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TMI Blog2017 (2) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of section 154 of the Act. See Oriental Cotton Corporation and Mills Ltd vs CIT [1990 (10) TMI 9 - CALCUTTA High Court]. Thus we hold that the proceedings initiated u/s 154 of the Act to disturb the claim of exemption granted u/s 54 of the Act as bad in law. - Decided in favour of assessee - I.T.A No. 1466/Kol/2014 - - - Dated:- 2-12-2016 - Shri M. Balaganesh, AM And Shri S. S. Viswanethra Ravi, JM For the Appellant : Shri J.P.Khaitan, Sr. Counsel Shri S. Jhajharia, FCA For the Respondent : Shri Sallong Yaden, Addl. CIT ORDER Per Shri M. Balaganesh, AM This appeal by assessee is arising out of order of CIT(A)-XIV, Kolkata vide Appeal No. 176/CIT(A)-XIV/2012-13 dated 03.03.2014. Assessment was framed by ITO, Ward- 24(3), Kolkata u/s. 154/143(3)/147 of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2005-06 vide his order dated 26.11.2012. 2. The only issue to be decided in this appeal is as to whether the exemption granted to the assessee u/s 54 of the Act could be withdrawn in part in the proceedings u/s 154 of the Act in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005- 06. 3.2. The assessee vide letter dated 17.4.2012 requested the ld AO to inform the reason for initiating proceedings u/s 154 of the Act. The ld AO vide letter dated 25.7.2012 informed the reason for initiating proceedings u/s 154 of the Act as below:- As per subsection 2 of section 54 of IT Act the amount of capital gain of ₹ 35 lakhs which should be utilized or deposited by you for the purchase of new flat within the stipulated period i.e before the due date of furnishing of IT Return was 31.07.2005 in any branch of a public sector bank in accordance with the capital gain account scehme, 1988 (date of agreement for sale 29.07.2005). Now you are hereby requested to appear before me either you or your legal representative on 31.08.2012 at 2 P.M. of the aforesaid address along with the proof of evidence of claiming u/s 54F of the IT Act. Failure to comply of this letter from your part the rectified order wil be passed as per IT Act. 3.3. The assessee vide letter dated 28.8.2012 represented to the ld AO that section 154 of the Act cannot be invoked for launching an investigation into facts or calling for evidence, particularly in a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 26,2012 which was passed by the ITO under sections 154/143(3)/147 of the Income Tax Act, 1961 wholly without jurisdiction. (B) For that the purported findings of the CIT(A) that investment was made beyond three years and upholding the withdrawal of exemption granted under section 54 in proceedings under section 154 are wholly arbitrary, erroneous, unreasonable and perverse. (C) For that the proceedings under section 154 were not initiated on the aforesaid ground and in any event the issues raised were beyond the purview of section 154. 5. The ld AR argued that the assessee had proved that the monies of ₹ 35,48,500/- had been paid by the assessee before 31.3.2007 which is not disputed by the revenue. The decision of Hon ble Gauhati High Court clearly supports the case of the assessee that if the capital gain amount is reinvested within the due date stipulated u/s 139(4) of the Act, then the same should be construed as substantial compliance u/s 54(2) of the Act. In any case, he argued that the issue is highly debatable in as much as it has reached the corridors of various judicial forums on the following aspects :- a) Whether the reinvestment in anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate prescribed u/s 54(2) of the Act :- Prakash Nath Khanna Anr vs CIT Anr reported in (2004) 266 ITR 1 (SC) CIT vs V.R.Desai reported in (2011) 197 Taxman 52 (Ker) 7. We have heard the rival submissions and perused the materials available on record including the paper book comprising of pages 1 to 92. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. The short point that arises for consideration is as to whether the subject mentioned claim of exemption u/s 54 of the Act could be disturbed in the rectification proceedings u/s 154 of the Act or not in the facts and circumstances of the case. We find that the ld AO had sought to disturb the claim of exemption u/s 54 of the Act in the proceedings initiated u/s 154 of the Act by resorting to verification of all the facts , investigation into the said facts vis a vis the relevant dates prescribed in the section, whether the reinvestment in AJC Bose Road Property made by the assessee would amount to purchase or construction so as to reckon the time limit prescribed in the statute. All these issues are highly debatable in nature which in our considered opinion, could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r letting of the assets is exploitation of commercial assets in the course of carrying on of business has to be decided in the light of the facts and circumstances of each case, and each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. For doing so, the Income-tax Officer would be required to investigate the facts and then apply the law to those facts. In our opinion, the power under section 154 cannot be exercised by the Income-tax Officer in such a situation. The question is a debatable one. For the foregoing reasons, we are of the view that on the facts of this case the mistake that was sought to be rectified was not a mistake apparent from the record and the Tribunal was justified in confirming the orders of the authorities below. 7.1. Respectfully following the said Jurisdictional High Court decision, we hold that the proceedings initiated u/s 154 of the Act to disturb the claim of exemption granted u/s 54 of the Act as bad in law. Accordingly, the Grounds (A) , (B) and (C) raised by the assessee are allowed. 8. The Ground Nos. (D) (F) ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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