2020 (7) TMI 818 - HC - Income Tax

Revision u/s 263 by CIT - whether the assessee was eligible for the claim u/s 54F? - HELD THAT - AO records that after a thorough verification of all records, the same has been found to be correct and the assessment completed by accepting the return filed by the assessee. We find that nothing more is required to be recorded by the assessing officer, especially when the assessment file would contain all the material which has been produced by the assessee. In fact the bank details have been produced to show that the amount has been invested in Capital Gain Scheme Account in two banks viz., Bank of Maharashtra and UCO Bank and the banks have given letters dated 31.12.2015 to the said effect. Thus, we are of the view that there was no material to indicate that the assessment was an erroneous assessment in so far as it is prejudicial to the interest of the revenue. The tribunal fell in error in not testing at the very first instance, as to whether the show cause notice issued by PICT was justifiable for assumption of jurisdiction under Section 263 of the Act. Thus, without addressing the moot point, the tribunal proceeded on a different footing. In fact, before the tribunal, the assessee raised a point about non applicability of SEBI guidelines, because the transaction was between an individual and the company. We find that there has been no adjudication on the said issue. Assessee had also specifically contended that it was necessary to comply with Section 54F (iv) and if the assessee invests the entire consideration in capital gains scheme account as contemplated within the period, then, such investment shall be deemed to be only cost of new asset and exemption under Section 54F is automatic. The assessee further contended that shares were sold for Rs.15 Crores on 18.01.2011 and before the due date for filing the return, the assessee had deposited into Capital Gains Scheme Account, LTCG and therefore, contended that as per Section 54F(iv), the assessee had duly complied with the condition for availing exemption. These issues were not adjudicated by the tribunal. Thus, we hold that the assumption of jurisdiction by the PCIT is erroneous and the order passed by the tribunal confirming such an order, calls for interference. Decided in favour of the Assessee.

Summary

Issues involved:
1. Jurisdiction of Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961.
2. Eligibility of the assessee for exemption under Section 54F for the Assessment Year 2011-12.

Issue 1: Jurisdiction of Principal Commissioner under Section 263:
The High Court examined whether the Principal Commissioner of Income Tax-VI was justified in invoking his power under Section 263 of the Income Tax Act. The court referred to the legal principle established in the case of Malabar Industrial Company Limited Vs. CIT, emphasizing that for the Commissioner to exercise jurisdiction under Section 263, two conditions must be satisfied: the order of the Assessing Officer must be erroneous and prejudicial to the revenue. The court highlighted that the show cause notice issued by the Principal Commissioner must disclose the prima facie opinion formed. In this case, the court found the show cause notice to be vague and lacking specificity in justifying the revision of the assessment order. The court noted that the Principal Commissioner's reasons were insufficient and failed to adequately demonstrate why the assessment order was erroneous and prejudicial to revenue.

Issue 2: Eligibility for exemption under Section 54F:
The court analyzed the specific issue of whether the assessee was entitled to claim exemption under Section 54F for the Assessment Year 2011-12. The court observed that the assessing officer had conducted a thorough verification of records, including the claim under Section 54F, and found the assessment to be correct. The court noted that the assessing officer had issued notices, verified documents, and confirmed compliance with the provisions of Section 54F. The court emphasized that the assessing officer had diligently examined the relevant details, such as investment in Capital Gain Scheme Accounts, and found no basis to consider the assessment as erroneous or prejudicial to revenue. The court criticized the Tribunal for not addressing the key issues raised by the assessee, such as compliance with Section 54F(iv) and the applicability of SEBI guidelines. The court concluded that the Principal Commissioner's assumption of jurisdiction was erroneous, and the Tribunal's confirmation of the order necessitated interference.

In conclusion, the High Court allowed the Tax Case Appeal, answering the Substantial Questions of Law in favor of the Assessee, highlighting the importance of proper justification and specificity in invoking powers under Section 263 and ensuring thorough examination of relevant issues related to exemptions under the Income Tax Act.