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2022 (6) TMI 594 - AT - Income TaxRevision u/s 263 by CIT - substantial increase in the capital account - as per CIT collector rate of the land in the year of conversion i.e; F.Y. 200607 was Rs. 9,50,000/- per acre and accordingly the fair market value of the land now sold as stock in trade should have been worked out for the F.Y. 2006-07 which would be much less than what had been claimed by the assessee in the computation of income, the difference has to be taxed as business income but the AO made no inquiry on this aspect - CIT also mentioned that the investment made in residential property under section 54F was less than net consideration in respect of capital asset transferred, therefore, the proportionate deduction in terms of provision of section 54F of the Act was to be allowed but the capital gain under section 54F of the Act had been wrongly calculated by the assessee as the capital gain already claimed exempt under section 54B on account of purchase of agriculture land had not been deducted - HELD THAT - As increase in capital as well as deduction claimed under the head capital gain were the issues identified for limited scrutiny for examination. The AO again directed the assessee to furnish the information during the course of assessment proceedings vide letter dt. 09/02/2017, copy of which is placed at page no. 195 and 196 of the assessee s compilation, in the said letter, at Sl.No. 8 the AO asked the information relating to large deduction claimed under section 54B, 54C, 54D, 54G and 54GA of the Act and at Sl. No. 11 the AO asked the details of substantial increase in capital in a year. The assessee furnished all the requisite details which we have already mentioned in the former part of this order, so it cannot be said that the AO did not make the inquiries relating to the increase in capital account or did not examine the issues. In the present case the Ld. Pr. CIT on the one hand mentioned that the assessee did not provide details of substantial increase in capital in a year, on the other hand, she mentioned that the reply was furnished by the assessee relating to addition in capital account which was reproduced in para 6 of the impugned order. In the present case, it cannot be said that the AO did not make inquiries / verification relating to increase in capital account of the assessee as alleged by the Ld. Pr. CIT. As regards to the certain entries which the Ld. Pr. CIT pointed as there was mismatch - when the case of the assessee was selected for scrutiny for a specific issue relating to increase in capital account and the AO asked the information and details for the said issue, the assessee furnished the relevant details which were examined by the AO who did not find any adversity or default in those details, so it cannot be said that the order passed by the AO was erroneous or prejudicial to the interest of the Revenue on the issue relating to the increase in capital account of the assessee. Deductions claimed under section 54B and 54F - Since the facts for the year under consideration are identical to the facts involved for the A.Y. 2013-14 2021 (7) TMI 568 - ITAT CHANDIGARH wherein in similar circumstances the order of the Ld. Pr. CIT under section 263 of the Act was quashed. We, therefore, are of the view that the Ld. Pr. CIT was not justified in holding that the assessment order passed by the AO for the year under consideration was erroneous and prejudicial to the interest of the Revenue on the issue relating to the deduction under section 54B and 54F of the Act. In that view of the matter and by considering the totality of the facts as discussed hereinabove, we are of the view that the Ld. Pr. CIT was not justified in holding that the assessment order dt. 29/12/2017 passed by the AO was erroneous in so far as it was prejudicial to the interest of the Revenue, accordingly the impugned order of the Ld. Pr. CIT is quashed.
Issues Involved:
1. Legality of invoking Section 263 of the Income Tax Act, 1961. 2. Validity of deductions claimed under Sections 54B and 54F of the Income Tax Act. 3. Examination of substantial increase in the capital account. Detailed Analysis: 1. Legality of Invoking Section 263 of the Income Tax Act, 1961: The primary issue in this appeal is the action taken by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. The Pr. CIT issued a notice on 24/02/2020 to the assessee regarding deductions claimed under Sections 54B and 54F. Subsequently, additional notices were issued on 21/10/2020 and 02/01/2021, raising concerns about the substantial increase in the capital account in the firms M/s Jamuna Developers and M/s Mehak Enterprises. The assessee contended that all relevant details were furnished to the Assessing Officer (AO) during the assessment proceedings, and the AO had thoroughly examined these details. The AO had issued a questionnaire on 09/02/2017, specifically asking for details related to the substantial increase in capital and large deductions claimed under Sections 54B and 54F. The AO accepted the returned income after examining the requisite details and documents, indicating that proper inquiries were made. The Tribunal observed that the case was selected for scrutiny to examine the increase in capital and deductions claimed under the head capital gains. The AO had issued notices and called for information, which the assessee duly furnished. The AO verified these details, and no adverse inference was drawn. Therefore, it cannot be said that the AO did not make inquiries or that the order was erroneous or prejudicial to the interest of the Revenue. 2. Validity of Deductions Claimed Under Sections 54B and 54F of the Income Tax Act: The Pr. CIT contended that the AO failed to examine the claim of the assessee for deductions under Sections 54B and 54F. The Pr. CIT observed that the properties in question were converted into stock in trade in FY 2006-07, resulting in Short Term Capital Gain (STCG), which was not eligible for deductions under Sections 54B and 54F. The Pr. CIT argued that the AO did not verify the facts and allowed the deductions erroneously. The assessee argued that similar deductions were allowed in earlier assessment years (2011-12, 2012-13, and 2013-14) under similar facts. The Tribunal, in the case of the assessee for the A.Y. 2013-14, had quashed the order of the Pr. CIT under Section 263, holding that the AO had taken a possible view after making proper inquiries. The Tribunal reiterated that the AO had made inquiries and allowed the deductions based on the facts and evidence provided by the assessee. Therefore, the order was not erroneous or prejudicial to the interest of the Revenue. 3. Examination of Substantial Increase in the Capital Account: The Pr. CIT raised concerns about the substantial increase in the capital account of the assessee in M/s Jamuna Developers and M/s Mehak Enterprises. The assessee provided details of the addition to the capital account, supported by bank statements and other relevant documents. The AO examined these details during the assessment proceedings. The Tribunal noted that the AO had issued a questionnaire specifically asking for details of the substantial increase in capital, and the assessee furnished the requisite information. The AO verified the details, and no adverse inference was drawn. Therefore, it cannot be said that the AO did not make inquiries or that the order was erroneous or prejudicial to the interest of the Revenue. Conclusion: The Tribunal held that the Pr. CIT was not justified in invoking Section 263 of the Income Tax Act, 1961. The AO had made proper inquiries and verified the details provided by the assessee. The order passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. Consequently, the Tribunal quashed the impugned order of the Pr. CIT and allowed the appeal of the assessee.
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