2020 (2) TMI 87 - AT - Income Tax

Tax Tribunal affirms Commissioner's jurisdiction, disallows deductions, allows brokerage deduction, and upholds Section 54F deductions.

The Tribunal upheld the Commissioner of Income Tax's jurisdiction under Section 263, finding errors in allowing deductions under Sections 54B and 54EC ... Capital gains arising from the sale of land to be long term capital gain in the hands of assessee HUF - HELD THAT:- CIT(A), in our view, has appreciated the facts in perspective and held the capital gains arising on sale of land to be long term capital gain in the hands of the assessee HUF. No error in the process of reasoning adopted by the CIT(A) while granting the relief to the assessee. Deduction u/s 54EC & 54F - HELD THAT:- The assessee has also furnished copy of bank account showing the deposit in capital gain scheme. The disallowance made by the AO is not justified as it is already held that sale of the land is long term capital gain instead of short term capital gain as held in the assessment order. Since the assessee has transferred long term capital asset, the deduction u/s.54F is available to the assessee. The assessee has also invested an amount of ₹ 1,25,00,000/-before the due date of filing of return as prescribed in the Section 54EC of the Act. As the assessee has fulfilled the conditions prescribed in Section 54EC of the Act, he is eligible for the deduction u/s.54F - Decided against revenue. Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Disallowance of claims under Section 54B of the Income Tax Act.3. Disallowance of claims under Section 54EC of the Income Tax Act.4. Disallowance of brokerage.5. Admission of additional evidence under Rule 46A of the Income Tax Rules.6. Classification of capital gains as long-term or short-term.7. Eligibility for deductions under Section 54F of the Income Tax Act.Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The Tribunal upheld the jurisdiction of the Commissioner of Income Tax (Pr.CIT) under Section 263, which allows the Pr.CIT to revise any order deemed erroneous and prejudicial to the interest of the Revenue. The Pr.CIT found that the Assessing Officer (AO) had wrongly allowed deductions under Section 54B without proper inquiry. The Tribunal noted that the land in question was not used for agricultural purposes as required by Section 54B, and the AO failed to investigate this aspect. Thus, the Pr.CIT's decision to revise the AO's order was upheld.2. Disallowance of Claims under Section 54B:The Tribunal found that the assessee had not provided satisfactory evidence to prove that the land was used for agricultural purposes in the two years preceding its sale. The land was declared as 'fallow land,' and no significant agricultural income was reported. The AO had allowed the claim without proper inquiry, and the Pr.CIT's decision to disallow the deduction was upheld.3. Disallowance of Claims under Section 54EC:The Tribunal ruled that the assessee was entitled to a deduction of Rs. 50 lakhs under Section 54EC for investments made in specified bonds within six months of the transfer date. The Tribunal referred to a previous case (Sudhaben Balkrishna Trivedi) where similar investments were allowed. The Tribunal upheld the CIT(A)'s decision to allow the deduction for investments made in two different financial years, as the restriction on investment applies per financial year.4. Disallowance of Brokerage:The Tribunal found that the issue of brokerage disallowance was covered in favor of the assessee in a previous case (ITA No. 651/Ahd/2016). Consequently, the Tribunal decided the issue in favor of the assessee, allowing the brokerage deduction.5. Admission of Additional Evidence under Rule 46A:The Revenue contended that the CIT(A) admitted additional evidence without giving the AO an opportunity to comment, violating Rule 46A. The Tribunal found that the CIT(A) had considered relevant documents showing the assessee HUF's ownership of the land and did not see any serious breach of Rule 46A. The Tribunal upheld the CIT(A)'s decision to treat the capital gains as long-term.6. Classification of Capital Gains as Long-Term or Short-Term:The Tribunal agreed with the CIT(A) that the land was a long-term capital asset, as the assessee HUF had owned it since 1971. The Tribunal found no error in the CIT(A)'s reasoning and upheld the decision to treat the gains as long-term capital gains, allowing the benefit of indexation from April 1, 1981.7. Eligibility for Deductions under Section 54F:The Tribunal upheld the CIT(A)'s decision to allow deductions under Section 54F, as the assessee had invested Rs. 1,25,00,000 in a capital gain scheme before the due date for filing the return. The Tribunal found that the conditions prescribed in Section 54F were met, and the disallowance by the AO was unjustified.Conclusion:- The appeal by the assessee in ITA No. 1225/Ahd/2013 was dismissed.- The appeal by the assessee in ITA No. 997/Ahd/2016 was partly allowed.- The appeal by the Revenue in ITA No. 1229/Ahd/2016 was dismissed.This order was pronounced in Open Court on 31/01/2020.