TaxTMI 
TaxTMI 
2023 (2) TMI 201
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....the Income-tax Act, 1961 by invoking the provisions of section 263 of the Income-tax Act, 1961 even when the order as passed by the assessing officer was neither erroneous nor prejudicial to the interests of the revenue. 2. That on the facts and in the circumstances of the case and in law, the Ld Pr. CIT erred in setting-aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Income-tax Act, 1961 even when the assessment order was passed by the assessing officer under section 143(3) of the Act after conducting necessary enquiries and after due application of mind. 3. That on the facts and in the circumstances of the case and in law, the Ld Pr. CIT erred in setting-aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Act and directing the assessing officer to disallow the deduction as claimed by the appellant under section 54B and 54F of the Income-tax Act, 1961 even when the appellant has rightly claimed deduction of Rs. 91,35,500/- and Rs. 85,86,419/- and under section 54B and 54F of the Income-tax Act, 1961 respectively. 4. The appellant reserves the right to add,....
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....al land situated at survey no. 77/1, 82/8 and 82/9 'Village- Chhota Bangarda, Indore to M/s Vakratund Real Infra Pvt, on 12/04/2016 for a consideration of Rs. 2,20,40,000/-. Copy of sale deed is placed on record. Further perusal of computation of income, it is noted that out of this sale consideration the assessee claimed indexed cost of acquisition amounting to Rs. 28,54,612/-. Offered long term capital gain amounting to Rs. 1,91,85,388/- and claimed exemption/deduction u/s 54F amounting to Rs. 85,86,419/- and u/s 54B amounting to Rs. 91,35,500/- and shown taxable income from long term capital gain amounting to Rs. 14,63,469/-. 3.2(a) Wrong claim u/s 54B The assessee has purchased an agriculture land at 'Village-Abu Khedi Tahsil Dhar at Rs. 85,10,000/- on 23/03/2018 and claimed exemption u/s 54B amounting Rs. 91,35,500/-. For claiming deduction u/s 54B, the land transferred should be agricultural land and the agriculture land should be used by the individual for agricultural purpose at least for the period of two years immediately preceding the date of transfer. In this regard, a query was raised by the A.O. on 30-05-2019 asking the assessee to submit Form No. B1....
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....the assessee has not constructed any residential house property and made wrong claim of exemption u/s 54F of the Income Tax Act, 1961 to the tune of Rs. 85,86,419/- which resulted in under assessment of income of Rs. 85,86,419/-. The exemption U/s 54F is allowable for investment of capital gain in purchase /construction of residential house property and not allowable for investment in Plot. Therefore, total under assessment of income is Rs. 1,77,21,919/- (Rs. 91,35,500/- and Rs. 85,86,419/-). 3.3 Thus, during the course of assessment proceedings, you have neither furnished any details nor explained the issues involved with relevant documentary evidence with regard to issues narrated above. It appears that submission and details available on records was not enough to verify the reasons for Selection of scrutiny under CASS. The Assessing Officer has not at all verified these issues and relevant facts involved therein while completing the assessment and accepted the income returned without any application of mind, without conducting proper inquiries and due verification. As such, the assessment is erroneous in the sense that it is prejudicial to the interest of reven....
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....ng due verification. The Ld. Counsel further submitted that the Ld. AO specifically required the assessee to justify the deduction claimed u/s 54B and 54F of the Act in her income-tax return which was duly replied to and explained with the help of ample corroborative documentary evidences. Hence, the Ld. Counsel submitted that there was no justification for invoking the revisionary jurisdiction vested u/s 263 of the Act. 7. Per contra Ld. Departmental Representative vehemently argued supporting the order of Ld. PCIT. 8. We have heard rival contentions and perused the records placed before us and carefully gone through submissions made by both the sides and the decisions referred and relied by both the parties. We find that the case of the assessee was selected for scrutiny for examination of deduction claimed by the assessee u/s 54B and u/s 54F of the Act. We further observe that the Ld. AO vide query raised in the notice dated 07.05.2019 and vide query no. 1 raised in the notice dated 30.05.2019 required the assessee to substantiate the deduction claimed by her u/s 54B and 54F of the Act. We also observe that the assessee vide para no. 1.3 and 1.4 of the submission dated 21.....
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....sessment order cannot give detailed reasons in respect of each and every item of deduction, which would cause impossible burden on the AO. On this count, he has further relied upon the judgment passed by the Hon'ble High Court of Gujarat in the case of CIT vs. Kamal Galani, reported in (2018) 95 taxmann.com 261 (Gujarat) and CIT vs. Nirma Chemicals Works (P.) Ltd., reported in [2009] 309 ITR 67 (Guj.), wherein Hon'ble High Court held as under: "22. The contention on behalf of the revenue that the assessment border does not reflect any application of mind as to the eligibility or otherwise under section 80-1 of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee ....
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..... It was also contended that no cash transfer took place from person to person and the transfer and the dissolution of the firm also did not result in accrual of capital gains. In the face of this material on record, it is difficult to explain that the assessment order was made without making any enquiry into the goodwill account of Rs. 10,75,000. . . ." (p. 158) [Except the fact to be pleaded separately in this particular paragraph] 12. So far as the jurisdiction of the Ld.PCIT under Section 263 of the Act is concerned, we have carefully considered the judgment relied upon by the assessee in the case of CIT vs. Nirma Chemicals Works (P.) Ltd. (supra). We find, while holding the Tribunal committed an error in upholding the exercise of powers under section 263 of the Act by the Ld. CIT(A) to be valid in the facts and circumstances of the case, the Hon'ble Court has been pleased to observe as follows: 24. There is another aspect of the matter. The assessee had challenged jurisdiction of the Commissioner of Income-tax to exercise powers under section 263 of the Act. For an order of the Assessing Officer to be interfered with in exercise of revisional powers the Co....
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....ion. 26. The view expressed by this court in the case of Shashi Theatre (P.) Ltd. (supra), therefore, is in consonance with not only the requirement of law but concludes the issue insofar as the present case is concerned. Just as it is not possible to decide grant of investment allowance in relation to one or the other item without considering the eligibility thereof, similarly deduction under section 80-1 of the Act cannot be considered without deciding whether a particular portion of profits and gains has been derived from an industrial undertaking which fulfils the requisite conditions stipulated by the section. 27. In the aforesaid set of facts and circumstances of the case and the view that the court has adopted, it is not necessary to enter into any discussion as regards merits of the controversy which has been brought before this court by the other questions at the instance of the assessee and the question at the instance of the revenue. The reference is answered accordingly by holding that the Tribunal committed an error in upholding the exercise of powers under section 263 of the Act by the Commissioner of Income-tax to be valid in the facts and circumsta....
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....sponse to the notice issued under section 142(1) of the Act was placed. Thus, the learned AR contended that there cannot he said that the assessment order is erroneous and causing prejudice to the interest of Revenue in the given facts and circumstances on account non-verification. 6. On the contrary, the learned DR before us contended that reconciliation of the amount shown in the service tax return and financial statement was not available before the AO during the assessment proceedings. Accordingly the learned DR vehemently supported the order of the learned PCIT. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessment order has been passed by AO without making inquiries or verification with respect to the difference in the figures as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue. Thus, requiring revision by Pr. CIT u/s 263 of the Act. 7.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer er....
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....he Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show 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. 15. Thus, even ....
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....of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant." 7.5 The Hon'ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of onmoney receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respec....
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.... was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed" 7.7 From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 7.8 Now in the facts before us, in the case of the assessee the AO during the course of assessment proceedings, made enquiries o....
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....serve that the assessee purchased an agricultural land in respect of which deduction was claimed u/s 54B of the Act. We also observe that the assessee made investment towards construction of residential house in respect of which deduction was claimed u/s 54F of the Act. We find that the case of the assessee was selected for Limited Scrutiny for examination of the issue related to 'Deduction/ Exemption from Capital Gains'. We further find that the Ld. AO raised specific queries during the course of assessment proceedings itself requiring the assessee to justify the deduction claimed u/s 54B and 54F of the Act. The queries raised by the Ld. AO were duly replied to by the assessee and ample corroborative documentary evidences were also filed to substantiate the veracity of deductions claimed by the assessee in her income-tax return. The aforesaid facts are duly verifiable on perusal of the notices issued and submissions filed during the course of assessment proceedings which have been placed on Page No. 163-174 of the Paper Book. We also find that the decisions relied upon by the Ld. Counsel including the decisions of the Hon'ble Gujarat High Court in the case of CIT v. Nirma Chemical....