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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI GEORGE GEORGE K.
Per Chandra Poojari, Accountant Member
This appeal by the assessee is directed against the order of the Principal Commissioner of Income-tax, Bengaluru-4, Bengaluru [PCIT] passed u/s. 263 of the Income-tax Act, 1961 [the Act] dated 25.01.2018 for the assessment year 2013-14.
In this case, assessment order was passed u/s. 143(3) of the Act on 2.2.2016. The PCIT after having gone through the records invoked jurisdiction u/s. 263 of the Act observing that the assessee sold 458.10 sq. mtrs. of land to the National Highways Authority of India (NHAI) in connection with widening of Hebbal Flyover for a sale consideration of Rs.2,21,85,000 vide registered sale deed dated 11.02.2013. The assessee purchased 2 acres of land belonging to University of Agricultural Sciences [UAS], Bengaluru for a consideration of Rs.2 crores on 3.2.2012, which was one year more than the due date of transfer i.e., 11.02.2013 and the assessee claimed exemption u/s. 54D of the Act. The PCIT observed that exemption u/s. 54D is claimed for the full extent of sale consideration, even though the cost of improvement in the new asset is only Rs.2 crores. In other words, the assessee claimed exemption at Rs.2,20,16,415. According to the PCIT, the assessee purchased the land before one year and nine days before the date of transfer of original asset, hence deduction u/s. 54D is not allowable. He was of the view that the AO has not made proper enquiry before passing the assessment order u/s. 143(3) dated 2.2.2016 and the order is erroneous insofar as it is prejudicial to the interests of revenue. He accordingly set aside the assessment order with a direction to the AO to re-examine the issue and pass a fresh order, after giving opportunity of hearing to the assessee. Against this, the assessee is in appeal before us.
We have heard both the parties and perused the material on record. The contention of the ld. AR is that there was a proper enquiry while framing assessment u/s. 143(3) of the Act and the AO had asked for relevant details in the questionnaire regarding computation of capital gain and deduction in the notice u/s. 142(1) dated 30.11.2015. The assessee by its letter dated 4.1.2016 provided necessary information and it cannot be said that the order of the AO is erroneous and prejudicial to the interests of revenue. He relied on the following case laws:- 1 Jyoti Foundation [2013] 38 taxmann.com 180 — Delhi High Court 2 Sunbeam Auto Limited [2010] 189 Taxman 436 — Delhi High Court 3 Narain Singla [2015] 62 taxmann.com 255 — Chandigarh High Court 4 Anil Kumar Sharma [2010] 194 Taxman 504 — Delhi High Court
5 Hema Krishnamurthy [ITA No. 51 l/Bang/2013] — ITAT Bangalore 6 Graham Dev Gupta [2017] 88 taxmann.com 831 — ITAT Delhi 7 IBM India Private Limited [ITA No. 1028/Bang/2013] — ITAT Bangalore 8 Crompton Greaves Limited [2017] 82 taxmann.com 246 9 P. Alikunju [1987] 34 Taxman 169 — Kerala High Court 10 Hemsons Industries [2001] 118 Taxman 903 - Andhra Pradesh High Court 11 Saravana Developers (ITA. No. 68/2014) — Karnataka High Court 12 Gabriel India Ltd. [19931 71 Taxman 585 — Bombay High Court Spectra Shares & Scrips (P) Ltd [2013] 36 taxmann.com 348 — Andhra 13 Pradesh High Court 14 Malabar Industrial Co. Ltd. v. CIT (243 ITR 83)
The ld. DR supported the order of the PCIT and relied on the following decisions wherein it was held that assessment order passed by the AO without making any enquiry on the issue rendered the assessment order erroneous and prejudicial to the interests of revenue. • The State Bank Employees Co-Operative Credit Society Ltd & 1204/Bang/19 (Bang Trib) • Smt Malini Subramanian ITA No 935/Bang/16 (Bang Trib) • M/S Mysore Minerals Ltd ITA No 464/Bang/14 (Bang Trib.) 5. In the present case, admittedly, the AO passed the assessment order u/s. 143(3) on 2.2.2016 without any proper enquiry allowing the claim of assessee u/s. 54D of the Act. There was no discussion whatsoever on the issues raised by the PCIT in his impugned order and the assessment order is silent on those issues. As per section 263 of the Act, the CIT could exercise jurisdiction under this provision if the order is erroneous insofar as it is prejudicial to the interests of the revenue. Further an incorrect assumption of facts or incorrect application of law will satisfy the requirement of order being erroneous. In the same category, falls orders passed without applying principles of natural justice or without application of mind. If there is escapement of income by the action of the AO, that order is said to be prejudicial to the interests of revenue. In the present case, the AO has not made any enquiry on the impugned issue which should be treated as erroneous order and it is prejudicial to the interests of revenue as there was revenue loss to the Government. On this count, we do not find any infirmity in the order of the PCIT in invoking jurisdiction u/s. 263 of the Act and remitting the issue back to the file of AO for fresh consideration in accordance with law. Hence we are of the view that the AO passed the order without making any enquiry on the impugned issue and the same would render the order erroneous and in view of the tax implications, the same would cause prejudice to the interests of revenue.
We therefore uphold the impugned order of the PCIT. We refrain from going into the merits of the issue since the PCIT has not given any findings on the allowability of the expenditure and he has only remanded the issue back to the AO for fresh consideration. We further make it clear that the AO/CIT(A) shall not be influenced by the findings of the PCIT in the impugned order while deciding the issue in accordance with law. With these observations, we reject the grounds of the assessee.
In the result, the appeal by the assessee is dismissed.
Pronounced in the open court on this 20th day of September, 2021.