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2021 (10) TMI 1146 - AT - Income TaxRevision u/ 263 by CIT - revisional order passed ex-parte has observed that deduction claimed by the assessee on sale of agricultural land u/s 54B of the Act has been wrongly allowed without adequate enquiry and the order of the AO passed u/s 143(3) of the Act is vitiated by non-application of mind - principal allegation of the PCIT is that the land sold and then purchased by the assessee is not an agricultural land - HELD THAT:- We find the observations of the PCIT neither here nor there. It is manifest that the PCIT has proceeded on a total misconception of law in the given set of facts. Where the agricultural sold land situated is outside the municipal limits, it will not be deemed as capital asset under Section 2(14)(iii) of the Act at the first place and consequently there would be no liability of capital gain on the assessee at the threshold. Hence, we do not understand the need for certificate of land record authorities in this regard. The assessee has not claimed at all that the agricultural land is situated outside the specified distance of municipality. The assessee has, in fact, calculated the LTCG and claimed deduction thereon on the ground that the capital gain accrued on sale of land has been towards purchase of other land parcels which is also used for agricultural purposes. The PCIT has made out a totally different case which has no relation with application of Section 54-B of the Act. The use of agricultural land, after its transfer to a builder, is of no consequence for the purposes of Section 54-B of the Act. The PCIT himself has admitted that the land in sale to be agricultural land and also not disputed the purchase of agricultural land by utilization of capital gain for agricultural purposes. The PCIT has proceeded to disturb the assessment on totally irrelevant consideration and without showing any error in the claim. On appreciation of facts available before us showing the use of land for agricultural purposes having regard to the agreement with farmers and other supporting papers, we are unable to discern even any remote error in the action of the AO in admitting the claim of deduction under Section 54-B of the Act. On the other hand, we find that the action of the PCIT suffers from vice of arbitrariness and total lack of application of mind. The palpably wrong revisional order is accordingly set aside and quashed. Non-issuance of notice and on total lack of opportunity while concluding the proceedings under Section 263 - whether a failure to give a reasonable opportunity to the assessee of being heard was only a procedural irregularity ? - The finality of the assessment cannot be disturbed for the failure of the PCIT to obdurately adhere to the explicitly prescribed requirement of opportunity to assessee. Hence, in the absence of any opportunity to the assessee for which the fault is attributable squarely to the PCIT, is fatal and such defect being incurable, the revisionary order passed under Section 263 of the Act is also required to be quashed independently on this ground also. - Decided in favour of assessee.
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