2024 (5) TMI 108 - HC - Income Tax

Revision u/s 263 - as per CIT AO failed to enquire the deduction claimed u/s 54 - ITAT justification in holding that the order passed u/s 263 suffered from hypertechnical approach in following the provision of Section 54(2) - HELD THAT - Tribunal has opined that the order may not have been prejudicial to the interest of revenue. Though not worded as such that appears to be the real finding of the Tribunal inasmuch as the Tribunal has observed that the revisional authority has not expressed any doubt regarding the quantum of capital gain arising at the hands of the assessee and that it was invested in purchase/construction of residential house. We find, there is no material to doubt the correctness of the findings recorded by the Tribunal. While procedural lapse may have been caused by the assessee in observing the provision of Section 54 of the Act, in absence of real prejudice having arisen to the revenue, upon claim capital gain having been allowed by the Assessing Officer the Tribunal may have rightly allowed the assessee's appeal. Seen in the context of an assessee with modest means, we find, the CIT had unnecessarily drawn up revision proceedings upon a procedural lapse as no real prejudice may have ever arisen to the revenue authorities in the context of petty amount involved. No substantial question of law arises.

Summary

Issues Involved:
The judgment involves the interpretation of Section 260-A of the Income Tax Act, 1961 and the application of Section 54 regarding capital gains and property transactions.

Issue 1:
The primary issue in this case was whether the Income Tax Appellate Tribunal (ITAT) was justified in allowing the appeal of the assessee by quashing the order u/s 263 of the Income Tax Act, 1961 passed by the Principal Commissioner of Income Tax, Ghaziabad due to the Assessing Officer's failure to inquire about the deduction claimed u/s 54 of the Act.

The Tribunal found that the Assessing Officer had thoroughly examined the sale of immovable property resulting in capital gain, including written replies, sale deeds, and evidence for claiming benefits under Section 54. The Tribunal opined that the order may not have been prejudicial to the revenue's interest, as there was no doubt regarding the quantum of capital gain invested in the new property. Despite a procedural lapse by the assessee in observing Section 54, the Tribunal allowed the appeal, noting no real prejudice to the revenue. The High Court upheld the Tribunal's decision, dismissing the appeal and maintaining the order.

Issue 2:
Another issue raised was whether the ITAT was justified in holding that the order u/s 263 suffered from a "hypertechnical approach" in following the provision of Section 54(2) of the Act.

The Tribunal examined the Assessing Officer's detailed enquiry during the original assessment, which included the sale and purchase documents and the computation of capital gains. It concluded that there was no material to doubt the correctness of the findings. The High Court agreed with the Tribunal's assessment, emphasizing that despite a procedural lapse by the assessee, no substantial question of law arose, and the order was maintained.

Issue 3:
The final issue questioned whether the ITAT was justified in allowing the appeal of the assessee by holding that when the basic condition of Section 54(1) of the Act was satisfied, the provision of Section 54(2) became redundant.

The Tribunal's analysis focused on the lack of real prejudice to the revenue authorities despite the procedural lapse by the assessee. The High Court concurred with the Tribunal's findings, noting that the revision proceedings initiated by the Commissioner of Income Tax were unnecessary, especially considering the modest means of the assessee and the insignificant amount involved. As no substantial question of law arose, the High Court dismissed the appeal and upheld the Tribunal's decision.