2022 (3) TMI 651 - AT - Income Tax

Disallowance of exemption u/s 54 within the scope of section 154 - exemption u/s 54 on account of long term capital gain on account of sale of house property which was invested in the purchase of another property one year ago, that is, the purchase deed was executed on 13.01.2012 - HELD THAT - We find that the assessee has claimed exemption u/s 54 on account of long term capital gain on account of sale of house property which was invested in the purchase of another property one year ago, that is, the purchase deed was executed on 13.01.2012. AO had allowed this claim vide in scrutiny assessment vide order passed u/s 143(3). Once the claim has been allowed in scrutiny proceedings, then the AO cannot withdraw the claim u/s 154, by mere change of opinion and without there being any apparent mistake on record. It is well settled proposition that AO cannot review his own order within the limitation and scope of section 154. There is no mistake apparent on record for the reason that; firstly, the formalities of sale and receiving of the entire sale amount was completed including handing of the possession was duly completed within the period of one year, that is, by the month of November 2012; and only due to some exceptional and unavoidable circumstances, there was a delay in registration which, here in this case. Secondly, it is undisputed fact that assessee has purchased the residential property on 13.01.2012 and assessee can claim exemption u/ 54 if she sale property within one year. Now, if assessee has received the entire sale consideration before one year and handed over the possession, then affectively assessee has transferred the property. If for extreme and unavoidable circumstances there is slight delay in registering the property exemption cannot be denied. Here the delay is only 11 days. Thus, no adverse inference can be drawn to withdraw the exemption. Accordingly, we hold that the exemption allowed by the AO in the original assessment order u/s 143(3) was correct and assessee s appeal is allowed.

Summary

Issues:
1. Jurisdiction of Assessing Officer to rectify order under section 154
2. Disallowance of exemption claimed under section 54 of the Income-tax Act, 1961

Issue 1 - Jurisdiction of Assessing Officer to Rectify Order under Section 154:
The appeal was filed against the order passed by the ld. CIT(A)-11, New Delhi concerning proceedings under section 154/143(3) of the Income-tax Act, 1961 for the assessment year 2013-14. The assessee contended that the Assessing Officer (AO) did not have the jurisdiction to rectify the order under section 154 as there was no apparent mistake on record. The AO had initially allowed the claim of exemption under section 54 in the assessment order passed under section 143(3) but later rectified the order disallowing the exemption. The ld. CIT(A) affirmed the AO's decision despite considering the facts presented.

Issue 2 - Disallowance of Exemption Claimed under Section 54:
The assessee claimed exemption under section 54 for long-term capital gains from the sale of two portions of a property. The Assessing Officer allowed the exemption initially but later disallowed it under section 154, citing that the new property was purchased beyond the permissible period of one year before the sale took place. The assessee argued that the delay in property registration was due to unavoidable circumstances, such as the husband's illness, and should not affect the exemption eligibility. The contention was that the sale consideration was received, possession was given, and the delay in registration was minimal. The Tribunal held that once the claim was allowed in the scrutiny proceedings under section 143(3), the AO could not withdraw it under section 154 without any apparent mistake on record. The delay in registration was deemed insignificant, and the exemption was upheld.

In conclusion, the Tribunal allowed the assessee's appeal, holding that the exemption allowed by the AO in the original assessment order under section 143(3) was correct. The judgment emphasized that the AO cannot review his own order within the scope of section 154 without any apparent mistake on record and that minor delays in property registration should not affect exemption eligibility.