2014 (12) TMI 669 - AT - Income Tax

Validity of revision order passed u/s 263 - CIT noted that assessee sold land and against that deduction u/s 54F claimed Held that - CIT observed that the assessee had failed to furnish any documentary evidence regarding construction on the said plot, neither any approval for construction of plot from the Municipal Committee was available on record nor any map was available on record - show cause notice issued u/s 263 reflects that the enquiry was made in respect of the construction on the new plot of land purchased by the assessee CIT while passing the order u/s 263 has directed the AO to make fresh assessment on the issue of deduction u/s 54F and the investment in land revenue has failed to produce any other show cause notice issued by the CIT vis- -vis the investment made in the purchase of land - as the CIT has failed to issue any show cause notice to the assessee on the issue of purchase of land which was declared by the assessee at ₹ 11,62,360/-, however before the bank, value of which was shown at ₹ 34,00,000/- there was no merit in the directions of the CIT in respect of the investment in purchase of land in the absence of any show cause notice being issued to the assessee u/s 263 of the Act and the same are reversed. Enquiries made by the AO vis- -vis the cost of construction of the plot of land - Claim of the assessee u/s 54 Held that - The assessment was made after the case was selected for scrutiny through CASS on the basis of AIR information AO has given a finding that the assessee had filed the reply and has also furnished the information as called for during the assessment proceedings - merely because the copy of sanctioned plans was not available on record, does not imply that the plans were not sanctioned - assessee in all fairness admitted that the plans were produced before the AO following the decision in Malabar Industries Co. Ltd. v. CIT 2000 (2) TMI 10 - SUPREME Court the AO had already taken a view on the issue and there was no merit in the order of CIT in taking a different view on the issue thus, there was no merit in exercise of power u/s 263 by the CIT and the same is cancelled Decided in favour of assessee.

Summary

Issues Involved:
1. Justification of the order passed by the Commissioner of Income Tax under section 263 of the Income Tax Act, 1961.
2. Contradictory directions regarding investment in land.
3. Failure to appreciate detailed submissions before concluding that the assessment order was erroneous and prejudicial to the interest of revenue.

Issue-wise Detailed Analysis:

1. Justification of the order passed by the Commissioner of Income Tax under section 263 of the Income Tax Act, 1961:

The appeal is against the order of revision passed under section 263 of the Income Tax Act. The Commissioner of Income Tax observed that the assessee had sold land for Rs. 29,35,000 and claimed deduction under section 54F. The sale consideration was received in cash, and a residential plot was purchased for Rs. 11,62,300, with the balance claimed to be invested in construction. The Commissioner noted that the assessee failed to furnish documentary evidence for construction, approval from the Municipal Committee, or construction bills. The Assessing Officer did not make any enquiry, leading the Commissioner to believe the deduction under section 54F was unjustified. A show cause notice was issued, and the assessee submitted that documents were produced during assessment proceedings, but the Commissioner found inconsistencies in the claimed construction expenses and lack of vouchers. Consequently, the Commissioner set aside the assessment order, directing a fresh assessment on the issue of deduction under section 54F and investment in land.

2. Contradictory directions regarding investment in land:

The Commissioner of Income Tax noted that the loan documents showed the cost of the plot purchased during the year at Rs. 11,62,360 was declared at Rs. 34,00,000 for obtaining a loan. The assessee argued that this document was not part of the record for the notice under section 263 and was merely the market valuation for loan purposes. The Commissioner referred the issue of investment in land back to the Assessing Officer. However, the Tribunal found that no show cause notice was issued regarding the investment in the purchase of land, thus reversing the directions of the Commissioner in this respect.

3. Failure to appreciate detailed submissions before concluding that the assessment order was erroneous and prejudicial to the interest of revenue:

The assessee claimed that all necessary details were furnished during the assessment, including the approval of the map and source of withdrawals for the investment. The Tribunal noted that the assessment was made after the case was selected for scrutiny through CASS based on AIR information. The Assessing Officer had confronted the assessee with the information and justified the claim under section 54F. The Tribunal found that the assessment order was passed after considering the submissions and documents provided by the assessee, including the sanctioned plans and housing loan details. The Tribunal held that the Commissioner's observation that the Assessing Officer failed to make enquiries was not justified, as the necessary documents were produced and considered.

Conclusion:

The Tribunal concluded that the Commissioner of Income Tax had no merit in exercising power under section 263 of the Act as the Assessing Officer had already taken a view on the issue. The Tribunal cancelled the order of the Commissioner, allowing the appeal of the assessee. The order was pronounced in the open Court on 28th August, 2014.