TMI Blog2021 (9) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... planations in respect of genuineness of the claim of deduction u/s 54Fand the AO on meticulous appreciation of evidence on record has allowed the claim of deduction which is not only accordance with provision of law but also supported from documentary evidences and as such there is no error in the Assessment order. Also during the revision proceedings the assessee had explained with legal valid documentary evidences that claim made by assessee on the basis of which the AO had allowed the same - As pointed out before ld PCIT that the facts narrated in show cause notice is apparently incorrect and false as the assessee had constructed the house on other residential plot not on the purchase in the year under consideration and in support of same the assessee had furnished evidences. AO had exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion on the basis of legal valid documentary evidences and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion and also there was no revenue loss as the entire sales consideration had been disclosed and offered for taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rameters of revisional jurisdiction U/s 263 of the Act. 4. That on the facts and in the circumstances of the case, the ld. PCIT-1, Jodhpur grossly erred in both on facts and in law, in assuming the jurisdiction U/s 263 of the Income Tax Act, 1961 without considering the material fact that during the course of the assessment proceedings, the assessee had brought on record all the materials and evidences relating to the concerning issue and the same were duly verified by the AO before passing the assessment order in the case of the assessee. 5. That on the facts and in the circumstances of the case, the ld. PCIT-1, Jodhpur grossly erred in proposing the disallowance of deduction U/s 54F ignoring the fact that the appellate has invested the consideration received by him in construction and has rightly claimed deduction under Section 54F of the Act as per law. 6. That on the facts and in the circumstances of the case, the ld. PCIT-1, Jodhpur grossly erred in exceeding his jurisdiction by issuing direction on the issue which was not subject matter of show cause notice U/s 263 of the Act. 7. That on the facts and in the circumstances of the case, the ld. PCIT- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dated 23/11/2020 was issued fixing the date of hearing and with regard to the notice dated 23/11/2020, the authorized representative of the assessee appeared and filed written submissions. After considering the submissions of the assessee and material placed on record, the ld. PCIT passed order U/s 263 of the Act on the ground that the order U/s 143(3) dated 05/11/2018 passed by the A.O. was found to be erroneous in so far as it is prejudicial to the interests of the Revenue and cancelled the assessment order passed by the A.O. U/s 143(3) of the Act with direction to pass the assessment order afresh. 3. Against the above said order passed by the ld. PCIT U/s 263 of the Act, the assessee is in further appeal before the ITAT on the grounds mentioned above. 4. All the grounds raised in the appeal are interrelated and interconnected and mainly the assessee is aggrieved by the order passed U/s 263 of the Act by the ld. PCIT. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied upon the written submissions filed before the Bench and the same is reproduced below: 1] That in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue which was neither part of show cause notice nor any explanation sought from the assessee during the revision proceeding. The AO is directed to re-compute the capital gain on the sale of property in question after adopting 50% of the sale consideration of ₹ 8,01,00,000/- in the hands of the assessee. The AO is also directed to refer the issue of adopting remaining 50% sale consideration in the hands of ShriMangiLal Mali (PAN AARPD2140D), to his Assessing Officer for re-computing LTCG in the AY 2016-17 after taking appropriate action as per the Income-tax Act, 1961. 6] The order passed by ld AO is contrary to provision of law and law decided by Hon ble Courts and as such in light of submission herein below, the order passed by ld PCIT may kindly be quashed. It is submitted that the case was selected for limited scrutiny on the reason Whether capital gains/ loss is genuine and has been correctly shown in the return of income. Not for deduction claimed under the head capital gain . However, during the assessment proceedings the AO had also made substantial verification examination on the other issue as the case may be taken up for comprehensive scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the above, it is crystal clear, that the ld AO had raised the queries in respect of allowiblity of deduction u/s 54F which were compiled by the assessee and the ld AO on meticulous appreciation of evidence on record has allowed the claim of deduction which is not only accordance with provision of law but also supported from documentary evidences and as such there is no error in the Assessment order. Further also during the revision proceedings the assessee had explained with legal valid documentary evidences that claim made by assessee on the basis of which the ld AO had allowed the same. It is further pointed out before ld PCIT that the facts narrated in show cause notice is apparently incorrect and false as the assessee had constructed the house on other residential plot not on the purchase in the year under consideration and in support of same the assessee had furnished legal valid evidences which were on record of ld AO. Therefore the assessment order of the AO cannot be held to be erroneous and prejudicial to the interest of revenue. In regard, he relied on the decisions of Hon'ble ITAT, Jaipur Bench in the case of Virendra Singh Bhadauriya v/s PCIT reported in 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. . Therefore the direction issued by the PCIT is beyond his jurisdiction and deserves to be quashed. d] It is further submitted that during the assessment proceedings the ld AO had issued notice u/s 142(1) in which he had raised specific queries in respect of above issue and the assessee had replied each every issue and also furnished the legal valid documentary evidences in support of sales consideration declared by him was genuine. Further also the ld AO had also obtained the copies of return of income and computation in respect of other co-partners and verified the facts that the each party had disclosed the sales consideration and the total sales consideration as received are duly disclosed for taxation by the each party. It is further relevant to mention here that in the case of Mangilal Deora the ld AO had completed the assessment u/s 143(3) and accepted the sales considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns why the assessment made by the AO was erroneous and prejudicial to the interest of the Revenue. The PCIT has not arrived at any independent finding for issuance of notice under s. 263. Further, a thorough enquiry has been conducted by the AO which comprised of questionnaire to which the assessee has submitted his reply, thereafter there is a notice under s. 142(1) with a query letter to which again the assessee has replied to the queries, so it Is evident there has been a detailed investigation and enquiry conducted by the AO. When such judicially exercise has been apparently made by ld AO, therefore the order of the AO cannot be branded as erroneous and prejudicial to the interests of the Revenue. The exercise of jurisdiction under s. 263 by the PCIT is, not valid in eye of law. Reliance is placed on the following judicial pronoucements: CIT vs. GirdhariLal (2002) 176 CTR (Raj) 92 : (2002) 258 ITR 331 (Raj), CIT vs. Shiv Hari Madhu Sudan (1998) 233 ITR 649 (Raj), CIT vs. Kanda Rice Mills (1989) 178 ITR 446 (P H) CIT vs. ArvindJewellers 259 ITR 502 (Guj) ITAT Indore Bench in the case of Rakesh Khandelwal V/s CIT ITA No.204/Ind/2019 dated 29.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT had considered the order passed by the AO is erroneous and prejudiced to the interest of the revenue on following reasons:- 2.1 On further perusal of record it is noticed that you have purchased a land for ₹ 1900000/- on 24.02.2016 and incurred ₹ 6106014/- on account of building construction during the period 23.11.2015 to 31.07.2016. Out of this you have incurred ₹ 1120620 prior to purchase of land (26.02.2016) and ₹ 1524500 after 30.07.2016 (date of filing return). Further while claiming deduction u/s 54F you have claimed deduction only in respect of construction and not on account of purchase of land. 2.2 As per the provisions of section 54F of the Act, exemption under section 54F is allowed in respect of investment made prior to date of filing of return. In the light of the above actual expenditure for claiming exemption u/s 54F was ₹ 3460894/- (6106014-1120620-1524500) only and therefore exemption u/s 54F was to be allowed for ₹ 3273202/- (3460894 x 25724885 / 27200000) only. However, while completing assessment full exemption for ₹ 5343588 has been allowed, as claimed by you. In response to notice u/s 263 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on which the ld PCIT had issued the notice u/s 263 and acquired the jurisdiction is not only illegal but also against the circular issued by Hon ble CBDT and law decided by Hon ble Court. In this regard, we draw strength from the decision of the Coordinate Bench of ITAT, Jaipur as relied by the ld. AR in the case of Mahendra Singh Dhankhar (HUF) V/s ACIT reported in (2021) 35 NYPTTJ 458 (Jp)wherein it was held: Scope of enquiry in case of limited scrutiny is limited to the extent of the issues for which case is selected for scrutiny under CASS. The CBDT has issued instructions from time to time in this respect and has specifically instructed the taxing authorities that scope of enquiry should be limited to verification of all the particulars for which limited scrutiny was taken up under CASS. However, in case during the assessment proceedings the AO is of the view that substantial verification of other issue is also required, then the case may be taken up for comprehensive scrutiny with the approval of the Principal CIT/Director of IT concerned. It is also instructed that such an approval shall be accorded by the Principal CIT/Director of IT in writing after being satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudicial to the interest of the Revenue. In the facts of the present case, these criteria are not met so far as the assessment order is concerned and therefore, we quash the order passed by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Act. We order accordingly. 10. We further observed thatthe at page No. 3 4 the ld PCIT had discussed the issue in respect of claim of deduction u/s 54F of the Act and recorded the observation in the order reads as under:- The AO is directed to examine the allowability of deduction u/s 54F on the property claimed to have been sold in the year under reference viz-a-viz source of investment in purchase of plot and construction thereon on the basis of cash book, bank book, contractors to whom payment for construction has claimed to have been made. During the assessment proceedings as well as revision proceeding the assessee had submitted the documentary evidences and explanations in respect of genuineness of the claim of deduction u/s 54Fand the AO on meticulous appreciation of evidence on record has allowed the claim of deduction which is not only accordance with provision of law but also supported from documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new asset, within a period of one year after the date of transfer of the original asset. In this regard, the assessee purchased the second residential house vide registered sale deed dt. 12th Sept., 2015 which is well beyond the period of one year from date of transfer of the original asset on 6th April, 2014 and thus, the said act cannot be held in violation of any of the terms of proviso to s. 54F. What is relevant to determine is the date of purchase and such date of purchase is evidenced by the registered conveyance/sale deed reflecting the final payment and taking over the possession of the residential house. Merely because the assessee entered into the sale/purchase agreement on 25th April, 2014 and made payments in instalments and some of the instalments were paid within one year window after the date of sale of the original asset would not debar the assessee from claim of deduction under s. 54F. Therefore, the AO has neither ignored the said proviso nor the deduction so allowed is in violation of the provision of s. 54F and therefore, the order so passed by the AO cannot be held as erroneous due to ignorance or incorrect application of law. All the relevant facts in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the quasi-judicial power vested in him in accordance with law and arrived at conclusion on the basis of legal valid documentary evidences and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion and also there was no revenue loss as the entire sales consideration had been disclosed and offered for taxation as per provisions of law by the respective parties. Further also the ld PCIT had not analyzed the documentary evidences and explanations available on record of the AO in right prospective judicially manner as the legal documentary evidences and the copies of return and assessment order of respective parties are on record which itself established that the entire sales consideration as obtained from sale of land was duly offered for taxation and there was no error committed by the AO while accepting the sales consideration disclosed by the assessee. Further also the AO in the case of other party had accepted such fact while passing the assessment order u/s 143(3) of the Act. 11. We further observed that in the order u/s 263 the ld PCIT had not recorded any specific finding that how the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n evidences, which the assessing officer has gone through. There is no dispute that the Ld. Principal CIT can exercise the revisionary jurisdiction u/s 263 of the Act. If he considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. Explanation (2) to section 263 of the Act further clarifies that an order passed by the A.O. shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Principal Commissioner or Commissioner (a) the order is passed without making enquiries or verification which should have been made (b) the order is passed allowing any relief without enquiring into the claim (c) the order has not been made in accordance with the order, direction or instruction issued by the Board u/s 119 or (d) order has not been passed in accordance with any decision, which is prejudicial to the assessee rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. In the present case, Principal CIT has revised the order on the ground that the A.O. has failed to make enquiries or verification, which should have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged inadequate investigation , it will be difficult to hold that the order of the A.O., who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/enquiry. The order of the A.O. may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the A.O. to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT held and records reason why it is erroneous. An order will become erroneous because on remit, the A.O. may decide that order is erroneous. Therefore, CIT must after recording reasons, hold that order is erroneous the jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It was further observed that the material, which the CIT can rely includes not only the records as it stands at the time when the order in question was passed by the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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