2019 (12) TMI 1309 - AT - Income Tax

Revision u/s 263 - Assessment u/s 153A - revision proceedings in PCIT s order under challenge on the ground that the AO has wrongly accepted the assessee s section 54 54F deduction claim - HELD THAT - PCIT s assumption of revision jurisdiction. Hon ble apex court s landmark decision in Malabar Industries Co. vs. CIT 2000 (2) TMI 10 - SUPREME COURT holds that before an assessment is sought to be revised in proceedings u/s 263 of the Act, the same has to be erroneous as well as caused prejudice to interest of the Revenue; simultaneously. An assessment cannot be termed as erroneous causing prejudice to interest of the Revenue in case the AO adopts one of the possible view. Reverting back to impugned regular assessment, we notice that the Assessing Officer had claimed yet another regular assessment on 30.11.10 invoking section 153A/143(3) proceedings whilst assessing the total income of ₹ 18,62,400/- only. That being the case, it is sufficiently clear that the impugned second assessment dated 25.12.16 pertained to the search dated 05.08.14 only qua the alleged incriminating material found/seized. It emerges from the case records that the assessee had claimed the impugned section 54 and 54F deduction relief at the first instance in former assessment. This issue nowhere formed subject matter of deduction in the latter assessment therefore. Since the AO could not have even taken up the assessee s above deduction claim during latter assessment, the PCIT has erred in law and on facts in terming the same as erroneous causing prejudice to interest of the Revenue. We therefore restore the Assessing Officer s regular assessment dated 25/30.12.16 and reverse the PCIT s revision directions under challenge. - Decided in favour of assessee.

Summary

Issues:
1. Revision of assessment under section 263 of the Income Tax Act, 1961 based on deduction claims under sections 54 and 54F.
2. Validity of the revision jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT).
3. Assessment proceedings under section 153A/143(3) concerning long term capital gains and deduction claims.

Analysis:

Issue 1: Revision of assessment under section 263
The appellant's appeal for the assessment year 2010-11 was against the PCIT's order dated 16.03.2018 regarding proceedings under sections 153A/143(3) of the Income Tax Act, 1961. The PCIT set aside the assessment order passed by the Assessing Officer (AO) on the grounds that the deduction claims under sections 54 and 54F were wrongly allowed. The PCIT directed the AO to re-examine the nature of the right purchased by the assessee in a flat under construction and determine the eligibility for the deductions. The PCIT found that the deduction was allowed without sufficient examination, leading to the revision of the assessment order.

Issue 2: Validity of revision jurisdiction by PCIT
Both parties presented their arguments regarding the PCIT's assumption of revision jurisdiction. Citing the Supreme Court's decision in Malabar Industries Co. vs. CIT 243 ITR 83, it was emphasized that for an assessment to be revised under section 263, it must be erroneous and cause prejudice to the Revenue. The AO had previously assessed the income at a specific amount, and the deduction claim was not part of the subsequent assessment. Therefore, the PCIT's decision to term the assessment as erroneous was deemed incorrect, and the original assessment was restored.

Issue 3: Assessment proceedings under section 153A/143(3)
The search conducted in M/s Kushal Group led to section 153A proceedings, with the assessee filing a return stating income. The AO completed the assessment accepting the returned income. The revision proceedings were initiated based on the deduction claims under sections 54 and 54F. The Tribunal noted that the deduction claim was not part of the subsequent assessment, and the PCIT's revision directions were reversed. The appeal was allowed, and the original assessment order was upheld.

In conclusion, the Tribunal found that the PCIT erred in setting aside the assessment order based on the deduction claims under sections 54 and 54F. The original assessment was restored, emphasizing that the deduction claim was not part of the subsequent assessment and therefore did not warrant revision.