2004 (4) TMI 579 - HC - Income Tax

Assessment of tax liability and capital gains - Claim of benefits u/s 54F - Revisional jurisdiction and powers of the Commissioner u/s 264 - Non-disclosure of certain facts in the Income tax return - sale of the land and subsequent purchase of l/5th share in the house - HELD THAT - A bare reading of section 264 makes it abundantly clear that the Commissioner has discretion to invoke the revisional jurisdiction. However, once he entertains a revision he has the power to call for the record of any proceedings under this Act and is also entitled to make any inquiry himself or cause any inquiry to be made and pass such order as he thinks fit. The only impediment on the power of the revisional authority is that he will not pass any order prejudicial to the assessee. Respondent No. 1 has much wider power u/s 264. It does not circumvent and confine the power of the revisional authority in any manner. It was established before the revisional authority that the capital gain on the sale of land was utilized for the purchase of a residential house within time and the consideration for the purchase of the house was much more than the amount of capital gain. The assessee had no liability to pay tax and was entitled to benefit u/s 54F of the Income Tax Act. It is also admitted position that the petitioner had failed to claim the benefit in her return but an effort was made to over-come the mistake before the revisional authority. Respondent No. 1 has not disputed the sale and purchase of the House as the same is evidenced by documentary evidence duly registered before the Competent authority. It is also admitted position that the petitioner had no remedy before the assessing authority after the assessment order was passed. The revisional jurisdiction was invoked within the prescribed time. The revisional authority having widest possible powers under section 264 was required to hold an inquiry or cause any inquiry to be held and consider the question of purchase of the property and proceeded to comply the provisions of section 54F. The reasoning given by the revisional authority is only technical. Though the assessing authority was not aware of the purchase of the property by the petitioner and proceeded on the basis of the admitted facts disclosed in the return. However, the revisional authority could not be oblivious of its duty to accept the contention of the assessee when the facts were brought to its notice about the capital gain being not chargeable to Tax under law. What to say of its duty to advice the assessee the revisional authority rejected the contention of the petitioner only on technical grounds. When the substantive law confers a benefit on the assessee under a statute, it cannot be taken away by the ad judicatory authority on mere technicalities. It is settled proposition of law that no Tax can be levied or recovered without authority of law. Article 265 of the Constitution of India and Section 114 of the State Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law. Admittedly, on the basis of facts disclosed before the revisional authorities and this Court, the petitioner is not liable to tax on the capital gain. Once, it is found that the petitioner has no tax liability, the respondents cannot be permitted to levy the tax and collect the same in contravention to Article 265 of the Constitution of India, which provides a constitutional safe-guard on levy and collection of tax. Conclusion The court concluded that the petitioner was not liable to pay tax on the capital gain as she had utilized the gain for purchasing a residential house within the specified period. The revisional authority should have considered this fact and granted relief. The court directed the respondent to reassess the taxable income of the petitioner, considering the benefit u/s 54F, and pass an appropriate order.

Issues Involved:

1. Assessment of tax liability and capital gains.
2. Claim of benefits u/s 54F of the Income Tax Act.
3. Revisional jurisdiction and powers of the Commissioner u/s 264.
4. Procedural aspects and technical grounds for tax assessment.

Summary:

1. Assessment of Tax Liability and Capital Gains:
The petitioner filed her return of income for the accounting year 2000-2001, declaring a total income of Rs. 4,37,503. The assessing authority processed the return u/s 143(1) and raised a demand of Rs. 1,10,346, inclusive of interest u/s 234A, 234B, and 234C. The petitioner disclosed a 24.71% share in land sold in April 1999, with a total sale price of Rs. 7,03,000 and declared capital gain of Rs. 2,80,858. The total tax payable was shown as Rs. 84,529, with advance tax paid being Rs. 6,000 and TDS on various incomes Rs. 21,845. The petitioner claimed an inability to pay the balance tax due to lack of funds.

2. Claim of Benefits u/s 54F of the Income Tax Act:
The petitioner approached the revisional authority, claiming benefits u/s 54F, stating that she sold her 1/5th share in the land for Rs. 2,80,858 and purchased a 1/5th share in a house for Rs. 4,90,000 within the specified period. She argued that due to her counsel's mistake, the purchase was not mentioned in the return, and she had no remedy of filing a revised return.

3. Revisional Jurisdiction and Powers of the Commissioner u/s 264:
The revisional authority rejected the petitioner's contention, maintaining the assessment order. The authority opined that the petitioner, having declared the taxable income, was rightly assessed by the assessing authority. The revisional authority also held that the petitioner filed the return beyond the prescribed period u/s 139(1) and thus was not entitled to file any revised return. The petitioner invoked the revisional jurisdiction u/s 264, which allows the Commissioner to call for the record of any proceeding and pass such orders as he thinks fit, provided they are not prejudicial to the assessee.

4. Procedural Aspects and Technical Grounds for Tax Assessment:
The petitioner argued that the revisional authority should have considered the purchase of the property and granted relief u/s 54F. The respondents contended that the petitioner failed to claim the benefit within the prescribed time and thus was not entitled to it. The court observed that the revisional authority has wide powers u/s 264 to grant relief in cases of over-assessment, even if the error was committed by the assessee. The court cited precedents where the revisional authority was required to correct mistakes leading to over-assessment.

Conclusion:
The court concluded that the petitioner was not liable to pay tax on the capital gain as she had utilized the gain for purchasing a residential house within the specified period. The revisional authority should have considered this fact and granted relief. The court directed the respondent to reassess the taxable income of the petitioner, considering the benefit u/s 54F, and pass an appropriate order.

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