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Income Tax Appellate Tribunal, BENCH : COCHIN
Before: SHRI N. V. VASUDEVAN & Ms. PADMAVATHY S.
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : COCHIN
BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND Ms. PADMAVATHY S., ACCOUNTANT MEMBER
ITA No.574/Coch/2022 Assessment Year : 2017-18
Puthuvamana Ramani, Vs. The Principal Commissioner Vadakumbhagathu Mana, of Income Tax, Eroor P.O., Kochi-1. Kochi – 682 306. PAN : ACWPR 0404P APPELLANT RESPONDENT
Assessee by : Shri Narayanan P Potty, Advocate Revenue by : Shri M. Rajasekhar, CIT(DR)
Date of hearing : 07.12.2022 Date of Pronouncement : .12.2022 O R D E R Per Padmavathy S, Accountant Member: This appeal is against the order of the Principal Commissioner of Income Tax [PCIT], Kochi-1, dated 24.3.2022 u/.s 263 of the Income- tax Act, 1961 [the Act] for the assessment year 2017-18.
“1. The Order of the Principal Commissioner of Income Tax, Kochi-1 under section 263 of the Income Tax Act, 1961 in so far as it is prejudicial to the appellant is erroneous in law, facts and circumstances of the case. 2. The learned Principal Commissioner of Income Tax erred on facts and in law while issuing the Order under Section 263 for revision of the Assessment order U/s143(3).The
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only case raised by the respondent Principal commissioner is regarding the deposit of unutilized amount of Capital Gain in Capital Gain Saving Scheme. As the Appellant had submitted the details of the same to the Assessing Officer and its copies are in the records of the department ,the issuance of Order U/s.263 for revision of the Assessment order U/s.143(3) is unlawful and not sustainable. 3. The learned Principal Commissioner erred on facts and in law in verification of the documents submitted by the appellant regarding the investment of Capital Gain in Assets under Section 54F. Appellant paid Rs.1, 20, 00,000.00 to the Land Owner before filing of her Income Tax return under Section 139(1) and deposited 35, 00,000.00 in Capital Gain Investment Scheme of Punjab National Bank on 05.08.2017.The amount deposited were utilized for the payment of Registration fee and Interior works of the purchased Asset. All the supporting documents were submitted to the Assessing Officer and verified before issuing the Assessment order U's 143(3). 4. The learned Principal Commissioner erred on facts and in law that the amount of capital Gain, which were not appropriated by the Appellant towards the purchase of new Asset were deposited in Capital Gain account Scheme on 05.08.2017,before the date of filing of her return of income under section 139(1) i.e. on 08.08.2017; to claim deduction under section 54F.The Principal commissioner over looked the fact that the Assessment Order U/s.143(3) was issued after examining the documentary proof submitted by the appellant ,which were available on the records of the department. 5. The learned Principal Commissioner erred on facts and in law in issuing Order under Section 263 of the Income Tax Act 1961 without examining the documents on records , absence of which were the only reason for the revision of the Assessment Order under Section 143(3).So the revision order U/s.263 by the respondent Principal Commissioner is to be quashed in the interest of justice.
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For these and the other grounds that may be urged at the time of hearing, it is humbly prayed that all the grounds may be adjudicated and justice rendered.” 2. The assessee filed a return of income for AY 2017-18 declaring a total income of Rs.63,70,750. The case was selected for limited scrutiny for the reason that there was large investment in property by the assessee. Notice u/s. 143(2) was duly served on the assessee. The AO called on the assessee to furnish various details with regard to the sale of property and investments made in capital gains savings account. The AO after verifying the details filed by the assessee concluded the assessment accepting the income returned.
The PCIT invoked the provisions of section 263 and issued a show cause notice for the reasons mentioned below:-
“"During the previous year relevant to the AY 2017-18, the assessee had sold her long term asset at Rs.3,81,22,560/ - and after indexation etc., claimed exemption u/s 54EC of Rs.50,00,000/- and u/s 54F to the tune of Rs.1,50,00,000/-. The balance amount (after indexation & claiming above exemptions) of Rs.51,11,360/- was offered for taxation purposes. Section 54F of the IT Act stipulates that 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. As per AIR information, the assessee along with two others sold 35.55 ares of land and building for total consideration of Rs.9,53,06,400/-. The share of the assessee was Rs.3,81,22,560/-. The assessee purchased bonds of REC and NHAI for Rs.25,00,000/ - each and claimed deduction u/ s 54EC
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amounting to Rs.50,00,000/ -. The assessee claimed deduction u/s 54F for Rs. 1,50,00,000/ - for the purchase of a new flat. As per the unsigned agreement available on record, the assessee entered into an agreement with M/s Silpi Constructions for purchase of flat for Rs.1,30,00,000/-. As per the original purchase deed dated 19/ 11/2018, purchase cost of the flat was Rs.1,20,00,000/ - only. As per section 54F(4) of the IT Act, before the due date for filing the return of income, the unutilized amount if any, has to deposited in capital gain account scheme. There is no proof available on record, whether the assessee had deposited the unutilized amount in the capital gain account scheme. Hence the assessee is eligible for deduction u/s 54F for the amount actually paid before the due date for filing the return of income towards the purchase of flat. From the records, it appears that assessee has erroneously reported purchase price of new property @ Rs.1,50,00,000/ - instead of Rs.1,20,00,000. But the AO has not enquired into the issue and has simply accepted the version of the assessee thereby causing prejudice to the interest of the revenue. Thus, it is clear that the AO has mistakenly and erroneously omitted to consider the above facts. while completing the assessment, thereby causing to the interests of revenue.”
The assessee submitted that she has paid Rs.1,20,00,000 to the land owner towards the cost of the land and cost of construction. The assessee also submitted that the assessee has made deposit in the capital gains account scheme an amount of Rs.35 lakhs in the capital gains account scheme for the purpose of utilising the same for further expenses towards construction. Accordingly, the assessee had claimed a sum of Rs.1,50,00,000 as exemption u/s. 54F. The assessee furnished the copy of the bank statement evidencing the deposit in the capital gains account scheme. The PCIT did not consider the
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submissions of the assessee and set aside the order of the AO for a de novo examination on the ground that the AO did not verify the details pertaining to the deductions claimed by the assessee u/s. 54F. Aggrieved, the assessee is in appeal before the Tribunal.
The ld. AR submitted that the assessee has furnished the details of deposits made by the assessee into the capital gains account scheme with Punjab National bank before the AO and the PCIT. The PCIT has held the order to be erroneous by merely relying on the purchase deed of the flat which was entered for an amount of Rs.1,20,00,000 whereas the assessee had claimed the deduction of Rs.1,50,00,000 including the amount deposited in the Capital Gains Account scheme for further improvement of the flat. The ld. AR also brought to our attention that the fact of the assessee having deposited the money in the Capital Gains Account Scheme with Punjab National Bank has been acknowledged by the PCIT in para 6.2 of his order. The ld AR submitted that based on these facts which were presented before the AO the deduction u/s. 54F was allowed by the AO after proper verification and application of his mind. Even on merits, the ld. AR submitted that the assessee is entitled to the deduction u/s. 54F and therefore there is no error in the order of AO which is prejudicial to the interests of the revenue.
The ld. DR submitted that the PCIDT has invoked the provisions of section 263 for the reason that there is lack of enquiry on the part of the AO. The ld. DR further submitted that when the assessee had
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purchased the flat for a consideration of Rs.1,20,00,000 as per the purchase deed and had claimed deduction u/s. 54F for Rs.1,50,00,000, the AO ought to have gone into the details of the transaction and would have made proper enquiry before allowing the deduction. The AO having carried out the detailed verification is not coming out clearly in the order of assessment and therefore the PCIT is correct in invoking the provisions of section 263.
We heard the rival submissions and perused the material on record. We notice that the PCIT has invoked the revisionary power u/s. 263 for the reason that the assessee has entered into a purchase deed towards acquisition of a flat for Rs.1,20,00,000 whereas the deduction u/s. 54F was claimed for an amount of Rs.1,50,00,000. We notice that the assessee has deposited a sum of Rs.35 lakhs on 5.8.2017 in Punjab National Bank, Ernakulam and this fact is acknowledged by the PCIT in his order u/s. 263. On merits, therefore, we are of the considered view that there is no error in the claim of the assessee since as per the provisions of section 54F, the assessee is entitled to claim deduction towards amount deposited in the Capital Gains Account Scheme which is to be used for the purpose of construction on or before the due date for filing of return u/s. 139(1). In assessee’s case, the amount is deposited into the Capital Gains Account scheme before filing the return of income and therefore the assessee is entitled to deduction u/s. 54F. It is submitted that the details of deposit into the Bank have been furnished before the AO and the AO has allowed the deduction u/s. 54F after considering the said details. Though these
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details are not clearly brought out in the decision of the AO, it cannot be said that the order is erroneous unless any material contrary to this fact has been brought on record by the PCIT. The Bombay High Court in the case of Gabriel India Ltd. (1993) 203 ITR 108 has explained as to when an order can be termed as erroneous as follows:-
“From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income tax officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income tax officer. That would not vest the Commissioner with power to examine the accounts and determine the income himself at a higher figure. It is because the Income tax officer has exercised the quasi judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion ………….. There must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed.”
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There is no dispute that u/s. 263 of the Act, the PCIT does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary and the assessment order is prejudicial to the interests of the Revenue. However, in doing so, the PCIT must have some material which would enable to form a prima facie opinion that the order passed by the AO is erroneous, insofar as it is prejudicial to the interests of the Revenue. From the perusal of the materials on record, it is clear that the PCIT ]has not brought anything contrary to record and has held the order to be erroneous merely for the reason that the bank statement has not been verified by the AO. We are therefore of the view that the PCIT has substituted his views with regard to the impugned issue with that of the AO and has held the order to be erroneous to that extent. We therefore hold that the order of the PCIT u/s.263 is without jurisdiction and accordingly quashed.
In the result, the appeal by the assessee is allowed.
Pronounced in the open court on this 19th day of December, 2022.
Sd/- Sd/- ( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER
Bangalore, Dated, the 19th December, 2022. /Desai S Murthy /
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Copy to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order
Assistant Registrar, ITAT, Bangalore/Cochin.