TMI Blog2021 (10) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 54-B, 54-C, 54-D, 54-G of the Act and whether deductions from capital gains have been claimed correctly. The assessment was completed under Section 143(3) of the Act allowing the deductions claimed. Thereafter, the PCIT called for the assessment records and opined that the assessment order so passed is erroneous insofar as prejudicial to the interest of the Revenue. A show cause notice was issued to assessee seeking his response. It will be pertinent to reproduce the show-cause notice issued by the PCIT for appreciation of controversy. To, RAMDEV MANDHANI C-295, SHAILENDRA NAGAR 492001, Chhattisgarh India PAN/TAN: AAGHR5208F AY: 2016-17 DIN Notice No. :ITBA/REV/F/REV1/2020-21/1031386740(1) Dated: 10/03/2021 NOTICE FOR THE HEARING Subject: Notice for Hearing in respect of Revision proceedings u/s. 263 of the THE INCOME TAX ACT, 1961 - Assessment Year 2016-17. In this regard, a hearing in the matter is fixed on 15/03/2021 at 11:00 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (b) in any area within the distance, measured aerially: (I) not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation: For the purpose of this sub-clause, population means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year. Further, as per Section 45 of Income Tax Act, provides that, any profit or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections be chargeable to income-tax under the head Capital gain , and shall be deemed to be the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021 at 11:00 am in the office of PCIT-1, Central Revenue Building, Civil Lines, Raipur. It was alleged by the PCIT that deductions claimed under Section 54-B by the assessee on transfer of agricultural land has been wrongly allowed by the AO and without application of mind. A revision order was passed by which the PCIT accordingly set aside the assessment so completed and remanded the issue back to the file of the AO for fresh adjudication thereof. 4. Aggrieved, the assessee preferred appeal before the Tribunal. 5. When the matter was called for hearing, two fold contentions were raised on behalf of the assessee. 5.1. Firstly, it was contended that the assessee has not received the show-cause notice under Section 263 at all and, therefore, no appearance could be made before the PCIT in the absence of any opportunity provided to the assessee. It was pointed out that the show-cause notice bears the date 10.03.2021 calling for hearing on 15.03.2021 at 11:00 am. However, the notice itself bears the signature on 15.03.2021 at 1.49 pm. Apparently, as per show-cause notice, the time fixed for hearing is prior to the time of issue of notice itself. Besides, the show-cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside specified distance of 8 kilometers of the Raipur Municipal Corporation, the asset will not be a 'capital asset' at the first place and gains arising would be totally exempt from taxation. In such a situation, the question of deductibility under s. 54B of the Act would not arise at all. The learned Counsel pointed out that the land in question is agricultural land as can be seen from the sale deed placed at page No. 16 of the paper book. It was further contended that all the conditions stipulated under s. 54B of the Act are fully satisfied in the instant case and the deductibility under Section 54B of the Act as claimed by the assessee was rightly allowed by the AO after taking cognizance of relevant facts placed on record. It was pointed out that land was used for agricultural purposes in two years prior to sale as can be seen from Revenue records (P-22) maintained by Patwari. Further, the new land purchased is agricultural land which fact is again supported by Form P-2 placed at page Nos. 92, 93, 95 96 of the paper book. The produce shown in the Form P-2 would demonstrate that the new land purchased was also put to use for agricultural purposes. The learned Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purchased are situated at more than specific distance from the limits of municipality bodies as described in Section 2(14)(iii) of the Act. It is further alleged that the land was sold to a builder which would mean that the land would be used for non-agricultural purposes and for commercial operation after sale. In this backdrop, it is alleged that the deduction taken by the assessee under Section 54-B of the Act is irregular and the gains arising on the sale of land is liable for taxation as LTCG without any deduction claimed under Section 543 of the Act. 8.1. 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 dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est in law per se. 10. In the case of Tata Chemicals Limited vs. DCIT, ITA No. 3127/Mum/2010, order dated 30.06.2011, the co-ordinate bench after making reference to the decision in the judgment in Maneka Gandhi vs. Union of India, AIR 1978 SC 597, and other judgments observed that the order which infringes the fundamental principle, passed in violation of audi alteram partem rule, is a nullity. When a competent Court or authority holds such an order as invalid or sets it aside, the impugned order becomes null and void. Once it is concluded that the order in question is null and void, it is not for the adjudicating authority to advise the Commissioner as to what should he do. He is always at liberty to do whatever action he can take in accordance with the law, but a life to null and void order by remitting it back to the Commissioner for giving a fresh opportunity of passing the order after giving the assessee an opportunity of hearing cannot be given. In a case where it is possible for the Commissioner to pass a fresh order at this stage in accordance with the scheme of the Act, he can very well do so but in case the time limit for passing such order has already expired, such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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