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Income Tax Appellate Tribunal, “C “ BENCH, KOLKATA
Before: SHRI S.S. GODARA, JM & DR. A.L. SAINI, AM
Appellant by : Shri Soumitra Choudhury, Advocate, ld.AR Respondent by : Dr. Shri P. K. Srihari, CIT/ld.DR सुनवाई क� तार�ख / Date of Hearing : 21-08-2019 घोषणा क� तार�ख/Date of Pronouncement: 15-11-2019 आदेश / O R D E R Per Dr. A. L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2011-12, is directed against the order dated 23-10-2017 passed by the Principal Commissioner of Income Tax, Kol-8, under section 263 of the Income Tax Act, 1961.
2. Grounds of appeal raised by the assssee are as follows:-
For that on the facts of the case the order passed by the Ld. Pr. C.I.T.-8, Kolkata u/s. 263 is completely arbitrary unjustified and illegal.
For that on the facts of the case the order of the Ld Pr. C.I.T.-8, Kolkata passed u/s. 263 dated 23.10.2017 should be quashed. 3. For that on the facts of the case the Ld. Pr. C.I.T.-8, Kolkata was wrong in initiating proceeding u/s. 263 of the I.T. Act when the assessment was completed u/s. 143(3)/147 on 16.03.2016 wherein all the issues have been dully considered, therefore, the whole proceeding is completely arbitrary, unjustified and illegal.
Shri Kartick Chandra Mondal 1 4. For that on the facts of the case the order passed by the Ld. Pr. C.I.T.-8, Kolkata u/s. 263 is wrong as he has asked the A.O. to do re-examination and re-verification, therefore, the whole order should be quashed.
For that on the facts of the case the Ld. CIT-8, Kolkata was wrong in passing the Order u/ s. 263 by setting aside the order u/s. 143(3)/147 for re-examining the extent of excess exemption of Rs.25,80,000/ - u/s. 54EC of the I.T. Act, when all the details were filed before the A.O. and duly considered by the A.O. at the time of assessment u/s. 143(3) / 147, therefore, the order of the Ld. Pr. CIT is completely arbitrary, unjustified and illegal.
For that on the facts of the case, the Ld. Pr. C.I.T.-8, Kolkata was wrong in giving the direction for re-examine and re-verification the claiming exemption at Rs.25,80,000 / - and not considering the facts that the assets of 7 co-owner were sold on 15.02.2011 in a single sale deed and entire capital gain also invested in a single bond-219 (1000 x 219, i.e. 21,90,000/-) with REC Bond before 180 days and the assets was reflected in A.O.'s assessment order u/s. 147/ 143(3), so the assessee is eligible for exemption u/s. 54 EC of the Income Tax Act, which was duly considered at the time of assessment u/s. 143(3)/147, therefore, the direction given by the Ld. Pr. C.I.T.-8, Kolkata is completely arbitrary, unjustified and illegal.
7. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.
Brief facts qua the issue are that the assessee, a resident individual in Hooghly Kolkata, is being assessed to income tax with the ITO, Ward-24(2), Hooghly with PAN: AFEPM3406M. The return of income for the A.Y. 2011-12 declaring total income of Rs.1,58,620/- was filed by the assessee on 30.03.2012. The assessment for the A.Y. 2011-12 was completed u/s 147/143(3) of the I.T. Act, 1961 on 16.03.2016 at a total income of Rs. 8,81,910/-.
Later on, the ld. PCIT exercised his jurisdiction u/s. 263 of the Act and on a perusal of the assessment record of the assessee the following error was noticed by him, which is reproduced below :-
Shri Kartick Chandra Mondal 1 (i) The assessee during the Financial Year 2010-11 sold two landed property and availed of long term capital gains. Total capital gain was assessed at Rs. 28,60,859/-. The Assessee had been provided exemption u/s 54-EC of the Act at Rs.21,90,000/- for depositing the capital gain amount in Rural Electrification Corporation Ltd Bond. But on perusal of records, it is found that the said investment was made after the limitation date (i.e. after expiry of 6 months from date of transfer of capital asset), and hence same was to be disallowed. (ii) It was further observed from the record that exemption u/s 54EC of the Act was allowed twice for an amount of Rs.3,90,000/-. So, the total amount to be disallowed will be Rs. 25,80,000/- (Rs. 21,90,000 + Rs. 3,90,000). Based on these reasons, the ld Pr. CIT had satisfied that it was a case of erroneous assessment in so far as it was prejudicial to the interest of revenue and, therefore, she had issued a showcause notice u/s. 263 of the IT Act vide this office letter No. Pr.CIT-8/Kolkata/2017-18/u/s.263/4494 dated 04.09.2017. The assessee has been requested to show cause as to why the provisions of section 263 of the I.T. Act should not be invoked in his case and why the assessment completed by the Assessing Officer should not be revised/modified or set-aside.
In response to the notice of Ld. PCIT, none attended. However, a written submission had been filed by assessee in the office of ld PCIT, which is reproduced below:
"That, as per S. L NO - 7 of the Notice u/s 263 it was presumed that exemption u/s 54EC was allowed twice [3,90,000/- + 18,00,000/-] but the contention is not correct. The entire assets of 7 co owner was sold on 15/02/2011 in a single sale deed and entire capital gain also invested in a single bond No - 219 (1000 X 219, i.e 21,90,000/-). The assets were reflected in A.O's assessment order further sale deed 47.38%. So, there was no default of the assessee as per notice of S.L No - 7 [Xerox copy of the sale deed and Xerox copy of Bond are annexed ] The during the course of hearing in response to A.O 's quarry [which has pointed out by your honour in S.L NO 6] it was explained to A.O " whenever the term "MONTH" a calendar month is mentioned it is normally taken as period commencing in a calendar month ending on a date prior to a corresponding a next month That, Hon'ble Ahmadabad Tribunal was held as under - " The term Month is not defined in the Income Tax Act therefore its meaning has to be under Shri Kartick Chandra Mondal 1 stood as General Clause Act 1897 which defined the word Month to mean a month reckoned according to British calendar. In CIT vs Munna Lal Shri Kishan(1987) 167 ITR 415(AII) it was held in the context of Limitation u/s 256(2) that the word Month referred to period of 30 days and therefore the referred to "6 month" in see 256(2) is to 6 calendar month not 180 days, therefore the assessee invested within 6 month of sale was in conformity with judgement laid down in ITAT. That, in addition to the above facts the assessment for which notice u/s 263 issue was pending to Hon'ble CIT (A) 6 / Kolkata. That A.O also asked explanation from the assessee that see 54EC avail was "justified". It is not known when the explanation given during the course of hearing was recorded in the order sheet as A.O. did not recorded various submission of the assessee that sending to valuation cell to estimated the case of the property was illegal as assessee did not submit any petition to A.O, u/s 56(2). [ That a letter is annexed as a prove of the statement] Yours honour will be highly appreciated if Tribunal judgement of referred above may kindly be accepted for the principle of natural justice".
5. The assessee, has submitted further written submission, during the proceedings under section 263 of the Act before the ld PCIT, Vide letter dated 08.10.2017, which is reproduced below:
“That, Income Tax Act, 1961 in availing sec 54EC stated investment to be made within completion of six month not any faction date i.e. 180 days. The Hon'ble judgement of High Court also admitted this facts which was reflected in the application Dt. 14/09/2017 submitted to you. That, Income Tax Act 1961 also specified the date of delivery of cheque for availing sec 54EC which as given on 09/08/2011 and it is valid not the encashment of cheque by the concern authority. Thus was also referred in petition already submitted to you through courier service (Photocopy enclosed). The considering the fact stated above it is clear that the contention in the notice that no compliance was made or no petition was submitted was not true. So, kindly drop the proceeding for the principle of natural justice.”
6. However, the ld. Pr. CIT rejected the contention of the assessee and held as follows:-
Shri Kartick Chandra Mondal 1 “6. I have carefully considered the facts and circumstances of the case. The impugned assessment order u/s. 143(3) dt. 16.03.2016 has been passed without examining the veracity of asessee's claim of exemption u/s 54EC of Rs.21,90,000/-. It is not in dispute that assessee had deposited the capital gain amount arising from sale of two properties in Rural Electrification Corporation Ltd, Bond as per the scheme of the Government. The investment in the REC Bond was made on 30.08.2011 as against the threshold limit of 14.8.2011, for the simple reason that the sale deed was entered on 15.2.2011. It is the contention of assessee that the investment is to be made within the completion of six months and not any faction date i.e 180 days. On a plain reading of the provision, it is clear that the investment is required to be undertaken any time within a period of six months after the date of such transfer and redeemable after three years. (emphasis assigned). In other words, the period of six months has to be reckoned from the date of the transfer i.e the sale deed dated 15.2.2011 and the stipulated six months’ period would expire with the day in the succeeding sixth month immediately preceding the day corresponding to the date upon which the period starts. The due date therefore falls on 14.8.2011. Certain tax benefits extended in the provisions of the Income tax Act, as is the case in hand, have to be strictly adhered to. The relied decisions by the assessee deals with limitation matters and hence are not applicable to the case in hand. As regards the observation about double deductions, the AO is also directed to examine the claim of the assessee with supporting documents. Therefore, having regard to the facts and circumstances of the case, the impugned assessment is deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. “
Aggrieved by the order of the ld. Pr. CIT, the assessee is in appeal before us.
The ld. Counsel of the assessee has relied on the order of the AO dated 16.03.2016 and submitted before the Bench that in order to avail the exemption under section 54EC, the assessee may invest within completion of six month and not any fraction date i.e. 180 days. Therefore, the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. On the other hand, ld. DR for the Revenue has relied on the impugned order of the ld. Pr. CIT.
We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case
Shri Kartick Chandra Mondal 1 laws relied upon, and perused the fact of the case including the findings of the ld Pr.CIT and other materials brought on record. First of all, let us examine the terminology of “Month” in the context of provisions of section 54EC of the Act. Sub-section (1) of section 54EC reads as follows:
“ 54EC-Capital gain not to be charged on investment in certain bonds
(1) Where the capital gain arises from the transfer of a long term capital asset, being land or building or both, (the capital asset so transferred being hereinafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer invested the whole or any part of capital gains in the long term specified asset…….” We note that the term “Month” has not been defined in section 54EC of the Act. However, we note that Hon`ble Allahabad High Court in the case of CIT Vs. Munnalal Shrikishan Mainpuri (167 ITR 415) has defined the term “Month” as calendar month. The findings of the court is as follows:
Before we deal with the questions raised at the instance of the Revenue, we may dispose of a preliminary objection raised by learned counsel for the assessee. Sri B. N. Bhatnagar, learned counsel for the assessee, submitted that in view of the fact that notice of refusal by the Tribunal under s. 256(1) of the IT Act was served on the CIT on June 25, 1986, the application filed by it on January 1, 1987, was barred by limitation by six days. It was urged that the period prescribed under s. 256(2) is six months which ought to be taken as 180 days. Learned counsel placed reliance on a decision of this Court in the case of CIT vs. Laxmi Rattan Cotton Mills Co. Ltd. (1974) 97 ITR 285, in support of his contention that the limitation should be calculated treating each of the six months as meaning 30 days. We are unable to agree with this contention. The decision cited by learned counsel for the assessee was in the context of s. 271(1)(a) which deals with an entirely different subject. This Court, construing that provision, held that inasmuch as penalty leviable under s. 27l(1)(a) has to be calculated by deducting the amount of tax already paid and not with respect to the gross tax assessable, the word month " occurring in s. 271(1)(a) must be taken to mean a period of 30 days. The contextual setting of s. 27l(1) is entirely distinct and different from s. 256(2). There is nothing in the context of s. 256(2) to warrant the meaning assigned to the word " month " in the aforesaid decision to an application filed under s. 256(2) of the Act. In our opinion, the reference to six months in s. 256(2) is to six calendar months. The preliminary objection is, therefore, overruled.”
Therefore, about the interpretation of the word "month, there is nothing in the context of section 256(2) to warrant the conclusion that the word "month" in it
Shri Kartick Chandra Mondal 1 refers to a period of thirty days. Therefore, reference to six months in section 256(2) is to six calendar months and not one hundred and eighty days. In view of the above judgment in the case of Munnalal Shrikishan Mainpuri (supra), we are of the view that the term “Month” means calendar month (and not period of thirty days), which should be applied for the purpose of section 54EC of the Act.
We note that the law with regard to exercise of jurisdiction u/s.263 of the Act on the ground that the AO failed to make enquiries which he ought to have made in the given circumstances of a case is well settled. 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. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. We derive support for the proposition as stated above from the decision of the Hon’ble Delhi High Court in the case of Gee Vee Enterprises 99 ITR 375 (Del).
Now, Coming to the facts of the assessee`s case, we note that it is not in dispute that assessee had deposited the capital gain amount arising from sale of two properties in Rural Electrification Corporation Ltd, Bond as per the scheme of the Government. The investment in the REC Bond was made by assessee on 30.08.2011. The sale deed was entered into by the assessee on 15.2.2011. The six calendar months from the date of sale deed would complete on 31.08.2011. The Shri Kartick Chandra Mondal 1 assessee made investment under section 54EC of the Act on 30.08.2011 which is within the completion of six months. Therefore, we note that there is no violation of the provisions of section 54 EC of the Act, as the assessing officer has rightly allowed the benefit of section 54EC of the Act to the assessee. Hence, order passed by assessing officer is not erroneous. Therefore, we quash the order under section 263 of the Act, passed by ld PCIT.
We note that ld PCIT further observed from the record that exemption u/s 54EC of the Act was allowed twice for an amount of Rs.3,90,000/- so, the total amount to be disallowed will be Rs. 25,80,000/- (Rs. 21,90,000 + Rs. 3,90,000). We note that this may be a mistake apparent from record, and therefore the same can be rectified under section 154 of the Act. Therefore, we direct the assessing officer to examine the amount of Rs.3,90,000/- and if it was allowed twice, the same may be disallowed and exemption should be granted under section 54EC of the Act in accordance to law.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 15 /11 /2019
Sd/- Sd/- (S.S. Godara) (A. L. Saini) �या�यक द�य / लेखा सद�य / JUDICIAL MEMBER ACCOUNTANT MEMBER कोलकाता /Kolkata; Dated: 15 /11 /2019 *PP, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- Shri Kartick Chandra Mondal, Barabazar, 1. Chinsurah, Hooghly-712 101. ��यथ� / The Respondent.- The Pr. CIT, Aaykar Bhawan, Khadinamore, 2. Chinsurah, Hooghly-712 101. आयकर आयु�त(अपील) / The CIT(A), 3. आयकर आयु�त / CIT 4.