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TMI Blog2020 (12) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, 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 assessee had entered into with a contract with the contractor that included the cost of furniture and other fixtures. Ld. PCIT has also not brought any such evidence on record. Under these facts we modify the direction of Ld. PCIT to the extent that the Ld. Assessing Officer would allow the expenses incurred for furniture and Air Conditioners if it is part and parcel of the contract for construction of new house. This ground of the assessee is partly allowed. - ITA No.426/Ind/2018 - - - Dated:- 28-12-2020 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER Appellant by : Shri Girish Agrawal Miss Nisha Lahoti, ARs Revenue by : Smt. Ashima Gupta, CIT-DR ORDER PER KUL BHARAT, J.M: This appeal by the assessee is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation made in the order passed u/s 263 of the Act. 3. Aggrieved against this the assessee is in present appeal 4. Grounds No. 1 to 4 are against initiating proceedings u/s 263 of the Act and passing the impugned order, thereby directing the assessing officer to make assessment afresh. 5. Ground No.5 is general in nature which needs no separate adjudication. 6. Apropos to grounds No.1 to 4 Ld. counsel for the assessee reiterated the submissions as made in the written submissions. The submissions of the assessee are reproduced as under: A. Enquiry conducted by Ld. AO no lack of enquiry 1. Order sheet noting evidently demonstrates the detailed and extensive enquiry conducted by the Ld. AO on the issue raised by Ld. Pr. CIT in the instant revisionary proceedings u/s 263. Certified true copy of the same are placed on record. [PB 10-12] 2. Ld. AO has conducted proper enquiry to verify the entire transaction of sale of agricultural land and investment made towards construction of residential house. Ld. Pr. CIT has not pointed out any shortcoming in the verification conducted by Ld. AO so that the assessment order be treated as erroneous and prejudicial to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44. Hence, the preposition and ratio laid down by Hon ble Gujarat High Court is that, when the assessee had produced relevant material and offered explanation in pursuance of notices u/s 143(2) and 142(1) of the Act and after considering the material and explanations, the AO had come to a definite conclusion. Their Lordship further held that in this situation, since the material was there on record and the said material was considered by the AO and a particular view was taken, the mere fact that a different view can be taken should not be the basis for a valid action u/s 263 of the Act and therefore, dismissing the appeal of the revenue the Hon ble High Court held that the order u/s 263 of the Act was not justified and valid. 45. In the light of above judgments and applying the facts of the instant case and perusal of the assessment order, paper book and the note-sheet of the assessment proceedings show that the AO has raised several queries by way of note sheet entries and notices. The assessee submitted various relevant documents. It is also pertinent to note that the AO adjudicated the issue of queries and replies in regard to said claim by passing a detailed order. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 263 of the Act on the basis of issues raised in the show cause notice. Thus the order of Ld. PCIT of setting aside the assessment order u/s 143(3) of the Act under consideration are beyond the scope of Section 263 of the Act and hence not valid and we accordingly quash the relevant order passed by Ld. PCIT u/s 263 of the Act dated 30.3.2017 and restore the assessment order u/s 143(3) dated 24.3.2015. 46. In the result all the grounds raised by the assessee in appeal No.350/Ind/2017 are allowed. b. Hon ble Jurisdictional Bench of Indore ITAT in the case of Narottam Mishra [2015] 25 ITJ 206 Even this is not the case of the Ld. CIT that certain evidences were overlooked which were very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught for and examined by Commissioner, and thereafter, if Commissioner still feels that order is erroneous and prejudicial to interest of revenue, Commissioner may pass revisional orders - Held, yes - Whether if a query was raised during course of scrutiny by Assessing Officer, which was answered to satisfaction of Assessing Officer, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision - Held, yes [emphasis supplied] e. Hon ble Delhi High Court in the case of Ashish Rajpal [2009] 320 ITR 674 order pronounced on 14.05.2009 HEAD NOTE Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2002-03 - Whether merely because an assessment order does not refer to queries raised by Assessing Officer during course of scrutiny and response of assessee thereto, it can be said that there has been no enquiry and, hence, assessment is erroneous and prejudicial to interest of revenue - Held, no - Whether it is requirement of section 263 that assessee must have an opportunity of being heard in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering all the facts had completed the assessment. It was further held that in the circumstances of the case it could not be held that the ITO had made assessment without making proper enquiries. Accordingly, the Tribunal was justified in reversing the order passed by the Commissioner. [emphasis supplied] b. Hon ble Delhi High Court in the case of Anil Kumar Sharma [2010] 194 Taxman 504 order pronounced on 24.04.2010 Para 7 In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fell into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this Court. That being the position, the present case would not be one of 'lack of inquiry' and, even if the inquiry was termed as inadequate, following the decision in Sunbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified - Held, yes [emphasis supplied] e. Hon ble Delhi High Court in the case of Sunbeam Auto Limited [2010] 189 Taxman 436 order pronounced on 11.09.2009 HEAD NOTE Section 263 of the Income-tax Act, 1961 - Revision - Of order prejudicial to interest of revenue - Assessment year 2001-02 - Whether if while making assessment, Assessing Officer has made an inadequate enquiry , that would not, by itself, give occasion to Commissioner to pass order under section 263, merely because he has different opinion in matter, it is only in cases of ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether, therefore, impugned order of Tribunal was to be upheld - Held, yes [emphasis supplied] g. Hon ble Delhi High Court in the case of D.G. Housing Projects Ltd [2012] 20 taxmann.com 587 order pronounced on 01.03.2012 HEAD NOTE Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 2004- 05 - Assessee sold an immovable property and claimed capital loss after indexation - Commissioner had doubts about valuation and sale consideration received but he had not examined said aspect himself and had merely given a finding that order passed by Assessing Officer was erroneous as Assessing Officer had not properly examined consideration receivables - Whether Commissioner could not direct Assessing Officer to conduct further enquiry to verify and find out whether order passed was erroneous or not - Held, yes [In favour of assessee] h. Hon ble Jurisdictional Bench of Indore ITAT in the case of Flexituff International Limited ITA No. 282/Ind/2017 order pronounced on 14.05.2019 Para 18 .assessee made correct claim by firstly taking the benefit of Section 10A of the Act for the profits earned from SEZ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside revisional order - Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 11] [In favour of assessee] [emphasis supplied] j. Hon ble Andhra Pradesh High Court in the case of Dr. Kodela Siva Prasada Rao [2013] 29 taxmann.com 18 order pronounced on 20.11.2012 Para 12 From the above facts it is clear that the assessee had received a gift of ₹ 22,76,750/-in U.S. dollars from an NRI, N.Mohan and the assessee had filed two confirmation letters, one in December 2006 and another on 10-07-2007 given by the donor stating that he had gifted the above amount to the assessee, that the assessee is his close relative, that he is a man of means owning a software company of a net worth of US $ 25 million, that he had gifted during the year 2002-03 ₹ 2.00 crores to rebuild a government school, and got constructed a guest house for Sri Sitaramachandra Swami temple at Bhadrachalam. Copies of the income tax returns filed by the donor in USA were also filed by the assessee. Even though the assessee informed the department that the donor was available in India in December 2006 on account of the death ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew residential house to give it an adequate standard of living shall also form part of construction of residential house for the purpose of section 54F. A residential house ought to be a building in habitual state . Ld. Pr.CIT has not raised any doubt on the quantum of investment made/expense incurred and refers it only for the purpose of the computation of deduction u/s 54F. 3. Reliance is placed on following judicial precedents a. Hon ble Ahmedabad Bench of ITAT in the case of Rajat B Mehta [2018] 90 taxmann.com 176 order pronounced on 09.02.2018 Para 7 It is in this backdrop that the question that we have to essentially take a judicial call on is as to what is the cost of the new residential house so purchased by the assessee at C 6 Anandvan Complex. As we do so, we must bear in mind the fact that the expression used in the statute is cost of the residential house so purchased and it does not necessarily mean that the cost of the 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lector. Fair market value is arrived at after applying the rate of depreciation. [PB 18] b. The Government Approved Valuer personally inspected the property on 15.01.2016 and made the valuation on 15.01.2016 as noted in his valuation report. [Clause 2 of Part I and clause (c ) of Part III at PB 13 and 15] c. Cost of construction Clause 41 Year of commencement and year of completion: 2012-14 [PB 15] d. Valuation report also states that valuation done for cost of construction only . [PB 15] 2. Ld. Pr.CIT erred in not applying his mind on the documents available on record and stating that value adopted by AO on the basis of valuation report. Reliance is placed on the decision of Hon ble Delhi High Court in the case of D G Housing Projects Limited [2012] 20 taxmann.com 587 order pronounced on 01.03.2012 followed by Hon ble Co-ordinate Bench in the case of Vipin Chauhan ITA no. 52 53/Ind/2018 order pronounced on 21.08.2019. 3. Ld. Pr.CIT in order passed u/s 263 at page 7, 2nd para has stated What is to be examined is the whether the item is essential and integral part of new house or it is just the contents of new house. Any number of items may be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (Rs.) Remarks 1 Full consideration value of sale 1,26,54,892 Value as per DVO in accordance with provisions of section 50C. This value has not been disputed either by Ld. AO or by Ld. Pr.CIT. 2 Less: Indexed Cost of Acquisition (FY 1981-1982) 4,26,000 Not disputed either by Ld. AO or by Ld. Pr.CIT. 3 Long Term Capital Gain (LTCG) [3 = 1 - 2] 1,22,28,892 4 Deduction claimed u/s 54B 36,40,080 5 Deduction claimed u/s 54F [Correct] (1,22,28,892*75,58,768/1, 26,54,892) 73,04,318 Ld. AO in assessment order has considered the entire cost of new residential house i.e. ₹ 75,58,768 as deduction u/s 54F. Computation of deduction u/s 54F is in dispute * 6 Deduction claimed u/s 54F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 of the case, submissions made, judicial precedents and documents on record, appeal of the assessee be allowed. 7. Per contra Ld. Departmental Representative (DR) vehemently opposed these submissions and supported the order of the ld. Pr. CIT. Ld. CIT-DR submitted that the assessment order is erroneous and prejudicial to the interest of Revenue which is evident from the fact that there was a computational error. Further, Ld. DR took us through the impugned order and the observation made by the Ld. Pr. CIT. 8. In rejoinder Ld. counsel for the assessee Shri Girish Agrawal submitted that the computation error could be rectified by passing order u/s 154. The computation error could be rectified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ₹ 75,58,768/- under section 54F, which was not correct. AO was only to allow proportionate amount of money actually invested ₹ 63,79,000/-) to the long term capital gain i.e. ₹ 1,22,28,892/-. The allowable deduction would be {1,22,28,892X6379,000/1,26,54,892} i.e. ₹ 61,63,265/-. Therefore, there was excess deduction allowed of ₹ 13,94,503/- From the above, it can be seen that while taking value of investment for the purpose of deduction u/s 54F, the AO had adopted the value of ₹ 75,58,768/- whereas as per the report of the registered valuer, the amount of investment stands at ₹ 63,97,000/-. The amount stated to be sent on various furniture and electronic items claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial 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 (₹ 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 available on the assessment records. All the bills 1 vouchers receipts regarding the proof of investment in construction of residential house property were duly produced before the AO and were examined by him. As per the date wise details of investment in construction of residential house property submitted before the AO, the total amount incurred stands at ₹ 75,58,768/- and not ₹ 63, 97,000/- as mentioned in your show cause notice. C . Your Honour's observation regarding non allowability of expenditure incurred on account of purchase of Air Cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amp; 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 expenditure u/s 54F is erroneous. Reliance is placed on the case of Shri Shriniwas R. Desai vs. A CIT - ITA No. 1245 2432/Ahd/20l0 (copy of judgment enclosed) wherein the Hon'ble Tribunal held that the AO is directed to allow deduction of the cost of new asset purchased by him and the expenses. If any. incurred by him to make the same inhabitable .. Reliance is also placed on a very recent judgment in the case of Rajat B. Mehta vs. ITO (2018) 90 Taxmann.com 176 (Ahd-Trib) (Copy enclosed) wherein the Hon'ble Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee had entered into with a contract with the contractor that included the cost of furniture and other fixtures. Ld. PCIT has also not brought any such evidence on record. Under these facts we modify the direction of Ld. PCIT to the extent that the Ld. Assessing Officer would allow the expenses incurred for furniture and Air Conditioners if it is part and parcel of the contract for construction of new house. This ground of the assessee is partly allowed. 12. In the result, appeal filed by the assessee ..... 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