2023 (12) TMI 501 - AT - Income Tax

Revision u/s 263 - Reopening of assessment u/s 147 - sale of the immovable property and the resultant capital gain arising from such sale - claim of deduction u/s 54 - HELD THAT - AO has clearly stated that assessee s counsel has furnished written reply, sale deed, copy of purchase of property and computation of capital gain. In the said order sheet, AO has also called upon the assessee to furnish the details of exemption claimed under section 54 with supporting evidences. Thus, as could be seen from the order-sheet entries in the assessment record, the Assessing Officer has duly examined the issue relating to capital gain from sale of property as well as assessee s claim of deduction under section 54 of the Act. A perusal of the showcause notice issued u/s 263 of the Act as well as the order passed under the said provision clearly reveal that the revisionary authority has not expressed any doubt regarding the quantum of capital gain arising at the hands of the assessee and also the fact that such capital gain was invested in purchase/construction of residential house within the time limit prescribed u/s 54(1) of the Act. Only because the capital gain was not deposited in the capital gain account scheme, the revisionary authority has treated the assessment order to be erroneous and prejudicial to the interest of Revenue. In our view, learned PCIT has adopted a hyper-technical approach while dealing with the issue. When the basic conditions of section 54(1) has been satisfied, in our view, the assessee remains entitled to claim the deduction under section 54 of the Act. In any case of the matter, there is no prejudice caused to the Revenue as the assessee in terms of section 54(1) of the Act is entitled to deduction. We hold that exercise of power under section 263 of the Act to revise the assessment order in the instant case is invalid. Accordingly, we quash the order passed under section 263 of the Act and restore the assessment order.

Summary

Issues involved:
The judgment involves the issue of whether the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue due to the non-deposit of capital gain amount in the capital gain account scheme by the assessee, leading to a revision under section 263 of the Act.

Facts and Decision:
The assessee, a resident individual, sold an immovable property and declared income in the return. The Assessing Officer reopened the assessment under section 147 based on information received. The property was jointly owned and sold for a certain amount, resulting in capital gain. The assessee claimed exemption under section 54 of the Act by investing in a new property. The Assessing Officer accepted the return and completed the assessment. The Principal Commissioner of Income Tax (PCIT) found the capital gain amount was not deposited in the capital gain account scheme and set aside the assessment order, directing to disallow the deduction claimed under section 54. The Tribunal observed that the Assessing Officer thoroughly examined the issue of capital gain and the claim under section 54 during assessment. The revisionary authority did not doubt the capital gain or the investment made by the assessee. The Tribunal held that the PCIT's approach was hyper-technical and the basic conditions of section 54(1) were satisfied, entitling the assessee to claim the deduction. The exercise of power under section 263 was deemed invalid, and the order was quashed, restoring the assessment order. The appeal was allowed.

Conclusion:
The Tribunal found that the revisionary authority's decision to set aside the assessment order due to non-deposit of capital gain amount in the capital gain account scheme was invalid. The Tribunal upheld the assessee's entitlement to claim the deduction under section 54 of the Act, as the basic conditions were met. The assessment order was restored, and the appeal was allowed.