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Facts
The assessee, an individual engaged in the business of gold and silver ornaments, claimed a deduction under Section 54F of the Income Tax Act for reinvesting sale proceeds of a plot. The Assessing Officer allowed this deduction. However, the Principal Commissioner of Income Tax (PCIT) invoked revisionary powers under Section 263, holding the assessment order erroneous and prejudicial to revenue by allowing an excessive exemption.
Held
The Tribunal held that the Assessing Officer had considered all aspects of the Section 54F claim and the order was not erroneous or prejudicial to the revenue. Invoking Section 263 for revision after scrutiny, especially to take a second opinion, was beyond its scope.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise an assessment order where the Assessing Officer had already considered and allowed a Section 54F deduction after scrutiny.
Sections Cited
263, 54F, 143(3), 143(1), 54
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI MAKARAND VASANT MAHADEOKAR
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the Assessee against order dated 15.03.2023 passed by the PCIT, Ahmedabad-1 for the Assessment Year 2018-19.
The assessee has raised the following grounds of appeal :-
“1.1 The Order u/s.263 passed on 15.03.2023 by Pr.CIT.Ahmedabad-1. A'bad (for short Pr. CIT) for AY 2018-19 holding that the excessive exemption u/s.54F was allowed by Rs.45,73,740/- in order of assessment u/s.14(3) passed on 19.02.2021 by AO is wholly illegal, unlawful and against the principles of natural justice.
2.1 The Id. Pr. CIT has grievously erred in law and or on facts in holding that the order of assessment passed u/s.143(3) on 19.02.2021 by AO accepting exemption u/s.54F was erroneous and prejudicial to the interest of the revenue and directing the AO to withdraw the excessive exemption u/s.54F to the extent of Rs.45,73,740/-.
(Assessment Year: 2018-19) Jayvantkumar Ramanlal Chokshi vs. PCIT-1 Page 2 of 5 2.2 That the in the facts and circumstances of the Id. Pr. CIT ought not to have invoked the powers of revision u/s.263 and thereby held that the order of assessment passed u/s.143(3) on 19.02.2021 by AO accepting the exemption u/s.54F were erroneous and prejudicial to the interest of the revenue and directing the AO to withdraw the excessive exemption u/s.54F to the extent of Rs.45,73,740/-.
2.3 The Pr. CIT has failed to appreciate that the issue relating to the capital gain was the subject matter of scrutiny by AO and after having considered material produced by the appellant, the same were accepted in the order of assessment passed u/s.143(3) on 19.02.2021 so that it was neither erroneous nor prejudicial to the interest of revenue which could be revised u/s.263 of the Act rw Explanation-2.
2.4 The Pr. CIT has failed to appreciate that the claim of alleged excessive deduction u/s.54F could not be disallowed in the year appeal in view of the fact that deposit made under Capital gains Scheme so that it could at the most have to be considered at the end of third year.
3.1 The Id. Pr. CIT has grievously erred in law and or on facts in holding that the provision of Explanation-2 to sec.263 was attracted in the facts of the case.
3.2 That the in the facts and circumstances of the Id. Pr. CIT ought not to have directed AO to make fresh assessment by withdrawing the excessive exemption u/s.54F to the extent of Rs.45,73,740/-.
It is, therefore, prayed that the order of revision passed u/s.263 by the respondent should be quashed and direction to make addition should be quashed.”
The original return of income for the assessment Year (A.Y.) 2018-19 was filed on 27.07.2018 declaring total income of Rs.38,350/- which was revised on 25.08.2018 declaring total income of Rs.38,350/-. The assessee is an individual engaged in the business of purchase and sale of gold and silver ornaments. The return was processed under Section 143(1) of the Income Tax Act, 1961 and statutory notices were issued to the assessee which was replied alongwith various documents/evidences to the Assessing Officer. The Assessing Officer observed that the property sold by the assessee was an open plot purchased by the assessee on 24.05.1995 and sold on 08.06.2017 and the property sold was not building or land appurtenant. Therefore, show cause notice was issued to the assessee asking as to why the assessee’s claim on deduction under Section 54 of the Act should not be (Assessment Year: 2018-19) Jayvantkumar Ramanlal Chokshi vs. PCIT-1 Page 3 of 5 disallowed. After taking cognisance of the assessee’s response, the Assessing Officer observed that as per the provisions of Section 54A of the Act, deduction is available on the capital gain arising from transferable Long Term Capital Gain (LTCG) assets other than residential house if the assessee reinvests the complete proceeds from the same for purchase of a residential house within two years or constructs one within three years. In assessee’s case, the assessee sold his plot on 08.06.2017 for a net amount of Rs.89,10,000/- after deduction of transfer fees and TDS. The assessee deposited complete proceeds into capital gains account with Bank of Baroda on 31.03.2018 and since the assessee fulfilled the conditions for claiming deduction under Section 54F of the Act, the assessee’s claim was acceptable and deduction under Section 54 of the Act was disallowed by the Assessing Officer. The PCIT observed that the assessee had furnished valuation report dated 10.10.2020 in which Fair Market Value of the plot as on 01.04.2001 was disclosed at Rs.9,59,000/-. However, in the revised return, the assessee claimed cost of acquisition of Rs.6,00,000/-. The said sale deed indicates that there was purchase of new residential property at Rs.39,95,930/-. However, the Assessing Officer has not verified the restriction of the deduction of capital gain under section 54F of the Act to the extent of Rs.28,27,380/- as per the computation given in order under Section 263 of the Act dated 15.03.2023 under Section 5 and hence the PCIT issued show cause notice thereby invoking Section 263 of the Act. After taking cognisance of the assessee’s submissions, the PCIT directed the Assessing Officer to pass a fresh Assessment Order as the Assessing Officer allowed excess deduction under Section 54F of the Act to the tune of Rs.45,73,740/-.
The assessee filed appeal before the Tribunal
The Ld. AR submitted that the fact remains the assessee reinvested the sale consideration of the plot as per Section 54F guidelines and, therefore, genuinely claimed under Section 54F of the Act and the Assessing Officer, after verifying the same, has disallowed the claim under Section 54 of the Act and has allowed under Section 54F of the Act. Thus, the ld. AR submitted that the PCIT has taken a different view which is not permissible under Section 263 of the Act as it is revisionary power (Assessment Year: 2018-19) Jayvantkumar Ramanlal Chokshi vs. PCIT-1 Page 4 of 5 looking into the Assessment Order which is erroneous and prejudicial to the interest of the Revenue or lack of enquiry during the assessment proceedings by the Assessing Officer. Thus, the ld. AR submitted that the PCIT was not right in invoking Section 263 of the Act.
The ld. DR submitted that the PCIT has rightly observed that the Assessing Officer allowed excess deduction under Section 54F to the tune of Rs.45,73,740/- which is erroneous and prejudicial to the interest of Revenue and the amount of exemption allowable was to the extent of Rs.28,27,380/- only.
We have heard both the parties and perused all the relevant material available on record. After going through the table which is reproduced by the PCIT relating to the amount of exemption allowable upto calculation, the main fact that the assessee has invested upto Rs.89,10,000/- in the properties which is threshold under Section 54F of the Act and there is no doubt created by the PCIT in the said transfer. Once the Assessing Officer has looked into all the aspects when the assessee is claiming deduction under Section 54 which was rightly disallowed by the Assessing Officer and the deduction claimed under Section 54 which was looked into after checking/verifying all the conditions of Section 54F of the Act and thereafter granting the same is not at all erroneous or prejudicial to the interest of the Revenue. Invoking Section 263 of the Act by the PCIT thus is that of review of the Assessment Order which is beyond the scope of Section 263 of the Act. The PCIT in fact has taken second opinion which is also not allowable under the provisions of Section 263 of the Act. Thus, appeal filed by the assessee is allowed.
In the result, appeal of the assessee is allowed. Order pronounced in the open Court on this 18th February, 2025.