2017 (11) TMI 1721 - HC - Income Tax

Revision u/s 263 - denial of exemption granted by the AO u/s 54EC and 54F towards investments in capital gains by way of purchasing bonds and residential property, as those investments were made beyond the time limit specified under the aforementioned provisions - Held that - The scope and jurisdiction under Section 263 of the Act, has been well articulated by a catena of decisions. It has been held that not only those aforementioned two conditions have to be satisfied, but also that while exercising the powers under Section 263, the Commissioner must not sit as an appellate authority and that where two views are possible and if the AO has taken one plausible view, the Commissioner cannot interfere with such view, merely because he has taken a different view. In the light of Section 2(47), it cannot be said that the view taken by the AO, was not a plausible one. In the absence of any specific provision which determines the actual date of transfer, the view taken by the AO that the date on which form No.7B was signed by both parties and presented to the purchaser company, is the date of effective transfer, can be a plausible view. On these facts of the case, the Commissioner ought not to have exercised his revisional jurisdiction under Section 263 of the Act. - decided in favour of assessee

Summary

Issues:
1. Revision of assessment order under Section 263 regarding exemption from capital gains.
2. Determination of effective date of transfer for capital gains exemption under Sections 54EC and 54F.

Analysis:
1. The respondent assessee filed a return for the assessment year 2010-11, claiming exemption from capital gains under Sections 54EC and 54F. The Commissioner of Income Tax issued a notice under Section 263 to review the assessment order, disputing the timing of investments made by the assessee. The Commissioner disagreed with the assessee's claim that investments were made within the prescribed time limits. The AO had considered the date on which form No.7B was signed as the date of sale, while the Commissioner argued that the investment agreement date should be considered. The Tribunal supported the AO's view, stating that the effective transfer occurred on the date the form was signed. The Tribunal held that the conditions for invoking Section 263 were not met, as the AO's order was not erroneous or prejudicial to revenue interests.

2. The crux of the matter was determining the effective date of transfer for capital gains exemption. The AO considered the date of signing form No.7B as the transfer date, while the Commissioner argued for the investment agreement date. The Tribunal supported the AO's view, emphasizing that the effective transfer date was crucial for calculating the exemption periods under Sections 54EC and 54F. The Tribunal highlighted the importance of not interfering with the AO's decision if it was a plausible view. Referring to Section 2(47) of the Act, the Tribunal emphasized that the AO's interpretation was reasonable in the absence of a specific provision determining the transfer date. Consequently, the High Court dismissed the appeal, ruling in favor of the respondent-assessee based on the plausible view taken by the AO regarding the effective transfer date.

In conclusion, the High Court upheld the AO's decision regarding the effective date of transfer for capital gains exemption, emphasizing the importance of not interfering with plausible views taken by the assessing officer. The judgment highlights the significance of considering all relevant factors in determining the transfer date for tax purposes and upholding the principles of fair assessment under the Income Tax Act.