TaxTMI 
TaxTMI 
2022 (8) TMI 510
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....y and truly all the material facts/details/documents necessary for the assessment and that the original assessment was made by the learned Assessing Officer under Section 143(3) of the Act, after due and proper consideration/verification of all the said details/documents relating to exemption claimed u/s 54 of the Act. Hence, the issue of Notice under section 263 of the Act is bad in law being void ab-initio, invalid, beyond the authority of law and devoid of legal force. 4. That, on the facts and in the circumstances of the case and in law, the learned Pr. CIT erred in invoking jurisdiction under Section 263 of the Act, without conducting verification/inquiry by himself and setting aside the assessment order u/s.143(3) of the Act for reviewing and re-examining the facts, details, documents, evidences already examined by the learned Assessing Officer. It is well settled that revision cannot be undertaken for re-examining and directing fresh inquiry due to change of opinion, without making adequate enquiry by the learned Pr. CIT himself. 5. That, on the fact and circumstances of the case and in law, the revisionary proceeding u/s 263 of the I.T. Act, 1961 is bad in....
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.... 54 the construction should have been completed within a period of 3 years. Findings of the Ld PCIT on this issue are as under:- 6. I have carefully considered the submissions. The judicial precedents cited apply to different fact situations not applicable to Assessee. The statute categorically states that the construction shall be completed within 03 years with a proviso to withdraw the exemption, if the construction is not complete with the stipulated period. The provision of sec.54 reads as under :- Profit on sale of property used for residence. 54. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date [co....
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....ction 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall....
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....ion of construction of a residential house in the plot so acquired. A bare perusal of the said provision does not even remotely suggest that it intends to convey that such construction should be completed in all respect in three years and /or make it habitable. The essence of said provision is to ensure that assessee who received capital gains would invest same by constructing a residential house and once it is established that consideration so received on transfer of his long term capital asset has invested in constructing a residential house, it would satisfy the ingredients of S. 54F. if the assesee is able to establish that he had invested the entire net consideration within the stipulated period, it would meet the requirement of S. 54F and as such assessee would be entitled to get the benefit of S. 54F of the Act. 8. Regarding Ld PCIT's finding that AO has not made enquiry or insufficient enquiry the ld AO shown us a query letter dated 06/08/2019 and response of the assessee vide its letter dated 09/09/2019. Ld AO on being satisfied with the response of the assessee has passed an order u/s 143(3) dated 27/09/2019, therefore this case cannot be said to because of no....
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.... of Rs. 2 crore is a residential house (Page-5 of the deed) Thus, it is to be examined whether the assessee was in possession of 2 Flats on the date of transfer in which case, he would not be eligible for deduction with effect from 1.4.2001 (see ITO Vo Apsara Bhavanasai ITA 557/HYD/2012 (AY 0809)." 13. From the above para Ld CITDR in support of the observation of the Ld PCIT contended that on the date of sale the assessee has two houses hence exemption U/s 54F shall not be allowed. Also a case law on this issue decided by the coordinate bench of the ITAT Pune in the case of Shetty GD. Vs. ITO W-2(2), Pune in 112 ITD 103(Pune) was quoted, where in exemption U/s 54F is denied to the assessee on the ground that The assessee already owns more than one residential house on the date of transfer of the long term capital assets. 14. Ld CITDR vehemently supported the suggested additions on account of Contribution for Infrastructure Development, Entry fee for owner's welfare society and maintenance fee for six months for Rs. 2,69,080/- (200000+50000+19080). On this count the PCIT has observed that: As regards entry fee for society & maintenance fee, the same is accepted by the....
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....:- There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax." 16. We have heard the rival contentions, perused material available on records, submissions of both the sides and considered facts of the case in light of the applicable legal position. 17. On factual matrix contentions of the revenue are not acceptable as the assessee has made an investment in new residential property on 20.04.2017 after sale of the existing residential house property on 16.03.2017 i.e. within stipulated time for exemption u/s 54 of the Act. New Flat was purchase....
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...., since has no nexus with the issue involved. 19. Further, In the instant case there is no doubt that enquiry on the limited scrutiny issue was initiated by the AO and duly responded by the assessee, the AO also mentioned in the order that "The Documents as submitted by the assessee were examined and placed on record", however no remark on the issue has been made by the AO in assessment order, therefore this shall be considered that the AO was satisfied with the enquiries made. Our considered view on this issue is that, if Pr. CIT/CIT is of the view that any enquiry is necessary in the matter, then he should either himself make such enquiry or may get such enquiry conducted. For the purpose of exercising jurisdiction u/s 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry by Pr. CIT/CIT. If the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry. If the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. 20. ....
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....sive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income- tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 13. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Saraogi v. CIT (1968) 67 ITR 84 and Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to thes....
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....on that one has to keep in mind the distinction between "lack of inquiry" and " inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom.), law on this aspect was discussed in the following manner (page 113): "... From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous insofaras it is prejudicial to the interests of the Revenue". It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub- section (1). The consideration of the Commissioner as to whether an order is erroneous insofaras it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedi....
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....how that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed...We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous" simply because in his order he did not make an elaborate discussion in that regard."" 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed i....
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....may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing Products, [1998] 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous.' 5. In the present case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited (supra), the inquiry should have been conducted by the Commissioner or Direct....