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TMI Blog2023 (4) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... tails have been obtained, cannot be sufficient to come to a conclusion that the AO did not make proper and adequate inquiries which he ought to have made in the given facts and circumstances of this case. We are of the view that none of the reasons set out by the CIT for invoking the jurisdiction u/s 263 of the Act are sustainable. The impugned order of the CIT has to be quashed for the reason that order of the AO sought to be revised in the impugned order was neither erroneous nor prejudicial to the interest of the revenue for the reason of any lack of inquiry that the AO ought to have made in the given facts and circumstances of the case. We accordingly quash the order u/s 263 of the Act and allow the appeal of the assessee, only for the exemption/deduction of Rs.54,35,981/-. Appeal of the assessee is partly allowed. - ITA No.43 5/ SRT /2018 - - - Dated:- 24-1-2023 - SHRI PAWAN SINGH, JM DR. A. L. SAINI, AM For the Assessee : Shri Suresh K Kabra, CA For the Respondent : Shri Ashok B Koli, CIT-DR ORDER PER DR. A. L. SAINI, AM: By way of this appeal, the assessee appellant has called into question correctness of impugned order passed by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 15.01.2018 under section 263 proposing to revise the assessment made by the Dy. Commissioner of Income Tax Circle 1(3), Surat in the case of above named client for the assessment year 2013-14. In the order passed u/s 143(3) your goodself has observed that following claim/expenses required to be disallowed in the interest of the revenue. Exemption u/s 54/54F claimed of Rs.54,35,981/- During the year under consideration the assessee has sold out residential flats No.601 701 of Sahas property Mumbai on 26.09.2012 and earned long term capital gain. Against the sale transaction the assessee was required to invest for purchase of residential unit before one year or after two years from the date of sale of property i.e. 26.09.2012. The assessee has rightly claimed deduction u/s 54 as he has received sale consideration of the flat as under and invested accordingly. Flat Nop.601 Date of receipt Mode of receipt Name of Bank Flat No.601 Purchaser s name 29.11.10 Cheque No.391262 HDFC Bank 21,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itin Chandulal Vasa and 28.10.11 Cheque HDFC Bank 75,000 Nitin Chandulal Vasa and 28.10.11 Cheque HDFC Bank 75,000 Nitin Chandulal Vasa 28.10.11 Cheque No.65756 HDFC Bank 75,000 Nitin Chandulal Vasa 28.10.11 Cheque No.65757 HDFC Bank 75,000 Nitin Chandulal Vasa and 28.10.11 Cheque No.65431 HDFC Bank 75,000 Nitin Chandulal Vasa and The assessee made investment in residential property as under: YEAR ON SALE CONSIDERATION RECD. FLAT No. AMOUNT RECIVED LAND PURCHASED DEVELOPMENT EXPENSES OF 20 PLOTS CONSTRUCTION F.Y 2010-11 ADVANCE RECD 601 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was to investment money in a residential unit to avail exemption u/s 54. Delhi High Court has observed in the case of CIT vs. Smt. Brinda Kumari [2022] 253 ITR 343 that giving advance to Builder for construction is equivalent to construction During the course of assessment proceedings all relevant details have been furnished in respect of subject matter and after considering all documents the Assessing Officer has allowed the deduction; only deduction of construction amount of Rs.17,81,713/- has not been allowed as same was not claimed. And for that rectification application was made separately on 15.4.2016; which till not disposed off. In short the office has not passed the order in haste but all relevant submission and documents have been considered and allowed the deduction so claimed. Therefore, it cannot be said that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. Allahabad High Court in the case of CIT vs. H K Kapoor 150 CTR 128 (All) 1998 has also observed that Exemption on capital gains under section 54 cannot be refused merely on the ground that construction of new house had begun before the sale of old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which a partner may have to incur for the purpose of his business. Expenses are not allowable against the exempted income only, and therefore expenses cannot be admissible against the share of profit from the firm and not against the income from interest and remuneration. From the above narrated facts it is submitted that exemption claimed u/s 54 and various expenses claimed against the business income (interest from the firm), rightly allowed by the officer after applying his mind on the facts of the case and therefore it is not erroneous and prejudicial to the interest of the Revenue. Therefore Section 263 is not attracted in the case of assessee. Therefore, it is prayed that action u/s 263 may please be dropped and accept the income assessed by the Office determined in the order passed u/s 143(3) of the Act. 8. However, ld PCIT has rejected the contention of the assessee and observed on perusal of the scrutiny records and it was seen from the computation of long term capital gains from sale of flat No.601 and flat No.701 of Sahas Building, Mumbai on 28/09/2012, that, against the sale value of the original asset at Rs.1,27,56,000/- the assessee had claimed indexed cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated expense claims in the absence of any evidentiary material regarding actual expense. Only the purchase of land is evidenced by documentary proof but as discussed above the purchase of the land is prior to the period permitted in the Act for claiming deduction u/s 54 of the Act. The rest of the expenses claimed mainly as land development expenses and as construction expenses are unsubstantiated expense claims and it cannot be said that timely construction of residential unit as envisaged u/s 54 has taken place. In the computation of income, exemption has been claimed by the assessee u/s 54 of the Act. 12. The ld PCIT noted that section 54 stipulates that in lieu of original asset comprising residential unit sold, there should be purchase of a residential unit within one year before or two years after the sale of the original asset or there should be construction of a residential unit within three years of the sale of the original asset to avail exemption u/s 54. As discussed above, the assessee has neither purchased nor constructed any residential unit during the allowable period of one year before or two/three years after the sale of the original asset. What is evidenced, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that assessee had claimed various expenses like fuel expenses, car depreciation, professional tax etc, against interest income earned by the assessee from partnership firm M/s Sahil Satr. Since these expenses do not appear to be expenses necessary for earning of the interest income, the same were required to be disallowed. However, no such disallowance has been made by the assessing officer in the assessment order. In response to query raised in the showcause letter dated 15.01.2018, the assessee has referred to Court decisions where it was held that expenses relatable and necessary for earning partners share of profit and partners remuneration and interest were allowable expenses. However, the facts of the assessee s case are different. He has shown interest income and exempt share of profit from the firm M/s Sahil Satr. Since the share of profit is claimed as exempt u/s 10(2A), no expense would be allowable against the same. As far as the interest income is concerned, the assessee has not been able to establish that the said expenses were incurred to earn the interest income. Therefore, ld PCIT held that assessment order u/s 143(3) dated 14.03.2016, passed in the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee filed paper book wherein on page nos.39 to 60, cost of construction of the house is mentioned and assessee has claimed the construction cost only which was incurred within one year prior to sale of asset, therefore we note that assessee is eligible to claim the deduction u/s 54 of the Act. The assessee never claimed the deduction on cost of land. During the assessment stage, the assessing officer has examined all these aspects therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest on Revenue. The Hon ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii) Assessing Officer s order is in violation of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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