2016 (12) TMI 1540 - AT - Income Tax

Revision u/s 263 - disallow the claim of exemption u/s 54EC and 54F - order erroneous and prejudicial to the interest of the revenue - Held that - In the present case on hand, on perusal of the facts available on record, we find that the A.O. has conducted detailed enquiry and also examined the issues pointed out by the CIT. The assessee has explained the issue pointed out by the CIT with necessary evidences. Therefore, the CIT, cannot assume jurisdiction to revise assessment order, once, assessee explained that it had filed all the details before the A.O. on the issues on which CIT wants further verification. It is the general presumption of law that, the A.O. has considered all the details before completion of assessment and the CIT cannot presume that the enquiries conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless CIT proves that assessment order passed by the A.O. is erroneous and also prejudicial to interest of revenue. In this case, assessment order passed by the A.O. is neither erroneous nor it is prejudicial to the interest of revenue, as the issue of capital gains and exemption u/s 54EC and 54F has been examined by the A.O. and also there is no prejudice is caused to the interest of revenue as investments in 54EC and 54F is in accordance with law. Therefore, we are of the view that the assessment order passed by the A.O. u/s 143(3) of the Act dated 16-01-2013 is not erroneous in so far as it is prejudicial to the interest of the revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the assessment order passed by the Assessing Officer (A.O.) is erroneous and prejudicial to the interest of the revenue.
2. Determination of the effective date of share transfer for the purpose of computing the limitation period for investments under sections 54EC and 54F of the Income Tax Act, 1961.

Detailed Analysis:

1. Whether the assessment order passed by the Assessing Officer (A.O.) is erroneous and prejudicial to the interest of the revenue:

Background:
The Commissioner of Income Tax (CIT) issued a show-cause notice under section 263 of the Income Tax Act, proposing to review the assessment order for the A.Y. 2010-11 on the grounds that the A.O. had erroneously allowed exemptions under sections 54EC and 54F for investments made beyond the specified time limits. The CIT argued that the A.O. failed to examine the crucial aspects of the issue, rendering the assessment order erroneous and prejudicial to the interest of the revenue.

Assessee’s Argument:
The assessee contended that the A.O. had examined the issue of capital gains and exemptions under sections 54EC and 54F through specific questionnaires and had allowed the exemptions after being satisfied with the details furnished. Therefore, the assessment order could not be termed erroneous.

Tribunal’s Findings:
The Tribunal found that the A.O. had indeed issued detailed questionnaires and received comprehensive replies from the assessee regarding the share transfer and related investments. The A.O.'s order, though brief, indicated that the issue was examined and a possible view was taken. The CIT’s assumption of jurisdiction under section 263 was deemed incorrect as the assessment order was neither erroneous nor prejudicial to the interest of the revenue.

2. Determination of the effective date of share transfer for the purpose of computing the limitation period for investments under sections 54EC and 54F:

CIT’s Position:
The CIT held that the effective transfer date should be the date of receipt of money (10-09-2009) and not the date of execution of the share transfer form (24-11-2009). Consequently, the investments in NHAI bonds and residential property were beyond the permissible period, making the exemptions under sections 54EC and 54F inapplicable.

Assessee’s Argument:
The assessee argued that the transfer took place on 24-11-2009 when the share transfer form was duly executed and delivered to the company, and the period for investments should be computed from this date. The investments were made within six months and two years from the date of transfer, thus qualifying for exemptions under sections 54EC and 54F.

Tribunal’s Findings:
The Tribunal agreed with the assessee, stating that the effective transfer of shares, as per section 108 of the Companies Act, 1956, occurs when the share transfer form is duly stamped, signed, and delivered to the company. The Tribunal emphasized that the date of the share transfer form (24-11-2009) should be considered the effective date of transfer, not the date of receipt of money. Therefore, the investments made by the assessee were within the permissible period, and the exemptions under sections 54EC and 54F were correctly claimed. The assessment order was neither erroneous nor prejudicial to the interest of the revenue.

Conclusion:
The Tribunal quashed the CIT’s order under section 263 and restored the assessment order passed by the A.O. for both appeals, holding that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The effective date of transfer was determined to be the date of execution and delivery of the share transfer form, allowing the exemptions under sections 54EC and 54F.