2023 (1) TMI 1015 - AT - Income Tax

Revision u/s 263 - As per CIT AO wrongly allowed claim for exemption u/s.10(37) r.w. RECTLARR Act, 2013 - HELD THAT - As the assessee had neither offered the surplus(net) on acquisition of its lands by NHAI as capital gain nor raised any claim for exemption in its return of income, therefore, there could have been no reason for the A.O to have allowed any such claim. Admittedly, it is also a fact that the assessee in the course of the assessment proceedings had sought for exemption of the surplus(net) on acquisition of its lands by NHAI u/s.10(37) r.w.s.96 of RECTLARR Act, 2013, but as stated by the Ld. AR the same was declined by A.O. Be that as it may, the assessee had neither disclosed income/surplus arising on acquisition of its lands by NHAI under the head capital gain or sought for any exemption of the said amount, nor any such exemption was allowed to him by the A.O vide his order passed u/s.143(3) dated 15.11.2019. We are of the considered view that now when neither any claim for exemption u/s.10(37) r.w. RECTLARR Act, 2013 had ever been raised by the assessee nor allowed by the A.O, therefore, there could be no justification on the part of the Pr. CIT to have held the order passed by the A.O u/s.143(3) dated 15.11.2022 as erroneous in so far as it was prejudicial to the interest of the revenue u/s.263 of the Act, for the reason that he had wrongly allowed it s claim for exemption u/s.10(37) r.w. RECTLARR Act, 2013. Interestingly, it is a case where the order u/s.143(3) dated 15.11.2019 had been held by the Pr. CIT as erroneous on the ground that he had wrongly allowed a claim of exemption which, in fact, had never been so allowed by the A.O. We, thus, in terms of our aforesaid observations finding no justification on the part of the Pr. CIT for having revised the order passed by the A.O u/s.143(3) dated 15.11.2019, set-aside his order and restore that passed by the A.O u/s.143(3) - Appeal of the assessee is allowed.

Summary

Issues:
1. Revision order passed u/s.263 of the Income-tax Act, 1961 based on exemption claims under section 10(37) and RFCTLARR Act.
2. Assessment of income for A.Y. 2017-18 by the A.O. u/s.143(3) and subsequent revision by the Pr. CIT u/s.263.

Issue 1 Analysis:
The appeal challenged the order passed by the Pr. CIT u/s.263, questioning the exemption claims made by the assessee under section 10(37) and RFCTLARR Act. The Pr. CIT found the A.O.'s assessment erroneous, alleging wrongful allowance of capital gain exemption under the RECTLARR Act, 2013. The Pr. CIT cited reasons such as the absence of a government notification under section 105(3) of the Act and the inapplicability of Rehabilitation and Resettlement Entitlements to families affected by land acquisition under the National Highway Act, 1956. Additionally, a CBDT notification clarified that section 96 of the RFCTLARR Act, 2013 does not apply to acquisitions by entities listed in the Fourth Schedule. Consequently, the Pr. CIT set aside the assessment order, directing the A.O. to reevaluate the case under the relevant provisions.

Issue 2 Analysis:
The assessee, a real estate company, received compensation for land acquisition by NHAI, which it treated as revenue from operations, not capital gains. The A.O. assessed the income, considering a discrepancy in the cost of land acquisition. The Pr. CIT, however, alleged that the assessee claimed capital gain exemption under section 10(37) and RECTLARR Act, which the assessee denied. The Tribunal observed that the assessee never sought such an exemption, nor did the A.O. allow it. The Pr. CIT's revision was deemed unjustified as the original assessment did not grant the alleged exemption. Consequently, the Tribunal allowed the assessee's appeal, setting aside the Pr. CIT's order and restoring the A.O.'s assessment.

This detailed analysis covers the issues raised in the judgment, explaining the legal complexities and the Tribunal's decision in a comprehensive manner.