9911796707
TMI Blog2015 (9) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the courses permissible in law and the Commissioner do not agree with him, it cannot be treated as erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law Thus Assessing Officer examined the issue of long term capital gain in accordance with section 54 of the Act at assessment stage, therefore, assessment order cannot be said to be erroneous in so far as prejudicial to the interests of the assessee. The learned Commissioner of Income Tax was, therefore, not justified in cancelling the assessment order under section 143(3) of the Act. He should not have exercised the jurisdiction under section 263 of the Income Tax Act. - Decided in favour of assessee, X X X X Extracts X X X X X X X X Extracts X X X X ..... in the notice. It was further noted that out of the above declared long term capital gains of ₹ 3,70,43,706/-, the assessee has claimed benefit of exemption under section 54 of the Act to the tune of ₹ 3,56,96,300/-, whereas the assessee had purchased House No.54, Sector 69, Mohali for consideration of ₹ 1,65,00,000/- on 18.6.2009 and incurred expenses of ₹ 9,80,000/- on stamp duty. Further the assessee also purchased a 12 marla plot No.1610, Sector 79, Mohali for consideration of ₹ 69,00,000/- on 23.7.2009 and spent ₹ 10,82,812/- for re-allotment of the same from GAMADA. It was, therefore, noted that overall the assessee claimed wrong exemption of ₹ 3,56,96,300/- against the total investment of ₹ 2,54,62,812/- under section 54 of the Act. The learned Commissioner of Income Tax also noted in the show cause notice that the assessee had sold farm house, therefore, cannot claim deduction under section 54 of the Act and further the assessee is not entitled for deduction under section 54F of the Act because of the proviso provided in the above section 54F of the Act. It was further noted in the notice that the assessee had failed to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed) is not the real. For claiming exemption u/s 54, the assets sold must be 'residential house' and thus the order passed u/s 143(3) by the assessing officer allowing exemption u/s 54 to the assessee is erroneous and prejudicial to the interest of the revenue. 3.3 Not withstanding the above, though the assessee has claimed vide para 2(b) of his reply that he has invested ₹ 1,00,00,000/- in the FDR under 'Capital Gain Scheme' but there is no documentary evidence on the assessment record and the assessee has also not submitted now any proof of the amount of ₹ 1,00,00,000/- invested in the 'Capital Gains Account'. So, this plea of the assessee has also remained unsubstantiated by him. 3.4 The assessee, vide para 2(c) of his reply has again submitted that amount of ₹ 8,70,000/- was given to one Shri Kesar Singh through bank on 07.11.2008. But there is still no document on record to prove the genuineness of this claim as assessee has not brought on record any evidence regarding rendering of any service by the said person or even of any involvement of this person in any manner for sale of the said property during assessment proceedings as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Assessments". The assessee's contention is misplaced. The Hon'ble Supreme Court in this case (supra ) has rather observed that "In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue." The assessee has also stated that "It is therefore most respectfully prayed that the notice issued under section 263 does not fulfill the requisites attached to it and therefore be vacated in the interest of justice." The assessee's contention is not correct because the assessing officer has not made enquiry on the various issues as detailed in the notice dated 10.01.2014. Hence, the order is erroneous in so far as prejudicial to the interest of revenue. Similar view was taken by the Hon'ble Allahabad High Court in the case of Swarup Vegetable Products Industries Limited v. Commissioner of Income Tax (1990) 187 ITR 412 where it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 54 of the Act and made part addition. Therefore, the learned Commissioner of Income Tax should not have revised the assessment order. The learned counsel for assessee referred to various details and replies placed on the Paper Book and also filed copy of acknowledgement of filing of the returns of income alongwith computation of income of earlier years in support of the contention. The learned counsel for assessee also submitted that the issue of two properties purchased by the assessee was not raised in show cause notice issued by the learned Commissioner of Income Tax under section 263 of the Act and no findings have also been recorded by the learned Commissioner of Income Tax. Therefore, such issue cannot be raised by the learned D.R for the Revenue during the course of arguments. The learned counsel for assessee submitted that the learned Commissioner of Income Tax merely raised the issue of difference of ₹ 1 crore, which was invested under Capital Gain Scheme, for which proper evidence was filed before the Assessing Officer and was also explained before the learned Commissioner of Income Tax. Therefore, the assessment order could not be said to be erroneous in so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidential houses and, therefore assessee is not entitled to exemption under s. 54." (v ) Decision of the Hon'ble Punjab & Haryana High Court in the case of Pawan Arya v. CIT, 237 CTR 210 , in which it was held that : "Capital gains- Exemption under s. 54-Investment in two houses-Exemption under s. 54 is available in respect of one house only - Tribunal was therefore justified in holding that the assessee was not entitled to exemption in respect of two independent residential houses situated at different locations-CIT v. D. Ananda Basappa (2009) 223 CTR (Kar) 186 :(2009) 309 ITR 329 (Kar) distinguished." (vi ) Order of the I.T.A.T. Mumbai (Special Bench) in the case of ITO v. Ms. Sushila M. Jhaveri, 107 ITD 321 in which it was held that : "Expression "a residential house" in ss. 54 and 54F means one residential house; assessee having invested capital gains in two residential houses situated in different localities of the same city, she was entitled to exemption under s. 54/54F in respect of investment in one house as per her choice but was not entitled to exemption in respect of investment in both the residential houses." 7. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land is mentioned as 'gairmumkin shed', the copy of the same is filed on pages 5 to 19 of the Paper Book. In the sale deed the property described was referred to as is mentioned in jamabandi for the year 2003-04. The copy of the jamabandi is also placed on record alongwith translated copy in which the property in question is shown as "gairmumkin shed and house". It, therefore, appears that the learned Commissioner of Income Tax has not properly gone through the sale deed of the property in question because when the details of the property are mentioned as per jamabandi for assessment year 2003-04 under sale, the learned Commissioner of Income Tax should have also gone through the copy of the jamabandi for the year 2003-04 as noted above and since the jamabandi shows the property in question as "gairmumkin shed and house", therefore, there is no question of considering it to be only 'gairmumkin shed'. The assessee has also placed copy of the acknowledgement of furnishing of the returns from assessment years 2003-04 to 2008-09 alongwith computation of income, in which the assessee has declared rental income from the property in question sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 54F of the Act would not apply in the case of the assessee. Thus this objection of the learned Commissioner of Income Tax would not be relevant and is also against the computation of income filed by the assessee alongwith the return of income, copy of which is filed at page 22 of the Paper Book. 10. The learned Commissioner of Income Tax further objected to the investment in a sum of ₹ 3,56,96,300/- as according to him, the total investment made by the assessee under section 54 of the Act was ₹ 2,54,62,812/-. The assessee explained before the learned Commissioner of Income Tax that the investment was made in the FDR under Capital Gain Scheme for ₹ 1 crore and certain other investments made by the assessee for availing benefit under section 54 of the Act as explained in the reply given before the Assessing Officer during the scrutiny proceedings, have not been considered while issuing notice under section 263 of the Act. The correct details of investment made under section 54 of the Act as explained by the assessee is reproduced at page 4 of the impugned order, in which the assessee has given complete details of investment made in the properties an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax was not justified in taking adverse view against the assessee on this issue. 12. The learned Commissioner of Income Tax further noted that the assessee has also failed to provide any corroborative evidence for incurring ₹ 4,50,000/- and ₹ 12,00,000/- in financial years 1997-98 and 1998-99 respectively for construction purposes under the head "cost of construction". The assessee explained that the construction was raised so many earlier years back and the Assessing Officer after discussing the issue at length has made addition of ₹ 2 lacs on this issue. Therefore, when the Assessing Officer examined the issue in detail, the learned Commissioner of Income Tax should not substitute the opinion of the Assessing Officer with his opinion when part addition is made by the Assessing Officer on this issue and when the return of income shows that the assessee earned rental income from the house property, it should have been inferred that the assessee has raised construction on the farm house. Therefore, the view of the Assessing Officer was correct in following the rule of preponderance of probabilities. Therefore, the learned Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax. The reply of the assessee dated 29.1.2014 is quoted in detail in the impugned order supports the case of the assessee that each and every objection raised by the learned Commissioner of Income Tax have been properly explained which were also taken into consideration by the Assessing Officer. Therefore, if the learned Commissioner of Income Tax was not satisfied with the reply of the assessee, he should have called for further explanation of the assessee and should have gone into the details of material produced before him as well as available on assessment record. The learned Commissioner of Income Tax, however, failed to consider the reply of the assessee in proper perspective. Since the explanation of the assessee in response to the notice under section 263 of the Act has not been considered by the learned Commissioner of Income Tax in proper perspective, therefore, the order of revision without considering the explanation of the assessee would not be valid. We rely upon the decision of the Hon'ble Gauhati High Court in the case of Smt. Lila Choudhury v. CIT & Others, 289 ITR 226 in which it was held as under : "Held, that in the order the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissing the appeal, that the order of the Tribunal did record the fact that specific queries were made during the assessment proceedings with regard to the details of expenditure claimed under the head "miscellaneous expenses" aggregating to ₹ 2.94 crores. The assessee had responded to the queries and on consideration of its response, the Assessing Officer held that only an amount of ₹ 17.98 lakhs incurred on account of repairs and maintenance out of ₹ 2.94 crores was capital expenditure. This itself would an indication of application of mind by the Assessing Officer while passing the order. The fact that the assessment order did not contain any discussion with regard to the balance amount of expenditure of Rs, 1.76 crores, i.e., ₹ 2.94 crores less ₹ 17.98 lakhs claimed as revenue expenditure would not by itself indicate non- application of mind to this issue by the Assessing Officer in view of the specific queries made during the assessment proceedings and the assessee's response to it. Moreover, from the nature of expenditure as explained by the assessee to the Assessing Officer during the assessment proceedings the view that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an issue cannot be raised before the Tribunal. We agree with then submission of the learned counsel for assessee that the issue which is not raised in the show cause notice under section 263 of the Act could not be subject matter of revision by the learned Commissioner of Income Tax. The Hon'ble Madras High Court in the case of CIT v. Smt. R.G. Umaranee, 262 ITR 507, in which it was held as under : "Held, (i ) that in the absence of any notice by the Commissioner to treat the cost of construction of the building as undisclosed income of the assessee it was not open to the Commissioner to hold that the cost of construction of the building would represent undisclosed income of the assessee and hence the Commissioner was not justified in directing the Income-tax Officer to initiate an enquiry regarding the cost of construction of the building, and after ascertaining the valuation, treat the unexplained investment as the undisclosed income of the assessee." 19. In the present case, this issue is not raised in the show cause notice under section 263 of the Act as well as the learned Commissioner of Income Tax did not pass any order. Therefore, the learned CIT DR could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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