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2020 (6) TMI 430 - AT - Income TaxRevision u/s 263 - deduction u/s.54F and section 54 - HELD THAT - The twin conditions are that the order of the AO must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Whether the actions of the AO can be termed as prejudicial to the interest of Revenue? - In assessee s case original assessment was completed much prior to search and seizure therefore the assessment year under consideration, that is, A.Y. 2010-11 is unabated and in unabated proceedings, the AO cannot disturb the findings given thereon in the original assessment unless there is incriminating material unearthed by the search team, since in assessee s case under consideration there is no incriminating material therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue. AO has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the AO cannot be treated as erroneous and prejudicial to the interest of the revenue as held in Malabar Industries Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME COURT . Since the order of the AO cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is null in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. - Decided in favour of assessee.
Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act. 2. Examination of the allowability of deduction under sections 54 and 54F of the Income Tax Act. 3. Determination of whether the acquisition of the new flat is a case of "construction" or "purchase." 4. Assessment of whether the original assessment order was erroneous and prejudicial to the interest of the Revenue. 5. Consideration of whether additions could be framed under section 153A of the Act without incriminating materials found during the search. Detailed Analysis: 1. Validity of the order passed under section 263 of the Income Tax Act: The Principal Commissioner of Income Tax (PCIT) exercised jurisdiction under section 263 of the Income Tax Act, setting aside the assessment order passed by the Assessing Officer (AO) under sections 153A/143(3) for the assessment year 2010-11. The PCIT's order was challenged on the grounds that the AO had already examined the issue of allowability of deduction under sections 54 and 54F during the original assessment. The Tribunal noted that the PCIT must satisfy twin conditions before exercising revisional jurisdiction: the order must be erroneous and prejudicial to the interest of the Revenue. 2. Examination of the allowability of deduction under sections 54 and 54F of the Income Tax Act: The PCIT found that the AO had allowed deductions under sections 54 and 54F without properly examining whether the acquisition of the new flat was a case of "construction" or "purchase." The PCIT noted that the assessee had booked the flat in May 2004 and paid installments till March 2010, which indicated a case of construction rather than purchase. The Tribunal observed that the AO had accepted the assessee's claim based on the registered purchase deed dated 09.03.2009 without further investigation. 3. Determination of whether the acquisition of the new flat is a case of "construction" or "purchase": The PCIT concluded that the acquisition of the new flat was a case of construction, as the assessee had booked the flat with the builder and paid installments over several years. This conclusion was based on judicial decisions and CBDT Circulars, which clarified that booking a flat under construction is considered a case of construction. The Tribunal found that the AO had not examined this aspect and had allowed the deduction based on the date of possession. 4. Assessment of whether the original assessment order was erroneous and prejudicial to the interest of the Revenue: The Tribunal referred to the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which held that an order is erroneous if it is based on incorrect facts, incorrect application of law, or without proper investigation. The Tribunal noted that the AO had not investigated the nature of the acquisition of the new flat, making the original assessment order erroneous. However, the Tribunal also considered whether the order was prejudicial to the interest of the Revenue. 5. Consideration of whether additions could be framed under section 153A of the Act without incriminating materials found during the search: The Tribunal examined whether the AO could disturb the findings of the original assessment without incriminating materials found during the search. Citing the Delhi High Court's decision in CIT vs. Kabul Chawla, the Tribunal held that in the absence of incriminating material, the AO cannot make additions for a concluded assessment year. Since no incriminating material was found during the search, the Tribunal concluded that the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue. Conclusion: The Tribunal quashed the PCIT's order under section 263, holding that the original assessment order was not erroneous or prejudicial to the interest of the Revenue. The Tribunal also noted that the AO had adopted one of the permissible views in law and that the assessment could not be revised without incriminating material found during the search. The appeal of the assessee was allowed.
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