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2019 (6) TMI 431

rused relevant material on record including question put to assessee in notice u/s 142(1) during original assessment framed u/s143(3) specific queries were raised by Ld.AO regarding assessee’s eligibility to claim exemption u/s 54 and the documents / information were duly supplied by the assessee. Therefore, we form an opinion that Ld. AO with due application of mind, after making requisite inquiries, accepted assessee’s claim. This being so, the action of Ld. Pr.CIT could not be justified. Nothing on record would suggest that the action of Ld.AO was not in conformity with statutory provisions or not in line with the binding judicial precedents prevailing at the time of framing assessment u/s 143(3). As per extant provisions of Section 54 as interpreted by various judicial authorities, the expressions ‘a residential house’ would not mean to indicate a singular number. The same is also evident from the fact that the words ‘a residential house’ were replaced with ‘one residential house’ only with effect from 01/04/2015 and accordingly, the amendment was not applicable to impugned AY. Simply because, Ld. Pr.CIT hold adverse view in the m .....

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the facts of the case and to pass a fresh assessment order be held void and bad in law. WITHOUT PREJUDICE TO GROUND NO. I: GROUND NO. II: Directing the AO to verify as to whether the "new acquired flats are independent units" and re-examining the claim of the Appellant under section 54 of the Act: 1. On the facts and circumstances of the case and in law, the ld. Pr. CIT erred in exercising jurisdiction u/s 263 of the Act and directing the AO to re-examine/freshly examine as to whether the new flats purchased were independent units and thereafter, pass order in accordance with law in respect of the Appellant's claim under section 54 of the Act. 2. The Ld. Pr. CIT failed to appreciate that section 54, prior to its amendment by Finance (No.2) Act, 2014 w.e.f. April 1, 2015, did not limit the number of units to be purchased out of the longterm capital gains arising from the sale a residential house for claim of the said exemption and therefore, whether the flats were independent units or not has no bearing on the claim under section 54 of the Act. 3. The Appellant prays that the direction to AO to examine claim under section 54 after verifying whether the newly acquired u .....

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tion u/s. 54 of the I.T. Act on purchase of 4 flats against the sale of 2 flats which is not permissible as per section 54 of the I.T. Act, 1961. 4. In view of the above, it is evident that the Assessing Officer has not examined the aforesaid issues at all and allowed the claims made by you without inquiring, verification, resulting in excess claims being allowed. Therefore, it is considered that the order dated 02.02.2016 u/s. 143(3) of the Income-tax Act, 1961 is erroneous in so far as it is prejudicial to the interest of revenue within the meaning of Sec. 263 of the Income-tax Act, 1961. 5. You are, therefore, allowed an opportunity of being heard and show cause as to why an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment within the meaning of Section 263 of the Income Tax Act, 1961 may not be passed in your case. 2.3 In response, the assessee vide letter dated 04/10/2017, submitted that the assessee sold two residential house property and against sale of each of the house property, the assessee had purchased two adjacent flats intended to be used as single dwelling unit and the deduction u/s 54 was claimed on purchase of .....

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the assessment proceedings, the Assessing Officer has not examined the aforesaid issues at all and allowed the claims made without verification, resulting in excess claims being allowed. 7. Therefore, it is held that the order dated 02.02.2016 u/s. 143(3) of the Income tax Act, 1961 is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of sec.263 of the Income-tax Act, 1961 and, as the Assessing Officer failed to conduct proper inquiries, investigation and enquiries, the assessment order is set aside to the Assessing Officer with the direction to verify the claim of the assessee after conducting proper inquiries, investigation and examination and pass a fresh assessment order in accordance with law after affording an opportunity of being heard to the assessee . The order shall be passed under the supervision and guidance of the Jt.CIT-28(1), Mumbai. Aggrieved, the assessee is in further appeal before us. 3. The Ld. Authorized Representative for Assessee reiterating the submissions advanced arguments that the stated issue was duly scrutinized by Ld. AO during original assessment proceedings and accepted the claim with due application of mind .....

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er. The same is also evident from the fact that the words a residential house were replaced with one residential house only with effect from 01/04/2015 and accordingly, the amendment was not applicable to impugned AY. Simply because, Ld. Pr.CIT hold adverse view in the matter, in our opinion, would not be a ground to invoke jurisdiction u/s 263 unless any perversity is established in the order of Ld. AO. Once a plausible & legally sustainable view has been taken by Ld. AO in the matter, the revisional jurisdiction u/s 263 would not be warranted. 4.4 We draw support from the decision of Hon ble Bombay High Court rendered in Moil Ltd. Vs. CIT [81 Taxmann.com 420] wherein Hon ble court has held as under: - 5. On a perusal of the orders passed by the Authorities, it appears that before the assessment order was passed, a notice was served on the assessee under Section 142(1) of the Act and 20 queries pertaining to different heads were made therein. The ninth query in the notice under Section 142 (1) of the Act pertains to the expenditure for the Corporate Social Responsibility. By the said query, the assessee was directed to give a detailed note of expenditure for the Corporate Soci .....

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e and a detailed note after giving bifurcation of the expenses under different heads was sought. We have perused the response in respect of this query which is exhaustive. We find that the assessee has given the details, as are sought under query no.9 in the notice under Section 142 (1) of the Act. If that is so, the judgments, reported in Fine Jewellery (India) Ltd. (supra) and Nirav Modi (supra) and on which the learned Counsel for the assessee has placed great reliance would come into play. It is held in the judgments referred to herein above by relying on the judgment in the case of Idea Cellular Ltd. (supra) that if a query is raised during the assessment proceedings and the query is responded to by the assessee, the mere fact that the query is not dealt with in the assessment order would not lead to a conclusion that no mind has been applied to it. In the case of Fine Jewellery (India) Ltd. (supra) this Court found that from the nature of the expenditure as explained by the assessee in that case the Assessing Officer took a possible view and therefore, it was not a case where the provisions of Section 263 of the Act could have been resorted to. Considering the explanation of .....

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inst the Revenue. The Hon ble Bombay High Court in CIT Vs. Hindustan Lever Ltd. 19 Taxman.com 56] following the judgment in CIT Vs. Gabriel India Ltd. [203 ITR 108] observed as under: - 9. Before we deal with the grounds on which the Commissioner sought to exercise his jurisdiction under Section 263 and the decision of the Tribunal in appeal, it would, at the outset, be necessary to advert to the parameters for the exercise of the jurisdiction under Section 263 of the Act. Section 263 empowers the Commissioner to call for and examine the record of any proceeding "if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue". The language of Section 263 imposes two requirements, the first being that the order of the Assessing Officer must be regarded as being erroneous and the second that the order must be prejudicial to the interests of the Revenue. Similarly, the Commissioner cannot exercise his jurisdiction under Section 263 merely on the ground that the interests of the Revenue are prejudiced without coming to the conclusion, in addition, that the order in respect of which he exercise .....

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tural operation and was liable to be taxed under the head "income from other sources". Both, the Tribunal in appeal and the High Court held against the assessee. The Supreme Court while dismissing the appeal came to the conclusion that the order of nil assessment by the Income Tax Officer was passed without application of mind. There was no material to support the claim of the assessee that the amount paid represented compensation for loss of agricultural income. The Assessing Officer, noted the Supreme Court, had accepted the entry in the statement of account filed by the assessee in the absence of any supporting material and without making any enquiry. On these facts, the conclusion that the order of the Income Tax Officer was erroneous was held to be irresistible and the jurisdiction under Section 263 was held to be a justifiable exercise. 12. The judgment of the Division Bench of this Court in Gabriel India Ltd. (supra) had confined the categories within which the jurisdiction under Section 263 could be exercised, to a situation in which the order of the Assessing Officer could be regarded as not being in accordance with law or which had been passed without making an .....

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y be prejudicial to the interests of the Revenue. 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 instance, where the Assessing Officer adopted one of several courses permissible in law or where two views are possible and the Assessing Officer has adopted one view with which the Commissioner does not agree, it has been held that it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken is unsustainable in law. We find the ratio of above decisions applicable to the facts of present case. 4.5 The revenue has placed reliance on the decision of Hon ble Bombay High Court rendered in Shoreline Hotels (P) Ltd. Vs CIT [ITA No. 332 of 2016 dated 11/09/2018]. However, upon study, we find the same to be inapplicable in view of the fact that in that case, there was clear failure on the part of Ld. AO to abide by the statutory mandate and Ld. AO accepted vague and general explanation of the assessee, which made the order erroneous as well as prejudicial to the interest of the revenue. However, in the present case, the action of Ld. AO was in line .....

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