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TMI Blog2022 (9) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... nwarranted and misplaced. We find on going through the impugned order that except for suspicions no valid violation of any law u/s. 54, 54F and 54EC has been referred to. We have taken into consideration the decisions of the various Courts including the Apex Court in the case of Sanjeev Lal [ 2014 (7) TMI 99 - SUPREME COURT] another decision of the Apex Court in the case of T.R. Arvinda Reddy [ 1979 (10) TMI 1 - SUPREME COURT] and the Hon'ble Delhi High Court in the case of Balraj Vs. CIT [ 2001 (12) TMI 51 - DELHI HIGH COURT] and the decision of the ITAT in the case of Shri Bassheer Noorullah Khan [ 2019 (8) TMI 180 - ITAT BANGALORE] have all been taken into consideration. Accordingly, we find that the impugned order cannot be sustained. We find that when read along with the reply on behalf of the assessee before the ld. PCIT, we find that the appeal of the assessee has to be allowed. Revisionary Powers cannot be exercised arbitrarily. The twin conditions necessary for exercising the powers in the facts of the present case are found to be missing. Coming to the issues on which no Show Cause Notice was issued to the assessee, we find that legally such an action is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in failing to consider the various replies and submissions placed on record in proceedings before her in the correct perspective which is arbitrary and unjustified. 3. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies, material on record and books of account, the action resorted to by the Principal Commissioner of Income Tax is unwarranted and uncalled for. 4. That the Ld. Principal Commissioner of Income Tax has failed to carry out any enquiry during the course of revisionary proceedings in respect of the issues being raised by her which is mandatory and as such the order passed by her is arbitrary and unjustified. 5. That the issues in respect of investment in house property u/s. 54F and 54EC was scrutinised by the Assessing Officer in depth and as such revising the order passed by the Assessing Officer is arbitrary and unjustified 6. That the order of Commissioner of Income tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law. 2. Briefly the facts are that the Assessing Officer passed an order u/s. 143(3) dated 19.05.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion claimed under the head Capital Gains 4.1. Despite the evidences to the contrary, it was submitted, the Ld. PCIT has wrongly held that the AO had accepted the version of the assessee without verification and allowed deduction u/s. 54, 54F and 54EC. Carrying the Bench through the impugned order and the record specifically Show Cause Notice to the assessee through the ITBA Portal. (Vide DIN Notice No. ITBA/REV/REV1/2020-21/10313867091(1) dated (sic).03.2021) and the reply made available on behalf of the assessee, it was submitted that the order passed by the ld. PCIT is an order not sustainable in law. The order of the Assessing Officer, it was submitted, was passed after due enquiries and no fault/error has been pointed out therein except for suspicions of the ld. PCIT. 4.2. Before elaborating these issues, ld. AR submitted that at the outset, apart from these arguments, the challenge to specific paras 5.3 and 5.4 of the order was also made on the grounds that on these issues, no notice was issued to the assessee by the ld. PCIT. As a result of this, it was submitted that there was no opportunity provided to the assessee to make a representation on the issues. Such an ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the written submissions before ld. PCIT it was submitted, had been placed on the case of Anil Bishnoi reported in 167 ITD 381. Reliance was also placed on Sanjeev Lal Vs. CIT (2014) 365 ITR 389 (S.C.). These submissions re-iterated in the order are heavily relied upon by the assessee. Referring to this decision extracted in page 4 of the impugned order, it was submitted that the assessee had submitted that in the said case, the Hon'ble Supreme Court observed that though in normal circumstances by executing an agreement to sell in respect of immovable property, a right in personam is created in favour of the transferee/vendee and when such a right is created, the vendor is restrained to sell the said property to someone else because the transferee has got a legitimate right to enforce specific performance of said agreement to sell. In normal circumstances, it cannot be said that entire property have been sold at the time when agreement to sell is entered into. However, looking at the provisions of section 2(47) of the Income-tax Act, 1961, 'transfer' in relation to the capital asset is complete if a right in a property is extinguished by executing an agreement to sell, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten been observed that generally the issues which are accepted, they do not find any mention in the assessment order and only such points are taken note of by the AO on which the assessee's explanation is rejected and additions/disallowances are made. Accordingly, non discussion in the order on the issues examined and agreed with is of no consequence as has often been held by Courts. 4.6. Addressing the facts, it was highlighted that the assessee has also made the following submissions on facts: As regards the second ground mentioned for exercising the power of revision under section 263 it has been mentioned Further, this asset was already in your possession, hence, Section 53A of the Transfer of Property Act also does not apply. , It may be submitted that the seller Smt. Gurmeet Kaur. wife of the assessee was the Registered owner of the property, H. No. 2120 Phase VII. Mohali. The family was residing under the same roof and section 2(47) speaks of the situation where the possession is already with the purchaser too and in that case if the purchaser is allowed to retain the possession, the condition as stipulated under section 2(47) of the Income Tax Act, 1961 is fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gain has been invested partly in purchase of property and partly in purchase of specified bonds. On the basis of purchase of property he has claimed deduction under section 54F. Perusal of the facts show that the investment in property has been shown by purchasing the very asset which is in the name of the wife. A simple agreement has been entered into which is not even registered The assessee furnished the agreement of sale with his wife for house No. 2120 phase-VII, Mohali and claimed that a sum of Rs. 2,35,00,000/- was paid as sale consideration. It is clear from the perusal of the sale agreement that the assessee was already resident of the property and the agreement has been entered into merely for the purpose of reducing the tax liability without any actual purchase of property. The landmark decision of the Hon'ble Supreme Court in the case of McDowall and Company Limited , 154 ITR 148 is squarely applicable in this case... (emphasis supplied) 4.7.1. It was his submission that there is no bar as per law for the assessee to purchase a property where he already is residing. The attempt to rope in McDowell Company (cited supra) is patently inapplicable. Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin a period of six months from the date of sale. It's apparent that the assessee has failed to meet this condition. The deduction under section 54EC was thus not admissible to the assessee, The AO has failed to examine this issue. The order passed by the AO is therefore erroneous on this issue and is also prejudicial to the interest of Revenue. 4.9.1. Maintaining the primary objection that no Show Cause Notice was issued on this issue to the assessee, it was argued that even otherwise, the view taken by the AO after carrying out enquiries is a view which is as per settled legal position was the correct view. Accordingly, relying upon Alkaben B. Patel vs. ITO 43 Taxmann.com 333 (Ahm), Dr. (Smt.) Sujatha Ramesh vs. CBDT 87 Taxmann.com 228 (Kar); and Kartick Chandra Modal vs. PCIT 113 Taxmann.com 586 (Kol) it was submitted that there is no infirmity in the view taken by the AO. 4.10. Accordingly, on a reading of the impugned order alongwith the assessment order itself, it was submitted that the conclusion drawn that the AO has not adequately enquired into the matter, it was submitted, is completely contrary to the facts on record. In view thereof, it was his prayer that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f occupied house. The assessee purchased share in SCF 103 Phase 7 Mohali, which was purchased during the year from the sale proceeds of sector 18, Chandigarh. No other assets other than capital gain bonds are also admitted. 4. x x x x 5. The mistake in return is admitted. It was the mistake on the part of the undersigned and was due to oversight. The copy of original computation sheet is also appended herewith for your kind perusal. Copy of the revised computation sheet is also appended herewith for your kind perusal. 4.11.1. Attention was invited to the revised computation of total income filed by the assessee which is available at pages 3-4 which would show that 67% of the sale proceeds were attributed to the commercial and 33% to residential portion of the property. The computation was refilled separately again which was stated to be final position thereon after the addition of Rs. 25 lacs was made. Attention was invited to another reply filed before AO in the 143(3) proceedings which is available at page 5-6 wherein in para 3, the assessee specifically made known to the AO that the case of the assessee's wife Smt. Gurmeet Kaur who was the seller of 2020, Phase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of Smt. Gurmeet Kaur was also filed before the AO with the following covering letter: Copy of her computation sheet is also appended herewith for your kind perusal. Copy of the purchase deed of the house by Smt. Gurmeet Kaur as a token of proof that she was the owner of the house is also appended herewith for your kind perusal. (emphasis supplied) 4.11.3. Computation of the assessee's wife Smt. Gurmeet Kaur, it was submitted, is available at pages 7 to 9 which supports the aforesaid claim. It was submitted by the Ld. AR that at this point of time, the assessee is also in possession of the copy of the assessment order passed u/s. 143(3) dated 30.05.2017 passed in the case of assessee's wife Smt. Gurmeet Kaur for the specific year under consideration. Copy of this order passed u/s. 143(3) proceedings is available at pages 53 to 534. 4.11.4. Accordingly, it was his submission that the present case is a case where full and proper enquiries have been carried out by the AO and only thereafter the Assessing Officer has passed the order making the addition. Attention was also invited to the reply of the assessee to the AO at pages 10-11 which would show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of six months. The cheque was presented late by the Bond issuing Corporation. There was no fault or callousness on the part of the assessee. Photocopy of the cheque is appended herewith. The facts of the present case are identical to the facts of the case cited. 4.11.5. Copy of Agreement to Sell dated 19.01.2015 at pages 12 to 14 of the Paper Book affirming the transaction was also relied upon by the assessee before the AO. In these circumstances, it was his submission that full and proper enquiries have been made on these facts by the AO. The ld. PCIT, it was submitted, does not dispute this fact as he is aware that enquiries have been made, in these circumstances, where is the occasion to say that the assessment order was passed without making proper enquiries . The order, it was submitted, is an arbitrary exercise of power. In the facts of the present case, the AO has applied his mind, asked for the relevant records, he has taken them into consideration, has considered the position of law as supported by the decision of the Apex Court in the case of Sanjeev Lal (cited supra). Reliance was also placed upon decision of the ITAT Bangalore Bench in Basheer Noorullah Khan V. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause Notice issued by the ld. PCIT to the assessee. It was his submission that by merely signing of the Agreement to Sell, it cannot be said that it is a valid sale in the eyes of law. For the said proposition, heavy reliance was placed upon the decision of the Apex Court in the case of Suraj Lamp Industries P. Ltd. V. State of Haryana 340 ITR 1 (S.C.). It was his submission that the Apex Court very categorically held that an immovable property by sale etc. can legally and lawfully be transferred only by a Registered Deed of Conveyance and not by way of a General Power of Attorney or a Sale Agreement or Power of Attorney etc. It was submitted that title cannot be conveyed by entering into an Agreement to Sell. 5.4. Accordingly, it was his vehement stand that it cannot be recognized as a valid mode of transfer of immovable property. In the facts of the present case, it was his submission that these arguments and this latest decision of the Apex Court fully clinches the issue in favour of the Revenue. Accordingly, it was his prayer that the order of the ld. PCIT may be upheld. 5.5. Attention was also again invited to the Show Cause Notice issued to the assessee by the PCIT. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the ld. CIT-DR it was submitted, is of no relevance. It was also his submission that whether the assessee can be said to have abided by the Agreement to Sell and hence, entitled to claim deduction u/s. 54, 54F, 54EC etc. cannot be governed from the prism of fulfilling or non fulfilling of the TDS conditions. It was his vehement submission that whether the property can be said to have been transferred also cannot be decided by the TDS provisions, hence the argument of the ld. CIT-DR on this count, it was submitted, has no relevance. 6.1. It was also his submission that reliance placed by the Revenue on the decision of the Supreme Court in the case of Suraj Lamp Industries Pvt. Ltd. (cited supra) is misplaced as in the facts of the said decision, the Hon'ble Apex Court was seized of the claim of the Development Authorities who were before the Court praying that these Authorities were being deprived of the Stamp Duty and Registration Charges i.e. Development Charges etc. on account of non-Registration of Deed of Conveyance etc. by the parties by GPAs, Will transfers and Agreement to Sell etc. The share of the Authority on unearned increase in prices was the issue for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs before the AO which have been tabulated before us by way of a Paper Book and has been referred to extensively in the earlier part of this order. We have also gone through the detailed submissions on facts and law extracted by the ld. PCIT herself in para 3.1 of the reply dated 22.02.2021 in various pages of the impugned order itself. When this detailed reply is read along with the Show Cause Notice issued to the assessee and the questions raised by the AO in the course of the assessment proceedings along with the replies of the assessee as made available to the AO, we find that the AO has passed the order after making all due and necessary enquiries. We find that the bifurcation of sale proceeds of SCF in commercial and residential proportion has a recognized legal foothold as illustrated by the order of the ITAT relied upon and the decision of the jurisdictional High Court cited. On the contrary, we find no reference to any decision made by the Ld. PCIT which supports the suspicions harbored by her. We have seen the decisions of the Hon'ble Punjab Haryana High Court in the case of Kawaljit Singh and the order of the Co-ordinate Bench in the case of Meenu Bansal Vs. PCIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of colorable device by citing the decision of the Apex Court in the case of McDowell Company on facts is completely unwarranted and misplaced. We find on going through the impugned order that except for suspicions no valid violation of any law u/s. 54; 54F and 54EC has been referred to. We have taken into consideration the decisions of the various Courts including the Apex Court in the case of Sanjeev Lal (supra) another decision of the Apex Court in the case of T.R. Arvinda Reddy (supra) and the Hon'ble Delhi High Court in the case of Balraj Vs. CIT and the decision of the ITAT in the case of Shri Bassheer Noorullah Khan (ITA 575/Bang/2019 have all been taken into consideration. Accordingly, we find that the impugned order cannot be sustained. 7.2. Coming to the issues on which no Show Cause Notice was issued to the assessee, we find that legally such an action is not permissible and even otherwise, on merits we find that six month period, as considered by the AO has judicial recognition. We find that the Co-ordinate Benches have held that the term month has not been defined in the Income Tax Act and hence resorting to the term as defined in the General Clauses Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner with power of re-examine the accounts and determine the income himself at a higher figure. This is because the Income Tax Officer has exercised the quasi judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself would not be enough to vest the Commissioner with the power of suo moto revision because the first requirement, namely, that the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then the power of suo moto revision can not be exercised. Any and every erroneous order cannot be the subject matter of revision because the second requirement must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute, on an incorrect or incomplete interpretation, a lesser tax than wha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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