TaxTMI 
TaxTMI 
2021 (3) TMI 1251
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....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 amenity of bathrooms as the family lives and enjoys together. Ld.AO as well as L....
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.... 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. had allowed deduction U/s 54F of the Act without understanding the entire gamut of provisio (ii) of section 5....
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....he 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. Appellate Commissioner deleted even the limited additions made by the Assessing Officer. The limited additions made by the Assessing Officer and the larger additions proposed by the Commissi....
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....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 the interest of revenue. It has necessitated the initiation of proceedings under section 263 of the Income Tax Act. This order has been done in a very mechanical way. This action of AO has resulted in an erroneous passing of assessment order u/s 143(3) of Income....
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.... 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 order Assessee submits and invites attention to the following part of the assessment order which is reproduced for your ready reference in which the above proposition is discussed recorded and rejected- 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....
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....eated 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 facts, deduction u/s 54F of the IT Act, 1961 is being given on one residential house property subject to fulfillment of other conditions as discussed in bel....
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....red 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 for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT u/s 263 may be summarized below: - i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the revenue. Both the conditions must be fulfilled. ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it is onl....
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....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 have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. From the records, we noticed that the assessment in the present case was completed U/s 143(3) of the Act on 26/12/2017 at a total income of Rs. 80,40,080/-. The addition of Rs. 62,39,484/- was made U/s 54F of the Act by the A.O. However, the ld. Pr.CIT while considering the order of the A.O. had concluded that the A.O. had allowed the assessee the remaining deduction U/s 54F of the Act of Rs. 17,10,536/-....
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.... 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. Appellate Commissioner deleted even the limited additions made by the Assessing Officer. The limited additions made by the Assessing Officer and the larger additions proposed by the Commissioner in the impugned notice are inextricably interli....
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.... 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 appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]" From the above proposition of law, we noticed that the power of ld. Pr.CIT or the ld. CIT under the provisions of Section 263 shall extend to such matters as had not been considered and decided in such appeal. Admittedly, the appeal filed by the assessee against the order of the assessment passed U/s 143(3) dated 26/12/2017 has so far not been considered or decided by the ld. CIT(A), therefore, the objection of the assessee that no proceeding U/s 263 of the Act can be initiated or tak....
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....0,000/- 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 of construction at Rs. 31,84,911/-. Assessee has claimed deduction u/s 54F & 54EC of the IT Act, 1961 respectively at Rs. 79,50,021/- and Rs,50,00,000/- by making investment of Rs. 97,82,780/- in house property and Rs. 50,00,000/- in specified bonds i.e. REC & NHAI bonds and taxable long term capital gain has been shown at Rs, 8,65,274/-" Para 3.5 page 4 and 5 of assessment order "3.5. In compliance of above query, Ld. AR of the assessee has submitted vide his written submission dated 22.12.2017 that: "1. The assessee has invested in residential house property within the stipulated time to claim deduction u/s 54F of the IT Act, 1961. Copy of conveyance deed is enclosed along with Bank Statements where the invested amounts are clearly shown. 2. The assessee has got a joint family consisting of his wife and two major son....
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....l 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 facts, deduction u/s 54F of the IT Act, 1961 is being given on one residential house property subject to fulfillment of other conditions as discussed in below mentioned paras. 3.9. Both the flats have been purchased by the assessee in coownership with his wife and sale consideration was also paid through this bank account, therefore, assessee is being allowed to claim deduction under section 54F of the IT Act, 1961 to half value of investment made in one residential house property. As sale consideration reported in the registered sale deeds executed for purchase of immovable properties situated at flat No. 702, Princess Park, Sector-86, Faridabad is more than the same consideration reported in sale deed executed for purchase of flat No. A-605, Princess Park, Sector-86, Faridabad, therefore by following the principle of natural justice, assessee is allowed deduction u/s 54F of the Income Tax Act, 1961 on this house property subject to 50% o....
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....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 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. In the instant case, the Pr CIT has alleged that as per proviso (ii) of section 54F(1), 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. In this regard, we find that the assessee has purchased the second residential house situated at A605, Princess Park vide registered sale deed dated 12.09.2015 which is well beyond th....
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....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 the next day." Therefore, we don't find that the AO has either ignored the said proviso or the deduction so allowed is in violation of the said provision to section 54F of the Act and therefore, the order so passed by the AO cannot be held as erroneous due to ignorance or incorrect application of law. All the relevant facts in respect of both the residential houses have been considered and provisions of law have been rightly applied by the AO and deduction u/s 54F has been allowed to the extent of assessee's share in respect of one residential house. 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 for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT u/s 263 may be summarized below:- i) The CIT must record satisfaction that the order of the A....