2023 (12) TMI 769 - AT - Income Tax

Validity of Revision u/s 263 - Allowing Exemption u/s 54 instead of 54F - Source of LTCG is not from residential house and since the assessee had earned capital gain on transfer of plot of land - Solitary contention raised by assessee was that there was no prejudice caused to the Revenue by allowing assessee s claim of exemption u/s. 54 since even in terms of section 54F assessee was eligible to the same quantum of exemption if not higher than that claimed u/s. 54 - DR contended that the calculation of exemption u/s. 54F of the Act was not as simple as contended by the assessee and needed verification by the AO HELD THAT - We are in agreement with the DR. The contentions raised by the assessee against the order passed by the Ld.PCIT u/s. 263 of the Act, of no prejudice being caused to the Revenue by the allowance of claim of exemption u/s. 54 of the Act by the Assessing Officer, is a fresh contention raised for the first time before us. The assessee had never raised such contention before the Ld.PCIT. Besides, the said contention is subject to verification. Therefore this contention cannot be appreciated by us for arriving at any finding regarding the revisionary order passed by the Ld.PCIT. The Ld.PCIT has himself directed the AO to examine assesses eligibity to claim of exemption u/s 54F of the Act. On the basis of the facts before him and the position of law as appreciated by him correctly, the Ld. PCIT has arrived a finding error in the assessment order on account of incorrect allowance of claim of exemption u/s. 54 of the Act, which the assessee also does not deny / dispute. There is therefore no infirmity in the order of the Ld. PCIT holding the assessment order erroneous for having granted exemption u/s 54 to the assessee against the provisions of law in this regard. In the absence of any other argument made by the Ld. Counsel for the assessee before us we do not find any reason to interfere in the order of the Ld.PCIT and uphold the same. Appeal of the Assessee is dismissed.

Summary

Issues Involved:
1. Validity of Revision under Section 263 of the Income Tax Act, 1961.
2. Eligibility for Deduction under Section 54 of the Income Tax Act, 1961.
3. Procedural fairness in the revisionary proceedings.

Summary of Judgment:

1. Validity of Revision under Section 263:
The assessee contended that the Principal Commissioner of Income Tax (PCIT) erred in initiating revision proceedings under Section 263 without fulfilling the necessary conditions. The PCIT found the assessment order erroneous and prejudicial to the interests of the Revenue because the Assessing Officer (AO) incorrectly allowed the assessee's claim for exemption under Section 54, which was not in accordance with the law. The PCIT directed the AO to re-examine the eligibility for exemption under Section 54F.

2. Eligibility for Deduction under Section 54:
The PCIT noted that the exemption under Section 54 is applicable only to capital gains from the transfer of a long-term capital asset, specifically a residential house. Since the assessee earned capital gains from selling a plot of land, the exemption under Section 54 was inapplicable. The PCIT suggested that the assessee might be eligible for exemption under Section 54F, but the quantum of exemption would be less than that claimed under Section 54. The assessee argued that even under Section 54F, the entire capital gain would be exempt, but this needed verification.

3. Procedural Fairness:
The assessee argued that the PCIT did not provide a proper opportunity for being heard and did not consider the submissions made during the revision proceedings. The assessee also claimed that the PCIT's order was based on assumptions and presumptions. However, the Tribunal found that the PCIT had correctly identified errors in the assessment order and directed the AO to verify the eligibility for exemption under Section 54F. The Tribunal upheld the PCIT's order, stating that the assessee's new contention regarding no prejudice to the Revenue was raised for the first time before the Tribunal and required verification.

Conclusion:
The Tribunal dismissed the appeal, upholding the PCIT's order under Section 263, as the assessment order was deemed erroneous and prejudicial to the interests of the Revenue due to the incorrect allowance of exemption under Section 54. The case was remanded to the AO for fresh assessment and verification of the assessee's eligibility for exemption under Section 54F.