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2020 (2) TMI 773 - AT - Income TaxRevision u/s 263 - exemption under section 54EC - terminology of Month in the context of provisions of section 54EC - HELD THAT - the term Month means calendar month (and not period of thirty days), which should be applied for the purpose of section 54EC of the Act. It is not in dispute that assessee had deposited the capital gain amount arising from sale of two properties in Rural Electrification Corporation Ltd, Bond as per the scheme of the Government. The investment in the REC Bond was made by assessee on 30.08.2011. The sale deed was entered into by the assessee on 15.2.2011. The six calendar months from the date of sale deed would complete on 31.08.2011. The assessee made investment under section 54EC of the Act on 30.08.2011 which is within the completion of six months. Therefore, we note that there is no violation of the provisions of section 54 EC of the Act, as the assessing officer has rightly allowed the benefit of section 54EC of the Act to the assessee. Hence, order passed by assessing officer is not erroneous. Therefore, we quash the order under section 263 of the Act, passed by ld PCIT. We note that ld PCIT further observed from the record that exemption u/s 54EC of the Act was allowed twice for an amount of ₹ 3,90,000/- so, the total amount to be disallowed will be ₹ 25,80,000/- (₹ 21,90,000 ₹ 3,90,000). We note that this may be a mistake apparent from record, and therefore the same can be rectified under section 154 of the Act. Therefore, we direct the assessing officer to examine the amount of ₹ 3,90,000/- and if it was allowed twice, the same may be disallowed and exemption should be granted under section 54EC of the Act in accordance to law. Appeal of the assessee is allowed.
Issues Involved:
1. Legality of the order passed under Section 263 of the Income Tax Act, 1961. 2. Validity of initiating proceedings under Section 263 when the assessment was completed under Sections 143(3)/147. 3. Direction for re-examination and re-verification of the exemption claimed under Section 54EC. 4. Alleged excess exemption claimed under Section 54EC. 5. Allegation of double deduction under Section 54EC. Issue-wise Detailed Analysis: 1. Legality of the Order Passed under Section 263: The assessee challenged the legality of the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. The assessee contended that the order was "completely arbitrary, unjustified, and illegal." The Tribunal examined the terminology of "Month" in the context of Section 54EC and concluded that the term "Month" means a calendar month, not a period of thirty days. The Tribunal cited the Hon’ble Allahabad High Court's decision in CIT vs. Munnalal Shrikishan Mainpuri (167 ITR 415), which defined "Month" as a calendar month. Consequently, the Tribunal found that the assessee's investment was within the completion of six calendar months, and thus, the order passed by the Assessing Officer (AO) was not erroneous. 2. Validity of Initiating Proceedings under Section 263: The assessee argued that the initiation of proceedings under Section 263 was unjustified as the assessment was already completed under Sections 143(3)/147, where all issues were duly considered. The Tribunal noted that the AO is not only an adjudicator but also an investigator and must ascertain the truth of the facts stated in the return. The Tribunal referenced the Hon’ble Delhi High Court's decision in Gee Vee Enterprises (99 ITR 375) to support the proposition that failure to make necessary inquiries renders the order erroneous. However, in this case, the Tribunal found that the AO had correctly allowed the benefit of Section 54EC as the investment was made within six calendar months. 3. Direction for Re-examination and Re-verification of the Exemption Claimed under Section 54EC: The Pr. CIT directed the AO to re-examine and re-verify the exemption claimed under Section 54EC. The Tribunal found that the AO had already examined the veracity of the assessee's claim and allowed the exemption correctly. Therefore, the Tribunal quashed the Pr. CIT's order under Section 263, deeming it unnecessary. 4. Alleged Excess Exemption Claimed under Section 54EC: The Pr. CIT alleged that the assessee claimed an excess exemption of ?25,80,000 under Section 54EC. The Tribunal found that the assessee's investment in Rural Electrification Corporation Ltd. Bonds was made within six calendar months from the date of the sale deed, thus complying with Section 54EC. The Tribunal concluded that there was no violation of the provisions, and the AO's order was not erroneous. 5. Allegation of Double Deduction under Section 54EC: The Pr. CIT observed that the exemption under Section 54EC was allowed twice for an amount of ?3,90,000. The Tribunal acknowledged that this might be a mistake apparent from the record and directed the AO to examine and rectify this under Section 154 of the Act. If the amount was indeed allowed twice, the AO was instructed to disallow the excess and grant the exemption in accordance with the law. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the order passed under Section 263 by the Pr. CIT. The Tribunal directed the AO to rectify any mistake regarding the double deduction under Section 54EC as per Section 154 of the Act. The order was pronounced in the open court on 15/11/2019.
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