TaxTMI 
TaxTMI 
2021 (3) TMI 1251
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....m of CIT(Appeal) and Pr.CIT(Adm.) are at same level and powers to be exercised on issues relating to assessment order are same. Ld. Pr.CIT failed to appreciate that the issue of objection of allowance u/s 54/54F is subject matter of appeal and that is the very issue under appeal and review Ld. Pr.CIT erred in not following provisions of law. b) In not treating the investment in house property to be relating to " A House" and instead applying the provision of purchase of two flats and disregarding assessee's plea and in not following provisions of law. In alternate in not accepting that LTCG on sale of plot and house has been invested in "A House" and assessee is eligible for deduction u/s 54 of Income Tax Act, 1961. c) There is no "Lack of enquiry" or " No enquiry" situation as assessee was thoroughly examined and questions raised by Ld. AO were replied informing that it is case of investment in "A House" where the house were not contiguous but in the same compound in separate towers, but the house amenity of joint living of a family of self, spouse, two sons with their families was present with living quarters, kitchen, bedrooms, guest room and such other ame....
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....,00,600/-. The case was selected for scrutiny for the reasons 'Large deduction claimed U/s 54B, 54C, 54D, 54G and 54GA of the Act. Assessment U/s 143(3) of the Act was completed on 26/12/2017 at a total income of Rs. 80,40,080/- for the year under consideration. In consequence thereof, addition of Rs. 62,39,484/- was made U/s 54F of the Act. The ld Pr.CIT after scrutinizing the records of the assessment reached to the conclusion that the A.O. while finalizing the assessment order, has not given any thought to the fact that the assessee purchased two flats situated at K-702, Princess park, Sector-86, Faridabad on 10/05/2014 and A-605, Princess Park, Sector-86, Faridabad on 25/04/2014 in co-ownership of his wife Smt. Sarla Devi Bhadauriya and claimed deduction U/s 54F of the Act on both the properties. According to the ld. Pr.CIT, as per the proviso (ii) of Section 54F(1) of the Act, no deduction is allowable to the assessee if he purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset. Consequently, after issuing show cause notice and seeking reply of the assessee, the ld. Pr.CIT concluded that the A.O. ....
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....lieved that the purchases were made that the question of transportation of the goods by the assessee of someone else would arise. Secondly, he made limited addition on the ground that when the assessee was not required to bear the transportation cost, his profit from such dealings would be higher than normal. [Para 10] The Commissioner in the impugned show-cause notice thus committed an error in recording that the Assessing Officer had held that the purchases were bogus. This very foundation for issuance of the notice was incorrect. His further observations were merely consequential in nature. In his opinion, when the Assessing Officer had found the purchases to be bogus, there was no question of limiting the addition on the basis of GP ratio. When the Commissioner was wrong in its very foundational fact, the consequential observations, which are more in the nature of corollary, cannot survive. [Para 11] Equally importantly, the issue itself had travelled before the Appellate Commissioner at the hands of the assessee. To the extent, the Assessing Officer rejected the assessee's request for making no additions, the assessee carried the matter in appeal. Appella....
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....ometax, Delhi- IV It is clear from the order passed by the Ld. AO that the issue relating to disallowance of the claim of assessee u/s 54F was specifically gone into and examined by the Assessing Officer. Thus, it was not a case of 'no inquiry' but specific and pointed enquiries by the Assessing Officer. The said finding could have been set aside and negated only with a finding by the Commissioner, that the Assessing Officer was erroneous and wrong. The Commissioner should have examined and gone into the question of claim u/s 54/54F on merits. Mere statement that there was a possibility that the Assessing Officer was erroneous, is not sufficient and does not meet the requirement stipulated by law.(369 ITR 14 (Delhi) Globus Infocom Ltd. v. Commissioner of Income-tax, Delhi- IV) Ld. Pr. CIT- 3 has not pointed out anywhere in his order dated 16/03/2020, about any issue where the AO did not make any enquiry or there was lack of enquiry. Para 7, Page 15 of the Ld. Pr. CIT-3 order is reproduced hereunder for your ready reference :- "This omission as made by the assessing officer resulting in an order which is erroneous as well as prejudicial to th....
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....t be contiguous but for the family it is in the same compound and in adjacent tower and the assessee and his family are satisfied with the arrangement that it is "A House" for them and both the flats are used for assessee's family residence. Assessee's family comprises of - i) Sh. Virendra Singh Bhadauria (self) ii) Smt. Sarla Bhadauria (wife) iii) Sh. Avadhesh Kumar Singh Bhadauria (Son) iv) Sh. Brajesh Kumar Singh (Son) And their respective families The family is a content family and the proposition of "a house" has been fulfilled with investment made by assessee out of sale proceeds of the property situated at Lucknow. Assessee submits that the conditions prescribed as per law were fulfilled. It is submitted that ld. AO has discussed the above proposition in his assessment order and has rejected the same. So, it cannot be said that there is "no enquiry" or "lack of enquiry" or provisions of law being not followed. Ld AO is fully aware that it is proposition of "A House" and not two flats and hence the question of two property investment is out of question. Assessee's averment reproduced from assessment....
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....locality. The assessee made purchase agreement of the two flats available at that time and made investment at the same day. Therefore the assessee deserves the entitlement of deduction u/s 54F." Para 3.6 page 7 and 8 of assessment order "8. The two flats purchased by the assessee with co-ownership with his wife are not adjacent to each other. Even both the flats are in different towers. Therefore, these cannot be treated as one residential house. On this count also assessee's contention is rejected. 9. Further, the assessee in his letter has mentioned the social obligation of his family members which have no relevance with provisions of Income tax Act, 1961." Para 3.8 and 3.9 and 3.10 page 8 to 9 of assessment order- "3.8. Further, the assessee has claimed deduction u/s 54F of the IT Act, 1961 on purchase of two flats in the same locality which is also not allowable as per provisions of section 54F of the IT Act, 1961. As per provisions of section 54F, assessee can purchase or construct a new house property within the specified time period for claiming deduction u/s 54F of the IT Act, 1961. In the instant case under reference assessee is....
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....asis of the 'material' that the order of the AO is erroneous and also prejudicial to the interest of the Revenue, the CIT is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in section 263. So, it is clear that the CIT does not have unfettered and unchequred discretion to revise an order. The CIT is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well as in section 263. An order can be treated as 'erroneous' if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. The 'prejudice' that is contemplated under section 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done fo....
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....ing citations on the issue that - a) That the order of the AO sought to be revised is not erroneous b) That it is not prejudicial to the interests of Revenue. He relied on the following judicial pronouncements: Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) 411 ITR 437 (Raj) CIT Vs. Sunil Sankhla SLP of the Department dismissed 407 ITR (St) 25 (SC) 402 ITR 117 (Raj) Laxmi Narain Vs. CIT 414 ITR 485 (Mad) Pr. CIT V. Abhijit Bhandari CIT Vs. Escorts Ltd. 338 ITR 0435 (Del) CIT Vs. Deepak Mittal 324 ITR 411 (P & H) CIT Vs. Nirmal Chemical Works Pvt. Ltd. 309 ITR 0067(Guj) Gupta International Vs. ITO 002 ITR (Trib) 0428 (Del) Green World Co. 314 ITR 81 (SC) CIT Vs. Paul Bros. 216 ITR 548 CIT Vs. Gokul Das Exports 333 ITR 214 Smt. Anita Malpotra V/s. ITO (2007) 109 TTJ (ASR) 76 India Heritage Foundation's Vs. Dy. Director of Income Tax 149 TTJ 908 (Bangalore) relevant para 11 page 915 of the order. EON Technologies Pvt. Ltd. 343 ITR 366 (Del) 5. On the other hand, the ld CIT-DR has relied on the order passed by the ld. Pr.CIT. 6. We h....
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....cision of the Hon'ble Gujarat High Court in the case of Haryana Paper Distributors Pvt. Ltd. Vs Pr.CIT 412 ITR 515 (Guj) wherein it was held as under: "Two things immediately become clear. First that the Assessing Officer did not hold that assessee purchases from T were bogus. In fact, he held to the contrary- accepting the evidence produced by the assessee mainly in the form of the statement of the Director of T Ltd. that the purchases were made. It was only after Assessing Officer had believed that the purchases were made that the question of transportation of the goods by the assessee of someone else would arise. Secondly, he made limited addition on the ground that when the assessee was not required to bear the transportation cost, his profit from such dealings would be higher than normal. [Para 10] The Commissioner in the impugned show-cause notice thus committed an error in recording that the Assessing Officer had held that the purchases were bogus. This very foundation for issuance of the notice was incorrect. His further observations were merely consequential in nature. In his opinion, when the Assessing Officer had found the purchases to be bogus, there w....
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....Para 13] When the Commissioner had no jurisdiction to exercise revisional powers, asking the assessee to submit to said impugned notice does not arise. Impugned notice is therefore set aside. (Para 14] The petition is disposed of accordingly. (Para 15]" We had considered the said objection raised by the assessee before us. We are conscious of the fact that in respect of arguments of the assessee to the effect that he has already filed income tax appeal before the ld. CIT(A) against the order of the assessment dated 26/12/2017 and the entire issue was at large now before the Appellate Commissioner and that the ld. CIT(A) while hearing the assessee's appeal has power to enhance the assessment. If he was of the opinion that not only limited additions made by the A.O. but much larger additions were justified, then in that eventuality, he could have certainly exercised such powers by putting the assessee to notice. For ready reference, we reproduce clause (c) of Explanation 1 of section 263 of the Act as under: "263(1) where any order referred to in this sub-section and passed by the Assessing Officer (c) had been the subject matter of any appea....
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....eed Stamp duty & other expenses. 1 K-702, Princess Park, Sector-86, Faridabad 01.08.2015 3706551 488000+15200 2. A-605. Princess Park, Sector-86, Faridabad 12.09.2015 2418002 146000+13100 We found that the proposition with respect of claim of deduction raised by the assessee U/s 54F of the Act is concerned, in this respect, the A.O. in the order of assessment had made detailed and extensive discussions which are at para 3 page No. 2 and 3, which reads as under: Para 3 page 2 and 3 of assessment order "3 Restriction & disallowance of claim u/s 54F of the IT Act, 1961:-During the year under consideration, assessee has sold an immovable property situated at B-2/4, Rajeev Gandhi Ward, Vinay Khand, Gomti Nagar, Lucknow on 06.04.2014 for sale consideration of Rs. 1,69,50,000/- whereas the stamp valuation authority has adopted the value of the property for the purposes of payment of stamp duty at Rs. 1,70,20,669/-. The assessee has shown full value of consideration of the property at Rs. 1,70,00,206/- and new Long Terms capital gain of Rs. 1,38,15,295/- has been worked out after deducting indexed cost of acquisition and cost o....
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....-ownership with his wife are not adjacent to each other. Even both the flats are in different towers. Therefore, these cannot be treated as one residential house. On this count also assessee's contention is rejected. 9. Further, the assessee in his letter has mentioned the social obligation of his family members which have no relevance with provisions of Income tax Act, 1961." Para 3.8 and 3.9 and 3.10 page 8 to 9 of assessment order- "3.8. Further, the assessee has claimed deduction u/s 54F of the IT Act, 1961 on purchase of two flats in the same locality which is also not allowable as per provisions of section 54F of the IT Act, 1961. As per provisions of section 54F, assessee can purchase or construct a new house property within the specified time period for claiming deduction u/s 54F of the IT Act, 1961. In the instant case under reference assessee is claiming deduction u/s 54F on purchase of two residential house property which is not allowable and as per provisions of section 54F of the IT Act, 1961, assessee is eligible for claiming deduction u/s 54F of the IT Act, 1961 on purchase/construction of one residential house property. Based on these fact....
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.... the claim of deduction in respect of only one residential house property situated at K-702, Princess park to the extent of 50% of investment being the share of the assessee which has been jointly purchased in his and wife's name and thus it cannot be held that the present case is based on "no enquiry" or "lack of enquiry". Even otherwise there are limitations on the powers of the Pr.CIT to the effect that he must have some material which would enable him to form a prima facie opinion that the order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the Revenue and when once he comes to the above conclusion on the basis of the 'material' that the order of the AO is erroneous and also prejudicial to the interest of the Revenue, the Pr.CIT or the CIT is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in section 263. Therefore, it is clear that the Pr.CIT does not have unfettered and uncheq....
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....s set out therein. The department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in long-term gains. According to the department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit under section 54F. In our view the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is 29-7-1988 when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and came to the conclusion that purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on 29.07.1988 and handing over of possession of the flat on t....
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....arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. viii) The CIT, before exercising his jurisdiction u/s 263, must have material on record to arrive at a satisfaction. ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation be a letter in writing and the AO allowed the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. In this respect, we rely upon the following decision: (i) Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) (ii) 411 ITR 437 (Raj) CIT Vs. Sunil Sankhla SLP of the Department dismissed 407 ITR (St) 25 (SC) (iii) 402 ITR 117 (Raj) Laxmi Narain Vs. CIT (iv) 414 ITR 485 (Mad) Pr. CIT V. Abhijit Bhandari (v) CIT Vs. Escorts Ltd. 338 ITR 0435 (Del) (vi) CIT Vs. Deepak Mittal 324 ITR 411 (P & H) (vii) CIT Vs. Nirmal Chemical Works Pvt. Ltd. 309 ITR 0067(Guj) ....