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2020 (1) TMI 724 - AT - Income TaxRevision u/s 263 - lack of inquiry into certain vital aspects concerning eligibility of deduction claimed u/s 54B - deduction claimed u/s 54B has not been properly examined by the AO and the deduction claimed u/s 54B has been allowed without meeting the pre-requisites of Section 54B and the amount of capital gains claimed as exemption u/s 54B has not been kept deposited in specified capital gains accounts scheme and the AO has also failed to make any proper inquiry in this regard - HELD THAT:- First part deals with exemption of capital gains from transfer of land (original asset) used for agricultural purpose in the two years immediately preceding the date on which the transfer took place. The second part deals with the manner of utilization of gains arising from transfer of such land used for agricultural purposes. Pr.CIT has impugned the eligibility of deduction u/s 54B. It is an admitted fact that on the date of transfer of land (which is broadly the legislative expression used in Section 54B of the Act), the land in question was neither agricultural land nor was used for agricultural purposes. The land has been admittedly declared as ‘fallow land’ on which no agricultural produce is plausible. Thus, as per the certificate of Talati as produced by the assessee himself, the viability of carrying out agricultural activity was quite dismal. We also find that the assessee has not declared any worthwhile agricultural income in the earlier years from such a large track of land (9286 sq.mtr.). Some expenses voucher produced for expenditure incurred on Tractor does not inspire any confidence. Such material was not produced before the lower authorities as well. The assessee has failed to adduce any satisfactory evidence that the land was subjected to any systematic agricultural operation in last two years immediately preceding the date of transfer as required in law indeed. The reply of the assessee and evidence relied thereupon appears to be cosmetic. AO has failed to make any inquiry on this vital aspect while admitting the claim of the assessee and allowed the claim summarily. Pr.CIT in our view correctly appreciated the facts and applied the law in perspective to draw an adverse conclusion on eligibility of deduction. We see no error in the conclusion drawn by the Pr.CIT to hold that the claim u/s 54B has been allowed without fulfillment of prescribed conditions. We thus decline to interfere with the revisional order of the Pr.CIT on this score. Notwithstanding that claim of deduction u/s 54B is found to be in contravention with law and therefore the second aspect of the assessee need not to be gone into, we would however deal with the second aspect of controversy as well, for the sake of completeness. The assessee claims to have transfer an amount of ₹ 30,45,500/- from ‘capital gains saving scheme’ to ‘capital gain deposit scheme’ on same stipulations and claims to have not diverted the money for the purposes other than specified under s.54B(2) of the Act. However, it is the admitted position that no evidence in this regard was filed before the AO to substantiate the assertions being made. The AO has accepted the claim without looking into this aspect which has direct bearing on maintainability of deduction. The Pr.CIT, in the circumstances, has rightly remitted the issue back to the file of the AO for requisite verification action of Pr.CIT has shunned prejudice to Revenue without any perceptible prejudice to assessee. - Decided against assessee. Disallowance towards brokerage in the second round of proceedings - HELD THAT:- AO in second round of proceedings pursuant to Section 263 of the Act has, however, also disallowed brokerage of ₹ 3,12,500/- which is not seen to be emanating from the direction given by the Pr.CIT u/s 263. In the second round of proceedings, the AO was governed by the revisional order of the Pr.CIT and in view of the specific directions given therein, the AO could not expand the scope of inquiry while passing the order under s.143(3) r.w.s. 263. Therefore, the AO was in error in making disallowance towards brokerage in the second round of proceedings. AO has clearly travelled beyond the scope of inquiry under s. 263 of the Act guided to him by the Pr.CIT. The action of the CIT(A) confirming the addition is therefore set aside and the AO is directed to delete the disallowance of brokerage - Decided in favour of assessee.
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