9911796707
TMI Blog2020 (12) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer for determination of cost of construction for the purpose of calculating of eligible deduction under section 54F of the Act is incorrect. 3. In the facts and in the circumstances of the case, Ld. Pr. CIT- I, Indore erred in directing Ld. Assessing Officer to allow deduction under section 54F of the act proportionately when such an action is covered by the provisions of section 154of the Act at the end of Ld. Assessing officer. 4. In the facts and in the circumstances of the case, Ld. Pr. CIT- I, Indore erred in setting aside the order to the file of Ld. Assessing officer with a direction to pass a fresh order by invoking the provisions of section 263 of the Act. 5. The appellant craves leave to add, amend, alter or otherwise raise any other ground of appeal." 2. Briefly stated facts are that in this case the assessment was completed u/s 143(3) of the Income Tax Act 1961(hereinafter referred as the Act) vide order dated 23.03.2016. The assessing Officer computed total income at Rs. 16,50,920/-. Subsequently, the Ld. Pr. CIT after examining the report found that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in the return and balance Rs. 6,54,892 was added while making the assessment 4. Ld. AO allowed the claim on being satisfied with the explanation of assessee, on an enquiry made during the course of assessment proceedings. Thus, the decision of Ld. AO cannot be held to be erroneous. 5. Distinction is to be appreciated between lack of enquiry and inadequate enquiry. If there was any enquiry, even inadequate that would not by itself give occasion to Ld. Pr. CIT to pass orders u/s 263, merely because he has different opinion in the matter. It is only in cases of "lack of enquiry" that such a course of action would be open for the Ld. Pr. CIT. 6. Reliance is placed on the following decisions - a. Hon'ble jurisdictional ITAT Indore Bench in the case of Vinod Bhandari in ITA 350/Ind/2017 & others, order dtd 20.03.2020: "43. Hon'ble Gujarat High Court in the case of Arvind Jewellers (259 ITR 502) held that: "Held, that the finding of fact by the Tribunal was that the assessee had produced relevant material and offered explanations in pursuance of the notices issued under section 142(1) as well as section 143(2) of the act and after considering the material and explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, namely order of the Ld. A.O stated to be erroneous and secondly it is prejudicial to the interest of revenue. But in the instant case wherein we have examined each and every issue raised by Ld. PCIT in the light of the reply filed by the assessee, information called by the Ld. A.O and the finding in the assessment order, we are of the considered view that under the given facts and in law the view taken by the AO in the order passed u.s143(3) of the Act dated 24.3.2015 seems to be reasonable and plausible which cannot be held as legally unsustainable and not in accordance with law. In our view it is passed with complete application of mind and thus it can neither be held as erroneous nor prejudicial to the interest of revenue. Therefore Ld. PCIT under the given facts and circumstances of the case erred in assuming jurisdiction u/s.263 of the Act since the Ld. A.O has made sufficient enquiry by way of questionnaire to which detailed reply have been filed from time to time and the Ld. A.O in the interest of revenue have also made addition of Rs. 7,74,12,941/- to the income disclosed by the assessee. It clearly appears that the Ld. A.O has applied his mind and therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly set aside assessment - Tribunal held that once inquiry was made, a mere non-discussion or non-mention thereof in assessment order could not lead to assumption that Assessing Officer did not apply his mind or that he had not made inquiry on subject and this would not justify interference by Commissioner by issuing notice under section 263 - Whether since department could not place anything to show that findings recorded by Tribunal were perverse or contrary to record, invoking of revision proceedings was unjustified - Held, yes [Para 13] [In favour of assessee]" [emphasis supplied] d. Hon'ble Delhi High Court in the case of Vikas Polymers - [2010] 194 Taxman 57 - order pronounced on 16.08.2010 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1982-83 - Whether for exercising power under section 263, it is a prerequisite that Commissioner must give reasons to justify exercise of suo motu revisional powers by him to reopen a concluded assessment and exercise of power being quasi-judicial in nature, reasons must be such as to show that enhancement or modification of assessment or cancellation of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer cannot be held to be erroneous simply because in his order he does not make any elaborate discussion in that regard - Held, yes" [emphasis supplied] B. Application of mind by the Ld. AO 1. In the instant case, Ld. AO during the assessment proceedings has made enquiries related to claim of deduction u/s 54B and 54F as is evident from the assessment order and the entries made in the order sheet. After due verification of the evidences and proofs placed on record and taking in to account the valuation reports by Ld. DVO and the Authorized Valuer, the Ld. AO made the addition and assessed the total income. 2. It is not a case of non-application of mind by the Ld. AO. It is also not a case where Ld. AO has allowed the relief without enquiring in the claim made by the assessee. Invoking provisions of section 263 is not in accordance with the law. 3. Reliance is placed on following judicial precedents - a. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Ratlam Coal Ash Co. - [1987] 34 taxman 443 - order pronounced on 17.08.1987 - HELD - "It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had not brought out material or evidence to rebut same, cash credits were not income of assessee-firm and, accordingly, set aside order of Commissioner passed under section 263 - Whether in view of finding of fact recorded by Tribunal, no substantial question of law arose out of impugned order - Held, yes - Whether, therefore, instant appeal was to be dismissed - Held, yes" [emphasis supplied] d. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983-84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry - Held, no - Whether further, on facts and law, view taken by Assessing Officer was one of possible views and, therefore, assessment order passed by Assessing Officer could not be held to be prejudicial to interest of revenue - Held, yes - Whether, therefore, Tribunal was justified in setting aside order of Commissioner - Held, yes" [emphasis supplied] f.Hon'ble Delhi High Court in the case of Hindustan Marketing & Advertising Co. Limited - [2011] 196 Taxman 368 - order pronounced on 21.09.2010 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment years 1983-84 and 1984-85 - Assessee- company was incorporated with an object of carrying on business of marketing agents and to render marketing services, etc. - For relevant assessment years, assessee filed its returns and assessments were framed - Commissioner set aside assessment orders holding that ITO had not made adequate and detailed investigations/enquiries in respect of a major area of assessee- company's operation and source of its income - Tribunal quashed revisional order passed by Commissioner - Whether in view of fact that ITO had made reasonably ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. We therefore set aside the finding of Pr. Commissioner of Income Tax on this issue as it was a mere change of opinion which would not enable Ld. Pr. Commissioner of Income Tax to exercise jurisdiction u/s 263 of the Act as the Ld. A.O had considered the details and the explanation offered by the assessee before accepting the claim. We therefore reinstate the action of the Ld. A.O allowing the assessee's claim of exemption u/s 10A of the Act at Rs. 12,51,79,200/- against the profits earned from SEZ units." [emphasis supplied] i. Hon'ble Bombay High Court in the case of Reliance Communication Limited - [2016] 69 taxmann.com 103 - order pronounced on 28.03.2016 - HEAD NOTE - "Section 68, read with section 263, of the Income-tax Act, 1961 - Cash credits (FCCBs) - Assessee raised funds by way of FCCBs during year under consideration - Assessing Officer completed assessment accepting income declared by assessee - Commissioner noticed that no investigation was carried out by Assessing Officer to establish name and address, genuineness and creditworthiness of actual subscribers to FCCBs in terms of section 68 - He thus passed a revisional order setting aside assessment - Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the term 'cost of any improvement' u/s 55(1)(b) which means all expenditure of capital nature incurred in making any additions or alternations to the capital asset by the assessee after it became his property. For expenditure to be termed as 'cost of improvement' the most essential element is that there should a time gap between incurring the expense and the acquisition of capital asset. If there is a time gap between incurring of expenses and its acquisition only then will the expense be treated as 'cost of improvement'. In the instant case, there is no such time gap between the acquisition of capital asset (i.e. construction of a new residential house) and incurring expense towards installation of electric equipment and other items which works out to a total investment of Rs. 11,79,768. There exists a proximate cause. Thus, this amount of Rs. 11,79,768 forms part of 'cost of new asset'. 2. Provisions of section 54F read - "......................or has within a period of three years after that date constructed, one residential house in India (hereinafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with " Provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable, but in a case where the assessee has purchased "new asset", which is not in a habitable condition, the expenses incurred by the assessee to make it habitable should be allowed under section 54(2) of the Act......" [emphasis supplied] In the instant case, the investment made by assessee of Rs. 11,79,768 towards installation of household items like Air Conditioner, Sofa sets, etc forms an integral part of the new residential house so as to put it in a habitable condition. This cost incurred is an integral part of cost of construction of the new residential house. D. Non - application of mind by Ld. Pr.CIT 1. Order u/s 263 dated 26.03.2018 page 6, 2nd para - "It may be mentioned that collector, Indore 2015-16 guideline rate of Rs. 10,000/- per sq. mt. have been taken for determining the basic cost of construction of Rs. 24,53,520/-. This has been mentioned in valuation report itself. This makes clear that this was valuation as on 15.01.2016 while the assessment pertains to A.Y. 2013-14. Accordingly, the above value has been incorrectly adopted by the AO thereby making the assessment erroneous and prejudicial to interest of revenue. The AO should have determined the corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under the law. It cannot be read as to a "mistake" which is rectifiable under the provisions of section 154 either suo moto or on the application of the assessee. Error committed by the Assessing Officer must be an error of jurisdiction, for if the order is not kept confined to jurisdictional error, no distinction would be left between the corrective powers conferred under section 154 and the revisionary powers exercisable under section 263. If such a distinction between the corrective powers and revisionary powers is not recognized, every incorrect order would become amenable to revisionary jurisdiction and the fall out would be that revisionary jurisdiction would then become exercisable even in case where the provisions for rectification are attracted. Such an exercise of provisions of section 263 will lead to making the provisions of section 154 redundant. This surely was never the intent of the legislature. 2. Rectification u/s 154 can be done suo motto either by Assessee himself or by Assessing Officer. In the instant case, during the impugned year assessee sold an agricultural land and subsequently made investment by purchasing another agricultural land and also con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of sale of agricultural land b. investment made towards purchase of another agricultural land (for which deduction claimed u/s 54B is not under doubt by Ld. Pr. CIT) c. investment made towards cost of new residential house (Ld. Pr. CIT has taken FMV of cost of construction of building only for the purpose of computation of deduction u/s 54F). All the bills and vouchers as evidence for the investment in construction of residential house were produced before Ld. AO and duly verified. 4. Ld. Pr. CIT in order passed u/s 263 has stated at para 4.4 - "In view of above discussion it is apparent that the order passed by AO is erroneous and prejudicial to interest of revenue in regard to determination of cost of new asset acquired as well as computation of eligible amount U/s 54F of I.T.Act." Ld. Pr. CIT has failed to make out of there is any jurisdictional error. What has been pointed out by Ld. Pr.CIT is only computational error rectifiable u/s 154. 5. Thus, twin conditions required to invoke the provisions of section 263 i.e. order should be erroneous and also prejudicial to the interest of revenue are not satisfied. Considering the above facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee claimed to have constructed a new residential house. He has claimed to have invested total of Rs. 75,58,768/- by the 31.07.2013 (i.e. before date of filing of return). On perusal of the record it is seen that the assessee has submitted a valuation report by the Registered valuer who has valued the cost of construction in respect of the residential property at Rs. 63,79,000/-. Apart from this the assessee has submitted a list of items like household installations, AC's, Sofa electrical equipment of value of Rs. 12 lacs. It is observed that the valuation of the property has been done as per Collector guidelines for FINANCIAL YEAR 2015-15 expenses on account of purchase of air conditioners, fitting of AC, Wallpapers, curtains, so far and runners are not allowable expenditure under section 54F. The expenditure on these items was done before the date of valuation which is already included in the valuation report. Therefore, the extent of deduction allowed against these expanses in the new property acquired was not in order. Further, the computation of income was done allowing deduction of entire amount invested i.e. Rs. 75,58,768/- under section 54F, which was not correct. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore is as under- Total Sale consideration u/s 50C 12654892/- Long Term Capital Gains 12228892/- Amount invested in construction of house till 31.07.2013 7558768/- Allowable deduction U/S 54F (12228892 x 7558768/12654892) 7304318/- Accordingly the AD has allowed excess deduction of Rs. 254450/-. B. Regarding your observation that, the amount of investment in the residential house which is eligible for deduction u/s 54F is Rs. 63,97,000/-, it is respectfully submitted that this figure of Rs. 63, 97, 0001- is not the amount actually invested in construction of residential house but is the fair market value (Cost of Construction only) as on 15.01.16 of the residential house belonging to the assessee as per the valuation report dt.16.02.16. It is very important to note here that the valuer has only made the valuation of cost of construction only. Therefore your observation that "AO was only to allowed proportionate amount of money actually invested (Rs. 63, 97, 000/-) is contrary to the facts of the case. The entire details of date wise investment in construction of residential house property was duly submitted before the AO during the assessment proceedings and is availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "long-term capital asset " means a capital asset which is not a short-term capital asset,* (ii) "net consideration ", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. The amount elegible for deduction u/s 54F is "cost of new asset" i.e.residential house and not the cost of construction only. Sir, it is a very common knowledge that a residential house means a house which is habitable. For making a house habitable, all the necessities required for living are to be installed. Air Conditioners, fitting of AC, wall papers, curtains, sofa and runners etc. are all necessities required for making a house inhabitable. Therefore all these things are part & parcel of a residential house The cost of new asset i.e. the residential house ought to include all the cost incurred for making a house inhabitable. Therefore your observation that the expenses on account 0/ purchase of Air Conditioners. fitting of AC, wall papers. curtains. sofa and runners etc. art not allowable expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be allowed u/s 54(2) of the Act. Reliance has also placed on the decision of Co-ordinate Bench in the case of Rajat B Mehta V/s ITO (2018) 90 taxmann.com 176 wherein it has been held that the expression used in statute is cost of the residential house so purchased and it does not necessarily mean that the cost of residential house must remain confined to the cost of civil construction alone. A residential house may have many other things, other than civil construction and including things like furniture and fixtures, as its integral part and may also be on sale as an integral deal. Further the Tribunal held that if these things are integral part of house being purchased, the cost of house has to essentially include the cost of these things as well. In such circumstances, what is to be treated as cost of the residential house is the entire cost of house and it cannot be open to the Assessing Officer to treat only the cost of only civil construction as cost of house and segregate the cost of other things as not eligible for deduction u/s 54. In this case it was not a composite deal, we find that the Ld. PCIT has also considered these case laws. However it is not clear whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
