,938/- was thus worked out and the same was claimed as deduction under section 54B of the Act. Further perusal of the details furnished in respect of capital gain revealed that capital asset was held by the assessee for less than two years and deduction claimed under section 54B was therefore incorrectly claimed by the assessee. The AO while framing the assessment order under section 143(3) of the Act has not looked into this issue, which is erroneous and prejudicial to the interest of the Revenue. Therefore, a show cause notice under section 263 of the Act was issued on 12.1.2016 to the assessee. The assessee after taking two adjournments filed his written submission. In para-3 of the submission, the assessee claimed that the actual transfer of the capital asset was on 15.8.2010 and due to typographical error it was mentioned as 15.4.2010. Thus, the assessee contended that the land was held for more than two years. After considering the above submission, the ld.Pr.CIT set aside assessment order dated 20.12.2013 by a speaking order as follows: “6. This contention of the assessee is not acceptable as in the statement of total income forming part of the return of income, the assessee has given a working of the capital gain wherein the date of transfer of capital asset is mentioned as 15.04.2010. As regards the contention that during the course of the assessment proceedings working of capital gain was given wherein the date of transfer was specifically mentioned as 15.08.2010, no such submission is found in the assessment record. In the record there is no submission to prove that an entry was passed in the books of accounts of the assessee's proprietary business on 15.08.2010 through which the land in question was converted into stock in trade. 7. In para 4 of the submission the assessee has contended that "Finally the land was converted into non agricultural land vide N.A. Order dated 16.12.2010 passed by Collector, Rajkot District (Copy of order is attached at page 8 to 13). Thus the land was still agricultural land till 16.12.2010. Thus effectively the agricultural activity was carried out even for more than 2 years....." ITA No.145/RJT/2016 4 8. Even if it is to be considered that agricultural activity was carried out till 16.12.2010, the period between transfer of capital asset i.e. 15.04.2010 and the date of the land being converted in to non agricultural land on 16.12.2010 cannot be included in the period of 2 years required u/s. 54B because as per the provisions of section 54B of the Act, the capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by (the assessee being an individual, or a HUF) for agricultural purposes which means that the stipulated 2 years of agricultural activity should be before the transfer of the capital asset/Therefore, the period during which agricultural activity was carried out after the assessee has transferred the land (15.04.2010 to 16.12.2010), cannot be considered for the agricultural activity stipulated to have been conducted during 2 years immediately preceding the date of transfer of capital asset, under the ownership of the transferor. Therefore, the land was not held by the assessee for a period of 2 years as required u/s. 54 B of the Act and the deduction of Rs.37,79,938/- was therefore wrongly allowed in the assessment. 9. In the submission dated 10.02.2016, at para 4 thereof, the assessee has stated that the land in question was converted into Non-Agricultural land vide the Collector's order dated 16.12.2010 and a copy of the said order has also been enclosed. On perusal of the order it is seen that the order was passed pursuant to the assessee's application dated 27.10.2010. The assessee has himself reckoned that the land was converted into non agricultural land on 16.12.2010. Since the transfer of the capital asset in this case could only have been after the capital asset was converted into non-agricultural land, the date of transfer of capital asset should be 05.03.2011. In that case the holding period of the capital asset transferred, would have been of more than 2 years. 10. However, even if the date of transfer of the capital asset is considered as 16.12.2010, the deduction u/s. 54B cannot be allowed due to the following reasons: (a) In the submission made during the course of the proceedings, the assessee has enclosed copies of documents in respect of land purchased for which deduction u/s. 54B of the Act has been claimed. The details of the investment is as follows: Sr. No. Particulars of land Purchase price/investment amount Date of purchase deed 1 Survey No. 60/10 of Village Kanagshiali 12,64,600 (25,29,200/2) 16.09.2010 ITA No.145/RJT/2016 5 2 Survey No. 60/8 & 61/8 of Village Kanagshiali 11,53,400 (23,06,800/2) 16.09.2010 3 Survey No. 61/10 of Village Kanagshiali 4,95,700/- (9,91,400/2) 18.09.2010 4 Survey No.61/6 of Village Kanagshiali 4,95,700/- (9,91,400/2) 18.09.2010 5 Survey No. 61/7 of Village Kanagshiali 4,95, 700/- (9,91,400/2) 18.09.2010 (a) above detailed lands were purchased before 16.12.2010 i.e. before the date of transfer of capital asset. (c) For claiming deduction u/s. 54B of the Act, the investment in land should have been made within a period of two years after the date of transfer of the capital asset. Deduction u/s. 54B of the Act cannot be allowed on lands purchased before the date of transfer of capital asset as made by the assessee. 11. The assessee cannot adopt any date to suit his claim for deduction u/s. 54B of the Act. In para 3 of the submission the assessee has considered 15.08.2010 as date of transfer. There is no basis for having adopted this date and as on this date the land was agricultural land and could not have been converted into stock-in- trade. Whereas, there is basis for treating the date of transfer as 16,12.2010 because on this date vide the Collector's order the land was converted into non-agricultural land and was since then eligible to be converted into stock-in-trade. 12. As per the facts discussed above, it is noticed that the assessee's investment in land was before the transfer of the capital asset. Therefore, even if the period of holding of the capital asset is considered as of more than 2 years, the assessee was not eligible for claiming the deduction u/s. 54B of the Act. The claim u/s. 54B of the Act therefore, requires to be disallowed on this issue also. 13. In para nos. 6, 7, 8,9,10 and 11 of the submission the assessee has challenged the issuing of the notice u/s. 263 of the Act and has relied on various decisions. The assessee's contention in this regard is not found to be tenable. The notice u/s. 263 of the Act in this case was issued on 12.01.2016. As per Explanation 2 to section 263 which was inserted w.e.f. 01.06.2015 by the Finance Act, 2015, an order would be deemed to be erroneous if the AO has not made ITA No.145/RJT/2016 6 proper verification or has not conducted proper inquiries. The relevant part of the Explanation is reproduced hereunder: "Explanation 2 For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) The order is passed without making inquiries or verification which should have been made; (b)The order is passed allowing any relief without inquiring into the claim; The proceedings u/s. 263 of the Act in this case is covered by the Explanation inserted by the Finance Act, 2015. In my opinion the assessment order in this case was passed without making proper inquiries or verification with regard to allowing the claim of deduction u/s. 54B of the Act. 14. In view of the above discussed facts, the assessment order passed u/s. 143(3) of the Act on 20.12.2013 for the A.Y. 2011-12 is held as erroneous and prejudicial to the interest of the revenue. By virtue of powers vested in me u/s. 263 of the I T Act, I cancel the order u/s. 143(3) of the Act dated 20.12.2013 and direct the Assessing Officer make a fresh assessment as per law after allowing assessee adequate opportunity of being heard.” 6. Aggrieved against the 263-order, the assessee is in appeal before us by raising the following grounds: “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. 3. 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.37,79,938/- 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 Id. 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.” ITA No.145/RJT/2016 7 7. Heard the ld.DR and gone through the material available on record. We find that this is the twelveth hearing of the matter before the Tribunal. None appeared on behalf of the assessee. Though adjournment application has again been filed, but no paper book has been filed by the assessee giving material for considering the stand of the assessee. We find that there was no infirmity in the order of the ld.Pr.CIT for invocation of power under section 263 of the Act, vide which, the ld.Pr.CIT set aside assessment order passed under section 143(3) as being erroneous and prejudicial to the interest of the Revenue and further direction to the AO to make a fresh assessment order. Even otherwise also, there is nothing before us to deviate from the view taken by the ld.Pr.CIT on this issue coupled with the fact that there is no assistance rendered by the assessee to adjudicate the issue involved in the ground raised before us without supporting evidences. As a consequence, the grounds raised by the assessee stand rejected, and the order of the ld.Pr.CIT is confirmed. 8. In the result, appeal of the assessee is dismissed. Order pronounced in the Court on 29 th April, 2022 at Ahmedabad. Sd/- Sd/- (ANNAPURNA GUPTA) ACCOUNTANT MEMBER (T.R. SENTHIL KUMAR) JUDICIAL MEMBER Ahmedabad, dated 29/04/2022 vk*