TaxTMI 
TaxTMI 
2020 (12) TMI 1196
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....r section 263 of the Act that the value adopted by the ld. Assessing Officer for determination of cost of construction for the purpose of calculating of eligible deduction under section 54F of the Act is incorrect. 3. In the facts and in the circumstances of the case, Ld. Pr. CIT- I, Indore erred in directing Ld. Assessing Officer to allow deduction under section 54F of the act proportionately when such an action is covered by the provisions of section 154of the Act at the end of Ld. Assessing officer. 4. In the facts and in the circumstances of the case, Ld. Pr. CIT- I, Indore erred in setting aside the order to the file of Ld. Assessing officer with a direction to pass a fresh order by invoking the provisions of section 263 of the Act. 5. The appellant craves leave to add, amend, alter or otherwise raise any other ground of appeal." 2. Briefly stated facts are that in this case the assessment was completed u/s 143(3) of the Income Tax Act 1961(hereinafter referred as the Act) vide order dated 23.03.2016. The assessing Officer computed total income at Rs. 16,50,920/-. Subsequently, the Ld. Pr. CIT after examining the report found that the assessment o....
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....s like AC, Sofa sets, etc e. from the amount of addition re-worked towards taxable LTCG of Rs. 10,30,044 out of which Rs. 3,75,152 was already reported in the return and balance Rs. 6,54,892 was added while making the assessment 4. Ld. AO allowed the claim on being satisfied with the explanation of assessee, on an enquiry made during the course of assessment proceedings. Thus, the decision of Ld. AO cannot be held to be erroneous. 5. Distinction is to be appreciated between lack of enquiry and inadequate enquiry. If there was any enquiry, even inadequate that would not by itself give occasion to Ld. Pr. CIT to pass orders u/s 263, merely because he has different opinion in the matter. It is only in cases of "lack of enquiry" that such a course of action would be open for the Ld. Pr. CIT. 6. Reliance is placed on the following decisions - a. Hon'ble jurisdictional ITAT Indore Bench in the case of Vinod Bhandari in ITA 350/Ind/2017 & others, order dtd 20.03.2020: "43. Hon'ble Gujarat High Court in the case of Arvind Jewellers (259 ITR 502) held that: "Held, that the finding of fact by the Tribunal was that the assessee ha....
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.... the books of accounts, we in view of judgment in the case of Malabar Industrial Co. (supra) as per which before invoking the provisions of Section 263 of the Act Ld. PCIT should have satisfied the twin conditions, namely order of the Ld. A.O stated to be erroneous and secondly it is prejudicial to the interest of revenue. But in the instant case wherein we have examined each and every issue raised by Ld. PCIT in the light of the reply filed by the assessee, information called by the Ld. A.O and the finding in the assessment order, we are of the considered view that under the given facts and in law the view taken by the AO in the order passed u.s143(3) of the Act dated 24.3.2015 seems to be reasonable and plausible which cannot be held as legally unsustainable and not in accordance with law. In our view it is passed with complete application of mind and thus it can neither be held as erroneous nor prejudicial to the interest of revenue. Therefore Ld. PCIT under the given facts and circumstances of the case erred in assuming jurisdiction u/s.263 of the Act since the Ld. A.O has made sufficient enquiry by way of questionnaire to which detailed reply have been filed from time....
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....ued a notice under section 263 on ground that Assessing Officer had not made inquiry on certain aspects and accepted version of assessee without making any inquiry or verification, which was substantially prejudicial to revenue - Accordingly, he partly set aside assessment - Tribunal held that once inquiry was made, a mere non-discussion or non-mention thereof in assessment order could not lead to assumption that Assessing Officer did not apply his mind or that he had not made inquiry on subject and this would not justify interference by Commissioner by issuing notice under section 263 - Whether since department could not place anything to show that findings recorded by Tribunal were perverse or contrary to record, invoking of revision proceedings was unjustified - Held, yes [Para 13] [In favour of assessee]" [emphasis supplied] d. Hon'ble Delhi High Court in the case of Vikas Polymers - [2010] 194 Taxman 57 - order pronounced on 16.08.2010 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1982-83 - Whether for exercising power under section 263, it is a prerequisite that Commissioner must gi....
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.... 263, read with section 80HHC, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2000-01 - Whether if all relevant details have been filed by assessee and Assessing Officer allows assessee's claim, decision of Assessing Officer cannot be held to be erroneous simply because in his order he does not make any elaborate discussion in that regard - Held, yes" [emphasis supplied] B. Application of mind by the Ld. AO 1. In the instant case, Ld. AO during the assessment proceedings has made enquiries related to claim of deduction u/s 54B and 54F as is evident from the assessment order and the entries made in the order sheet. After due verification of the evidences and proofs placed on record and taking in to account the valuation reports by Ld. DVO and the Authorized Valuer, the Ld. AO made the addition and assessed the total income. 2. It is not a case of non-application of mind by the Ld. AO. It is also not a case where Ld. AO has allowed the relief without enquiring in the claim made by the assessee. Invoking provisions of section 263 is not in accordance with the law. 3. Reliance is placed on foll....
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....assessment order passed in case of assessee-firm on ground that Assessing Officer did not make proper enquiry regarding genuineness of certain cash credits found in books of firm - However, Tribunal held that since assessee had explained satisfactorily cash credit in books of account and discharged burden and Department had not brought out material or evidence to rebut same, cash credits were not income of assessee-firm and, accordingly, set aside order of Commissioner passed under section 263 - Whether in view of finding of fact recorded by Tribunal, no substantial question of law arose out of impugned order - Held, yes - Whether, therefore, instant appeal was to be dismissed - Held, yes" [emphasis supplied] d. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983-84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not pr....
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.... when facts clearly showed that Assessing Officer had undertaken exercise of examining as to whether expenditure incurred by assessee in replacement of dyes and tools was to be treated as revenue expenditure or not and on being satisfied with assessee's explanation, he accepted same, it could be said to be a case of lack of inquiry - Held, no - Whether further, on facts and law, view taken by Assessing Officer was one of possible views and, therefore, assessment order passed by Assessing Officer could not be held to be prejudicial to interest of revenue - Held, yes - Whether, therefore, Tribunal was justified in setting aside order of Commissioner - Held, yes" [emphasis supplied] f.Hon'ble Delhi High Court in the case of Hindustan Marketing & Advertising Co. Limited - [2011] 196 Taxman 368 - order pronounced on 21.09.2010 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment years 1983-84 and 1984-85 - Assessee- company was incorporated with an object of carrying on business of marketing agents and to render marketing services, etc. - For relevant assessment years, assessee filed its returns and as....
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.... two views are possible and Ld. Pr.CIT does not agree with the view taken by the Assessing Officer, assessment order cannot be treated as erroneous and prejudicial to the interest of the revenue unless the view taken by the Assessing Officer not unacceptable in law this action of the Ld. A.O cannot be held as erroneous and prejudicial to the interest of revenue. We therefore set aside the finding of Pr. Commissioner of Income Tax on this issue as it was a mere change of opinion which would not enable Ld. Pr. Commissioner of Income Tax to exercise jurisdiction u/s 263 of the Act as the Ld. A.O had considered the details and the explanation offered by the assessee before accepting the claim. We therefore reinstate the action of the Ld. A.O allowing the assessee's claim of exemption u/s 10A of the Act at Rs. 12,51,79,200/- against the profits earned from SEZ units." [emphasis supplied] i. Hon'ble Bombay High Court in the case of Reliance Communication Limited - [2016] 69 taxmann.com 103 - order pronounced on 28.03.2016 - HEAD NOTE - "Section 68, read with section 263, of the Income-tax Act, 1961 - Cash credits (FCCBs) - Assessee raised funds by way of FCCBs during year under ....
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....iation of the material on record and cannot be said to be perverse. In our view, no question of law, much less a substantive question of law arises for consideration in this appeal. C. Meaning of 'Cost of new asset' as per the provisions of section 54F 1. The term of 'cost of new asset' has not been defined under the Income Tax Act, 1961 (the Act). The Act defines the term 'cost of any improvement' u/s 55(1)(b) which means all expenditure of capital nature incurred in making any additions or alternations to the capital asset by the assessee after it became his property. For expenditure to be termed as 'cost of improvement' the most essential element is that there should a time gap between incurring the expense and the acquisition of capital asset. If there is a time gap between incurring of expenses and its acquisition only then will the expense be treated as 'cost of improvement'. In the instant case, there is no such time gap between the acquisition of capital asset (i.e. construction of a new residential house) and incurring expense towards installation of electric equipment and other items which works out to a total investment of Rs. 11,79,76....
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....d it cannot be open to the Assessing Officer to treat only the cost of only civil construction as cost of house and segregate the cost of other things as not eligible for deduction under section 54." [emphasis supplied] b. Hon'ble Ahmedabad Bench of ITAT in the case of Shriniwas R Desai - ITA No. 1245/Ahd/2010 - order pronounced on 07.09.2012 - Para 4 - "..............In our view although the cost of "improvement" of the asset is not allowable, but in a case where the assessee has purchased "new asset", which is not in a habitable condition, the expenses incurred by the assessee to make it habitable should be allowed under section 54(2) of the Act......" [emphasis supplied] In the instant case, the investment made by assessee of Rs. 11,79,768 towards installation of household items like Air Conditioner, Sofa sets, etc forms an integral part of the new residential house so as to put it in a habitable condition. This cost incurred is an integral part of cost of construction of the new residential house. D. Non - application of mind by Ld. Pr.CIT 1. Order u/s 263 dated 26.03.2018 page 6, 2nd para - "It may be mentioned that collect....
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....n u/s 54F on proportionate basis 1. It is a settled law that scope of section 263 to revise an assessment is different from scope of section 154 to rectify any mistake apparent from record. Provisions of section 263 gives jurisdictional power whereas provisions of section 154 gives power of rectification. It is not correct to say that "rectification" is equal to "revision" under the Act. Term "erroneous" used in the section 263 is to be read relating to jurisdictional error on the part of the Assessing Officer in exercise of his powers vested under the law. It cannot be read as to a "mistake" which is rectifiable under the provisions of section 154 either suo moto or on the application of the assessee. Error committed by the Assessing Officer must be an error of jurisdiction, for if the order is not kept confined to jurisdictional error, no distinction would be left between the corrective powers conferred under section 154 and the revisionary powers exercisable under section 263. If such a distinction between the corrective powers and revisionary powers is not recognized, every incorrect order would become amenable to revisionary jurisdi....
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....n should be computed on proportionate basis as per provisions of section 54F(1). No doubt has been raised on value of investment made by assessee on the new residential house i.e Rs. 75,58,768. What is under dispute is the amount that has to be taken as cost of new asset for the purpose of calculation of deduction u/s 54F. The matter was open before Ld. AO to take appropriate measures for rectification of mistake apparent from records, if he so believed to exist. 3. In order passed u/s 263 by Ld. Pr. CIT no doubt has been raised on verification and enquiry conducted by Ld. AO during the assessment proceedings of various items namely - a. manner of verification of the transaction of sale of agricultural land b. investment made towards purchase of another agricultural land (for which deduction claimed u/s 54B is not under doubt by Ld. Pr. CIT) c. investment made towards cost of new residential house (Ld. Pr. CIT has taken FMV of cost of construction of building only for the purpose of computation of deduction u/s 54F). All the bills and vouchers as evidence for the investment in construction of residential house were produced before Ld. AO....
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....ed to be invoked in your case, hence this show cause notice is issued and opportunity of being heard is provided to you. The detailed reasons for the same are described as under: On perusal of record it is found that during the year the assessee has sold a property claimed to be agricultural land for a sale consideration of Rs. 1,20,00,000/-. The property was valued at Rs. 1,92,88,000/- for stamp duty purposes. During assessment proceedings the valuation was challenged and the matter was referred to the DVO for valuation of the property. The DVO determined the value of the property at Rs. 1,26,54,892/-. The assessee has claimed deduction u/s 54B and 54F against the capital gains accruing on the sale of the property. For the claim of Section. 54F the assessee claimed to have constructed a new residential house. He has claimed to have invested total of Rs. 75,58,768/- by the 31.07.2013 (i.e. before date of filing of return). On perusal of the record it is seen that the assessee has submitted a valuation report by the Registered valuer who has valued the cost of construction in respect of the residential property at Rs. 63,79,000/-. Apart from this the asses....
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....the newly acquired house has been determined at Rs. 63,79,000/-. It has been mentioned in the valuation report that the above value is fair market value (cost of construction only) as on 15.01.2016. The assessee was asked as to why the cost of construction as on 31.07.2013 which is due date of return should be adopted. 10. In response thereto the assessee filed the reply the contents of the same are recorded in the impugned order: A. Regarding the calculation of allowable deduction on proportionate amount of money actually invested in the construction of house upto the due date of filing of IT return, it is accepted that the deduction claimed &,' allowed u/s 54F at Rs. 75587681- was an inadvertant error which needs to be corrected. The correct calculation of allowable deduction u/s 54F, therefore is as under- Total Sale consideration u/s 50C 12654892/- Long Term Capital Gains 12228892/- Amount invested in construction of house till 31.07.2013 7558768/- Allowable deduction U/S 54F (12228892 x 7558768/12654892) 7304318/- Accordingly the AD has allowed excess deduction of Rs. 254450/-. B. Regarding your observation that, ....
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....asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45,* (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head & not,-Income from house property & not; other than the new asset. Explanation.-For the purposes of this section,- (i) "long-term capital asset " means a capital asset which is not a short-term capital asset,* (ii) "net consideration ", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfe....
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....el for the assessee argued that this order could be rectified by the Assessing Officer u/s 154 of the Act. However Ld. Counsel for the assessee did not bring to our notice any such action being taken by the Assessing Officer. Hence on this ground revision of the order is justified. Another ground for exercising of power u/s 263 of the Act was regarding adoption of the cost of acquisition of new asset. Ld. Counsel for the assessee submitted that the cost of furniture, Air Conditioners is allowable and the same would form part of acquisition of new assets. To buttress this contention Ld. Counsel has placed reliance on the decision of the Co-ordinate Bench rendered in the case of Shriniwas R Desai V/s ACIT, ITA No.1245 and 2432/Ahd/2010 wherein the Co-ordinate Bench has held that cost of the asset is not allowable but in a case where the assessee has purchased a new asset, which is not habitable condition the expenses incurred by the assessee to make it habitable should be allowed u/s 54(2) of the Act. Reliance has also placed on the decision of Co-ordinate Bench in the case of Rajat B Mehta V/s ITO (2018) 90 taxmann.com 176 wherein it has been held that the expression used in statute....