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2025 (3) TMI 1272 - AT - Income TaxRevision u/s 263 - deduction/exemption u/s 54F - verification of the claim of indexation as per the provisions of Section 2(47) - date of transfer of the original asset i.e. 13/03/2020 the assessee did not own any residential property as the earlier residential unit had been gifted to her daughter-in-law on 27/02/2020 - HELD THAT - The entire matter was duly examined by the AO in a speaking order and every aspect was thoroughly scrutinized during the assessment proceedings. The decision in PCIT vs. Cartier Leaflin (P.) Ltd. 2023 (5) TMI 1013 - SC ORDER is also relevant wherein the Hon ble Supreme Court held that if the AO has adopted a plausible view there is no justification for invoking Section 263 to revise the assessment order. This ruling applies even if it is alleged that the AO did not examine certain aspects such as the books of accounts or the share trading transactions conducted by the assessee through demat accounts during the assessment proceedings. Given these facts it is evident that the order passed by the Ld. AO is neither erroneous nor prejudicial to the interests of the revenue. Since one of the two mandatory conditions for invoking Section 263 is not satisfied the revisionary jurisdiction u/s 263 cannot be exercised. Assessee s grounds of appeal succeed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Invocation of Section 263 by the PCIT Relevant legal framework and precedents: Section 263 of the Income-tax Act, 1961, empowers the PCIT to revise an assessment order if it is deemed erroneous and prejudicial to the interests of the revenue. The Supreme Court in PCIT vs. Cartier Leaflin (P.) Ltd. held that if the AO has adopted a plausible view during assessment, Section 263 cannot be invoked merely due to a difference in opinion. Court's interpretation and reasoning: The Tribunal evaluated whether the AO's order was erroneous and prejudicial to the revenue's interests. It concluded that the AO had conducted a detailed examination of the assessee's claims during the assessment process. Key evidence and findings: The AO had scrutinized the assessee's claim for exemption under Section 54F and the indexation benefit on gifted shares, determining that the claims were justified based on the evidence provided. Application of law to facts: The Tribunal found that the AO's decision was based on a plausible interpretation of the law, supported by the facts presented during the assessment. Treatment of competing arguments: The Tribunal considered the arguments of both the assessee and the revenue, ultimately siding with the assessee's position that the assessment order was neither erroneous nor prejudicial. Conclusions: The Tribunal concluded that the invocation of Section 263 was unjustified as the AO had adopted a plausible view, and the assessment order was not erroneous or prejudicial to the revenue. 2. Exemption under Section 54F Relevant legal framework and precedents: Section 54F provides for exemption from capital gains tax if the net consideration from the sale of a long-term capital asset is invested in a new residential property, subject to certain conditions, including the ownership of only one residential house at the time of transfer. Court's interpretation and reasoning: The Tribunal examined whether the assessee met the conditions under Section 54F, particularly regarding the ownership of residential properties. Key evidence and findings: The assessee had gifted one residential property to her daughter-in-law before the transfer of shares, thereby owning only one residential property at the relevant time. Application of law to facts: The Tribunal determined that the assessee complied with the requirements of Section 54F, as she did not own more than one residential property at the time of the asset transfer. Treatment of competing arguments: The PCIT argued that the exemption was incorrectly allowed; however, the Tribunal found the AO's decision to be justified based on the facts. Conclusions: The Tribunal upheld the AO's decision to allow the exemption under Section 54F, finding no error in the assessment order. 3. Indexation Benefit on Gifted Shares Relevant legal framework and precedents: The Bombay High Court in Commissioner of Income Tax-12 v. Manjula J. Shah established that for gifted assets, the indexed cost of acquisition should be computed from the year the previous owner acquired the asset. Court's interpretation and reasoning: The Tribunal applied the precedent set by the Bombay High Court, affirming the assessee's right to claim indexation from the date the previous owner acquired the shares. Key evidence and findings: The shares were acquired by the assessee's husband in 2016 and gifted to the assessee in 2020. The AO allowed the indexation benefit from the husband's acquisition date. Application of law to facts: The Tribunal found that the AO correctly applied the law, allowing the indexation based on the original acquisition date. Treatment of competing arguments: The PCIT challenged the indexation claim, but the Tribunal upheld the AO's decision, consistent with judicial precedents. Conclusions: The Tribunal concluded that the AO's decision to allow indexation from the date of the original acquisition was correct. SIGNIFICANT HOLDINGS
The appeal was allowed, and the order of the PCIT was set aside.
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