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2024 (7) TMI 576 - AT - Income TaxRevision u/s 263 - exemption u/s 54B was not to be allowed on investment in agricultural lands purchased after the due date of filing the return for the year and exemption u/s 54F for investment in residential property was not to be allowed because the plot purchased was industrial plot and the valuation report is fabricated document - assessment was reopened due to a high-value cash deposit in the assessee's bank account HELD THAT - We note that the assessee s case was reopened to examine the cash deposited in the bank account of Rs. 44,00,000/-. In the assessment order, Assessing Officer enquired this aspect and was satisfied with the explanation given by the assessee. In these circumstances, when the Assessing Officer has not made addition on the issue of reasons recorded, he is ousted of his jurisdiction to any other amount/addition in the assessment order. Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice u/s 148 of the Act. This position is not disputed and disturbed by the PCIT in his order u/s 263 of the Act. Resultantly, Assessing Officer could not have made any addition on account of capital gain in the assessment proceedings u/s 147/148 of the Act. As such, the assessment order is not erroneous as held by the ld. PCIT. Hence, the ld. PCIT could not have exercised his jurisdiction u/s 263 of the Act. In the background of the aforesaid discussion and precedent, we set aside the order of PCIT and quash the order passed u/s 263 of the Act. Appeal filed by the assessee is allowed.
Issues:
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961. 2. Validity of reopening the assessment under section 147. 3. Assessment of capital gains on the sale of agricultural land. 4. Exemption under sections 54B and 54F for investment in agricultural and residential properties respectively. 5. Compliance with principles of natural justice in directing income enhancement and exploring penalty or prosecution actions. Jurisdiction of PCIT under Section 263: The appeal challenged the PCIT's order under section 263, contending that the Assessing Officer's assessment was not erroneous or prejudicial to revenue. The PCIT questioned the allowance of exemptions under sections 54B and 54F for post-due date investments and a fabricated valuation report for an industrial plot. The Tribunal noted that the AO did not make any additions on the issues for which the assessment was reopened, rendering the PCIT's jurisdiction invalid. Validity of Reopening Assessment under Section 147: The assessment was reopened due to a high-value cash deposit in the assessee's bank account. The AO accepted the explanation for the cash deposit during the assessment proceedings, leading to no additions. The Tribunal emphasized that if the AO did not make any additions based on the reasons for reopening, the PCIT could not question the assessment under section 263, citing relevant case law. Assessment of Capital Gains on Sale of Agricultural Land: The AO computed capital gains on the sale of agricultural land at nil, which was subject to the PCIT's order under section 263. The PCIT disagreed with the AO's treatment, highlighting that exemptions were incorrectly allowed for post-due date investments. The Tribunal ultimately set aside the PCIT's order, emphasizing the AO's satisfaction with the explanations provided by the assessee. Exemption under Sections 54B and 54F: The PCIT disallowed exemptions under sections 54B and 54F, citing post-due date investments and a fabricated valuation report for an industrial plot. The assessee argued that the AO's acceptance of explanations during the assessment proceedings precluded the PCIT from questioning the assessment. The Tribunal concurred, quashing the PCIT's order under section 263. Compliance with Principles of Natural Justice: The PCIT directed the AO to enhance the assessed income and consider penalty or prosecution actions, allegedly without observing natural justice principles. The assessee contended that all relevant details were available during the assessment proceedings and exemptions were rightfully claimed. The Tribunal found in favor of the assessee, setting aside the PCIT's order and allowing the appeal. This detailed analysis of the judgment addresses the issues raised in the appeal comprehensively, highlighting the key arguments, decisions, and legal principles applied by the Tribunal.
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