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2022 (8) TMI 959 - AT - Income TaxRevision u/s 263 by CIT - Deduction u/s 54F - HELD THAT - When ld. PCIT concluded that the assessee was wrongly taxed for the capital gains which did not accrue to her, then ld. PCIT had no jurisdiction to proceed further under section 263 of the Act and examine the deduction u/s 54F. There was error of taxing wrong person but there was no prejudice caused to the revenue. The ld. PCIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent then Section 263 cannot be invoked. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which ld PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT We do not concur with the findings of the ld. PCIT. Thus the order passed u/s 263 of the Act, by the ld. PCIT is quashed. Hence, the appeal of the assessee is allowed.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Legality of the Principal Commissioner of Income Tax's (PCIT) order under Section 263 of the Income Tax Act. 3. Examination of the capital gains tax liability and deduction under Section 54F. 4. Determination of the rightful owner for capital gains tax purposes. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal by the assessee was delayed by 62 days due to the lockdown. The assessee filed a condonation application along with a Supreme Court order supporting the delay. The Revenue had no objection to the condonation. The Tribunal found merit in the assessee's prayer and condoned the delay, allowing the appeal to proceed. 2. Legality of the PCIT's Order under Section 263 of the Income Tax Act: The assessee challenged the PCIT's order under Section 263, which set aside the original assessment order under Section 143(3). The assessee argued that the PCIT's action was "illegal, unjustified, arbitrary and against the facts of the case." The Tribunal examined whether the PCIT had jurisdiction to invoke Section 263, which requires the order to be both erroneous and prejudicial to the interests of the Revenue. 3. Examination of the Capital Gains Tax Liability and Deduction under Section 54F: The assessee had filed a revised return declaring a total income of Rs. 10,76,610, which included capital gains from the sale of an immovable property. The PCIT directed the Assessing Officer (AO) to verify the taxability of the capital gains and the claim of deduction under Section 54F. The AO had accepted the revised return after verification, finding no adverse inference. 4. Determination of the Rightful Owner for Capital Gains Tax Purposes: The PCIT observed that the property was sold by the assessee in the capacity of Power of Attorney holder for her husband, and thus, the capital gains should be taxed in the husband's hands. The PCIT cited judicial precedents, including CIT vs. Shri C. Sugumaran and Shri Gyan Chand Agarwal, which held that capital gains should be taxed in the hands of the real owner, not the Power of Attorney holder. The Tribunal noted that the PCIT's notice and order were conflicting. While the PCIT initially concluded that the assessment should be on a protective basis, she later directed the AO to verify the tax liability. The Tribunal found that the PCIT had no jurisdiction to proceed under Section 263 once she concluded that the assessee was wrongly taxed. The Tribunal emphasized that for Section 263 to be invoked, the order must be both erroneous and prejudicial to the Revenue. Since the AO had adopted a permissible course of action, the PCIT's order was not sustainable. Conclusion: The Tribunal quashed the PCIT's order under Section 263, finding that it did not meet the twin conditions of being erroneous and prejudicial to the interests of the Revenue. The appeal by the assessee was allowed, and the original assessment order was upheld.
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