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2022 (12) TMI 1118 - AT - Income TaxRevision u/s 263 - Entitlement to deduction u/s. 54F - as per CIT had not applied his mind with regard to the ownership of two residential houses by the assessee as on 31.03.2015 which are reflected in the balance sheet but simply granted the deduction u/s. 54F on purchase of a new property which is against the provisions of Section 54F - AO has not discussed any details either in the assessment order or in the notices issued to the assessee whether the assessee fulfills the conditions as prescribed u/s. 54F - HELD THAT - As seen that the assessment order passed by the Assessing Officer is without any details and no information about the claim of deduction u/s. 54F of the Act more particularly when the claim is to the extent of Rs. 3, 96, 79, 796/- by the assessee. Though the A.O. asked the assessee to justify the deduction claimed in computation of capital gain along with supporting evidences through notice issued u/s. 143(2) of the Act and the assessee made simple rely which is extracted in Para 6.1 above. The same does not details about the already existing property details other information. Thus in our considered opinion that the Assessing Officer has not conducted necessary inquiry before allowing deduction u/s. 54F but simply allowed the claim made by the assessee. Section 54F of the Act is not applicable if the assessee at time of transfer of original assets owns more than one residential house other than the new assets acquired by him. Thus without applications of the provisions of law the assessing officer has granted the relief to the assessee which otherwise the assessee is not eligible for the claim of deduction u/s. 54F of the Act. PCIT has invoked the provisions of Section 263 thereby set aside the erroneous assessment order passed by the Assessing Officer and directed the A.O. to pass a fresh assessment order after allowing adequate opportunities to the assessee in accordance with law following the prescribed procedure and duly examining the issue of allowability of deduction u/s. 54F - Decided against assessee.
Issues Involved:
1. Delay in filing the appeal. 2. Validity of the Principal Commissioner of Income Tax's (PCIT) revision order under Section 263 of the Income Tax Act, 1961. 3. Eligibility for deduction under Section 54F of the Income Tax Act, 1961. 4. Adequacy of the Assessing Officer's (AO) inquiry and verification process. Issue-wise Detailed Analysis: 1. Delay in Filing the Appeal: The appeal was filed with a delay of 6 days during the Covid-19 period. The Supreme Court's order in M.A. No. 665 of 2021 in SMW(C) No. 3 of 2020 extended the limitation period from 15.03.2020 to 02.10.2021. Consequently, the delay was excused, and it was determined that there was no delay in filing the appeal. 2. Validity of the PCIT's Revision Order under Section 263: The PCIT observed that the AO did not conduct a thorough inquiry regarding the assessee's eligibility for deduction under Section 54F. The PCIT noted that the AO failed to verify whether the assessee owned more than one residential house at the time of transfer of the original asset. The PCIT concluded that the assessment order was erroneous and prejudicial to the interest of the Revenue due to the lack of proper inquiry and verification by the AO. Consequently, the PCIT set aside the assessment order and directed the AO to conduct a fresh assessment. 3. Eligibility for Deduction under Section 54F: The assessee claimed a deduction under Section 54F for the purchase of a new residential house. However, the PCIT found that the assessee owned two residential houses at the time of the transfer of the original asset, which disqualified the assessee from claiming the deduction under Section 54F. The PCIT rejected the assessee's contention that one of the houses was inhabitable and should not be considered a residential house. The PCIT emphasized that Section 54F does not require the house to be habitable to qualify as a residential house. 4. Adequacy of the AO's Inquiry and Verification Process: The PCIT noted that the AO's assessment order lacked details and did not demonstrate that a thorough inquiry was conducted regarding the assessee's ownership of residential houses. The AO's order was found to be cryptic and insufficient, as it did not address the conditions prescribed under Section 54F. The PCIT concluded that the AO did not apply his mind to the relevant facts and legal provisions, resulting in an erroneous and prejudicial assessment order. Conclusion: The appeal filed by the assessee was dismissed. The ITAT upheld the PCIT's revision order under Section 263, confirming that the AO's assessment order was erroneous and prejudicial to the interest of the Revenue due to the lack of proper inquiry and verification regarding the assessee's eligibility for deduction under Section 54F. The ITAT emphasized the need for strict interpretation of exemption provisions and the requirement for thorough inquiry by the AO.
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