2021 (10) TMI 108 - AT - Income Tax

Tribunal Quashes Income Tax Revisional Order, Emphasizes Procedural Irregularities

The Tribunal quashed the revisional order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act. It found that the ... Revision u/s 263 by CIT - assessee is not eligible for deduction under section 54F of the Act where the construction of the residential house had already commenced prior to the sale of the original asset (four land parcel) and the conditions of section 54F does not stand satisfied - HELD THAT:- AO has carried out the specific enquiry with regard to eligibility of deduction claimed under section 54F of the Act. On a corollary, it can be argued that he was satisfied on the propriety of the claim in question. Secondly, the claim of the assessee under section 54F towards residential house property already under construction at the time of transfer of original asset but the construction completed after the transfer is found to be eligible in law by several judicial precedence quoted in the preceding paragraph - where the case of the assessee is vindicated by judicial endorsement, one would at least say that the issue raised by the PCIT is not free of any debate. Where the issue is debatable, and the A.O. has taken a view which is plausible in law, such view cannot be substituted by the view of the superior authority and the order passed cannot be branded as erroneous per se. Therefore, in the absence of any ‘error’ in the assessment having regard to the allowability of section 54F, the enquiry directed by the PCIT are superfluous and without authority of law. Such action of the PCIT cannot be said to be within the realm of revisional jurisdiction under section 263 - Decided in favour of assessee. Issues:Challenge to jurisdiction under section 263 of the Income Tax Act, 1961 by the assessee.Alleged lack of proper enquiry by the Assessing Officer regarding deduction claimed under section 54F.Validity of revisional order passed by the Principal Commissioner of Income Tax (PCIT).Analysis:Issue 1: Challenge to jurisdiction under section 263:The appeal was filed by the assessee against the revisional order of the PCIT under section 263 of the Income Tax Act. The assessee contested the assumption of jurisdiction by the PCIT, arguing that the assessment order was not erroneous or prejudicial to revenue. The PCIT set aside the original assessment order under section 143(3) for reframing the assessment. The assessee challenged this action before the Tribunal, claiming lack of proper opportunity and procedural irregularities. The Tribunal found that the PCIT's actions lacked authority of law, both at the time of assuming jurisdiction and passing the revisional order. The Tribunal concluded that the PCIT's action was not within the realm of revisional jurisdiction under section 263, leading to the quashing of the revisional order.Issue 2: Alleged lack of proper enquiry by the Assessing Officer:The PCIT alleged that the Assessing Officer did not conduct a proper enquiry regarding the deduction claimed under section 54F of the Act. The assessee contended that the construction of the residential house, for which the deduction was claimed, commenced before the sale of the original asset but was completed after the sale. The Tribunal noted that the A.O. had conducted a specific enquiry and was satisfied with the eligibility of the deduction under section 54F. Citing various judicial precedents, the Tribunal held that the issue was debatable and the A.O.'s view was plausible in law. Therefore, the PCIT's directions for further enquiry were deemed superfluous and without legal authority.Issue 3: Validity of revisional order passed by the PCIT:The Tribunal also addressed the vehement opposition by the assessee regarding the lack of proper notice and opportunity during the section 263 proceedings. It was observed that the PCIT's failure to provide a reasonable opportunity for the assessee to be heard rendered the order null and void. Citing legal precedents, the Tribunal emphasized that an order passed in violation of the audi alteram partem rule is a nullity. The Tribunal concluded that the revisional order was required to be quashed independently due to the fatal lack of opportunity for the assessee. Ultimately, the Tribunal set aside and quashed the revisional order passed under section 263 of the Act, allowing the appeal of the assessee.This detailed analysis of the judgment highlights the issues raised, arguments presented, and the Tribunal's reasoning leading to the decision to set aside the revisional order.