2022 (6) TMI 152 - AT - Income Tax

Revision u/s 263 - indexed cost of construction disallowed - long term capital gain under section 50C - ascertaining the eligibility u/s. 54F - HELD THAT - The assessment order is completely silent on the aspect of exemption u/s.54F, which is integral to the computation and assessment of capital gain. There has been neither any enquiry by the AO on the different aspects of sec. 54F, nor, resultantly, any finding qua the same by him. Shri Gupta, the assessee, also could not during hearing show us any enquiry having been made in its respect in assessment, though would plead as to the correctness of the claim u/s. 54F as per the return of income. That being a matter subsequent, i.e., to be determined after due inquiry and verification, is however not relevant. There is also, as the competent authority states, income from these two properties arising to the assessee, indicating it to be her properties and in her control and possession. The addition u/s. 50C (in assessment) is a matter distinct and apart from the application of s. 54F, and in any case was the subject matter of appellate proceedings. It is the enquiry during assessment and not that in the appellate proceedings, much less de hors the record, that is relevant. The Hon ble Delhi High Court in Gee Vee Enterprises 1974 (10) TMI 29 - DELHI HIGH COURT held, inter alia, that the income tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income -tax- Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. In view of the foregoing discussion, we find no infirmity in the order passed by the ld. Pr. CIT u/s. 263 of the Act. - Decided against assessee.

Issues:

1. Condonation of delay in filing the appeal.
2. Disallowance of indexed cost and addition of differential amount for long-term capital gain.
3. Set aside of assessment order under section 263 for deficiencies in assessment.
4. Failure to make necessary inquiries and apply proper law in assessment.
5. Observations regarding the eligibility under section 54F for exemption.
6. Lack of examination of allowability of provision under section 54F in the assessment order.
7. Relevance of enquiry during assessment for determining correctness of claims.
8. Upholding the order passed by the Principal Commissioner of Income Tax under section 263.

Analysis:

1. The judgment addressed the issue of condonation of delay in filing the appeal. The appeal was delayed by 263 days, but the delay was condoned based on a decision by the Apex Court providing relaxation from limitation under all laws up to a specified date. The delay was accordingly condoned.

2. The judgment discussed the disallowance of indexed cost and addition of a differential amount for long-term capital gain. The Assessing Officer disallowed the claim of indexed cost based on discrepancies in the sale deeds, leading to the addition of the differential amount and assessment of long-term capital gain accordingly.

3. The judgment focused on the set-aside of the assessment order under section 263 due to deficiencies in the assessment process. The Principal Commissioner of Income Tax observed shortcomings in the assessment, directing the Assessing Officer to conduct necessary inquiries and pass a speaking order after providing the assessee with an opportunity to be heard.

4. The judgment highlighted the failure to make necessary inquiries and apply proper law in the assessment process. The Principal Commissioner of Income Tax found the assessment erroneous and prejudicial regarding the issue of the allowability of deduction under section 54F, emphasizing the importance of proper application of law and thorough examination during assessment.

5. The judgment addressed observations regarding the eligibility under section 54F for exemption. It was noted that the assessment order was silent on the aspect of exemption under section 54F, which is crucial for the computation and assessment of capital gain. The lack of inquiry and findings on this matter during assessment was deemed problematic.

6. The judgment discussed the lack of examination of the allowability of the provision under section 54F in the assessment order. The Assessing Officer did not adequately investigate the eligibility under section 54F, leading to deficiencies in the assessment process and subsequent intervention by the Principal Commissioner of Income Tax under section 263.

7. The judgment emphasized the relevance of conducting inquiries during assessment to determine the correctness of claims. It was highlighted that the assessment officer has a duty to investigate the facts stated in the return, and failure to do so can render the assessment erroneous. The judgment cited a previous ruling emphasizing the duty of the officer to conduct further inquiries when necessary.

8. Finally, the judgment concluded by upholding the order passed by the Principal Commissioner of Income Tax under section 263. The decision to set aside the assessment order was deemed appropriate based on the deficiencies identified in the assessment process. As a result, the assessee's appeal was dismissed, and the order was pronounced in open court on a specified date.

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