2022 (8) TMI 667 - AT - Income Tax

Tribunal Upholds Deduction Claimed by Assessee under Section 54F, Quashes PCIT's Order

Smt. Renu Poddar Versus Principal Commissioner of Income Tax-2 Jaipur

The Tribunal found the Principal Commissioner of Income Tax's invocation of Section 263 unjustified, as the Assessing Officer had conducted a detailed ... Revision u/s 263 - claim of deduction u/s 54F has not been claimed correctly and Assessing Officer has not seen these aspects - assessee has filed the copy of memorandum of understanding, to prove the share of the assessee upon which the deduction was claimed now and not before the assessing officer but PCIT hold a view that as it was not on record and it is also executed after purchase deed is registered and thus ld. PCIT hold a view that this evidence is after thought - PCIT further observed that if the assessee claimed his claim to the extent of 50% deduction u/s 54F, surely, the payment received from sale of plot would have been paid in acquiring the house but the relevant joint bank statement was not available on record by the assessee - HELD THAT:- AO has asked pointed question on the investment made by the assessee and considering the disclosure made by the assessee the same accepted - on the detailed observation that the ld. AO has already verified the claimed to his satisfaction and merely the claim is not verified with the MOU or other evidence the claim which is based on the evidence already considered cannot be revisited merely in the opinion of the PCIT the claim is not supported by the evidence in the manner desired by him. Therefore, in our considered view the assessment order cannot be said to the prejudicial and erroneous in the interest of Revenue, when all the information were already available on record. Once we have satisfied that the AO has already raised a query and verified the claim of the assessee, considering the relevant material placed before us. The records already speak that the share of the assessee is 50 % therefore, considering the arguments of the ld. AR of the assessee, we found force that though AO seen the issue in the A.Y 201617 may not have called for full details in A.Y 2017-18 merely on these issue in the year it cannot be said that the assessment order passed is erroneous and prejudicial to the interest of Revenue. We hold that the ld. PCIT has wrongly invoked the provisions of section 263 of the Act and in terms of these observations, we quash the order of Pr.CIT passed u/s 263 - Decided in favour of assessee. Issues Involved1. Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking Section 263 of the Income Tax Act, 1961, to revise the assessment order passed under Section 143(3).2. Whether the deduction claimed under Section 54F by the assessee was correctly allowed by the Assessing Officer (AO).3. Whether the AO conducted adequate inquiry while allowing the deduction under Section 54F.Detailed AnalysisIssue 1: Invocation of Section 263 by PCITThe PCIT invoked Section 263, stating that the AO had not verified the issues related to the deduction under Section 54F, making the assessment order erroneous and prejudicial to the interest of the revenue. The PCIT issued a show cause notice to the assessee, indicating that the AO's order was passed mechanically without application of mind. The PCIT relied on judicial rulings, including *Malabar Industrial Limited vs. CIT* and *Gee Vee Enterprises v Additional Commissioner of Income-tax*, to support the assertion that an order passed without proper inquiry is erroneous.Issue 2: Deduction Under Section 54FThe assessee claimed a deduction under Section 54F for the capital gains earned from the sale of a plot of land, which was invested in purchasing a residential house. The PCIT contended that the deduction should be limited to 25% of the investment, as the property was jointly owned by four individuals. However, the assessee argued that her share in the property was 50%, supported by a Memorandum of Understanding (MOU) executed among the co-owners.Issue 3: Adequacy of Inquiry by AOThe AO issued specific notices and sought detailed information regarding the deduction under Section 54F. The assessee provided relevant documents, including the purchase deed, bank statements, and the MOU. The AO, after considering these submissions, allowed the deduction. The PCIT, however, held that the AO failed to conduct a thorough inquiry, particularly regarding the joint ownership and the source of funds used for the purchase.Tribunal's FindingsOn Invocation of Section 263The Tribunal found that the PCIT's invocation of Section 263 was unjustified. The AO had conducted a detailed inquiry and had considered all relevant documents before allowing the deduction. The Tribunal noted that the PCIT did not dispute the eligibility of the assessee for the deduction but only the quantum of the deduction. The Tribunal emphasized that mere differences in opinion on the quantum do not render the AO's order erroneous.On Deduction Under Section 54FThe Tribunal accepted the assessee's claim that her share in the property was 50%, as evidenced by the MOU. The Tribunal observed that the AO had considered the MOU and other relevant documents during the assessment. The Tribunal also noted that the assessee's share in the property was reflected in her computation of income and the assessment records of the co-owners.On Adequacy of Inquiry by AOThe Tribunal held that the AO had conducted an adequate inquiry into the deduction claimed under Section 54F. The Tribunal pointed out that the AO issued notices, sought detailed information, and examined the documents provided by the assessee. The Tribunal found that the PCIT's assertion of inadequate inquiry was not supported by the facts on record.ConclusionThe Tribunal quashed the order passed by the PCIT under Section 263, holding that the AO's assessment was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal allowed the appeal filed by the assessee, affirming the deduction claimed under Section 54F and the adequacy of the inquiry conducted by the AO.OrderThe appeal of the assessee is allowed, and the order of the PCIT passed under Section 263 is quashed. The assessment order passed by the AO under Section 143(3) is upheld.