2016 (3) TMI 88 - AT - Income Tax

Revision u/s 263 - whether exemption u/s 54F of the Act can be denied for the assessment year 2009-10, for failure to construct the property within the period of 3 years from the date of sale of original asset? - Held that - On careful consideration of the provisions of section 54F of the Act, it is abundantly clear that sub section 4 of section 54F of the Act, provides for, where the assessee has not utilized the full value of consideration for purchase/construction of residential house property within the due date specified u/s 139(1) of the Act, then the assessee shall invest the unutilized portion of sale consideration under the capital gain deposit scheme and furnished the proof along with return of income. The proviso to sub section 4 of section 54F of the Act provides that in case the assessee failed to utilize the amount invested under sub sec. 4 for construction of house property within a period of 3 years from the date of sale of original asset, then the assessee is required to pay the tax on the whole capital gain in the previous year in which the period of 3 years from the date of transfer of the original asset expires. In the present case on hand, on perusal of the facts, it is clear that the assessee has purchased another residential site within a period of 3 years and the balance amount was also invested under capital gain deposit account scheme. If there is inadequate enquiry, that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion on the issue. The CIT can do this, when there is a lack of enquiry by the assessing officer. In the present case on hand, there is no reason of whatsoever for the Commissioner to revise assessment order, as on both counts i.e. the order is not erroneous as the A.O. has verified the issues and allowed the claim made by the assessee u/s 54F of the Act. The order is also not prejudicial to the interest of the revenue, as the issue of exemption u/s 54F of the Act claimed by the assessee was in accordance with law. Therefore, we are of the opinion that the CIT without any justification assumed the jurisdiction to revise the assessment order which is not permissible under the law. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the order under Section 263 of the Income-Tax Act, 1961.
2. Examination of the exemption claim under Section 54F of the Income-Tax Act, 1961.
3. Proper enquiry by the Assessing Officer (A.O.) during the assessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of the order under Section 263 of the Income-Tax Act, 1961:
The appeal was directed against the order of the Commissioner of Income Tax (CIT), Rajahmundry, dated 13.3.2014, under Section 263 of the Income-Tax Act, 1961. The CIT issued a show cause notice proposing to revise the assessment order on the grounds of certain omissions and commissions, rendering the assessment order erroneous and prejudicial to the interest of the revenue. The CIT observed that the A.O. did not verify all the bank accounts and allowed an exemption under Section 54F of the Act, which was not allowable. The CIT, therefore, concluded that the order under Section 143(3) was erroneous and prejudicial to the interest of the revenue.

2. Examination of the exemption claim under Section 54F of the Income-Tax Act, 1961:
The assessee claimed an exemption under Section 54F of the Act, having sold a property and reinvested the sale consideration in another residential site and a capital gain deposit scheme. The A.O. verified these details during the assessment proceedings and allowed the exemption. The CIT, however, contended that the exemption was not allowable as the construction of the house was not completed within the specified period. The assessee argued that the entire capital gain was offered to tax for the assessment year 2012-13 due to the inability to complete the construction within the specified period, which was in accordance with the proviso to sub-section 4 of Section 54F.

3. Proper enquiry by the Assessing Officer (A.O.) during the assessment proceedings:
The CIT assumed jurisdiction to revise the assessment order on the grounds of lack of enquiry by the A.O. The assessee countered that the A.O. had conducted detailed enquiries, issued a detailed questionnaire, and verified the reinvestment details and the capital gain deposit scheme. The Tribunal found that the A.O. had indeed examined all the issues raised by the CIT during the assessment proceedings. The Tribunal noted that there was a distinction between lack of enquiry and inadequate enquiry. The CIT could not assume jurisdiction under Section 263 merely because he had a different opinion on the matter. The Tribunal concluded that the A.O.'s order was neither erroneous nor prejudicial to the interest of the revenue, as the exemption under Section 54F was allowed in accordance with the law.

Conclusion:
The Tribunal quashed the order passed by the CIT under Section 263 of the Act and restored the assessment order. The appeal filed by the assessee was allowed, emphasizing that the A.O. had conducted proper enquiries and the exemption under Section 54F was correctly allowed. The Tribunal also highlighted that the CIT could not revise the assessment order based on a different opinion when the A.O. had already examined the issues in detail.