2022 (7) TMI 535 - AT - Income Tax

Revision u/s 263 - deduction u/s 54F - Whether investment and income relating to properties are duly disclosed? - Revenue has failed to demonstrate that the assessee's share in the newly purchased property for which deduction u/s 54F had been claimed was to the tune of 33% - HELD THAT - The mere fact that his wife's name is also appended to therein alongwith his name and that of his son who as per record has obtained a housing loan for the stated property, we find that these facts do not erode the claim of exemption of the assessee u/s 54. The fact that this entire amount has been invested in the property is not disputed by the Revenue. We have also seen that it has not been upset by the ld. PCIT in the order. All relevant documents are available on record. What enquiry/investigation the AO should have done in the first round, we find has been left unaddressed. In the face of the consistent stand of the assessee that the entire Long Term Capital Gain from the sale of the property has been applied to the new property. Documents substantiating this claim are available on record and have not been upset. The revisionary power u/s 263 of the Act cannot be allowed to be exercised in a casual arbitrary manner. It is incumbent upon the ld. PCIT to point out the error in the order and that too such an error which can be said to be prejudicial to the interests of the Revenue. Revenue has dismally failed on this count. Accordingly, in the said factual background where we find no evidence for supporting the conclusion that only 1/3rd share belonged to the assessee. The exercise of power by the PCIT in these peculiar facts cannot be upheld. The case laws relied upon by the ld. PCIT in the order and the ld. CIT-DR including the one cited by the AR, accordingly, we hold do not warrant any discussion. At the very threshold itself, we have seen that the issue being purely factual, presumptions cannot be allowed to prevail and taint the facts on record. Since much reliance for the Revenue has been placed upon the decision in the case of Kamal Kant Kamboj 2017 (8) TMI 285 - PUNJAB AND HARYANA HIGH COURT we find on a careful reading of the same and hold that it does not have any applicability to the facts of the present case. In the facts of the said decision which was rendered by the jurisdictional High Court, the admitted fact available on record was that the assessee had invested in the property exclusively in the name of his wife. As a result thereof, the exemption for Long Term Capital Gain u/s 54B was held to be not allowable as the investment had not been made in the name of the assessee. In the facts of the present case, the new purchase has been made in the name of the assessee but funds largely have flown from the assessee and the said fact is not upset. The mere fact that names of the wife and son also is included, we hold has no relevance for determining in the peculiar facts the issue at hand. In the facts of the present case, the suspicions entertained by the PCIT have not been translated into facts despite the fact that the entire documents were available. Accordingly, on a consideration of facts and circumstances and position of law, we find that the order deserves to be quashed. - Decided in favour of assessee.

Summary

Issues Involved:

1. Jurisdiction under Section 263.
2. Basis of Audit Objection.
3. Limited Scrutiny and Examination.
4. Consideration of Replies and Submissions.
5. Due Application of Mind by Assessing Officer.
6. Overall Legitimacy and Justification of the Order.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263:
The assessee challenged the jurisdiction assumed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, arguing that the assessment order dated 07.12.2018 was neither erroneous nor prejudicial to the interest of Revenue. The Tribunal noted that the Principal Commissioner of Income Tax (PCIT) set aside the assessment order on the grounds that the Assessing Officer (AO) failed to examine the assessee's eligibility for exemption under Section 54. The Tribunal found that the PCIT's presumption that the assessee held only a 1/3rd share in the newly purchased property was arbitrary and not supported by the Sale Deed or any other evidence. The Tribunal concluded that the exercise of power by the PCIT under Section 263 was arbitrary and whimsical, and thus, the jurisdiction was wrongly assumed.

2. Basis of Audit Objection:
The assessee argued that the PCIT's order was based solely on an audit objection, which is not permissible. The Tribunal observed that the PCIT did not explicitly mention the audit objection as the basis in the show cause notice or the order. However, the Tribunal found that the assessee had provided detailed submissions and evidence during the assessment proceedings, which were ignored by the PCIT. The Tribunal concluded that the revisionary powers under Section 263 cannot be exercised in a casual and arbitrary manner, especially when the assessment order was passed after due consideration of all relevant facts and evidence.

3. Limited Scrutiny and Examination:
The assessee contended that the case was picked up for limited scrutiny, and all relevant issues, including the sale/purchase of property and indexed cost, were thoroughly examined by the AO. The Tribunal reviewed the detailed submissions and evidence provided by the assessee during the e-proceedings, including bank statements, sale deeds, and replies to notices. The Tribunal found that the AO had made all necessary and due enquiries before passing the assessment order. The Tribunal held that the briefness of the assessment order does not imply that the relevant record was not looked into.

4. Consideration of Replies and Submissions:
The assessee argued that the PCIT failed to consider the various replies and submissions placed on record. The Tribunal noted that the assessee had provided detailed responses and supporting documents during the assessment and revisionary proceedings. The Tribunal found that the PCIT had ignored these submissions and arbitrarily concluded that the assessee held only a 1/3rd share in the property. The Tribunal emphasized that the entire sale consideration was invested in the new property, and the names of the wife and son were included for convenience and safety, not for ownership purposes.

5. Due Application of Mind by Assessing Officer:
The assessee claimed that the AO had passed the assessment order after due application of mind and consideration of all relevant material. The Tribunal reviewed the evidence on record and found that the AO had issued multiple notices and received detailed responses from the assessee during the e-proceedings. The Tribunal concluded that the AO had duly applied his mind and conducted a thorough examination before passing the assessment order.

6. Overall Legitimacy and Justification of the Order:
The assessee argued that the PCIT's order was erroneous, arbitrary, and unsustainable in law. The Tribunal found that the PCIT's presumption regarding the assessee's share in the property was not based on any factual evidence. The Tribunal held that the entire Long Term Capital Gain was invested in the new property, and the mere inclusion of the wife's and son's names did not affect the assessee's eligibility for exemption under Section 54. The Tribunal concluded that the revisionary order was not justified and quashed it.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the PCIT's order under Section 263 and upholding the original assessment order passed by the AO. The Tribunal emphasized the importance of evidence-based conclusions and the proper exercise of revisionary powers under Section 263.