2023 (7) TMI 990 - AT - Income Tax

Tribunal condones appeal delay, dismisses as infructuous; revised assessment order upheld

Shri Suman Kumar Anand Versus Principal CIT-1, Bhopal

The delay in filing the appeal was condoned by the Tribunal due to the assessee's explanation of lack of awareness regarding the impugned order. The ... Revision u/s 263 by CIT - exemption u/s 54F - HELD THAT:- We find that in the consequential assessment-order framed de novo, the AO has accepted assessee’s submissions and again allowed exemption u/s 54F although he has reduced the quantum of exemption so as to set right some calculation-mistake as pointed by Ld. AR. But the fact remains that the AO has accepted the exemption u/s 54F and allowed the same. Faced with this situation, we do not find any grievance subsisting to the assessee from revision-order when the AO has allowed exemption u/s 54F even while carrying out the direction given by PCIT. When it so, the present appeal filed by the assessee becomes infructuous liable to be dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay in filing the appeal should be condoned where the assessee attributes delay to reliance on former counsel's incorrect assurances and non-visibility of electronic service on the income-tax portal. 2. Whether a revision under section 263 of the Income-tax Act is sustainable where the Principal Commissioner/Commissioner of Income-Tax set aside the assessment as erroneous and prejudicial but, on de novo assessment directed by the revision order, the Assessing Officer again allows the same exemption (subject only to a minor arithmetic adjustment). 3. Whether absence of documentary proof during the original assessment regarding completion of construction within three years (relevant to exemption under section 54F) renders the original assessment erroneous and prejudicial to the revenue such that the revision under section 263 must be upheld notwithstanding subsequent allowance of the exemption on de novo assessment. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeal Legal framework: The Tribunal has jurisdiction to condone delay in filing appeals where sufficient cause is shown; principles consider bona fides, reasons for delay, absence of negligence or mala fides, and prejudice to the Revenue. Precedent Treatment: The Tribunal applied ordinary principles governing condonation of delay (no specific prior authority was analyzed in the text). Interpretation and reasoning: The assessee swore an affidavit stating reliance on prior counsel who had advised that all compliances were completed; subsequent verification by new counsel revealed the revision order had been passed; electronic service had been effected but may not have been noticed by the assessee. The Revenue offered no serious objection and acknowledged the possibility that the assessee did not check the portal. Considering object of justice and lack of mala fide or clear negligence, the Tribunal exercised discretion to condone the delay. Ratio vs. Obiter: Ratio - where a delayed appeal is supported by credible affidavit of reliance on counsel and absence of deliberate default, and the Revenue does not demonstrate prejudice, delay may be condoned. Conclusion: Delay of 232 days (as registry indicated) was condoned; appeal admitted for hearing. Issue 2 - Validity of revision under section 263 where de novo assessment upheld the exemption Legal framework: Section 263 permits revision of an assessment order that is erroneous in so far as it is prejudicial to the interests of the revenue; relief under revision may include setting aside the assessment and directing de novo consideration by the AO. Precedent Treatment: The assessee relied upon an earlier Tribunal decision to support the proposition that re-taxability or withdrawal of exemption upon expiry of the three-year construction period affects subsequent assessment years and does not automatically invalidate the exemption in the original assessment year. The Tribunal in the present decision considered that line of reasoning when assessing sufficiency of grievance. Interpretation and reasoning: The Principal Commissioner/Commissioner considered the original assessment erroneous because the AO had not verified documentary proof of construction completion within three years. Accordingly, revision under section 263 set aside the assessment and directed a de novo assessment. The Assessing Officer, on remand and de novo assessment, re-examined the claim and again allowed exemption under section 54F, reducing the quantum only to correct a calculation mistake. Given that the AO, upon proper verification and exercise of remand, sustained the exemption (save for a trivial arithmetic adjustment), the Tribunal reasoned that there exists no substantive grievance surviving from the revision-order against the assessee: the purpose of the revision (correct scrutiny and decision) had been achieved and the assessee's position remained substantially unchanged. Ratio vs. Obiter: Ratio - where a revision under section 263 directs de novo consideration and the AO, after re-examination, allows the same relief originally claimed (save for immaterial arithmetic correction), an appeal against the revision may be rendered infructuous and can be dismissed. Obiter - the broader proposition that failure to seek documentary proof at original assessment constitutes error may be context-specific and was not necessary to decide beyond the concrete outcome here. Conclusion: No substantive grievance remained after de novo assessment that again allowed exemption under section 54F; therefore the appeal against the revision order was rendered infructuous and dismissed. Issue 3 - Effect of non-verification of completion of construction within three years on entitlement to exemption under section 54F Legal framework: Exemption under section 54F is conditional upon investment in specified assets and, where construction is involved, within prescribed time limits (three years). Non-compliance within the relevant period can affect taxability in subsequent assessment years; compliance must be assessed by the AO. Precedent Treatment: The assessee cited Tribunal authority supporting the view that failure to complete construction within the three-year period may attract re-taxation in the year of non-compliance but does not necessarily vitiate allowance of exemption in the earlier assessment year where conditions were otherwise satisfied at the time or where steps toward compliance (such as deposit in Capital Gain Deposit Scheme) were taken. Interpretation and reasoning: The Tribunal acknowledged the argument that, at worst, re-taxation or withdrawal of exemption would occur in the year in which the three-year period expired (affecting the assessment year relevant to that period) rather than retroactively disturbing the exemption lawfully claimed and allowed in the earlier assessment year where the AO ultimately accepts the position upon re-examination. The AO's acceptance, after de novo assessment, that the exemption was allowable (subject to a computational correction) reinforced the view that any question about subsequent completion did not negate the correctness of allowance for the assessment year under consideration. Ratio vs. Obiter: Ratio - where the AO, upon proper verification in de novo assessment, allows section 54F exemption, issues around subsequent non-completion within the three-year window do not automatically render the original allowance erroneous for the earlier assessment year; consequences for non-completion pertain to later years. Obiter - general propositions about timing and effect of non-compliance were noted but not authoritatively expanded beyond the facts. Conclusion: Absence of documentary proof during the original assessment justified revisional scrutiny; however, because the AO, on de novo assessment, allowed the exemption (after correcting a calculation error), the substantive entitlement for the assessment year stood affirmed and any potential re-taxation for failure to complete construction within three years would be a matter for later assessment years, not a ground to sustain grievance against the taxpayer in the present appeal.