MANOJ SINGHAL,NEW DELHI vs. PR. CIT-5, NEW DELHI

Per Dr. B. R. R. Kumar, Accountant Member:

“1. On the facts and circumstances of case and in law, the Ld. Principal Commissioner of Income Tax - 5, New Delhi (hereinafter referred to as the Ld. PCIT) erred in initiating proceedings under section 263 of come Tax Act, 1961 (Act) by wrongly assuming jurisdiction under section 263 of the Act and hence, the order passed by the PCIT under section 263 of Act is without jurisdiction, bad in law and void ab-initio.

2. On the facts and circumstances of case and in law, the Ld. PCIT erred in setting aside the assessment and has also erred in holding that the original assessment order passed by the Assessing Officer under section 2 Manoj Singhal 143(3) of Act was erroneous and prejudicial to the interest of the revenue.

3. On the facts and circumstances of case and in law, the directions issued by the Ld. PCIT under section 263 of Act are erroneous, vague, ambiguous and untenable and, therefore the order u/s 263 of the Act passed by the Ld. PCIT is liable to be quashed.

4. On the facts and circumstances of case and in law, the order passed under section 263 of the Act by the Ld. PCIT is bad in law as the same has been passed without application of mind and deserves to be quashed.

5. On the facts and circumstances of case and in law, the Ld. PCIT erred in invoking the provisions of section 263 of the Act, and thereby directing the Assessing Officer to make the de-novo assessment.

3. All the grounds of appeal, in substance, relate to the contention that the proceeding initiated and order passed u/s 263 by ld. PCIT is liable to be quashed as it is bad in law, without jurisdiction and against the principle of natural justice.

I) Purchase of property II) Deduction claimed under the head-capital gain

5. The ld. PCIT issued notice dated 16.03.2020 u/s 263 of the Act asking the assessee to furnish reply by 20.03.2020. The 3 Manoj Singhal said notice is enclosed in the paper book at page no. 2 to 4. Para 2 to 6 of this notice is reproduced as under:

“2. Perusal of record revealed that The assessment of Mr. Manoj Singhal for the assessment year 2015- 16 was completed in November, 2017 at income of Rs. 3,30,61,960/- u/s 143(3) of the Income Tax Act. On perusal of the record, it is found that the assessee has claimed deduction of Rs. 6,12,10,100/- u/s 54F of the Act. However the assessee has sold equity shares of Rs. 9,74,40,000/- and has gained LTCG amounting Rs. 9,72,95,775/- after indexation. The assessee has invested Rs. 6,12,10,100/- (including incident expenses) into a new residential house and has claimed deduction u/s 54F of this whole amount. However, as per section 54F of the Income Tax Act, 1961 assessee is eligible for deduction to the extent of proportion to amount of Capital Gain invested in new residential house. The eligible deduction in the case of the assessee u/s 54F is calculated as under:

“Deduction u/s 54F = Cost of the new house X Capital Gain Net Consideration = Rs. 6,12,10,100/- X Rs. 9,72,95,775/- Rs. 9,74,40,000/- = Rs. 6,11,19,500/- Thus the assessee is eligible for deduction of Rs. 6,11,19,500/- u/s 54F of the Income Tax Act, 1961 and not of Rs. 6,12,10,100/-. The AO overlooked this issue and this resulted in under assessment of Rs. 90,600/- (61210100- 61119500).

4 Manoj Singhal properties. But the assessee has not mentioned the full address and description of these properties. Therefore, it cannot be ascertained from the assessment record, whether the assessee satisfies the conditions for claiming deduction u/s 54F of the Act, or not, particularly, when the receipts on account of sale proceeds of shares are shown from Kolkata based company M/s Shreyan Vyapar Pvt. Ltd. for shares of M/s SMS IT Solutions Pvt. Ltd., again a Kolkata based company doing no business. Further, no evidence has been placed on record to substantiate the market value of the said investment. In view of these facts, the assessee is not entitled for deduction u/s 54F of the Act. The issue involves a huge amount of Capital Gain and the revenue loss may be Rs. 1,38,70,209/- or more. This issue has not been examined to determine correctness of the claim of the assessee regarding deduction u/s 54F of the Act and justification of investment in purchase of new specified asset.

4. In view of the above, and there is no plausible explanation by the assessee, and besides, proper inquiry has also not been done.

5 Manoj Singhal 6. Heard the arguments of both the parties.

6 Manoj Singhal 11. On going through the details, we find that the deduction claimed u/s 54F was Rs.6,12,10,100/- whereas the deduction eligible was Rs.6,11,19,500/-. Thus, there is a computational difference of Rs.90,600/- in the claim of deduction u/s 54F which could have been rectified u/s.154. The provisions of section 263 need not be invoked for computational error for which other provisions of the Act are fairly sufficient. The directions of the ld. PCIT which are beyond the selection criteria of scope of scrutiny for the instant year cannot be held to be legally valid.