2012 (6) TMI 823 - AT - Income Tax

Allowability of deduction u/s 54EC - Held that - Direction of ld. CIT may kindly be modified to the extent that the A.O. will reframe his assessment order in accordance with law ignoring the observation made by ld. CIT on allowability of deduction u/s 54EC of the Act. Ld. D.R. did not object to this submission of the assessee. Therefore, the direction of ld. CIT is modified and the A.O. is directed to reframe the assessment order in accordance with law ignoring the observation of ld. CIT on allowability of deduction u/s 54EC of the Act.

Summary

Issues:
- Appeals against orders passed under section 263 of the Income Tax Act
- Allowability of deduction under section 54EC of the Act
- Observations made by the Commissioner of Income Tax (CIT)

Analysis:

1. Appeals against orders under section 263:
The case involved two appeals filed by the assessees against separate orders passed by the CIT under section 263 of the Income Tax Act. The appeals were based on similar facts, and the grounds of appeal were common. The Tribunal decided to dispose of both appeals by passing a consolidated order, considering the facts presented in one of the appeals.

2. Allowability of deduction under section 54EC:
The assessee had sold shares and invested in specified bonds to claim benefits under Section 54EC of the Act. The CIT issued a show cause notice under section 263, highlighting that the investment in specified assets should not exceed a certain limit. The CIT found the assessment order erroneous and prejudicial to the revenue's interest due to the claimed deduction exceeding the permissible limit. After submissions and explanations, the CIT set aside the original assessment order and directed the Assessing Officer (A.O.) to reframe the assessment order in compliance with the law.

3. Observations by the CIT:
The assessees raised objections during the hearing regarding certain observations made by the CIT in the order. They argued that these observations contradicted a decision by the ITAT in a different case. The assessees requested the modification of the CIT's direction to reframe the assessment order, specifically regarding the deduction under section 54EC. The Tribunal modified the direction, instructing the A.O. to reframe the assessment order in accordance with the law, disregarding the CIT's observations on the deduction under section 54EC.

In conclusion, the Tribunal allowed the assessees' appeals, emphasizing the need for the A.O. to reframe the assessment order in compliance with the law and disregarding the CIT's observations on the deduction under section 54EC.