No Denial of Sec. 54B Relief Just Because Assessee Didn’t Show Agricultural Income in His ITR: ITAT

Case Details: Pareshbhai Parsottambhai Patel vs. Principal Commissioner of Income-tax - [2024] 162 taxmann.com 573 (Surat-Trib.)

Judiciary and Counsel Details

• • Pawan Singh, Judicial Member & Dr A. L. Saini, Accountant Member
  • P.M. Jagasheth, CA for the Appellant.
  • Ravi Kant Gupta, CIT-DR. for the Respondent.

Facts of the Case

Assessee-individual sold land and claimed deduction under section 54B in respect of capital gain arising from the sale of land. The Assessing Officer (AO) completed the assessment under section 143(3) without making any addition. Later, the Principal Commissioner of Income Tax (PCIT) found that the assessee had not shown agricultural income earned by him in his return of income.

Accordingly, the assessee was not entitled to claim deduction under section 54B. Arguing that the Assessing Officer (AO) was obligated to conduct inquiries and verifications and make necessary additions regarding the deduction under Section 54B during the assessment proceedings but failed to do so, the PCIT initiated revisionary proceedings against the assessee.

Aggrieved-assessee filed an appeal to the Surat Tribunal.

ITAT Held

The Tribunal held that the AO had issued three notices to the assessee under section 142(1) to examine three issues: (i) investment in immovable property, (ii) capital gain on the sale of property, and (iii) capital gain deduction claimed under section 54B. In response to these notices, the assessee submitted a detailed reply and various evidences stating that the land was used for agriculture. Thus, the assessee proved that the land was used for agricultural purposes prior to its sale for many years.

The main allegation of the PCIT was that the assessee had not shown agricultural income in his return of income. In this regard, the assessee submitted that the land was inherited by the members of the assessee’s family, and one of the family members was showing agricultural income. It was sufficient compliance on the part of the assessee to claim such deduction under section 54B.

Only the condition to be fulfilled to claim the deduction under section 54B is that ‘land was being used’ by the assessee for agricultural purposes, and it was not necessary for the assessee to show agricultural income in his return of income. The assessee fulfilled this condition as the land was used by the assessee for two preceding previous years for agricultural purposes. It is not the requirement of section 54B(1) that the assessee has to show agricultural income in his return of income.

Since the AO conducted an inquiry on the matter at hand and based on the evidence collected, he had formed a reasonable view, which cannot be considered unsustainable. Thus, the AO’s order cannot be termed as erroneous or prejudicial to the interest of revenue.

List of Cases Reviewed

• • Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 (SC) (para 19)
  • Sharadbhai Popatbhai Kakadia v. Pr. CIT [IT Appeal No. 29 (SRT.) of 2021, dated 27-04-2022] (para 20) followed.
  • Smt. Asha George v. ITO [2013] 30 taxmann.com 334/214 Taxman 236/351 ITR 123 (Ker.) (para 21)
  • ITO v. Tome Hiltor Silvester De Oliveira [2014] 49 taxmann.com 582/[2015] 152 ITD 877 (Panaji – Trib.) (para 21)
  • BSES Rajdhani Power Ltd. v. Pr. CIT [2023] 152 taxmann.com 139/293 Taxman 605/454 ITR 436 (SC) (para 21)
  • Paras Chinubhai Jani v. Pr. CIT [2019] 107 taxmann.com 217/177 ITD 591 (Ahd. – Trib.) (para 21)
  • Rajiv Dass v. Dy. CIT [2019] 103 taxmann.com 192/264 Taxman 40/414 ITR 37 (Delhi) (para 21)
  • Chomansingh M. Deora v. Pr. CIT [2023] 155 taxmann.com 291/203 ITD 240 (Mum. – Trib.) (para 21)
  • Smt. Madhu Devi Jain v. ITO [2023] 156 taxmann.com 349/203 ITD 713 (Hyd. – Trib.) (para 21) distinguished.

List of Cases Referred to

• • Smt. Asha George v. ITO [2013] 30 taxmann.com 334/214 Taxman 236/351 ITR 123 (Ker.) (para 13)
  • ITO v. Tome Hilitor Silvester De Oliveira [2014] 49 taxmann.com 582/[2015] 152 ITD 877 (Panaji – Trib.) (para 13)
  • BSES Rajdhani Power Ltd. v. Pr. CIT [2017] 88 taxmann.com 25/399 ITR 228 (Delhi) (para 13)
  • BSES Rajdhani Power Ltd. v. Pr. CIT [2023] 152 taxmann.com 139/290 Taxman 605/454 ITR 436 (SC) (para 13)
  • Paras Chinubhai Jani v. Pr. CIT [2019] 107 taxmann.com 217/177 ITD 591 (Ahd. – Trib.) (para 13)
  • Rajiv Dass v. Dy. CIT [2019] 103 taxmann.com 192/264 Taxman 40/414 ITR 37 (Delhi) (para 13)
  • Chomansingh M. Deora v. Pr. CIT [2023] 155 taxmann.com 291/203 ITD 240 (Mum. – Trib.) (para 13)
  • Smt. Madhu Devi Jain v. ITO [2023] 156 taxmann.com 349/203 ITD 713 (Hyd. – Trib.) (para 13)
  • Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 (SC) (para 19)
  • Sharadbhai Popatbhai Kakadia v. Pr. CIT [IT Appeal No. 29 (SRT.) of 2021, dated 27-04-2022] (para 20).