2023 (2) TMI 962 - AT - Income Tax

Revision u/s 263 - As per CIT did not make proper and adequate inquiries which he ought to have made - Deduction u/s 54F - CIT directing the ld. A.O to consider while framing the fresh assessment order the issue of exemption granted u/s 54F - HELD THAT - AO has issued notice u/s 142(1) wherein AO has asked the details and documents in respect of the issue raised by ld PCIT in his 263 order, the assessee explained the nature of each properties before the AO. Those properties, which are using for commercial purposes, the assessee submitted rent agreement, Municipal tax receipt, electricity bill, and proper evidence to demonstrate that such properties have been using only for commercial purposes for a very long period. All these facts and evidences were before the AO. AO, as an adjudicator and investigator, has applied his mind and framed the assessment order, thus such order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of revenue. Since in the present case the PCIT has exercised jurisdiction u/s.263 of the Act on the ground that the Assessing Officer while completing the assessment proceeding did not make enquiries which he ought to have made. It is necessary to look into what enquiries the Assessing Officer made on the issues raised in the order u/s.263 of the Act. It is clear from the submissions and material available on record with regard to claim of assessee u/s 54F of the Act, that Assessing Officer got the details of the properties and examined the nature of properties and then framed the assessment order. In appropriate cases he made further inquiry also. A mere observation that no proper details have been obtained, cannot be sufficient to come to a conclusion that the Assessing Officer did not make proper and adequate inquiries which he ought to have made in the given facts and circumstances of this case. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Whether the Principal Commissioner of Income Tax (PCIT) erred in setting aside the original assessment order and directing a fresh assessment.
2. Whether the PCIT erred in directing the Assessing Officer (AO) to reconsider the exemption granted under Section 54F of the Income Tax Act.
3. Whether the PCIT erred in reconsidering issues already addressed in the original assessment order.
4. Whether the PCIT erred in assuming jurisdiction under Section 263 of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Setting Aside the Original Assessment Order:
The assessee challenged the correctness of the PCIT's order dated 22.03.2022, which set aside the original assessment order and directed the AO to frame a fresh assessment. The PCIT exercised jurisdiction under Section 263 of the Income Tax Act, citing that the AO had not conducted proper verification or inquiry regarding the exemption claimed under Section 54F. The Tribunal found that the AO had indeed issued notices and conducted inquiries, and the assessee had provided all necessary documents and explanations. Therefore, the Tribunal concluded that the AO had applied his mind and the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue.

2. Reconsideration of Exemption under Section 54F:
The PCIT directed the AO to reconsider the exemption under Section 54F, arguing that the assessee owned more than one residential property on the date of transfer of the original asset, which disqualified him from claiming the exemption. The assessee contended that the AO had already verified this issue during the original assessment proceedings. The Tribunal noted that the AO had asked for and received detailed information about the properties, and the assessee had provided sufficient evidence to support his claim. Thus, the Tribunal held that the AO had appropriately allowed the exemption under Section 54F.

3. Reconsideration of Issues Already Addressed:
The PCIT's directive to reconsider issues already examined by the AO was contested by the assessee. The Tribunal observed that the AO had conducted a thorough examination of the properties and their usage during the original assessment. The assessee had provided rent agreements, municipal tax receipts, and other relevant documents to demonstrate the commercial use of certain properties. The Tribunal found that the AO had made a considered decision based on the evidence provided, and there was no need for a fresh assessment.

4. Assumption of Jurisdiction under Section 263:
The assessee argued that the PCIT wrongly assumed jurisdiction under Section 263. The Tribunal emphasized that for the PCIT to invoke Section 263, the original assessment order must be both erroneous and prejudicial to the interest of the Revenue. The Tribunal found that the AO had conducted proper inquiries and applied his mind while allowing the exemption under Section 54F. The Tribunal referenced the legal principle that an AO is not required to record every detail in the assessment order, especially those issues decided in favor of the assessee. Therefore, the Tribunal concluded that the PCIT's assumption of jurisdiction under Section 263 was unwarranted.

Conclusion:
The Tribunal held that the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue. It quashed the PCIT's order under Section 263 and allowed the appeal of the assessee. The Tribunal emphasized that the AO had made necessary inquiries and applied his mind during the original assessment proceedings, and the exemption under Section 54F was rightly allowed. The Tribunal's decision was pronounced on 22/02/2023.