2022 (8) TMI 453 - AT - Income Tax

Revision u/s 263 - As per CIT cost of improvement is not supported by any material evidences and also that the rental admitted by the Assessee under the head income from house property was prima facie on the lower side, keeping in view the locality and the properties let out which would fetch more rental income than admitted - assessment framed by the AO is a limited scrutiny case for verification of the deduction from the capital gains claimed by the Assessee - HELD THAT - As the limited scrutiny was for the purpose of examining the claim of deduction from the capital gains and no other issue was there. Hence, we are of the view that this issue now cannot be examined while proceeding u/s.263 of the Act making revision to the assessment order. Hence, the scrutiny assessment is only for a limited issue, that was a claim of deduction u/s.54 of the Act which has been accepted by the Assessing Officer and even in the order giving effect to the order of the Principal Commissioner of Income Tax u/s.263 of the Act, the Assessing Officer has accepted the stand of the Assessee. Hence, according to us, the revision order on this issue is just academic and nothing more. Rental income under the head income from house property - As regards to the second issue which was never before the Assessing Officer during the course of the original assessment and that the assessment was for a limited scrutiny, the issue of rental income cannot be examined in the revision proceedings. Hence, according to us, this issue on rental income is decided in favour of the Assessee and to that extent the revision order is quashed. Claim of deduction u/s.54 of the Act, the Assessing Officer has already examined the issue and the issue only remains academic.

Issues:
1. Condonation of delay in filing appeal due to Covid-19 pandemic.
2. Revision order passed by Principal Commissioner of Income Tax u/s.263 of the Income Tax Act.
3. Limited scrutiny assessment for deduction from capital gains.
4. Examination of rental income under the head 'income from house property'.

Issue 1: Condonation of Delay
The appeal by the Assessee was barred by limitation by 637 days due to the Covid-19 pandemic. The Assessee filed a condonation petition supported by an affidavit. The Hon'ble Bench considered the Supreme Court's order regarding the Covid-19 pandemic and decided to condone the delay of 637 days, admitting the appeal for adjudication on merits.

Issue 2: Revision Order
The appeal pertained to the revision order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act. The revision order was issued after the Assessment Officer framed a limited scrutiny assessment for the Assessment Year 2015-2016. The revision was based on discrepancies in the Assessee's claim of deduction under section 54 of the Act and the rental income declared.

Issue 3: Limited Scrutiny Assessment
The Assessment Officer conducted a limited scrutiny assessment to verify the Assessee's claim of deduction from capital gains under section 54 of the Act. Discrepancies were found in the claimed deduction amount and the actual cost reported by a registered Evaluator. The Assessment Officer added the differential amount to the Assessee's returned income.

Issue 4: Examination of Rental Income
The Principal Commissioner of Income Tax issued a show-cause notice questioning the Assessee's declared rental income under the head 'income from house property.' The Assessee did not respond, leading to the PCIT directing the Assessment Officer to frame a reassessment. The Tribunal held that the issue of rental income, not raised during the limited scrutiny assessment, could not be subject to revision under section 263 of the Act.

In conclusion, the Tribunal partly allowed the Assessee's appeal, quashing the revision order on the issue of rental income. The Tribunal found that the revision order on the claim of deduction under section 54 of the Act was merely academic, as the Assessment Officer had already examined the issue.

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