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2021 (9) TMI 853 - AT - Income TaxRevision u/s 263 - initiating the proceedings under section 147 - deduction claimed u/s 54B - HELD THAT - Whether the error highlighted by the learned Pr. CIT under section 263 of the Act causes any prejudice to the interest of revenue. In the case on hand the assessee has declared her amount of share in the sale consideration in the joint property under dispute amounting to ₹ 36 lakh- whereas the learned Pr. CIT has held that the amount attributable to the assessee in the sale consideration stands only. Admittedly, there is no dispute in the total value of the sale consideration as well as the cost of acquisition - if we increased the sale consideration in the hands of the assessee then simultaneously effect should also be given in the hands of the co-owner being the father of the assessee by decreasing the corresponding sale consideration in his hands. Thus effectively, there will not be any benefit to the revenue. Accordingly, there is no prejudice to the revenue even if there is error in the assessment order and consequently no revision is required under section 263 of the Act. Reopening was made on the allegation that the assessee has understated the amount of sale consideration of the property and therefore the AO framed the assessment under section 143(3) read with section 147 of the Act considering the sale consideration declared by the assessee viz a viz the value adopted for the stamp duty purposes under section 50C of the Act. As such, there was no issue in the re-assessment proceedings with respect to the provisions of section 54B of the Act. Now the controversy arises whether the learned Principal CIT can widen the scope of the assessment which was framed under section 147 of the Act by including any other income chargeable to tax which has escape assessment. We note that such power for expanding the scope of the proceedings under section 147 of the Act does not lie with the Principal Commissioner of Income Tax. Therefore, in our considered view the learned Principal CIT cannot expand the scope of the proceedings under section 47 of the Act by raising the issue of deduction under section 54B of the Act. Thus, in the case on hand, we find that there was no issue with respect to the exemption/deduction claimed by the assessee under section 54B of the Act in the proceedings initiated under section 147 of the Act. Accordingly, we find that the learned Principal CIT has exceeded his jurisdiction by holding the order of the AO as erroneous insofar prejudicial to the interest of revenue on this count i.e. deduction/exemption under section 54B of the Act. In view of the above, we hold that the order passed by the ld. Principal CIT under threat 263 of the Act is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.
Issues Involved:
1. Whether the Principal Commissioner of Income Tax (Pr. CIT) erred in holding the assessment framed under Section 143(3) read with Section 147 of the Income Tax Act as erroneous and prejudicial to the interest of revenue. 2. The correct computation of the assessee's share in the sale consideration of the property. 3. The validity of the deduction claimed under Section 54B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Erroneous and Prejudicial to the Interest of Revenue: The Pr. CIT held that the assessment framed under Section 143(3) read with Section 147 of the Act was erroneous and prejudicial to the interest of revenue. The Tribunal noted that for an order to be revised under Section 263, it must be both erroneous and prejudicial to the revenue. In this case, the Tribunal found that even if there was an error in the assessment order, it did not cause prejudice to the revenue. The assessee and her father were both taxed at the maximum marginal rate. Therefore, any increase in the assessee's share of the sale consideration would result in a corresponding decrease in the father's share, making the entire exercise tax neutral. 2. Computation of Assessee's Share in Sale Consideration: The Pr. CIT had increased the assessee's share in the sale consideration from ?36 lakhs to ?1,20,49,962 based on the area of the property held rather than the investment made. The Tribunal noted that the total sale consideration and the cost of acquisition were not in dispute. The Tribunal held that any increase in the assessee's share would require a corresponding decrease in the father's share, resulting in no prejudice to the revenue. Therefore, the revision under Section 263 was not justified. 3. Validity of Deduction under Section 54B: The Pr. CIT observed that the AO allowed the deduction under Section 54B without proper verification. The Tribunal noted that the reassessment proceedings under Section 147 were initiated due to differences in the sale consideration declared by the assessee and the value determined under Section 50C. The reassessment did not involve the deduction claimed under Section 54B. The Tribunal held that the Pr. CIT could not expand the scope of the reassessment proceedings under Section 147 to include issues not originally covered. Therefore, the Pr. CIT exceeded his jurisdiction in holding the assessment order as erroneous and prejudicial to the revenue on this count. Conclusion: The Tribunal quashed the order passed by the Pr. CIT under Section 263, holding that the twin conditions of being erroneous and prejudicial to the interest of revenue were not satisfied. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the Court on 03/09/2021 at Ahmedabad.
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