2022 (7) TMI 61 - AT - Income Tax

Revision u/s 263 - revision of the assessee s reassessment, proceedings for which were initiated in view of the discrepancies that came to the notice of AO in the assessee s share trading transactions, found to be in order in assessment, was the claim for exemption u/s. 54EC - HELD THAT - The matter in the instant case, as is apparent, is rather purely legal, so that there is no scope of any inquiry. As regards the different interpretation of s. 54EC by the ld. Pr. CIT, which is the basis of his order, we find no such limitation in the (first) proviso to sec. 54EC(1), which (limitation) rather stands introduced w.e.f. 01/04/2015, i.e., AY 2015-16 onwards, and which itself clarifies that no such limitation obtained prior thereto. Reference, with profit, in this context, be made to the decision in DIT vs. Mitsubishi Corporation 2021 (9) TMI 875 - SUPREME COURT explaining the relevant principle of interpretation of statues. Both the conditions, being of investment at no more than Rs. 50 lacs in any one financial year and, two, of investment in a notified asset, to be made within six months of the date of transfer (of the relevant long-term capital asset), prescribed by the section, are met, and on which aspect no doubt stands expressed by the ld. Pr. CIT. There is, in our view, no incorrect application of law by the AO, which would render his order infirm and, thus, liable for revision u/s. 263, which accordingly fails. The impugned order is not sustainable in law, and is accordingly cancelled. Assessee appeal allowed.

Summary

Issues:
Claim for exemption u/s. 54EC of the Income Tax Act at Rs. 100 lacs instead of Rs. 50 lacs.

Detailed Analysis:

Issue 1: Claim for Exemption u/s. 54EC
The appeal was against the Principal Commissioner of Income Tax-1's order under section 263 of the Income Tax Act, 1961, regarding the assessee's assessment for the Assessment Year 2013-14. The main issue was the claim for exemption u/s. 54EC of the Act at Rs. 100 lacs instead of Rs. 50 lacs. The AO had allowed the exemption at Rs. 100 lacs based on the investment made by the assessee in a long-term asset. However, the Principal Commissioner opined that the exemption should be limited to Rs. 50 lacs only, as per the provisions of the Act.

Issue 1 Analysis:
The assessee argued that the AO had taken a plausible view supported by legal precedents and that no revision was warranted. On the other hand, the Revenue contended that the absence of an enquiry by the AO during assessment rendered the order erroneous and prejudicial to the Revenue's interests, justifying revision. The Tribunal found that the issue was primarily legal, and no further inquiry was necessary. The Tribunal noted that the relevant provisions of section 54EC were met by the assessee's investment within the prescribed limits and timelines. The Tribunal held that there was no incorrect application of law by the AO, making the order not liable for revision under section 263.

Conclusion:
The Tribunal allowed the assessee's appeal, canceling the Principal Commissioner's order under section 263. The decision was based on the correct application of the law regarding the claim for exemption u/s. 54EC of the Income Tax Act.