TMI Blog2022 (8) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... her himself make such enquiry or may get such enquiry conducted. For the purpose of exercising jurisdiction u/s 263 the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry by Pr. CIT/CIT. If the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry. If the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. Decision of Hon'ble Delhi High Court in the case of CIT Vs. Hindustan Marketing and Advertising Company Limited [ 2010 (9) TMI 352 - DELHI HIGH COURT] is relevant in this case where the Hon'ble Delhi High Court has held that where the ITO had made reasonable detailed enquiries, had collected relevant material and discussed various facts of case with assessee, order of CIT to direct fresh assessment by going deeper into the matter would not form a valid or legal basis to exercise jurisdiction u/s 263. As on perusal of the fact of the case it is explicitly clear that this case cannot be said to be a case of no enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 263 of the I.T. Act, 1961 is bad in law in absence of any new fact, information, corroborative evidence or materials being made available by the Learned Pr. CIT, Bhubaneswar-1, the impugned order u/s 263 of the Act be annulled and quashed. 6. That the appellant may add, alter, delete or modify any of the grounds at the time of hearing of the matter with the leave of the Hon'ble ITAT. 2. Brief facts of the case are that there the assessee is an individual, who derives income from salaries/pensions, long term capital gains and income from other sources. He filed return of income on 15.06.2017 disclosing total income of Rs.40,74,620/-. Thereafter the AO completed the assessment assessing the total income of the assessee at Rs.40,76,227/- and made addition of Rs.1,607/- on account of earned interest income. 3. Subsequently, the Pr.CIT invoking his powers u/s.263 of the Act, called for the assessment records and found that the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of revenue. Accordingly, the PCIT remitted back the assessment framed by the AO for limited purpose. 4. Now, the assessee is in appeal before the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears after that date [constructed, one residential house in India], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdraw such amount in accordance with the scheme aforesaid. Explanation. [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] When at the time of allotment on 20.04.2017, 34 months was the stipulated time for completion, the AO should have examined when actually the property after completion has been handed over to the assessee. The agreement to purchases must be obtained or examined cross verified with the builder. 7. To contradict this contention of the revenue the Ld AR of the assessee submitted that if the investment is made by the assesee before filing of the ROI, the same tantamount to purchase as well as construction of new house as stated in the Direct Tax Mannual Volume 3 and also held by various Honourable Courts. AO relied on following case laws:- i) Balraj Vs CIT, 254 ITR 22 (DEL) Held : For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property. Section 54 speaks of purchase. Moreover, the ownership of the property may have different connotations in different statutes. In view of various decisions of the Supreme Court, it was to be held that the Tribunal went wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that to invoke provisions of section 263 the order must be erroneous and prejudicial to the interest of revenue as the law is discussed by the Honorable Supreme Court in the case of Malabar Industrial Company Limited Vs CIT (243 ITR 83). However, in present case as the original assessment order was neither erroneous nor prejudicial to the interest of revenue hence proceedings initiated and order passed u/s 263 is bad in law, voide ab-initio, beyond the authority of law and devoid of legal force. Also, On the fact and circumstances of the case in absence of any new facts, information, corroborative evidence or material being made available by the Ld PCIT Bhubaneswar-1 the impugned order under section 263 of the act deserves to be annulled and quashed. 10. On the contrary, Ld CITDR argued the case on behalf of the revenue, stated that query raised by the AO vide his letter dated 06/08/2022 as referred by the AR of the assessee was with reference to Section 54EC of the Act and not on Sec 54F. The assesee also has given a short reply on the same which shall not be considered as satisfactory by the AO. As AO has not conducted any further enquiry on the issue only the response of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e such disallowance, as acceded to. In this connection, the submissions of the assessee are as follows : The assessee is however advised that there may be merit in the objection to the inclusion of Rs.50,000 towards entry fee for Owners Welfare Society and Rs.19,080 towards six months maintenance. Necessary directions may be issued with regard to the sum of Rs.69,080. In sum, the AO may look into all the above aspects as raised in the notice as discussed supra. He may verify whether he is eligible for Capital gains expenditure/deduction also, if so eligible, verify the computation of capital Gains as furnished by him. As regards other issues raised in the notice, he may also examine the other issues as discussed supra. 15. CITDR relied on following judgments: i) Jeevan Investment Finance (P) Ltd.,88 Taxman.com 552, wherein the Hon ble Bombay High Court has held that : Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 1997-98 - Where while making assessment, Assessing Officer raised query regarding method of valuation of unquoted shares and in response, assessee merely stated that said sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s numbers 162080 and 162082 (50,00,000 + 29,81,180) dated 20.04.2017 which were cleared from bank also on 24.04.2017 as per copy of allotment letter, money receipt and bank statement submitted in Paper Book by the Assessee page no. 59 to 62. Assessee also invested a sum of Rs. 50 Lac in Capital Bonds allotted on 31.03.2017 exempted u/s 54EC copy of the Bond was placed at page 63 of the paper book. Further, it is evident from the computation submitted by the assessee to revenue authorities and also before the ITAT that Net Capital Gain after these two investments / exemptions was offered for tax by the assessee and the same was accepted by the AO. Legal preposition on this ground is also in favour of assessee as discussed supra and in the case of CIT Vs. Kapil Nagpal in ITA 609/2014 Honble Delhi High Court held that : Question (i) 19. Turning to question (i) whether the exemption under Section 54F could be availed of by the Assessee, it requires to be first noticed that in light of the decision of the Supreme Court in CIT v. Podar Cements (P) Limited (supra), CIT v. T.N. Aravinda Reddy (supra) and Balraj v. CIT (2002) 254 ITR 22 (Del), in order to constitute purchase for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oti Foundation (2013) 38 Taxmann.com 180, the Hon'ble High court in the said decision has held that: 4. Revisionary power under Section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In ITO v. D.G. Housing Projects Ltd. [2012] 343 ITR 329/20 taxmann.com 587/[2013] 212 Taxman 132 (Mag.) it has been observed: '11. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner 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 assessee in his return. 14. The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the Assessing Officer had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or verification. These cases have to be distinguished from other cases (i) where there is enquiry but the findings are incorrect/erroneous; and (ii) where there is failure to make proper or full verification or enquiry. 15. In the case of Commissioner of Income-tax v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi), Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held as under:- We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10)... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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