The burden of proof to establish eligibility for a tax deduction under Section 54B of the Income Tax Act, 1961, lies on the assessee, and appellate authorities must verify factual parity before applying binding judicial precedents.

आदेश/O R D E R

PER MAKARAND V.MAHADEOKAR, AM:

This appeal by the Revenue is directed against the order dated 11.11.2024 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the CIT(A)”] for the Assessment Year 2016–17, arising from the assessment order dated 22.05.2023 passed under section 147 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Assessment Unit of Income Tax Department [hereinafter referred to as “Assessing Officer or AO”].

2. Facts of the Case

2.1 The assessee is an individual engaged in the profession of law and also deriving agricultural income. For the year under consideration, the assessee filed his return of income on 04.08.2016, declaring total income of Rs. 13,08,330/-. The return was processed under section 143(1) and subsequently selected for scrutiny. The original assessment was completed under section 143(3) on 16.11.2018 accepting the returned income.

2.2 Subsequently, information was received from the office of DCIT (International Taxation)-1, Ahmedabad, that the assessee, along with his brother Shri Ashok Kanubhai Patel (PAN ARRPP4895J), had sold certain immovable properties during the previous year relevant to A.Y. 2016–17 and both co-owners had claimed exemption under section 54B of the Act in respect of the long-term capital gains. In the case of the co-owner, Shri Ashok Kanubhai Patel, the claim under section 54B was disallowed by the Assessing Officer and the addition of Rs. 6,64,83,153/- was confirmed by the CIT(A). Although the ITAT, Ahmedabad, subsequently allowed the co-owner’s appeal vide order dated 31.05.2021 in ITA No. 405/Ahd/2020, the Department’s appeal before the Hon’ble Gujarat High Court (Tax Appeal No. 121 of 2022) is stated to be pending adjudication.

2.3 Based on this information, the Assessing Officer reopened the assessment by issuing notice under section 148 on 30.06.2021 in accordance with the provisions of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and CBDT Notifications Nos. 20 and 38 of 2021. The said notice, issued during the transitional period, was treated as notice under section 148A(b) pursuant to the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal (2022 SCC Online SC 543). After considering the assessee’s reply, an order under section 148A(d) was passed on 29.07.2022, and thereafter a fresh notice under section 148 was issued after obtaining necessary approval from the competent authority.

2.4 In response to the statutory notices under sections 142(1) and 143(2), the assessee furnished replies electronically. The Assessing Officer noted that the assessee had sold agricultural land situated at Village Khoraj, Taluka Gandhinagar, for substantial consideration, and claimed deduction under section 54B on long-term capital gains amounting to Rs.2,95,92,616/- by asserting that the land had been used for agricultural purposes in the two years preceding its transfer and that the sale proceeds were invested in the purchase of new agricultural land.

2.5 The assessee submitted copies of sale and purchase deeds, 7/12 extracts of land, bills of seeds, fertilizers, and pesticides, and claimed that he personally carried out agricultural activities on the said land engaging the labour. It was stated that he cultivated crops, part of which were consumed for personal use and part sold locally, and that such activities were also reflected in agricultural income declared in the return of income.

2.6 After examining the submissions, the Assessing Officer recorded that the Village Form No. 12 for the relevant years revealed cultivation