TaxTMI 
TaxTMI 
2018 (10) TMI 1933
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....ignoring the documentary evidence available in assessment record & documents submitted during the course of revisionary proceedings & wrongly replied on the report of Inspector & no opportunity to rebut the report was afforded. 2. The ld. AR referring to the record submitted that the exercise of power u/s 263 of the Act by the Pr. CIT was bad in law. Inviting attention to the show cause notice dated 24.11.2016 extracted in para 3 of the order, it was submitted that the issue had been enquired into at length by the AO in the scrutiny proceedings. Carrying us through the reply dated 06.03.2017 of the assessee also extracted in the impugned order at para 4 pages 2 to 6, it was submitted that the Pr. CIT in paras 6 to 8 ignoring the fact that the investment had been made in the shopcum- flat by the assessee on 05.10.2012 has sought to upset the assessment order relying upon the report of Inspector carried out presumably much after the event of investment in November, 2016 and that too on a Report which was not even confronted to the assessee. The exercise of power considering the facts and the record, it was submitted, deserves to be quashed. It was his submission that the relevant ....
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....of long term capital gain as the assessee has invested whole of the amount in the purchase of first floor of SCF, Sector-11D, Chandigarh. Copy of title deed of booth No. 36/86, Chandigarh alongwith purchase deed alongwith intersee agreement for SCF No. 13, Sector-11D, Chandigarh have also obtained and examined. " 2.2. Inviting attention to the Paper Book filed, attention was invited to copy of the Income Tax Return filed for the year under consideration placed at pages 1 to 6, copies of the reply filed in response to the claim of exemption u/s 54F available at pages 7 and 8 were relied upon to show that the issue had been enquired into by the AO. Attention was invited to copy of the Sale Deed available at Paper Book pages 9 to 20 which contains the copy of the same also made available to the AO was referred to. Inter-se Agreement entered into between Smt. Sharda Rani W/o Shri Pawan Kumar and Smt. Sudesh Bansal W/o Shri Satish Kumar which had also been enquired into and considered by the AO was referred to. It was submitted that it had been brought to the notice of the AO that the assessee's part of the property was 33.33% and consisted of the entire first floor. These documents ....
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....prises Vs DCIT 5.1 ITR (trib) 320 Chandigarh; CIT Vs Max India 295 ITR 282; CIT Vs Fine Jewellery IT Appeal no 296 of 2013 Page 41-45; Tulsi Tracom Vs CIT 161 DTR 0148, it was submitted, that the 263 proceedings may be quashed. 3. The ld. CIT-DR relying upon the impugned order submitted that the assessee's reply to the show cause notice issued has been considered and has been held to be not acceptable. It was her submission that the deduction is available to an assessee if the investment is made in a residential property and in the facts of the present case, the assessee as per enquiry carried out by an Inspector was found to have been using the specific property no doubt in November,2016 as a godown of the shop being run on the ground floor. Thus the fact that it was not used as residential property disentitles the assessee to claim the benefit of Section 54F. Accordingly, heavily relying upon the impugned order, it was her submission that the assessee's appeal may be dismissed. 4. We have heard the rival submissions and perused the material on record. It is seen that in the facts of the present case, the assessee efiled his return on 31.03.2013 declaring an income of R....
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....been disclosed in Income Tax Return filed by the assessee on 31.03.2013. The case was selected under scrutiny assessment under CASS for reason that amount of deduction u/s 54F claimed by the assessee in ITR. During the course of assessment proceedings, copies of purchase deed of shop-cum-flat (SCF) No. 13, Sector-11D, Chandigarh and intersee agreement for SCF No. 13, Sector-11D, Chandigarh were given to the Assessing Officer for verification of deduction u/s 54F of the I. T. Act. The Assessing Officer has examined the claim of the assessee u/s 54Fof I.T. Act and same has been noted in office note which reads as under: "The case was selected under CASS for the reasons that large amount of deduction u/s 54 of the I. T. Act. This issue has been examined specifically alongwith the other major issues during the course of assessment proceedings. During the year under consideration, the assessee has sold a booth No.36, Sector-SB, Chandigarh on 25.10.2011 for total sale consideration of Rs. 59,00,000/- and claimed deduction u/s 54 of the I.T. Act. 1961 on the amount of long term capital gain as the assessee has invested whole of the amount in the purchase of first floor of SCF, Se....
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....on of the owners of SCF and held that no commercial activity can be done in residential portion of SCF. We also submit that assessee has purchased the residential portion on 05.10.2012 and Chandigarh Administration has sanctioned the Map. In sanctioned map, it is clear that 1st & 2nd floor is residential portion and assessee has purchased a residential portion of SCF as per intersee agreement between the co-owners." 4.1 The assessee has further placed reliance on the decision of Hon'ble Supreme Court in Commissioner of Income Tax vs. Max India Ltd and Malabar Industrial Company Ltd. vs. Commissioner of Income Tax and has stated that the Assessing Officer has applied his mind after due inquiry during the course of assessment proceedings and also accepted the claim and therefore, the order is neither erroneous nor prejudicial to the interest of Revenue." 4.2 It is seen that the aforesaid reply of the assessee was not accepted by the Pr. CIT on account of the following facts : "5. The reply filed by the assessee has been considered. The assessee has contested that it had invested the capital gain in a residential property being the 1st floor of SCF-13, Sector-HD, ....
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....report of the Inspector of Income Tax, the 1st floor was not being used for residential purpose. The claim of the assessee was therefore, accepted by the Assessing Officer without making any inquiries and without application of mind. The case laws relied upon by the assessee have also been examined and it is seen that these are clearly distinguishable from the facts of the present case." 4.3 Accordingly, the order was set aside holding as under : 17. It is, therefore, held that the said assessment is erroneous in so far as prejudicial to the interest of revenue for the reasons as discussed above in view of the provisions of section 263, inter-alia including Explanation 2(a) inserted w.e.f. 01.06.2015. Accordingly, the assessment order u/s 143(3) dated 12.09.2014 for assessment year 2012-13 is cancelled and set-aside with a direction to the Assessing Officer to pass an order afresh in accordance with law keeping in view of the above observations and after allowing adequate opportunity of being heard to the assessee. 4.4 Before we address the position of law, we are of the view that on going through the record we are in agreement with the claim of the assessee that in ....
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....ngst others, it has been canvassed that as far as the assessee is concerned, no notice for flouting the terms and conditions of the SCF has been issued to the assessee. Admittedly it is only the Inspector's Report which too has not been confronted to the assessee. We find that in the peculiar facts of the present case, when the above facts in the light of the submissions of the parties and the relevant findings in the orders are taken into consideration, it is not in dispute that the issue has more than adequately been enquired into by the AO in the course of the assessment proceedings for which very purposes, the case was selected under CASS. The issue for consideration is whether the order passed can be said to be erroneous and erroneous to the extent that it can be said to be prejudicial to the interests of the Revenue. Accordingly, we now propose to consider Explanation 2(a) of Section 263 which has been invoked by the Pr. CIT applicable to the facts of the case as considered. The relevant extract is reproduced hereunder for ready reference : "Revision of orders prejudicial to revenue. 263.(1) ........................ ... Explanation 1.... ...............
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....urposes, it cannot be said that what was acquired by the assessee was not a residential property, but a commercial one. Subsequent change in the use of the property does not disentitle the assessee to relief under ' S.54F of the Act, as held by Hyderabad Bench B of this Tribunal in the case of Shri M.V. Subramanyeswara Reddy(HUF),Hyderabad." 6.1 The proposition of law laid down is that "Subsequent change in use of property does not disentitle assessee to relief under s 54F, where assessee had received possession of such property as residential property". Similarly, the Co-ordinate Bench in the case of Mahavir Prasad Gupta (cited supra) held that, "Mere non-residential use would not render a property ineligible for benefit under s. 54F, if it otherwise is a residential house-If the assessee is found to have constructed a residential house, whatever might be the use it had been put to, the assessee can be said to have fulfilled the conditions envisaged under s. 54F-New residential house, let out for commercial use, would not lose exemption under s. 54F. In the said background, it would be appropriate to also refer to the decision of the Hon'ble Bombay High Court in the case of CIT....
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....s from end of financial year in which order sought to be revised was passed-Thus, there was outer limit in statute u/s 263 which, was 31st March, 2013-Since, no useful purpose would be served in giving opportunity to Appellant of being heard at this stage, question answered in favour of Assessee-Assessee's appeal allowed." 6.3 In order to address the correctness of the order passed by the AO it was incumbent upon the Pr, CIT to demonstrate that as on the date of investment, property invested was not a residential property and the reference to subsequent use of the property by a tenant in terms of various decisions relied upon and even otherwise as noted is an irrelevant factor. The fact that the said report was not confronted to the assessee in the facts of the present case for the purposes of present proceedings, we note is not relevant for determining the issue. In order to justify the exercise of the power vested by the Statute u/s 263, it was incumbent upon the Pr.CIT to demonstrate that at the time of investment, the property was not a residential property and in terms of the relevant provisions of the Act i.e. Explanation 2(a), the Pr. CIT was required to demonstrate that ....