2017 (2) TMI 1180 - AT - Income Tax

Revision u/s 263 - capital gain account shown by the assessee is actually saving bank account and the assessee could not have deposited the amount in a savings bank account - Held that - This proposition of the ld. Principal CIT is incorrect as per the Capitals Gains Accounts Scheme 1988 vide Notification No. G.S.R. 724 (E), dated 22nd June, 1988. Thus it is clear that the deposit shall be in the form of savings deposit, therefore, the proposition of the ld. Principal CIT do not test the CBDT notification. No proof of payment made for acquiring land is on records - Held that - Though the expenses relate to the construction of a house property. In our considered opinion to claim the exemption u/s.54 of the Act, the assessee has to construct a house property within the stipulated period of time. Obviously, the purchase of land will be either antecedent to the construction or simultaneous to the construction. In any case, the purchases of land do not entitle the assessee for the exemption u/s. 54 of the Act. Therefore, we fail to understand when the land was purchased earlier to the start of construction how this can trigger the provisions of Section 263 of the Act. No merit in the order of the ld. Principal CIT made u/s. 263 - Decided in favour of assessee

Summary

Issues:
Challenge to correctness of order u/s. 263 of the Act by the Assessee.

Analysis:
The Assessee challenged the order of the Ld. Principal CIT, Ahmedabad dated 27.01.2016 under section 263 of the Income Tax Act. The main contention was that the jurisdiction exercised by the Ld. Principal CIT under section 263 was incorrect, rendering the order bad in law. The assessment was initially made under section 143(3) of the Act, where the returned income was assessed at a specific amount. The Ld. Principal CIT found the assessment order to be erroneous and prejudicial to the revenue due to incorrect claims of deductions under section 54 and incorrect allowance of expenditure for new house construction. The Ld. Principal CIT issued a statutory notice to the assessee, providing an opportunity to show cause before passing an order under section 263 of the Act.

Upon examining the submissions made by the assessee, the Ld. Principal CIT concluded that the assessment order was erroneous and prejudicial to the revenue. The Ld. Principal CIT found discrepancies in the claims made by the assessee regarding the capital gain account and the expenditure for new house construction. The Ld. Principal CIT directed the Assessing Officer to make a fresh assessment after giving the assessee proper opportunity to address the identified issues. The assessee appealed against this decision.

During the appeal, the Tribunal considered the jurisdiction of the Ld. Commissioner under section 263 of the Act. Citing the decision in Malabar Industrial Co. Ltd., the Tribunal emphasized the necessity for the order to be both erroneous and prejudicial to the revenue for section 263 to be applicable. The Tribunal analyzed the contentions raised by the Ld. Principal CIT regarding the capital gain account and the lack of proof for land acquisition expenses. The Tribunal found that the claims made by the assessee were in accordance with the Capital Gains Accounts Scheme 1988 and that the absence of proof for land acquisition expenses did not justify invoking section 263 of the Act. Consequently, the Tribunal set aside the order of the Ld. Principal CIT and restored the assessment made by the Assessing Officer under section 143(3) of the Act.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the importance of adherence to legal provisions and proper assessment procedures in determining the correctness of orders under the Income Tax Act.