2016 (11) TMI 602 - AT - Income Tax

Revision u/s 263 - allowability of exemption u/s 54F - Held that - We find that the A.O. has conducted detailed enquiry and also examined the issue of allowability of exemption u/s 54F of the Act. The assessee has filed necessary details and also made a fresh claim u/s 54F of the Act, by filing revised statement of total income. The A.O. after satisfied with the explanations offered by the assessee has accepted the claim. Therefore, we are of the view that the CIT was incorrect in assuming jurisdiction to revise the assessment order, once assessee explained that it had filed all the details before the A.O. on the issue, on which CIT wants further verification. It is a general presumption of law that the A.O. has considered all the details before completion of assessment and the CIT cannot presume that the enquiries conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless the CIT categorically proves that the assessment order passed by the A.O. is erroneous. In so far as the observation of the CIT, with regard to the decision of Goetz (India) Ltd. (2006 (3) TMI 75 - SUPREME Court ), we are of the view that though the Supreme Court held that a fresh claim before the A.O. can be made only by filing a revised return and not otherwise, the A.O. is well aware of the legal position and after considering the relevant facts chosen to allow the exemption claimed by the assessee, which cannot be termed as erroneous in so far as it is prejudicial to the interest of the revenue. Therefore, the assessment order passed by the A.O. u/s 143(3) of the Act, is not erroneous in so far as it is prejudicial to the interest of the revenue. Order passed by the CIT u/s 263 quashed - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the assessment order passed by the Assessing Officer (A.O.) under section 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of the revenue.
2. Whether the Commissioner of Income Tax (CIT) was justified in invoking the provisions of section 263 of the Income Tax Act, 1961 to revise the assessment order.

Issue-wise Detailed Analysis:

1. Erroneous and Prejudicial Assessment Order:
The primary issue revolves around the assessment order passed by the A.O. for the assessment year 2008-09, where the assessee declared a total income of ?19,200/-. During scrutiny, the A.O. observed discrepancies in the computation of long-term capital gains (LTCG) from the compulsory acquisition of property and allowed an exemption under section 54F of the Act based on the revised computation provided by the assessee. The CIT issued a show cause notice proposing to revise this assessment order, arguing that the A.O. allowed the exemption without a revised return being filed by the assessee, thus rendering the order erroneous and prejudicial to the revenue.

2. Justification for Invoking Section 263:
The CIT invoked section 263, stating that the A.O. failed to examine the allowability of the exemption claimed under section 54F, as the assessee did not claim this exemption in the original return filed under section 139(1). The CIT relied on the Supreme Court's decision in Goetz (India) Ltd. Vs. CIT, asserting that any fresh claim must be made through a revised return under section 139(5). The CIT concluded that the A.O.'s acceptance of the exemption without a revised return made the assessment order erroneous and prejudicial to the revenue, thus directing a de-novo assessment.

Tribunal's Findings:
The Tribunal examined the arguments and materials presented. It noted that the A.O. had indeed scrutinized the details of the LTCG and the exemption claim during the assessment proceedings. The Tribunal found that the A.O. had conducted a proper enquiry and was satisfied with the explanations provided by the assessee, thus accepting the exemption under section 54F. The Tribunal emphasized that the CIT's assertion of inadequate enquiry was unfounded, as the A.O. had examined the issue thoroughly.

The Tribunal also addressed the CIT's reliance on the Goetz (India) Ltd. decision, stating that while the Supreme Court ruled that fresh claims must be made via revised returns, the A.O. had the discretion to entertain the claim based on the revised computation of income provided during the assessment. The Tribunal highlighted that the issue was debatable and involved two possible views, and the A.O. had taken one such view.

Conclusion:
The Tribunal concluded that the CIT's invocation of section 263 was unjustified as the assessment order was neither erroneous nor prejudicial to the revenue. The Tribunal quashed the CIT's order and restored the original assessment order passed by the A.O. under section 143(3).

Judgment:
The appeal filed by the assessee was allowed, and the order pronounced in the open court on 30th September 2016. The Tribunal's decision underscored the importance of thorough examination by the A.O. and the limitations of the CIT's jurisdiction under section 263 when the twin conditions of error and prejudice are not concurrently met.