TaxTMI 
TaxTMI 
2019 (3) TMI 1124
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....all for the records and quash the order in C.No.2(24)/263/PCIT-5/CR-5/2015-16 dated 26.02.2016, passed under Section 263 of the Income Tax Act, 1961 [in short "the Act"] by the Principal Commissioner of Income Tax-5, Chennai. 4.The writ petitioner was the principal shareholder of a company called Royal Images Direct Marketing Private Company [in short referred to as "RIDM"]. The petitioner, along with other shareholders had entered into a Share Purchase Agreement, dated 17.07.2006 [in short "SPA"] with another entity by name Accor Services. 5.According to the SPA, 70% of the shareholding in RIDM was to be sold by way of tranche, followed by a second and third tranches comprising 20% and 10% of the equity stake in RIDM. The said three tranches were required to be sold in three consecutive years, namely, AY-2007-2008, AY-2008-2009 and AY- 2009-2010. The petitioner had received an advance to a sum of Rs. 15,82,86,273/- in the previous year 2006-2007, relatable to AY 2007-2008 towards the sale of 70% of the shares in the first tranche. The petitioner claimed that 70% of the shareholding was sold by him on 05.05.2007 for a total consideration of Rs. 22,42,72,478/- in the first ....
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....holding in RIDM and declared a total consideration of Rs. 11,24,14,809/-. He also claimed that he paid Rs. 40 lakhs out of the said amount as advance for purchase of immovable property in Alibaug in Rajgad District, Maharashtra, to construct a residential property. He also invested in Capital Gains Account Scheme, maintained in the Bank of India. 14.The return for AY 2009-2010 was also subjected to scrutiny and an assessment order was passed under Section 143(3) of the Act, on 12.12.2011. The Assessing Officer disallowed the claim of the petitioner for a sum of Rs. 6.50 Crores, under Section 54 of the Act, on the ground that the flats purchased by the petitioner were two separate residential units and consequently, he was not entitled to claim the benefit under Section 54F of the Act. 15.The petitioner challenged the assessment order by preferring an appeal before the Commissioner of Income Tax (Appeals) [in short "CIT(A)"]. The CIT(A), by order dated 29.07.2013, allowed the appeal and sustained the deduction claimed by the petitioner under Section 54F of the Act. It must be pointed out that in the very same order the CIT(A) also dealt with the appeal preferred by the p....
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....ce dated 15.12.2015 to the petitioner under Section 263 of the Act. In the show cause notice, the petitioner's claim for deduction under Section 54F of the Act to a sum of Rs. 4,88,78,900/- being the amount invested in the flats was questioned. 21.The petitioner claimed that he filed a reply to the notice. The respondent in the writ petition namely, the Principal Commissioner of Income Tax-5, passed the impugned revisional order dated 26.02.2016, challenged in the writ petition. By the said order, the respondent in the writ petition set aside the assessment order dated 31.03.2014, pertaining to AY 2008-2009 passed under Section 143(3) read with Section 147 of the Act. This led the petitioner to file writ petition seeking to call for the records of the said order and to quash the same. The Order dated 02.06.2017: 22.By order dated 02.06.2017, the learned Singe Judge of this Court observed that the CIT(A) by common order dated 29.07.2017, had held that the petitioner should be allowed deduction under Section 54F of the Act, as the aspects pertaining to the claim had been considered in AY 2008-2009. It was observed that in the order, the CIT(A) had discussed the entire hi....
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....014, passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act." 26.The learned Singe Judge further observed as follows: "13. Furthermore, according to me, as correctly argued by Mr.Senthil, on behalf of the appellant, the view taken by the Assessing Officer in its order dated 31.03.2014, was a possible view, and therefore, would not, necessarily, as it sought to be projected on behalf of the Revenue, be categorised as an erroneous view. 13.1. A perusal of the impugned order would show that the respondent has set aside the order and directed the Assessing Officer to revisit the issue, as he, according to him, had faulted to take into account the fact that the subject flats had been purchased via two separate sale deeds, and had separate electricity meter connections. According to me, it appears that the respondent was unnecessarily burdened by the fact that the subject flats were purchased by two separate sale deeds and had separate electricity meter connections. The issue at hand, before the Assessing Officer, in my opinion, was whether or not the subject flats form a single residential unit. 13.2. The size of the flat, or,....
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....e Income Tax Act, with respect to the second flat purchased by him was never discussed by the Assessing Officer for AY 2008-2009 or even by the CIT(A) or by the Tribunal. The discussion arose in the course of deciding whether the respondent was entitled for deduction under Section 54F for investment made in AY 2009-2010 in Alibaug property. Since the Assessing Officer had not decided this question, Ms.Hema Muralikrishnan, learned counsel insisted that the order of the appellant in initiating proceedings under Section 263 of the Act, was in accordance with law and cannot be termed as prejudicial to the interest of the respondent. It was repeatedly urged by the learned counsel that the issue as to whether the purchase of two residential flats by the respondent can be considered as purchase of one residential unit eligible for exemption under Section 54F in AY 2008-2009 had not been decided at all by only of the authorities. 31.The learned counsel also assailed the observation of the learned Single Judge while setting aside the impugned order that the flats formed a single residential unit as a "possible view" and that consequently, the appellant cannot revise the same under Sec....
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....9.07.2013. The CIT(A) passed a common order also recording the report of the Surveyor wherein it was stated that the respondent herein had converted the two residential flats into one single unit. The CIT(A) allowed the claim of the respondent for exemption under Section 54 (AY 2009-2010), stating that all aspects have been duly considered for permitting relief claimed under AY 2008- 2009. It was observed that the assessment was completed under Section 143(3) by order dated 22.12.2010. The claim of the respondent that the acquisition was a single dwelling unit in the previous year and could not be a ground to deny relief under Section 54F in the subsequent year AY 2009-2010 was accepted. 35.The learned counsel pointed out that the Tribunal had remitted the issue for fresh consideration with respect to the investment in Capital Gains Accounts Scheme and advance paid for purchase of property in Alibaug. In the meanwhile, on 15.12.2015, the appellant herein had issued the notice under Section 263 of the Act, with respect to AY 2008-2009 claiming that the assessee owned more than one residential unit on the date of sale of shares on 05.05.2007. The learned counsel supported the orde....
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....tion referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain." 39.Section 54F provides as follows: "Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house: 54F.(1)Subject to the provisions of sub-section(4), where, in the caseof an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a....
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....ential unit. The respondent purchased flat No.607 by sale deed dated 23.07.2006 and flat No.612 by sale deed dated 16.01.2007. 42.As had been pointed out earlier, the Society had also recognized the respondent as the owner of one single residential unit alone and had also provided the facility of only one vote in matters relating to the Society. These facts have not been seriously disputed by the appellant herein. 43.The respondent had also filed his return for AY 2008-2009 on 31.07.2008 and he claimed deduction under Section 54F of the Act. It was taken up for scrutiny and the order dated 22.12.2010, was passed. It was then intimated to the respondent that the Internal Revenue Audit had raised an objection with respect to the claim under Section 54F of the Act. 44.The Assessing Officer, on receipt of the information provided by the respondent dropped the proceedings which had been initiated pursuant to the objection of the Internal Revenue Audit. The respondent received a notice dated 20.03.2013, under Section 148 of the Act, in respect of the very same AY 2008- 2009, on the ground that income chargeable to tax has escaped assessment. When the respondent sought reasons....
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....deduction claimed by the respondent under Section 54F of the Act. The CIT(A) had given a specific finding that the apartment is a single residential unit comprising of a single kitchen and connected by a common passage inside the house. Further, there was only one entry for the house. There was no independent entry to the flat No.607. It was further observed as follows: "9.11 All these aspects have been duly considered for permitting relief u/s 54F claimed during the A 2008-09. The assessment for the said year was completed u/s 143(3) vide order dated 22.12.2010 by accepting the assessee's submission and considering the acquisition as a single dwelling unit in the previous year it is (not) appropriate to deny relief u/s 54F, in the subsequent year i.e.AY 2009-2010 by taking a stand that the assessee has more than one house. 9.12.I have verified the assessment order, remand report of the AO, assessee's reply to the remand report and note on sequence of events. Mr.Abhijit Bhandari, the appellant was the principal share holder of M/s Royal Images Direct Marketing Pvt Ltd., a company that was engaged in management of Customer Loyalty Programs. The property pur....
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....ains accounts scheme amounting to Rs. 6,10,000/- and Rs. 40,00,000/- and advance paid for the purchase of property. It means that the Assessing Officer has not given any comments regarding this issue. Being so, in our opinion, it is appropriate to remit this issue. being so, in our opinion, it is appropriate to remit this issue back to the Assessing Officer, as there is violation of Rule 46A. Accordingly, we remit the issues for fresh consideration with regard to investment in capital gains accounts scheme and the advance paid for the purchase of property totalling at Rs. 6,50,00,000/- back to the Assessing Officer, as he has only considered the investment in flat Nos.607 and 612, Altamount Road, Cumballa Hills, for which the assessee has already claimed deduction u/w.54F for assessment year 2008-09 and allowed by the Assessing Officer in the assessment year 2008-09. Therefore, the same cannot be considered once again in the assessment year 2008-09 (sic 2009-2010). This issue to be decided afresh by the Assessing Officer. ...." 49.The Revenue, did not raise any issue regarding the above order, but issued a show cause notice under Section 263 of the Act, on 15.1....
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....he submissions by the assessee did not support the assessee's contention of holding single residential unit on the date of transfer of capital gain and also no supporting documents were received from the assessee regarding completion of renovation and occupation of the assessee in the combined residential unit of flat Nos.607 & 612. Further, according to the Assessing Officer, the second condition for disallowance is that the assessee should have invested in a residential house. The Assessing Officer states that as per deduction of claim u/s.54F, the assessee could invest either in purchase of residential property one year prior to the date of transfer or 2 years after the date of transfer or construct house within 3 years after the date of transfer. In the assessee's case the Assessing Officer states that the assessee has utilized the amount in agricultural land located at Dhokawade Village, Alibag, Taluka of Rajgad District, which is evident from the document describing the property as 'pieces and parcels' of agricultural land. The Assessing Officer also pointed out that the assessee had not produced any proof like approval obtained from the Municipal Corporation ....
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.... these facts, the Commissioner of Income Tax (Appeals) called for remand report and the same was submitted by the Assessing Officer vide remand report dated 31.07.2012. Later, a second remand report dated 13.8.2012 was also submitted by the Assessing Officer, which was considered by the Commissioner of Income-tax (Appeals)." (emphasis is mine) 12. The Tribunal, thus, as indicated in my narration above, was dealing with three aspects via its order dated 08.04.2015. First, as to whether the subject flats formed a single residential unit. Second, the petitioner's claim that he had invested Rs. 6.10 Crores in the Capital Gains Accounts Scheme was borne out. Third, the petitioner's claim that he had invested money in the Alibaug property, on which, he had, purportedly, constructed a residential structure. 12.1. The Tribunal, after discussing these three aspects of the matter, confined the remand only to the last two aspects, that is, the claim of the petitioner with regard to investment of Rs. 6.10 Crores in the Capital Gains Scheme; and the purported investment of Rs. 40 lakhs made by him by way of advance towards purchase of Alibaug property. ....
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....er passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." It is seen that unless there is a definite finding that the order passed by Assessing Officer was erroneous and prejudicial to the interest of the Revenue, and, further only after providing opportunity and after making necessary enquiry, an order under Section 263 of the Act can be passed. 53. In the case of MALABAR INDUSTRIAL CO.LTD. VS. COMMISSIONER OF INCOME TAX, KERALA STATE, [reported in (2000) 2 SCC 718], the Honourable Supreme Court, held as follows: "5.To consider the first contention, it will be apt to quote Section 263(1) which is relevant for our purpose:- 263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he consi....
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....igh Court of Madras in Venkatakrishna Rice Company Vs. Commissioner of Income-tax [163 ITR 129] interpreting prejudicial to the interests of the Revenue. 9. ........ 10.The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi Vs. Commissioner of Income-tax....