TMI Blog2020 (10) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... all facts were laid before the AO and it can be presumed that he had taken note of this aspect while concluding the assessment. AO himself initiated proceedings u/s.154 to rectify error apparent on record on the aspect of computation of LTCG goes to show that he had while completing the Assessment not made proper enquiries. The law is well settled that if there is a failure on the part of AO to make an enquiry on the issue which calls for an enquiry, that by itself will render the order of assessment erroneous and prejudicial to the interests of the revenue. Since there was a failure on the part of AO to make necessary enquiry, we are of the view that the Pr.CIT was justified in invoking jurisdiction u/s. 263 of the Act in the facts and circumstances of the present case. Claim of the Assessee for deduction while computing LTCG has to be examined de novo without being influenced by any of the discussion in the impugned order of the Pr. CIT as the jurisdiction u/s.263 of the Act has been exercised by the Pr.CIT on the ground of the failure on the part of the AO to make proper enquiries before completing the assessment. The Assessee should also be allowed to substantiate hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s. 54F of the Act, the assessee s earlier tax consultant advised the assesses that the issues can be agitated in the order to be passed afresh by the AO u/s. 143(3) r.w.s. 263 of the Act. Later on, the AO passed the order u/s. 143(3) r.w.s. 263 of the Act dated 26.12.18 in which the issues raised in the 263 order were held against the Assessee. It has been stated that thereafter the present tax consultant was approached for filing the appeal against the order u/s. 143(3) r.w.s. 263 of the Act dated 26.12.2018. The new tax consultant advised the assessee that appeals ought to have been filed against the impugned orders u/s. 263 also. It has been explained that it is due to the aforesaid circumstances that the delay had occurred in filing the appeals. Reference was made to several judicial pronouncements for the proposition that in the matter of condonation of delay, a pragmatic approach should be adopted. The following decisions were cited in support of the plea of assessee that in the matter of condonation of delay, a liberal approach should be adopted:- 1. Ram Nath Sao Ors. Vs Gobagrdhan Sao Ors (2002) 3 SCC 195 2. Concord of India Insurance Co. Ltd. v. Nirmal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale deed dated 17.10.2012 for a sale consideration of ₹ 1,10,00,000 + registration and stamp duty charges of ₹ 66,000 and ₹ 1,10,620 respectively.(hereinafter referred to as flat at High Point Apartment) Total investment = ₹ 1,11,76,620 (₹ 1,10,00,00+66,000+1,10,620) 9. M.Lokesh filed return of income computing LTCG on sale of the property as follows:- (i) Cost of Acquisition in the year 1994-95 ₹ 1,06,723 (ii) Land levelling in the year 1994-95 ₹ 29,150 (ii) Compound wall and borewell with building in the year 1995-96 ₹ 2,08,400 (iv) Salary of watchman at ₹ 18000 per year for FY 96-97 to 1999-2000 and ₹ 21,000 per year from FY 2000-01 to 2005- 06 and at ₹ 24,000/- from FY 2006-07 to 2010-11 and ₹ 16,000 for FY 16000. The total of all the above comes to ₹ 6,78,273 and on indexation from the respective years, the indexed cost was ₹ 16,86,707 and the LTCG was computed at ₹ 1,58,13,293 (₹ 1,75,00,000 ₹ 6,78,273). The share of each of the Assessee in the LTCG was 79,06,640/-. The same computation of Long term capital gain(LTCG) has been repeated in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te basis. In this regard the CIT took the investment in flat at pooja apartment as new asset on which deduction u/s.54F was claimed by both the Assessees and gave a finding that the investment in the new asset was ₹ 1,59,90,590 and the capital gain was ₹ 1,64,21,161. The proportional deduction to be allowed u/s.54F was only ₹ 1,50,04,803 and consequently there would be a taxable capital gain on sale of the property of ₹ 14.16,358 (₹ 1,64,21,161 1,50,04,803) (iii) The CIT found that the Assessee M.Lokesh owned more than one residential house other than the new asset i.e., he owned residential apartment as on the date of transfer of the original asset. The CIT found that the Assessee owned Flat in High Point Apartment, flat at Pooja Apartment and house at Malleswaram as on the date of transfer of the original asset. The flat in high point apartment and flat at pooja apartment were purchased prior to the sale of the original asset. Since the Assessee owned more than one residential house other than the new asset as on the date of transfer of the original asset, the Assessee ought not to have been allowed deduction u/s.54F of the Act. In the case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f three years after that date constructed, a residential house; then, capital gain will be exempt to the extent of Long-Term Capital Gains OR to the extent of amount invested in the purchase or construction of the new residential house, whichever is less. 16. He submitted that u/s.54F of the Act, if capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter referred to as the original asset), and the assessee has, (i) within a period of one year before or (ii) two years after the date on which the transfer took place (a) purchased, (b) or has within a period of three years after that date constructed, a residential house (hereafter referred to as the new asset), the Assessee will get exemption proportionately i.e., Exemption = (Capital Gain X Amount Invested) Net Sale Consideration Exemption is not available where: (a) the assessee, - (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le deeds and purchase deeds. Since the office note is not clear about what enquiries the AO made before concluding the assessment, we have to conclude that the findings of the Pr.CIT that the AO has not made adequate and proper enquiries before concluding the Assessment, is correct. The ld. Counsel for the assessee could not substantiate before us as to how the AO made enquiries on this issue before concluding the assessment, except by pointing out that all facts were laid before the AO and it can be presumed that he had taken note of this aspect while concluding the assessment. The fact that the AO himself initiated proceedings u/s.154 of the Act to rectify error apparent on record on the aspect of computation of LTCG goes to show that he had while completing the Assessment not made proper enquiries. The law is well settled that if there is a failure on the part of AO to make an enquiry on the issue which calls for an enquiry, that by itself will render the order of assessment erroneous and prejudicial to the interests of the revenue. It has been so held by the Hon ble Delhi High Court in the case of Gee Vee Enterprises Vs. DCIT 99 ITR 375 386(Delhi) . The following passage fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rma that the word erroneous means that the order must appear to be wrong on the face of it. In other words, he equated the error with error of law apparent on the face of record which is a well-known ground for the review of a quasijudicial order by this Court under Article 226. We are unable to agree with this interpretation. The intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income Tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessed has stated in his return and fails to make inquiries which are called for in the circumstances of the case. Shri Sharma's contention that this would give the Commissioner the power to revise the order of the Income Tax Officer merely on the ground of suspicion is. untenable in view of the following two Supreme Court decisions which have already construed the old section 33B. contrary to Shri Sharma's contention. In Rampyari Devi Saraogi v. Commissioner of Income Tax, (1968)67 I.T.R. 84, the Income Tax Officer accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment was erroneous and prejudicial to the interests of the Revenue. The High Court held that there were materials to justify the Commissioner's finding that the order of assessment was erroneous insofar as it was prejudicial to the interests of the Revenue. Shri Sharma tried to distinguish this decision on the ground that the address of the assessed in that case was given incorrectly. The decision of the High Court and that of the Supreme Court were not, however, based on that ground at all. On the contrary, the Supreme Court followed their previous decision in Rampyari Devi's (12) case and upheld the decision of the High Court precisely on the same grounds. These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessed in his return. (14) The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sale receipts have to be invested. In case entire capital gains are not invested the amount not invested is charged to tax as long-term capital gains. In case entire sale receipts are not invested, the exemption is allowed proportionately. [Exemption = Cost the new house x Capital Gains/Sale Receipts] Assessee should not own more than one residential house at the time of sale of the original asset. 21. For Sec.54 of the Act to apply, the asset that was transferred should be a residential house. From the description of the property in the sale deed it appears that there was a house. As to whether the same can be said to be a residential house for the purpose of Sec.54 of the Act, is a matter that requires examination. The Assessee in this regard has drawn our attention to a decision of Hon ble Karnataka High Court in the case of CIT Vs. Dr. R.Balaji (2014) 222 Taxman 305 (Karnataka) . We do not wish to go into those aspects because, we feel that the claim of the Assessee for deduction while computing LTCG has to be examined de novo without being influenced by any of the discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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