TaxTMI 
TaxTMI 
2020 (10) TMI 407
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....d by the ld. AO was erroneous nor the same was prejudicial to the interest of the revenue. 3. On the facts and circumstances of the case the proceedings initiated under section 263 of the Act are bad in law and on the facts of the case. a. That the Ld. AO has conducted assessment proceedings properly and granted the relief u/s 54F after making proper inquiry and after considering all relevant details provided by the assessee with respect to the claim made by her. b. That the ld. PCIT has failed to appreciate the fact that AO has adopted one of the possible views of the matter and the jurisdiction under section 263 of the Act cannot be exercised merely to substitute the view taken by the AO. c. That the action of the ld. PCIT is in negation of overriding principles of natural justice which were explicitly required to be followed while exercising the power under section 263 of the Act. d. That ld. PCT grossly erred in invoking provisions of section 263 based merely on 'Change of Opinion'. e. That the ld. PCIT grossly has erred both on facts and in law, in assuming the jurisdiction u/s 263 of the Income Tax Act, 1961 without consid....
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....at the returned income of the assessee. Thereafter, the ld. Principal Commissioner of Income Tax (PCIT) on perusal of the assessment record noticed that the deduction under section 54F has been allowed by the AO in respect of purchase of agricultural land and construction of house which is not admissible. Accordingly, the ld. PCIT has issued a show cause notice dated 4th February, 2019 under section 263 of the IT Act whereby proposed to modify the order of the AO on the issue of allowing the deduction under section 54F of the Act. The assessee filed her reply to the show cause notice and contended before the ld. PCIT that this limited scrutiny was taken up by the AO only in respect of the large investment in the property and deduction claimed under section 54F of the IT Act. The assessee produced all the relevant details, documents as well as books of account in support of the claim of deduction under section 54F which was duly examined and verified by the AO and only when the AO was satisfied with the claim of assessee, the assessment order was passed accepting the returned income. Thus the assessee contended before the ld. PCIT that it is not a mere purchase of agricultural land ....
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.... revisionary powers under section 263 of the Act. Since the AO conducted a proper enquiry and examined all the relevant evidences, details as well as books of account, it cannot be said that the order is erroneous for want of enquiry or application of mind by the AO. Hence, the action under section 263 was not valid and liable to be quashed. The ld. A/R has relied upon the decision of the Coordinate Bench of this Tribunal dated 11.09.2020 in case of Shri Rajendra Kumar Sharma vs. JCIT in ITA No. 358/JP/2015 and submitted that the Tribunal has held that a deduction under section 54F cannot be denied on the ground that the assessee got constructed a residential house on the agricultural land. The Tribunal has considered various decisions on this point and finally come to the conclusion that the deduction under section 54F is allowable in respect of the amount invested in construction of residential house. Therefore, the cost of acquisition of the plot together with cost of construction of the house will be considered as cost of new asset for the purpose of allowing deduction under section 54F. Thus the AO has taken a possible view on the issue of allowability of deduction under secti....
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.... 5. We have considered the rival submissions as well as the relevant material on record. We have carefully perused the assessment order passed by the AO under section 143(3), show cause notice issued by the ld. PCIT under section 263 of the Act as well as the impugned order passed under section 263. It is manifest from the record that the case of the assessee was taken up for limited scrutiny as per the notice issued under section 143(2) dated 19.09.2016, the relevant part of the said notice listing the issues identified for examination are as under :- " This is for your kind information that the return of income for Assessment Year 2015-16 filed vide ack. No. 134831180300316 on 30/03/2016 has been selected for Scrutiny. Following issues have been identified for examination :- i. Purchase of Property ii. Deduction claimed under the head Capital Gains 2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on 26/09/2016 at 11:00 AM in the Office of the undersigned." Thus it is clear that the case was selected for limi....
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....section 263 that the ld. PCIT has invoked the provisions of section 263 only on the issue of allowability of deduction under section 54F in respect of the investment made by the assessee towards cost of agricultural land and construction of house. The sole ground for initiating the proceedings under section 263 by the ld. PCIT is that in his view the claim of deduction in respect of agricultural land is not admissible. As apparent from the show cause notice that the scope of proceedings under section 263 was limited only on the issue of allowability of deduction under section 54F in respect of the agricultural land acquired by the assessee and used for construction of house. There was no allegation by the ld. PCIT about the lack of enquiry on the part of the AO while passing the assessment order. Even otherwise, it is clear from the assessment order that the case was selected for limited scrutiny only on the issue of investment made in the agricultural land and deduction under section 54F of the IT Act. Therefore, the question of lack of enquiry does not arise when the AO has taken up the scrutiny and issued the notice under section 142(1) along with a questionnaire calling for all....
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.... the allowability of the deduction under section 54F in respect of the investment made for construction of house on agricultural land. Whereas in the proceedings under section 263 the ld. PCIT has travelled beyond the scope of proceedings as initiated vide show cause notice dated 4th February, 2019. Therefore, the proceedings which are beyond the scope of the revisional proceedings, are not permissible as not an issue involved in the show cause notice. 6. Further, once it is not a case of lack of enquiry or inadequate enquiry as per the show cause notice issued under section 263 of the Act, then conducting a further enquiry on the factual aspects of the investment made in purchase of agricultural land and construction of the house is beyond the jurisdiction of the ld. PCIT as assumed by issuing show cause notice under section 263. The finding of the ld. PCIT in the revision order ought to have been confined on the issue of allowability of deduction under section 54F. Since the ld. PCIT was not agreeing with the view of the AO regarding the claim of deduction under section 54F, at the outset, he was required to give a concluding finding on the issue. On the contrary, the ld. PCIT....
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....sired information by 15-11-1995. There-after, the case was adjourned to 22-11-1996 and 1-12-1995. On 5-12-1995, the Assessing Officer studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid and the case was adjourned to 19-1-1996. On 19-1-1996, the Assessing Officer again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adjourned for 23-1-1996. On 23-1-1996, the case was discussed and finalised. After that, assessment was completed by passing assessment order. These matters clearly indicate that the Assessing Officer particularly made reference to the matters, which the CIT has opined were not inquired. Thus, according to the Tribunal, the foundation to exercise power under section 263 of the Income-tax Act, was not existing. 8. We are of the opinion in the aforesaid circumstances on the finding reached by the Assessing Officer, no question of law really arises for consideration in this appeal. 9. It is true that in a given case not holding of any enquiry, which is relevant for assessment may indicate....
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....basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable. Consequently, the appeal fails and is hereby dismissed." Thus the Hon'ble High Court has held that the ld. CIT can cancel the order of the AO and require the concerned AO to pass a fresh order in accordance with the law after holding a detailed enquiry. But when the enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of assessment, but the same is apparent from the record of the proceedings, the invocation of jurisdiction by the ld. CIT was unsustainable. A similar view has been taken by the Hon'ble Delhi High Court in case of ITO vs. D.G. Housing Projects Ltd. 343 ITR 329 in para 18 as under :- "18. It is in this context that the Supreme Court in Malabar Industrial Co.....
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....d that the assessee claimed deduction of Rs. 83,54,434/- u/s 54F from the LTCG declared by it. The assessee made investment of Rs. 1,15,00,000/- in purchase of land and constructed residential house thereon. The area of land was 4090 Sq.mt. and construction thereon is of 1504 Sq. ft. The A.O. on these facts issued a show cause notice to assessee as given in assessment order to which assessee replied which is given in page - 6 of assessment order. The A.O. on following grounds denied the claim of assessee: (a) The land is agricultural and not residential. (b) The construction of residential house without approval of plan by Govt. Authority. (c) The assessee has also not submitted any electricity and water connection evidence. (d) The land was registered in the name of assessee on 28-3-13 i.e. beyond the period specified in Section 54F (4) and so assessee not complied conditions laid down therein. The agreement to purchase land executed on 2-6-2011 claimed by assessee has no evidentiary value as payment of consideration shown in cash. (e) The bills for construction are lacking details and contain no detail of work done and each payment mad....
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....ouse. The construction on land is meant for residential house. The assessee could complete the construction of the residential house within three years and if any facility lacking in the constructed residential house the same could be completed within in that period. There is water supply from well and temporary electric connection in the residential house constructed by assessee. The construction of residential house is 1553.50 Sq.ft. and not having proper bills for construction cannot be taken adversely against him for purposes of Section 54F. These facts are evident from the valuation report of Regd. Valuer a copy of which is submitted. The Inspector of department furnished vague details without any physical inspection of building and took only photographs. The assessee has only to invest net sale consideration in purchase or construct a residential house and therefore registration or legal ownership is not necessary which is evident from Circular No. 471 dated 15-10-1986 issued by CBDT and from judgements of Balraj Vs. CIT 254 ITR 22 and CIT Vs. Laxmi Chand 211 ITR 804 and various other judgements on the issue. Thus, agreement to purchase copy of which submitted proves domain a....
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....esult, appeal of the assessee is allowed. Order is pronounced in the open court on 06/10/2020. ============= Document 1 FORLATA PHILA à¤à¤¾à¤°à¤¤ सरकार Government of India कारà¥à¤¯à¤¾à¤²à¤¯, पà¥à¤°à¤§à¤¾à¤¨ आयकर आयà¥à¤•à¥à¤¤ - दà¥à¤µà¤¿à¤¤à¥€à¤¯, O/o the Pr. Commissioner of Income-tax-2, कमरा नमà¥à¤¬à¤°-111, केनà¥à¤¦à¥à¤°à¥€à¤¯ राजसà¥à¤µ à¤à¤µà¤¨, सà¥à¤Ÿà¥‡à¤šà¥à¤¯à¥‚ सरà¥à¤•à¤¿à¤², à¤à¤—वानदास रोड, जयपà¥à¤° Room No. 111, New Central Revenue Building, Statue Circle, Jaipur Phone No. 0141-2385035- Email id:- [email protected] No. Pr. CIT-II/ITO(T&J)/JPR/263-264/2018-19/1274 Smt. Lata Phulwani W/o Shri Bhagwani Phulwani, 1-2, New Joshi Colony, Brahampuri, Jaipur Date:- -24-01-2019 विषय = Show cause ....