2023 (2) TMI 201 - AT - Income Tax

Tribunal quashes PCIT's Section 263 order, upholds Assessing Officer's assessment under Sections 54B and 54F.

The Tribunal quashed the Principal Commissioner of Income Tax's order under Section 263, holding that the Assessing Officer's original assessment order ... Revision u/s 263 - deduction claimed u/s 54B and 54F - HELD THAT:- We observe that the assessee purchased an agricultural land in respect of which deduction was claimed u/s 54B of the Act. We also observe that the assessee made investment towards construction of residential house in respect of which deduction was claimed u/s 54F of the Act. We find that the case of the assessee was selected for Limited Scrutiny for examination of the issue related to ‘Deduction/ Exemption from Capital Gains’. We further find that the Ld. AO raised specific queries during the course of assessment proceedings itself requiring the assessee to justify the deduction claimed u/s 54B and 54F of the Act. The queries raised by the Ld. AO were duly replied to by the assessee and ample corroborative documentary evidences were also filed to substantiate the veracity of deductions claimed by the assessee in her income-tax return. The aforesaid facts are duly verifiable on perusal of the notices issued and submissions filed during the course of assessment proceedings. We find that when the original assessment order has been passed under Section 143(3) of the Act by the Ld.AO after due verification of the same issue as raised in the order impugned passed under Section 263 of the Act and that too upon causing exhaustive enquiry and finalising the same after taking a possible view, the invocation of provision of Section 263 on the basis of change of opinion is, thus, not found to be sustainable. We have also found substance in the arguments advanced by AR that the original order needs not to give detailed reason. Further that, when one possible view has been taken by the Ld.AO the said cannot be treated as erroneous and prejudicial to the interest of the Revenue - See NIRMA CHEMICALS WORKS P. LTD. (AND VICE VERSA) [2008 (2) TMI 373 - GUJARAT HIGH COURT] and KAMAL GALANI [2018 (6) TMI 1052 - GUJARAT HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Whether the Principal Commissioner of Income Tax (PCIT) erred in invoking Section 263 of the Income-tax Act, 1961 to set aside the order passed by the Assessing Officer (AO) under Section 143(3).2. Whether the AO conducted necessary inquiries and applied due diligence in allowing the deductions claimed under Sections 54B and 54F of the Income-tax Act, 1961.3. Whether the deductions claimed by the assessee under Sections 54B and 54F were justified and supported by adequate evidence.4. The jurisdiction and validity of the PCIT's revisionary powers under Section 263 of the Income-tax Act, 1961.Detailed Analysis:Issue 1: Invocation of Section 263 by PCITThe PCIT invoked Section 263 of the Income-tax Act, 1961, setting aside the AO's order under Section 143(3) on the grounds that the AO's order was erroneous and prejudicial to the interest of the Revenue. The PCIT's primary contention was that the AO failed to make sufficient inquiries and verification regarding the deductions claimed under Sections 54B and 54F by the assessee. The PCIT issued a show-cause notice highlighting discrepancies and lack of conclusive evidence supporting the deductions claimed by the assessee.Issue 2: Conduct of Necessary Inquiries by AOThe Tribunal observed that the AO made specific inquiries during the assessment proceedings, requiring the assessee to substantiate the deductions claimed under Sections 54B and 54F. The assessee furnished detailed submissions and supporting documentary evidence in response to the AO's queries. The AO accepted the deductions after examining the relevant material and conducting due verification. The Tribunal noted that the AO's assessment order reflected the examination of the issues and the acceptance of the deductions claimed by the assessee.Issue 3: Justification of Deductions under Sections 54B and 54FThe Tribunal found that the assessee provided ample corroborative documentary evidence to substantiate the deductions claimed under Sections 54B and 54F. The assessee purchased agricultural land and made investments towards the construction of a residential house, justifying the deductions claimed. The Tribunal noted that the AO raised specific queries and the assessee duly replied with relevant evidence, which was examined by the AO before allowing the deductions.Issue 4: Jurisdiction and Validity of PCIT's Revisionary Powers under Section 263The Tribunal emphasized that for the PCIT to exercise revisionary powers under Section 263, the order passed by the AO must be both erroneous and prejudicial to the interest of the Revenue. The Tribunal referred to judicial precedents, including the judgments of the Hon'ble Gujarat High Court in CIT vs. Nirma Chemicals Works Pvt. Ltd. and the Hon'ble Bombay High Court in CIT vs. Kamal Galani, which established that an order cannot be deemed erroneous merely because the PCIT holds a different view. The Tribunal held that the AO conducted adequate inquiries and took a possible view based on the evidence presented, and therefore, the PCIT's invocation of Section 263 was not justified.Conclusion:The Tribunal quashed the order passed by the PCIT under Section 263, holding that the original assessment order passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal allowed the assessee's appeal, emphasizing that the AO conducted necessary inquiries and due verification before allowing the deductions claimed under Sections 54B and 54F. The Tribunal reiterated that the PCIT cannot invoke revisionary powers under Section 263 merely based on a different opinion, especially when the AO's view is sustainable in law.