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TMI Blog2021 (3) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... ras in the order of the assessment, we are of the view that the order passed by the Pr.CIT u/s 263 of the Act by holding that the AO had not applied correct provisions of law while finalizing the assessment indicating lack of enquiries or verification is thus not sustainable in law and therefore, we quash the order of the ld. CIT(A) passed U/s 263 - Appeal of the assessee is allowed - ITA No. 255/JP/2020 - - - Dated:- 25-3-2021 - SHRI SANDEEP GOSAIN, JM AND SHRI VIKRAM SINGH YADAV, AM For the Assessee : Ms. Datyani Pandey (Adv) Shri Rajiv Pandey (CA) For the Revenue : Shri B.K. Gupta (CIT-DR) ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of the ld. Pr.CIT-3, Jaipur dated 16/03/2020 passed U/s 263 of the Income Tax Act, 1961 (in short, the Act) for the A.Y. 2015-16. The assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case Ld. Pr. Commissioner of Income Tax-3, Jaipur erred in:- Ground No.1:- In holding that the assessment order dt.26.12.2017 passed u/s 143(3) by Assessing Officer to be erroneous in so far as is prejudicial to interest of revenue on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accepting the investment made by assessee in A House amounting to ₹ 97,82,780/- (K-702 ₹ 62,82,780/- and A-605 ₹ 35,00,000/-) and further erred in reviewing and setting aside assessment order dt. 26.12.2017 in which ld. AO has erred in not allowing exemption u/s 54F and without prejudice u/s 54 for aforesaid amount of ₹ 97,82,780/- and in alternate of sum of ₹ 62,82,780/- as claimed by assessee in computation of income and therefore erred in not following provisions of law. Ground No. 4:- Assessee humbly prays that the order dt. 16.3.2020 passed by ld. Pr. CIT-3, Jaipur u/s 263 of Income Tax Act, 1961 and its operation may be stayed as assessee has already preferred IT appeal against order dt. 26.12.2017 passed by ld. AO u/s 143(3) and such appeal (IT No. 568/17-18) is being listed and pending hearing before ld. CIT(A)-3, Jaipur. It is further prayed that necessary order may be issued to Id. Pr. CIT3, Jaipur and Dy. CIT, Circle 7, Jaipur. Appellant reserves the right to add, alter, amend or withdraw of any of the grounds of appeal. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 263 of Income Tax Act, 1961 and submits that assessee after passing of assessment order dt. 26.12.2017 has preferred Income tax appeal before Ld. CIT (A) on 13.1.2018. Assessee vehemently submits that once income tax appeal has been filed no proceedings can be initiated u/s 263 of Income tax Act, 1961. Case citation Oil India Vs. CIT 138 ITR 836 (Cal) Held It is well settled that, in an appeal preferred before the AAC, the whole assessment is open for review. It is also well settled that where an appeal is preferred and the matter raised in the appeal is the subject-matter before the AAC, then the AAC's order cannot be the subject-matter of revision by the Commissioner. In the instant case, as the quantum of depreciation was the subjectmatter of appeal, the Commissioner had no jurisdiction to issue the notice under section 263 and to pass any order on this aspect of the matter. 412 ITR 515 (Guj) Haryana Paper Distributors Pvt. Ltd. V. Pr. CIT Held Two things immediately become clear. First that the Assessing Officer did not hold that assessee purchases from 'T' were bogus. In fact, he held to the contrary accepting the evidence produced by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 263 of the Act empowers the Principal Commissioner or the Commissioner to call for and examine the record of any proceeding and revise the same if he considers that the order passed therein by the Assessing Officer was erroneous insofar as it is prejudicial to the interest of the revenue. [Para 12] Clause (c) of Explanation 1 may be worded in a manner as suggesting the extent of the powers of the Commissioner for taking an order in revision, its effect is of circumscribing such powers in cases where the order passed by the Assessing Officer has been subject matter of any appeal and such subject matter has been considered and decided in such appeal. This provisions thus statutorily recognizes the principle of merger and avoids any conflict of opinion between two quasi-judicial authorities of the same rank. [Para 13] When the Commissioner had no jurisdiction to exercise revisional powers, asking the assessee to submit to said impugned notice does not arise. Impugned notice is therefore set aside. [Para 14] The petition is disposed of accordingly. [Para 15] 172 ITR 733 (Kerala) CIT v. Travancore Tea Estates Co. Ltd. [2014] 50 taxmann.com 100 (Delhi)/[2014] 227 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of deduction u/s 54F was based on sale of a Long Term asset (which was house property at Lucknow Plot No. B-2/4, Rajiv Gandhi Ward, Vinay Khand, Gomti Nagar Scheme, Lucknow sold on 6.4.2014 for ₹ 1,69,50,000/- on which stamp value evaluation is for ₹ 1,70,20,600/-) and assessee invested the sale proceeds in purchase of house property in the same compound at Faridabad and details of which appear at page 6 of the assessment order and for ready reference the same is reproduced hereunder:- S.No. Flat No. address Date Purchase deed Consideration Reported in sale deed Stamp duty other expenses. 1 K-702, Princess Park, Sector-86, Faridabad 01.08.2015 3706551 488000+15200 2. A-605. Princess Park, Sector-86, Faridabad 12.09.2015 2418002 146000+13100 The proposition of assessee is that he wanted to purchase A House for his residential purposes bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/-. Assessee has claimed deduction u/s 54F 54EC of the IT Act, 1961 respectively at ₹ 79,50,021/- and Rs,50,00,000/- by making investment of ₹ 97,82,780/- in house property and ₹ 50,00,000/- in specified bonds i.e. REC NHAI bonds and taxable long term capital gain has been shown at Rs, 8,65,274/- Para 3.5 page 4 and 5 of assessment order 3.5. In compliance of above query, Ld. AR of the assessee has submitted vide his written submission dated 22.12.2017 that: 1. The assessee has invested in residential house property within the stipulated time to claim deduction u/s 54F of the IT Act, 1961. Copy of conveyance deed is enclosed along with Bank Statements where the invested amounts are clearly shown. 2. The assessee has got a joint family consisting of his wife and two major sons and their family. Therefore he purchased two flats according to his need in the same locality in Princess Park, Sector-86, Faridabad. The assessee purchased the two flats for the convenience of his family members. After his passing away, his two sons will take care of the flats and his wife-Sarla Devi. The Intention of the assessee is very clear to have a residential prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same consideration reported in sale deed executed for purchase of flat No. A-605, Princess Park, Sector-86, Faridabad, therefore by following the principle of natural justice, assessee is allowed deduction u/s 54F of the Income Tax Act, 1961 on this house property subject to 50% of investment as assessee s share in the house property is 1/2nd . 3.10. Based on the above discussed facts, working of Long term capital gain deduction claimed u/s 54F is being recomputed as under:- Full value of consideration as shown by assessee in his ITR 17000206 Less: Indexed cost of acquisition construction 3184911 Net long term capital gain 13815295 Deduction u/s 54F of the IT Acrt,1961 (LTCG X investment made in new residential house/full value of consideration) 13815295 X 2104875/17000206 17,10,536/- Deduction u/s 54EC of the IT Act 1961 5000000 Net long term capital gain 7104758 Capital gain already shown in ITR 865 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order unless the view taken by the AO is unsustainable under the law. vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power u/s 263, is not permitted to substitute his estimate of income in place of the income estimated by the AO. vii) The AO exercises quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. viii) The CIT, before exercising his jurisdiction u/s 263, must have material on record to arrive at a satisfaction. ix) If the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed and allowed assessee an incorrect deduction leading to an erroneous order which is also prejudicial to the interest of revenue. It was also held by the ld. Pr.CIT that the A.O. had not applied the correct provisions of law while finalizing the assessment order indicating lack of enquiry or verification which should have been made. In this context, the ld AR has categorically submitted that the proceedings U/s 263 of the Act initiated by the ld. Pr.CIT were barred by law as the assessee after passing the assessment order U/s 143(3) dated 26/12/2017 had preferred Income Tax appeal before the ld. CIT(A) on 13/01/2018. It was also submitted by the ld AR that once an Income Tax appeal has been filed, then no proceeding can be initiated U/s 263 of the Act and in this respect, the ld AR has relied upon the decision of the Hon ble Kolkata High Court in the case of Oil India Vs CIT 138 ITR 836 (Cal) wherein it was held as under: It is well settled that, in an appeal preferred before the AAC. the whole assessment is open for review. It is also well settled that where an appeal is preferred and the matter raised in the appeal is the subject-matter before the AAC, then the AAC' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premise that the assessee's profit from such dealings would have been higher than disclosed. The entire issue was at large before the Appellate Commissioner. It is well known that the Commissioner (Appeals) while hearing the assessee's appeal has powers to even enhance the assessment. If he was of the opinion that not only limited additions made by the Assessing Officer but much larger additions were justified, he could have certainly exercised such powers, of course after putting the assessee to notice. In this context, one may refer to clause (c) of Explanation 1 to sub-section (1) of section 263 of the Act. As is well known sub-section (1) of section 263 of the Act empowers the Principal Commissioner or the Commissioner to call for and examine the record of any proceeding and revise the same if he considers that the order passed therein by the Assessing Officer was erroneous insofar as it is prejudicial to the interest of the revenue. (Para 12] Clause (c) of Explanation 1 may be worded in a manner as suggesting the extent of the powers of the Commissioner for taking an order in revision, its effect is of circumscribing such powers in cases where the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by the ld. Pr.CIT is that the AO had not applied correct provisions of law while finalizing the assessment order indicating lack of enquiry or verification is concerned, in this respect, the ld AR has drawn our attention to the fact that the A.O. had made full enquiries and had issued questionnaire examining the case and thus, the present case cannot be said to be a case of no inquiry or lack of inquiry and therefore, the assessment order lacks the characteristic of being prejudicial to the interest of revenue from side of revenue rather as per the ld AR, the assessee is aggrieved with the assessment order and has preferred an appeal before the ld CIT(A). The ld AR of the assessee has submitted that the proposition of claim of deduction u/s 54F was based on sale of a Long Term asset, which was house property at Lucknow - Plot No. B-2/4, Rajiv Gandhi Ward, Vinay Khand, Gomti Nagar Scheme, Lucknow was sold on 6.4.2014 for ₹ 1,69,50,000/- on which stamp value evaluation is for ₹ 1,70,20,600/-) and assessee invested the sale proceeds in purchase of house property in the same compound at Faridabad and details of which appear at page 6 of the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is enclosed along with Bank Statements where the invested amounts are clearly shown. 2. The assessee has got a joint family consisting of his wife and two major sons and their family. Therefore, he purchased two flats according to his need in the same locality in Princess Park, Sector-86, Faridabad. The assessee purchased the two flats for the convenience of his family members. After his passing away, his two sons will take care of the flats and his wife-Sarla Devi. The Intention of the assessee is very clear to have a residential property where all his family members could settle their life happily and there would not be any dispute in between two sons for the residential units. The need of the assessee and his family members was fulfilled after the purchase of the two flats in the same locality. The assessee made purchase agreement of the two flats available at that time and made investment at the same day. Therefore the assessee deserves the entitlement of deduction u/s 54F. Para 3.6 page 7 and 8 of assessment order 4. On perusal of both the sale deed executed by M/s BPTP Limited with the assessee and his wife Smt. Sarla Devi Bhadauriya for sale of aforementioned two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sale consideration reported in the registered sale deeds executed for purchase of immovable properties situated at flat No. 702, Princess Park, Sector-86, Faridabad is more than the same consideration reported in sale deed executed for purchase of flat No. A-605, Princess Park, Sector-86, Faridabad, therefore by following the principle of natural justice, assessee is allowed deduction u/s 54F of the Income Tax Act, 1961 on this house property subject to 50% of investment as assessee s share in the house property is 1/2nd . 3.10. Based on the above discussed facts, working of Long term capital gain deduction claimed u/s 54F is being recomputed as under:- Full value of consideration as shown by assessee in his ITR 17000206 Less: Indexed cost of acquisition construction 3184911 Net long term capital gain 13815295 Deduction u/s 54F of the IT Acrt,1961 (LTCG X investment made in new residential house/full value of consideration) 13815295 X 2104875/17000206 17,10,536/- Deduction u/s 54EC of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m partem as envisaged in the Constitution of India as well as in section 263. An order can be treated as 'erroneous' if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. In the instant case, the Pr CIT has alleged that as per proviso (ii) of section 54F(1), no deduction is allowable to the assessee if he purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset. In this regard, we find that the assessee has purchased the second residential house situated at A605, Princess Park vide registered sale deed dated 12.09.2015 which is well beyond the period of one year from date of transfer of the original asset on 6.4.2014 and thus, the said act cannot be held in violation of any of the terms of proviso to section 54F of the Act. What is relevant to determine is the date of purchase and such date of purchase is evidenced by the registered conveyance/sale deed reflecting the final payment and taking over the possession of the residential house. Merely because the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignorance or incorrect application of law. All the relevant facts in respect of both the residential houses have been considered and provisions of law have been rightly applied by the AO and deduction u/s 54F has been allowed to the extent of assessee s share in respect of one residential house. The 'prejudice' that is contemplated under section 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT u/s 263 may be summarized below:- i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the revenue. Both the conditions must be fulfilled. ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it is only when an order is erroneous, that the section will be attracted. iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous. iv) If the order is passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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