2019 (8) TMI 106 - HC - Income Tax

Rectification of mistake u/s 154 - in order u/s 154 AO alleged that the assessee claimed the entire capital gain arising from the sale of the two properties as exempt u/s 54 and 54F - assessee contention that both the properties sold are one property being building and land appurtenant thereto but sold to two different purchasers - CIT(A) and Tribunal decided the issue on merit against assessee without disposing objection of being debatable issue hence no order u/s 154 can be passed HELD THAT - In our considered view the first issue that should have been taken into consideration is as to whether the power u/s 154 could have been invoked. Admittedly the power u/s 154 is a power to rectify the mistake and it is not a power to review an order. Furthermore the power can be invoked to rectify a mistake which is apparent from the record which undoubtedly would mean that such power cannot be exercised by making roving enquiry into the matter specially where there are disputes raised by the assessee on which a decision requires to be given after considering the submissions. The Hon ble Apex Court in CIT VERSUS SOUTH INDIA BANK LTD. 2000 (12) TMI 6 - SUPREME COURT noted that there was a difference of opinion among the learned Judges of the High Court on the principal question and held that there was a debatable question and cannot be rectified u/s 154. We hold that the Tribunal committed an error in dismissing the appeal filed by the assessee and in the result the appeal is allowed and the substantial question of law are answered in favour of the assessee.

Issues:
1. Jurisdiction of the Assessing Officer to rectify the assessment order under Section 154 regarding exemption under Section 54F of Income Tax Act, 1961.
2. Whether debatable issues can be rectified under Section 154 of the Income Tax Act, 1961.
3. Entitlement of the appellant to claim exemption under Section 54 on transfer of adjacent properties.
4. Duty of the Assessing Officer to assist the appellant in making a claim under Section 54.
5. Entitlement of the appellant to exemption under Section 54 of the Income Tax Act, 1961.
6. Interpretation of part performance within the meaning of section 2(47)(v) of the Income Tax Act, 1961.
7. Entitlement of the appellant, a co-owner of a house property, to exemption under Section 54F on the purchase of a house property exclusively in his name.

Analysis:
1. The main issue in this case was the jurisdiction of the Assessing Officer to rectify the assessment order under Section 154 regarding exemption under Section 54F of the Income Tax Act, 1961. The Tribunal dismissed the appeal filed by the assessee, claiming that the Assessing Officer had the jurisdiction to rectify the order. However, the High Court held that the power under Section 154 is to rectify a mistake apparent from the record and not to review an order. It emphasized that the power cannot be exercised when there are disputes raised by the assessee that require a decision after considering submissions. Citing precedent cases, the court highlighted that debatable issues cannot be rectified under Section 154, ultimately allowing the appeal in favor of the assessee.

2. The second issue revolved around whether debatable issues can be rectified under Section 154 of the Income Tax Act, 1961. The court referred to past judgments where it was established that if there is a difference of opinion or a debatable question, the assessing authority cannot invoke the machinery for rectification under Section 154. The court emphasized that in cases where there is no mistake apparent from the record, the power under Section 154 cannot be utilized. By citing relevant case law, the court reiterated that rectification under Section 154 is not applicable to debatable issues, ultimately ruling in favor of the assessee.

3. Another issue raised was the entitlement of the appellant to claim exemption under Section 54 on the transfer of adjacent properties. The appellant argued that the properties sold were one property, a building with land appurtenant, but sold to two different purchasers. The Assessing Officer disagreed with this submission, leading to the rectification of the assessment order. The appellant contended that the capital gain arising from the transactions should be exempt under Section 54. The court considered this argument and ultimately allowed the appeal, holding in favor of the appellant's claim for exemption under Section 54.

4. The duty of the Assessing Officer to assist the appellant in making a claim under Section 54 was also a crucial issue in this case. The appellant claimed exemption under both Section 54 and Section 54F, but the Assessing Officer rejected the claim on technical grounds. The appellant argued that the Assessing Officer should have assisted in making the claim and allowing it as exempt under Section 54 on the entire property. The court considered this contention and ruled in favor of the appellant, emphasizing the duty of the Assessing Officer to assist in such claims rather than rejecting them solely on technical grounds.

5. The issue of the appellant's entitlement to exemption under Section 54 of the Income Tax Act, 1961, was also contested. The Tribunal had ruled against the appellant's claim for exemption under Section 54. However, the High Court reviewed the case and held that the Tribunal had erred in dismissing the appeal. The court ultimately allowed the appeal, answering the substantial question of law in favor of the appellant, thus establishing the appellant's entitlement to exemption under Section 54.

6. The interpretation of part performance within the meaning of section 2(47)(v) of the Income Tax Act, 1961, was another significant issue in this case. The Tribunal had ruled that part performance had not taken place in relation to the house property as of the date of transfer of vacant land. The appellant, a co-owner of a house property at the time of the transfer of vacant land, claimed exemption under Section 54F on the purchase of a house property exclusively in his name. The court reviewed this issue and ultimately held in favor of the appellant, emphasizing the appellant's entitlement to exemption under Section 54F.

7. Lastly, the issue of the appellant's entitlement, as a co-owner of a house property, to exemption under Section 54F on the purchase of a house property exclusively in his name was addressed. The Tribunal had ruled against the appellant's entitlement to exemption under Section 54F. However, the High Court reviewed the case and found that the Tribunal had erred in dismissing the appeal. The court allowed the appeal, answering the substantial question of law in favor of the appellant, thereby establishing the appellant's entitlement to exemption under Section 54F on the purchase of a house property exclusively in his name.

← Previous Next →