2017 (6) TMI 247 - AT - Income Tax

Revision u/s 263 - Claim of loss on account of forfeited amount - Held that - AO has accepted the claim of assessee in respect of loss on account of forfeited amount of ₹ 5 lakhs, only on the basis of submissions of assessee without conducting further enquiry with regard to the genuineness and nature of the loss. Perusing the submissions of assessee, it does not prove the nature of loss as revenue expenditure. Being so, it is to be examined by the AO. At this point, we make it clear that the ld. CIT in his order clearly mentioned that there is no proper enquiry made by the AO and he is required to cause further enquiry regarding this expenditure as the AO stopped the enquiry after receiving the submissions from the assessee. In view of this, we do not find any infirmity on the findings of the ld.CIT with reference to the claim of loss of advance paid to M/s.Volvo India Pvt Ltd. Claim for deduction u/s.54 or u/s 54F - mentioning of the wrong section - Held that - Our opinion on allowability of deduction u/s.54F of the Act is an alternative claim of assessee and not a fresh claim so as to file the revised return. The assessee has already filed the revised return and has made a claim in its return under wrong section. At the time of assessment, the assessee clarified that claim of deduction u/s.54 of the Act is wrong and it should be claimed u/s.54F as the assessee has used the capital gains of sale of property for purchase of residential house within a due date. Hence, mentioning of the wrong section in the return of income while claiming deduction cannot be considered as prejudicial to the interest of the Revenue. Accordingly, no merit in the order of ld.CIT in invoking the provisions of the section 263 on this issue. Accordingly, the findings of the ld.CIT to make proper enquiry by the AO is vacated. Appeal of the assessee partly allowed.

Summary

Issues:
1. Revision of assessment order under section 263 of the Act by the Commissioner of Income Tax.
2. Allowance of deduction for forfeited amount and under section 54F of the Act.
3. Proper enquiry by the Assessing Officer.

Issue 1: Revision of assessment order under section 263 of the Act by the Commissioner of Income Tax:
The appellant challenged the order of the Commissioner of Income Tax (CIT) under section 263 of the Act, contending that the CIT's decision to set aside the assessing officer's order was erroneous. The CIT found the assessing officer's order to be erroneous and prejudicial to the revenue's interests due to the nature of the forfeited amount and the incorrect claim under section 54 of the Act. The CIT directed the assessing officer to conduct further investigation. The appellant argued that the assessing officer had already considered the issues during assessment proceedings, and the CIT's intervention was unwarranted.

Issue 2: Allowance of deduction for forfeited amount and under section 54F of the Act:
The assessing officer had allowed the appellant's claim for deduction of a forfeited amount and under section 54F of the Act during the assessment. The appellant claimed that the amount forfeited for the purchase of a Volvo bus was a revenue loss, which the assessing officer accepted after due consideration. Similarly, the appellant claimed deduction under section 54F for reinvestment of capital gains from the sale of land into a residential house, which the assessing officer also allowed. The CIT, however, raised concerns regarding the nature of the forfeited amount and the correct section under which the deduction was claimed. The Tribunal found that the assessing officer had conducted an initial enquiry but failed to independently determine the nature of the loss. The Tribunal upheld the CIT's directive for further investigation into the forfeited amount but disagreed on the deduction under section 54F, as it was an alternative claim and not prejudicial to the revenue.

Issue 3: Proper enquiry by the Assessing Officer:
The Tribunal noted that the assessing officer had accepted the appellant's submissions without conducting a thorough investigation into the nature of the loss claimed. The assessing officer did not ascertain whether the loss was a revenue or capital loss, leading to the CIT's intervention under section 263 of the Act. The Tribunal agreed with the CIT's observation that the assessing officer needed to conduct a proper enquiry into the forfeited amount. However, the Tribunal disagreed on the deduction under section 54F, as it was a clarification of the original claim and not a fresh claim requiring a revised return. Therefore, the Tribunal vacated the CIT's directive for further investigation on the deduction under section 54F.

In conclusion, the Tribunal partly allowed the appeal, upholding the need for further investigation into the forfeited amount while dismissing the requirement for additional enquiry into the deduction under section 54F of the Act.