2013 (1) TMI 233 - AT - Income Tax

Exemption under section 54EC - AO allowed the claim - CIT issued notice u/s 263 as claim of deduction u/s 54EC was not acceptable as it was made beyond the time period of six months from the date of sale deed even beyond the extended date i.e. 31.12.2006 - Held that - It is evident that from the date of sale deed i.e. on 10.01.2006 the assessee had time limit of six months upto 10.07.2006 so as to invest the consideration for claiming exemption under section 54EC. However, as the paper book reveals, there is no effort stated to have been made by the assessee, which could lead to conclusion that she had applied for investment in bonds, but because of their non-availability, the investment could not be made. Notification F.No. 142/09/2006 TPL dated 30.06.2006 extended the time limit of six months envisaged by section 54EC upto 31.12.2006 which was followed by REC correspondence dated 01.08.2006. Even if it is presumed no evidence is forthcoming that the assessee ever applied for the bonds from any day upto 01.08.2006. There is no assertion on her part as to when the bonds are available thereafter. She only pleaded that on 22.12.2006, a cap was imposed on the maximum amount which could be invested in bonds i.e. Rs. 50.00 lakhs. In our opinion, the same is not relevant in the present case as the assessee s case is admittedly of investment of Rs. 35.00 lakhs. The assessee herself admitted that she did not invest in the bonds upto 31.12.2006. Rather her case is that she invested only on 27.01.2007 and the delay is attributed to non-availability of REC bonds. This, is not in consonance the express provision prescribing six months time limit which stood extended upto 31.12.2006. Unable to concur with assessee s contention that the time limit for investment which was admittedly extended by notification upto 31.12.2006 can be stretched upto 27.01.2007. Thus the assessee s claim of exemption u/s 54EC is not acceptable - against assessee.

Summary

Issues Involved:
1. Validity of the assessment order under section 143(3) of the Income Tax Act, 1961.
2. Legitimacy of the exemption claim under section 54EC of the Income Tax Act, 1961.
3. Appropriateness of the revision order under section 263 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the assessment order under section 143(3):
The assessee sold agricultural land on 10.01.2006 for Rs. 36,24,868 and invested Rs. 35.00 lakhs in REC bonds on 27.01.2007. She filed her return on 29.03.2007 declaring income of Rs. 79,695 and showing NIL capital gains, which was accepted under section 143(1). The assessment order dated 07.11.2008 under section 143(3) confirmed the gross total income as Rs. 79,695 and allowed deduction under section 80C, resulting in a total income of NIL. The CIT later issued a notice under section 263, deeming the assessment order erroneous and prejudicial to the interests of the Revenue, primarily because the exemption under section 54EC was claimed beyond the permissible time limit.

2. Legitimacy of the exemption claim under section 54EC:
The assessee claimed exemption under section 54EC by investing in REC bonds beyond the six-month period post-sale, citing non-availability of bonds. The CIT did not accept this explanation, emphasizing that the assessee should have explored other avenues for investment to claim the exemption. The statutory provision under section 54EC mandates investment within six months from the date of transfer to avail the exemption. Despite the extension of the investment deadline to 31.12.2006 via notification, the assessee failed to provide evidence of attempts to invest within this extended period. The CIT concluded that the exemption claimed beyond the statutory period was not permissible.

3. Appropriateness of the revision order under section 263:
The CIT invoked section 263, arguing that the assessment order was erroneous and prejudicial to the Revenue's interests. The CIT directed the Assessing Officer to withdraw the exemption under section 54EC and reassess the case. The assessee contended that the CIT's order was merely a substitution of the Assessing Officer's opinion, which is not permissible. However, the Tribunal held that the assessee did not demonstrate any effort to invest in the bonds within the prescribed period, and the delay in investment was not justified. The Tribunal found that the CIT had correctly exercised jurisdiction under section 263, as the assessment order indeed suffered from an error causing prejudice to the Revenue.

Conclusion:
The Tribunal upheld the CIT's order under section 263, concluding that the assessment order was erroneous and prejudicial to the Revenue's interests due to the improper acceptance of the exemption claim under section 54EC. The assessee's appeal was dismissed, affirming the CIT's directive to reassess the case and withdraw the exemption.