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2015 (9) TMI 324 - ITAT CHANDIGARH

2015 (9) TMI 324 - ITAT CHANDIGARH - TMI - Revision u/s 263 - assessee claimed wrong exemption of ₹ 3,56,96,300/- against the total investment of ₹ 2,54,62,812/- under section 54 - Commissioner of Income Tax noted that the assessee had sold farm house, therefore, cannot claim deduction under section 54 of the Act and further the assessee is not entitled for deduction under section 54F - Held that:- It is clear that the specific queries were raised by the Assessing Officer at assessme .....

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Assessing Officer has adopted one of the courses permissible in law and the Commissioner do not agree with him, it cannot be treated as erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law

Thus Assessing Officer examined the issue of long term capital gain in accordance with section 54 of the Act at assessment stage, therefore, assessment order cannot be said to be erroneous in so far as prejudicial to the i .....

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appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax-II, Chandigarh dated 5.2.2014 for assessment year 2009-10, challenging the order under section 263 of the Income Tax Act. 2. Briefly, the facts of the case are that the assessee filed return of income for assessment year under appeal i.e. 2009-10 on 31.7.2009 declaring taxable income of ₹ 31,66,210/- consisting of capital gains and income from other sources. The case of the assessee was se .....

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after making investigation and enquiries the Assessing Officer noted that the assessee sold farm house during the year. The property was acquired by the assessee during the year 1996-97. The assessee has claimed benefit of indexation on expenses incurred for the construction work carried out in the years 1997-98 and 1998- 99. The assessee was asked to furnish the evidence of incurring expenses on construction of farm house. It was submitted by the assessee that the construction was incurred way .....

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to cover up any discrepancy on account of cost of construction shown by the assessee. The Assessing Officer accordingly made addition of ₹ 2 lacs towards long term capital gains and after examining the details accepted the claim of the assessee by making part addition on the same issue. 3. The learned Commissioner of Income Tax-II, Chandigarh, however, issued a show cause notice dated 10.1.2014 under section 263 of the Act (Pb-60) intimating the assessee that as per record the assessee ha .....

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of ₹ 1,65,00,000/- on 18.6.2009 and incurred expenses of ₹ 9,80,000/- on stamp duty. Further the assessee also purchased a 12 marla plot No.1610, Sector 79, Mohali for consideration of ₹ 69,00,000/- on 23.7.2009 and spent ₹ 10,82,812/- for re-allotment of the same from GAMADA. It was, therefore, noted that overall the assessee claimed wrong exemption of ₹ 3,56,96,300/- against the total investment of ₹ 2,54,62,812/- under section 54 of the Act. The learned Com .....

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expenses in respect of sale of property. It was also seen that the assessee failed to provide the corroborative evidence justifying the claim of having incurred ₹ 4,50,000/- and ₹ 12,00,000/- in financial years 1997-98 and 1998-99 respectively for construction purposes under the head "construction cost". It was also noted that no documentary evidence was called for by the Assessing Officer in respect of the carry forward long term capital loss of ₹ 23,057/- pertaining .....

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are not called for and the matter may be dropped. The assessee relied upon several decisions in support of the contention. We would deal with the reply of the assessee later on in this order. The learned Commissioner of Income Tax, however, was not satisfied with the explanation of the assessee and cancelled the assessment order under section 143(3) of the Act dated 27.5.2011 and directed the Assessing Officer to pass assessment order afresh after making necessary enquiries in accordance with l .....

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be a residential house. As no document has been furnished by the assessee in respect to his claim of the property sold being a residential house, so his claim remains unsubstantial and thus he has been unable to prove that what is apparent ('A shed' as per registered sale deed) is not the real. For claiming exemption u/s 54, the assets sold must be 'residential house' and thus the order passed u/s 143(3) by the assessing officer allowing exemption u/s 54 to the assessee is errone .....

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d by him. 3.4 The assessee, vide para 2(c) of his reply has again submitted that amount of ₹ 8,70,000/- was given to one Shri Kesar Singh through bank on 07.11.2008. But there is still no document on record to prove the genuineness of this claim as assessee has not brought on record any evidence regarding rendering of any service by the said person or even of any involvement of this person in any manner for sale of the said property during assessment proceedings as well as in reply to this .....

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d". Therefore, only a shed existed at the time of purchase as well as sale of the alleged land/farm house. In view of the above, the claim of the assesee that this issue was explained by him and got examined by the Assessing Officer is contrary to facts on record and assessee has not brought on record any evidence to that what is apparent is not the real and Assessing Officer has also failed to examine the issue properly. 3.6 Though the assesee claimed that long term capital loss was declar .....

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m which were necessary for the assessment. 3.8 The assessee has relied upon the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (SC) 243 1TR 83. He has inter-alia, mentioned that "where two views are possible and the ITO has taken one view with which the commissioner does not agree. It cannot be treated as an erroneous order prejudicial to the interest of revenue." However, it is seen that no view was taken by the assessing officer on the iss .....

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ther observed that "In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue." The assessee has also stated that "It is therefore most respectfully prayed that .....

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s Limited v. Commissioner of Income Tax (1990) 187 ITR 412 where it was held that "It is beyond dispute that, under section 263 of the Income-tax Act, the Commissioner does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary, and that the order of the Income-tax Officer is prejudicial to the interests of the Revenue." 4. Other case laws as referred to by the assessee in his reply are distinguis .....

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not sufficient; explanation is to be substantiated by cogent and reliance evidences. 6. In view of the above, it is held that the said assessment order is erroneous in so far as prejudicial to the interest of revenue for the reasons mentioned above. Accordingly, the assessment order u/s 143(3) dated 27.05.2011 is cancelled with a direction to the Assessing Officer to pass an order afresh after making necessary enquiries in accordance with law keeping in view the above observations and allowing .....

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pies of the order- sheet of the Assessing Officer and Commissioner of Income Tax under section 263 of the Act. The learned counsel for assessee reiterated the submissions made before the learned Commissioner of Income Tax and also referred to various documents and replies filed before the Assessing Officer and submitted that the Assessing Officer after making detailed enquiries on the issue of long term capital gains correctly accepted the claim of the assessee under section 54 of the Act and ma .....

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notice issued by the learned Commissioner of Income Tax under section 263 of the Act and no findings have also been recorded by the learned Commissioner of Income Tax. Therefore, such issue cannot be raised by the learned D.R for the Revenue during the course of arguments. The learned counsel for assessee submitted that the learned Commissioner of Income Tax merely raised the issue of difference of ₹ 1 crore, which was invested under Capital Gain Scheme, for which proper evidence was file .....

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cannot be treated as residential house and as such, the assessee would not be entitled for exemption under section 54 of the Act. The learned D.R for the Revenue also submitted that since the assessee has purchased two properties, therefore, the assessee would not be entitled for exemption as claimed. The learned D.R for the Revenue relied upon the following decisions : (i ) Decision of Hon'ble Rajasthan High Court in the case of Rajesh Surana v. CIT 306 ITR 368 , in which it was held that & .....

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yana High Court in the case of Dr. A.S. Atwal v. CIT 277 ITR 462, in which it was held that "Property sold by assessee i.e., plot with a tin shed, was not a house as the tin shed had not bathroom or kitchen or electricity connection, and even if the same is considered as a house, assessee is not entitled to exemption under s. 54 on the sale of said property as it was not occupied by the assessee or a parent of his for their residence in the two years immediately preceding the date of transf .....

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porary structures covered with asbestos roofing were meant to be used as residential houses and, therefore assessee is not entitled to exemption under s. 54." (v ) Decision of the Hon'ble Punjab & Haryana High Court in the case of Pawan Arya v. CIT, 237 CTR 210 , in which it was held that : "Capital gains- Exemption under s. 54-Investment in two houses-Exemption under s. 54 is available in respect of one house only - Tribunal was therefore justified in holding that the assessee .....

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houses situated in different localities of the same city, she was entitled to exemption under s. 54/54F in respect of investment in one house as per her choice but was not entitled to exemption in respect of investment in both the residential houses." 7. The learned D.R for the Revenue, therefore submitted that the appeal of the assessee may be dismissed. 8. We have considered the rival submissions. The learned Commissioner of Income Tax noted that the record revealed that since the assesse .....

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e from such house under the heading "income from house property" in her income tax returns upto assessment year 2008-09. The assessee referred language of section 54 of the Act, which provides that in case of an assessee being an individual or HUF, the capital gain arises from the transfer of a long term capital asset being building or land appurtenant thereto and being a residential house, the income of which is chargeable under the head "income from house property". The ass .....

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gible for benefit under section 54 of the Act'. The learned Commissioner of Income Tax, however, considered the sale deed of the property in question dated 17.10.2008 and found that the type of the land sold is 'gairmumkin shed', whereas the assessee claimed it to be residential house and as per the sale deed, since it was a shed, therefore, the assessee cannot claim exemption under section 54 of the Act because for making such claim under section 54 of the Act the asset sold must be .....

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question is shown as "gairmumkin shed and house". It, therefore, appears that the learned Commissioner of Income Tax has not properly gone through the sale deed of the property in question because when the details of the property are mentioned as per jamabandi for assessment year 2003-04 under sale, the learned Commissioner of Income Tax should have also gone through the copy of the jamabandi for the year 2003-04 as noted above and since the jamabandi shows the property in question as .....

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"income from house property", which is also not disputed by the Revenue Authorities in earlier years, would clearly show that the Revenue Department has accepted the property in question to be residential house property. Therefore, when the residential house is surrounded by lands, which were under sale, would be entitled for deduction under section 54 of the Act. It may also be noted here that the assessee had filed copy of estimated assets and liabilities statements as on 1.4.2008 an .....

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been able to prove that the capital gains arises from transfer of long term capital assets being building or land appurtenant thereto and being a residential house, the income of which is chargeable under the head "income from house property". Therefore, the conditions of section 54 of the Act have been satisfied in the case of the assessee. Therefore, the decisions relied upon by the learned D.R for the Revenue would not support the case of the Revenue. 9. The learned Commissioner of .....

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erefore, there is no question of applying the proviso of section 54F of the Act in the case of the assessee. We find force in the submission of the learned counsel for assessee that since the case of the assessee falls under section 54 of the Act, therefore, the provisions of section 54F of the Act would not apply in the case of the assessee. Thus this objection of the learned Commissioner of Income Tax would not be relevant and is also against the computation of income filed by the assessee alo .....

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e by the assessee for availing benefit under section 54 of the Act as explained in the reply given before the Assessing Officer during the scrutiny proceedings, have not been considered while issuing notice under section 263 of the Act. The correct details of investment made under section 54 of the Act as explained by the assessee is reproduced at page 4 of the impugned order, in which the assessee has given complete details of investment made in the properties and also explained that ₹ 1 .....

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n Capital Gain Account. The learned CIT DR produced assessment record before us during the course of hearing from which we find that the copy of FDR under Capital Gain Scheme of ₹ 1 crore is available on record, copy of which is also filed in the Paper Book at page 42. Therefore, the findings of the learned Commissioner of Income Tax are wholly incorrect and cannot be sustained. Thus the assessee would be entitled for benefit of ₹ 1 crore under section 54 of the Act on making FDR und .....

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rations of debit and credit entries were given to the Assessing Officer alongwith reply, which shows that this amount was paid through account payee cheque drawn on Punjab & Sind Bank, Phase-5, Mohali to Shri Kesar Singh for facilitating the completion of the said deal. This point was also clarified to the Assessing Officer. The learned Commissioner of Income Tax, however, noted that no document is filed on record to prove the genuineness of the claim of the assessee. The assessee in the Pap .....

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Tax further noted that the assessee has also failed to provide any corroborative evidence for incurring ₹ 4,50,000/- and ₹ 12,00,000/- in financial years 1997-98 and 1998-99 respectively for construction purposes under the head "cost of construction". The assessee explained that the construction was raised so many earlier years back and the Assessing Officer after discussing the issue at length has made addition of ₹ 2 lacs on this issue. Therefore, when the Assessing .....

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rance of probabilities. Therefore, the learned Commissioner of Income Tax should not substitute his opinion to that of the Assessing Officer for the purpose of making addition only. 13. The learned Commissioner of Income Tax further noted that no documentary evidence have been called for by the Assessing Officer in support of carried forward long term capital loss of ₹ 23,057/- pertaining to assessment year 2005-06. The assessee submitted that the long term capital loss of ₹ 23,057/- .....

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come in all the earlier years. Therefore, there was no question of examining such issue which has happened in the earlier years 2005-06 onwards. Since all informations have been given in the computation of income and returns of income to the Revenue Department and the Assessing Officer examined the issue of long term capital gain in detail, therefore, no fault could be found with the order of the Assessing Officer. 14. The learned D.R for the Revenue filed copy of order-sheet from the assessment .....

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is also filed on record, which shows that after issue of show cause notice under section 263 of the Act dated 10.1.2014, the assessee filed reply before the learned Commissioner of Income Tax on 29.1.2014 and thereafter straightaway the impugned order has been passed on 5.2.2014. It is, therefore, appeared that the detailed reply filed before the learned Commissioner of Income Tax was not considered properly and no further query was raised by the learned Commissioner of Income Tax. The reply of .....

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ced before him as well as available on assessment record. The learned Commissioner of Income Tax, however, failed to consider the reply of the assessee in proper perspective. Since the explanation of the assessee in response to the notice under section 263 of the Act has not been considered by the learned Commissioner of Income Tax in proper perspective, therefore, the order of revision without considering the explanation of the assessee would not be valid. We rely upon the decision of the Hon&# .....

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se, must be understood to be rebuttable. Such opinion was required to be reiterated after hearing the petitioner and after holding the necessary enquiry. On receipt of the show-cause notice, the petitioner submitted an elaborate reply. The Commissioner on receipt of the reply of the petitioner could not have ignored the same. Rather, it was incumbent on the Commissioner to consider the explanations offered and on that basis to record his opinion/conclusion. Moreover, the competent criminal court .....

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ring the above discussion and material on record, it is clear that the specific queries were raised by the Assessing Officer at assessment stage regarding long term capital gains and the Assessing Officer was satisfied with the explanation of the assessee. This itself would be an indication of application of mind by the Assessing Officer while passing the assessment order. When the Assessing Officer was satisfied with the explanation of the assessee with regard to the claim made under section 54 .....

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ery (India) Ltd., 372 ITR 303, in which it was held as under : Held, dismissing the appeal, that the order of the Tribunal did record the fact that specific queries were made during the assessment proceedings with regard to the details of expenditure claimed under the head "miscellaneous expenses" aggregating to ₹ 2.94 crores. The assessee had responded to the queries and on consideration of its response, the Assessing Officer held that only an amount of ₹ 17.98 lakhs incur .....

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Officer in view of the specific queries made during the assessment proceedings and the assessee's response to it. Moreover, from the nature of expenditure as explained by the assessee to the Assessing Officer during the assessment proceedings the view that the expenses were in the realm of revenue expenditure, was a possible view. Therefore, there was no fault in the order of the Tribunal having followed the binding decision of the Supreme Court while allowing the appeal before it.' 16. .....

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sioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." 17. Same view has been taken by the Hon'ble Supreme Court in its subsequent decision in the case of CIT v. Max India Ltd. 295 ITR 282. The Hon'ble Punjab & Haryana High Court in the case of CIT v. Deepak Mittal, 324 ITR 411, has held as under : "Change of opinion by reappraising the evidence i .....

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sessee and then recorded the finding. The Assessing Officer was justified in granting the special deduction under section 80-IB. The order of revision disallowing the special deduction was not valid." 18. The learned D.R for the Revenue lastly argued that since the assessee purchased two properties, therefore, the assessee would not be entitled to claim of exemption under section 54 of the Act in respect of the two residential houses. The learned counsel for assessee submitted that this iss .....

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of CIT v. Smt. R.G. Umaranee, 262 ITR 507, in which it was held as under : "Held, (i ) that in the absence of any notice by the Commissioner to treat the cost of construction of the building as undisclosed income of the assessee it was not open to the Commissioner to hold that the cost of construction of the building would represent undisclosed income of the assessee and hence the Commissioner was not justified in directing the Income-tax Officer to initiate an enquiry regarding the cost of .....

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