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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
आदेश/ O R D E R
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER :
This appeal filed by the assessee is directed against the order passed by the Learned Pr.Commissioner of Income-Tax, Rajkot-1 [hereinafter referred to as “Ld.CIT” for short] dated 17/02/2021 in exercise of his revisionary jurisdiction under Section 263 of the Income-Tax Act, 1961 [hereinafter referred to as "the Act" for short] for Assessment Year (AY) 2015-16.
The assessee has raised the following grounds:-
“All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. Invalid Revision u/s 263:
Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [2]
1. The learned Pr. Commissioner of Income Tax, Rajkot-1 ("PCIT") erred in fact and in law in initiating the revision proceedings without fulfilling the conditions for exercising such extraordinary jurisdiction as stated in section 263 of the Act.
2. The learned PCIT erred in fact and in law in not dropping the proceedings u/s. 263 despite the fact that the original order passed by the AO was not erroneous and prejudicial to the interest of the revenue.
3. The learned PCIT erred in fact and in law in revising the assessment by invoking powers u/s.263 of the Act which was completed by way of assessment u/s 143(3) of the Act despite the fact that the conditions stipulated for invoking such extra-ordinary jurisdiction were not satisfied.
4. The learned PCIT erred in fact and in law in not dropping the proceedings u/s. 263 and observing that the order passed u/s. 143(3) was made without making inquiry or verification.
5. The learned PCIT erred in fact and in law in setting aside the assessment u/s. 143(3) and directing the Deputy Commissioner of Income Tax, Circle 1(1), Rajkot ('the AO")to frame fresh assessment.
6. The learned PCIT erred in fact and in law in setting aside the assessment u/s 143(3) of the Act despite the fact that the learned AO has passed assessment order after proper examination and verification of facts on records.
The learned PCIT erred in fact and in law in passing revisional order u/s. 263 without giving proper opportunity of being heard.
The learned PCIT erred in fact and in law in passing the order u/s.263 without considering the submissions filed by the Appellant during the revision proceedings.
9 The learned PCIT erred in fact and in law in passing the order u/s 263 on the basis of assumptions and presumptions.
Without prejudice to the above 10. The learned PCIT erred in fact and in law in holding that the Appellant is not eligible for deduction u/s 54 of the Act.”
As transpires from the order of the Ld.PCIT, the error noted by him in the assessment order passed by the Assessing Officer u/s.143(3) of the Act in Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [3] the case of the assessee for the impugned year ,was allowance of claim of exemption to capital gains earned by the assessee u/s.54 of the Income Tax Act, 1961, despite the records clearly showing that the assessee was ineligible to the same. The Ld.PCIT noted from the records that the assessee had earned capital gain during the year by selling of plot of land. That, in the computation of income, the assessee had claimed exemption of the capital gain to the tune of Rs.1,10,49,413/- on account of investment in purchase of another house property of Rs.65,49,413/- and amount deposited in capital gain account with Bank of Baroda of Rs.45 lakhs.1. The Ld.PCIT noted that exemption u/s.54 of the Act is allowed only against capital gain earned from transfer of Long Term Capital Asset being building or land appurtenant and being a residential house. He noted that since the assessee had earned capital gain on transfer of plot of land, the exemption claimed u/s.54 of the Act and allowed by the Assessing Officer was not in accordance with law. At the same time, he noted that the assessee was eligible to claim exemption u/s.54F of the Act, but even if the same is allowed to the assessee the quantum of exemption worked out would be less than that claimed and allowed to the assessee section 54 of the Act. He accordingly held that since the Assessing Officer had erred in applying the law to the facts of the case while allowing the assessee’s claim of deduction u/s.54 of the Act, the order passed by him was erroneous causing prejudice to the Revenue. He, therefore, set aside the order passed by the Assessing Officer and directed him to pass a fresh assessment order after calling for necessary details and verifying the assessee’s eligibility to claim of exemption u/s.54F of the Act.
3.1. Before us, the solitary contention raised by the Ld.counsel for the assessee was that there was no prejudice caused to the Revenue by allowing assessee’s claim of exemption u/s.54 of the Act since even in terms of section Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [4] 54F of the Act, the assessee was eligible to the same quantum of exemption if not higher than that claimed u/s.54 of the Act. She pointed out that the exemption of capital gains u/s.54F of the Act was to be computed in the proportion of the cost of acquisition of the new asset to the net consideration received by the assessee on the sale of the asset on which capital gain was earned. She contended that the records showed that the cost of new asset was far more than the net consideration on the sale of the asset, Rs.1.67 crores being the cost of new asset while the net consideration on sale of original asset being Rs. 1.64 Crs.She, therefore contended that even under Section 54F of the Act her entire capital gain was exempt from tax and, therefore, there was no prejudice caused to the Revenue in allowing a lesser claim on exemption by the assessee u/s.54 of the Act, wherein the assessee after claiming exemption u/s.54F of the Act had still offered an amount of Rs.13,11,206/- of the capital gains to tax.
The Ld.DR, however, pointed out that there was several conditions imposed u/s.54F of the Act for claiming the quantum of capital gain exemption under the said section. He drew our attention to the provisions of the section 54F of the Act, which is reproduced hereunder:-
Section - 54F, Income-tax Act, 1961 - FA, 2023 “Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.
54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India] (hereafter in this section referred to as the new asset), the capital gain shall be Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [5] dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:
Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns70 more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) 71constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".
Following second proviso shall be inserted after the existing proviso to sub-section (1) of section54F by the Finance Act, 2023, w.e.f. 1-4-2024:
Provided further that where the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of this sub-section.
Explanation.—For the purposes of this section,— [***] [***] "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result
Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [6] of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
(2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub- section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed.
(3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub- section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred.
(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme77 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall, subject to the second proviso to sub-section (1) be deemed to be the cost of the new asset :
Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [7] Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount by which— (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), Exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.
Following second proviso shall be inserted after the existing proviso to sub-section (4) of section54F by the Finance Act, 2023, w.e.f. 1-4-2024: Provided further that the net consideration in excess of ten crore rupees shall not be taken into account for the purposes of this sub- section.”
4.1. He contended that the section required the assessee to invest the consideration not invested in a new asset in the capital gain account scheme and which if not utilized for the said purpose was to be subjected to tax as specified in the section. He contended that the calculation of exemption u/s.54F of the Act was not as simple as contended by the assessee and needed verification by the Assessing Officer. He pointed out that even the Ld.PCIT had directed the Assessing Officer to allow the assessee’s claim of exemption u/s.54F of the Act. He, therefore, argued that this contention of the assessee
Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [8] that there was no prejudice caused to the Revenue needed to be dismissed. He pointed out that, in any case, it is not denied by the Ld.counsel for the assessee that its claim of exemption of capital gains u/s.54 of the Act was wrongly allowed by the Assessing Officer and the assessee having not made its alternative claim before the Ld.PCIT for exemption u/s.54F of the Act, which could have been verified by him also, the same cannot be entertained now for allowing the assessee’s appeal.
Having heard the contentions of both the parties, we are in agreement with the Ld.DR. The contentions raised by the assessee against the order passed by the Ld.PCIT u/s.263 of the Act ,of no prejudice being caused to the Revenue by the allowance of claim of exemption u/s.54 of the Act by the Assessing Officer, is a fresh contention raised for the first time before us. The assessee had never raised such contention before the Ld.PCIT .Besides, the said contention is subject to verification.Therefore this contention cannot be appreciated by us for arriving at any finding regarding the revisionary order passed by the Ld.PCIT. The Ld.PCIT has himself directed the AO to examine assesses eligibity to claim of exemption u/s 54F of the Act.
5.1. On the basis of the facts before him and the position of law as appreciated by him correctly, the Ld.PCIT has arrived a finding error in the assessment order on account of incorrect allowance of claim of exemption u/s.54 of the Act, which the assessee also does not deny / dispute. There is therefore no infirmity in the order of the Ld. PCIT holding the assessment order erroneous for having granted exemption u/s 54 to the assessee against the provisions of law in this regard. In the absence of any other argument made by the Ld.Counsel for the assessee before us we do not find any reason to interfere in the order of the Ld.PCIT and uphold the same.
Janki Kishan Hingorani vs. Pr.CIT AY : 2015-16 [9]
In the result, the appeal of the Assessee is dismissed.
Order pronounced in the open Court on 15th December-2023 at Ahmedabad.