2018 (9) TMI 213 - AT - Income Tax

Revision u/s 263 - eligible for deduction under section 54F - Held that - AO had enquired about the source of income of the assessee and assessee had replied regarding each and every source of income and it cannot be said that on this share trading business no enquiry was conducted by the Assessing Officer. Facts available on record on the contrary spell out that adequate enquiry was conducted by AO and entire source of income was in the knowledge of the Revenue. Assessee has not only stated that he was into share trading but also stated that for the last eight years he is not doing share trading business and he has also provided address of the trading office which he agrees that is still in existence at Ahmedabad. These evidences clearly show that factual verifications were conducted by the Assessing Officer. Even after insertion of Explanation 2(a) to section 263 of the Act, the wisdom enshrined in various judicial pronouncements shall still hold good, that is to say that even now also the Commissioner of Income Tax cannot have unfettered power or unlimited power under section 263 of the Act. If such power is allowed, then Assessing Officer shall never be applying his mind in a free and judicious way which he is required to do. Furthermore, if unlimited power is assigned to the Commissioner of Income Tax through Explanation 2 to section 263 of the Act, that would lead to innumerable litigations. So far as deduction under section 54F is concerned, the order of the Pr. Commissioner of Income-tax passed under section 263 is valid in view of the proviso to section 54F whereas regards the other issues are concerned, they have been already examined by the Assessing Officer and for them there is no applicability of revisional jurisdiction under section 263 by the Pr. Commissioner of Income-tax and to that extent i.e. share trading business of the assessee and the loan transaction from brother of the assessee, for these issues, we quash the order under section 263 of the Act.

Issues Involved:
1. Assumption of revisional jurisdiction under section 263 of the Income-tax Act, 1961.
2. Claim of deduction under section 54F of the Act.
3. Non-enquiry into the assessee's share trading business by the Assessing Officer (AO).
4. Non-investigation of a loan transaction of ?0.925 crores taken by the assessee from his brother.

Detailed Analysis:

1. Assumption of Revisional Jurisdiction under Section 263:
The primary grievance of the assessee is against the assumption of revisional jurisdiction under section 263 of the Income-tax Act, 1961, by the Pr. Commissioner of Income Tax-I, Kanpur. The Pr. Commissioner issued a show cause notice on 21/03/2017, indicating that the AO had failed to examine certain issues during the assessment, rendering the order erroneous and prejudicial to the interest of the Revenue. The Pr. Commissioner concluded that the AO did not conduct proper enquiries into three main issues: the claim of deduction under section 54F, the assessee's share trading business, and a loan transaction from the assessee's brother.

2. Claim of Deduction under Section 54F:
The Revenue contended that the AO accepted the revised return filed just two days before the completion of the assessment without proper enquiry. The assessee argued that all relevant documents, including the purchase deed of the property, bank statements, and other financial records, were already in the possession of the AO, enabling him to verify the eligibility for deduction under section 54F. The Tribunal examined the documents and found that the AO had indeed conducted enquiries regarding the purchase and sale of properties. However, the Tribunal noted that the AO did not examine whether the property purchased was solely residential, as required under section 54F, or if the assessee owned more than one residential house at the time of the transfer. Therefore, the Tribunal upheld the Pr. Commissioner's order to this extent, as the AO's failure to investigate these aspects made the assessment order erroneous and prejudicial to the Revenue.

3. Non-Enquiry into Share Trading Business:
The Pr. Commissioner argued that the AO did not enquire into the assessee's share trading business. The Tribunal reviewed the records and found that the AO had indeed raised specific questions about the assessee's sources of income, including share trading, and had received detailed responses. The assessee had provided information about his share trading activities, including the fact that he had not been actively trading for the past eight years. The Tribunal concluded that the AO had conducted adequate enquiries into the share trading business, and therefore, the Pr. Commissioner's order on this issue was not justified.

4. Non-Investigation of Loan Transaction:
The Pr. Commissioner contended that the AO did not investigate a loan transaction of ?0.925 crores taken by the assessee from his brother. The Tribunal found that the AO had issued a questionnaire asking for details of unsecured loans, and the assessee had provided the necessary information, including bank statements and confirmation from his brother. The Tribunal determined that the AO had conducted the required enquiries and investigations into the loan transaction, and thus, the Pr. Commissioner's order on this issue was not warranted.

Conclusion:
The Tribunal concluded that the Pr. Commissioner's order under section 263 was valid only concerning the deduction under section 54F due to the AO's failure to examine the residential nature of the property and the ownership of other residential properties. However, the Tribunal quashed the Pr. Commissioner's order regarding the share trading business and the loan transaction, as the AO had conducted adequate enquiries on these issues. Consequently, the appeal of the assessee was partly allowed.

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