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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRI B.M. BIYANI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 09.12.2019passed by learned Pr. Commissioner of Income-Tax-1,Bhopal[“Ld. PCIT”]u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment-order dated 28.11.2017 passed by learned DCIT-1(1), Bhopal[“Ld. AO”]u/s 143(3) for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on the grounds raised in the Appeal-Memo.
Heard the learned Representatives of both sides at length and case- records perused.
Smt. Neera Kotwani Assessment year 2015-16 3. Briefly stated the facts are such that the assessee filed her return of income of relevant AY 2015-16 at a total income of Rs. 65,31,390/-. While submitting return, the assessee declared a long-term capital gain of Rs. 73,50,020/- from relinquishment of right; claimed exemption u/s 54F of Rs. 52,53,008/- on the basis of new investment in a residential house; and thereby declared taxable gain of Rs. 20,97,012/-. The case of assessee was selected for scrutiny-assessment and the Ld. AO completed assessment u/s 143(3). Subsequently,the Ld. PCIT examined the record of assessment- proceeding and viewed that the assessment-order passed by Ld. AO is erroneous in so far it is prejudicial to the interest of revenue, which attracts revisionary-jurisdiction u/s 263. The reasons of framing such a view, as culled out fromshow-cause notice dated 11.09.2019 issued by Ld. PCIT, are two-fold as under:
(i) The assessee had claimed exemption of Rs. 52,53,008/- u/s 54F despite being owner of 4 residential house properties on the date of transfer of original asset (i.e. relinquishment of right) from which the capital gain was derived, which is not allowed by section 54F. Thus, the AO has wrongly allowed exemption.
(ii) The assessee was owner of more than one properties, still not declared notional income taxable under “Income from house property” from properties other than self-occupied and actually let out. This has resulted in under-assessment of taxable income.
By the aforesaid show-cause notice, the assessee was asked to explain as to why the assessment-order may not be revised. In response thereto, the assessee made a detailed submission to Ld. PCIT vide reply dated 02.12.2019, which is re-produced in revision-order.
However, none of those submissions impressed the Ld. PCIT. The Ld. PCIT further observed that since the section 263 has been amended and Explanation 2, as reproduced below, had been introduced therein, the Smt. Neera Kotwani Assessment year 2015-16 assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made:
“Explanation 2 – “For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the Principal Commissioner or Commissioner - (a) The order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) …. (d) …”
Finally, Ld. PCIT concluded that the Ld. AO has not carried out the inquiry/verification which he should have done and hence the assessment- order is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, the Ld. PCIT passed revision-order u/s 263 whereby the assessment-order was set aside to the file of Ld. AO with a direction to reframe assessment de novo.
Aggrieved by such revision-order, the assessee has filed this appeal.
By means of various grounds raised in the Appeal Memo which are not being reproduced for the sake of brevity, the appellant-assessee requires us to adjudicate whether or not the revision-order passed by Ld. PCIT u/s 263 is valid in the eyes of law?
Ld. AR representing the assessee submitted that the assessee earned capital gain from transfer of asset (relinquishment of right) made on 02.01.2015. Ld. AR submitted that the assessee owned only 1 residential house on 02.01.2015 and there is a wrong impression gained by Ld. PCIT that the assessee owned 4 residential houses. The Ld. AR has filed the details of alleged 4 houses in his Written-Synopsis as under:
“(i)Bunglow at “Powai – 84 AakritiAcqua City” – The agreement for Smt. Neera Kotwani Assessment year 2015-16 sale of Duplex-Powai-84 was entered by assessee with M/s AG8 Ventures Ltd. On 22.03.2012 (PB 38-47). The construction was not complete till the date of transfer i.e. 02.01.2015. The reminder letter for payment of installment towards the purchase cost of said property on 23.07.2018 (PB36) also shows that the possession was not received. Further, the company AG8 Ventures Ltd. Went into Corporate Insolvency Resolution Process by National Company Law Tribunal, Indore. Refer PB 37. Thus, the property on the date of transfer i.e. 02.01.2015 was not owned by assessee. Later on the agreement was cancelled due to insolvency proceedings of Seller and Builder – M/s AG8 Ventures Ltd. (ii) Flat at Pune – This property was wrongly taken under the head Fixed Asset schedule of Assessee’s Balance-Sheet, it actually belongs to the Mother in law – Smt. Meera Kotwani. After the death of Smt. Meera Kotwani, the property got transferred in name of Shri Mohan Lal Kotwani (Husband and Legal Heir). The registered land ownership documents in name of Smt. Meera Kotwani are at PB 48-57. (iii) Flat at Aakriti – In the computation of income, under the head “House Property” the flat No. A-7/404, Akriti Ecocity, Bhopal was shown. This was the only flat owned by the assessee on the date of transfer, which was let out to one Shri Pankaj Jaiswal. (iv) Plot at Rajdev Nagar – It is the new property which was purchased and the construction was carried out on this. The assessee claimed exemption u/s 54F in respect of land cost, stamp duty charges and the construction cost undertaken after the date of transfer amounting to Rs. 52,53,008/-.”
Thus, the Ld. AR claimed that on the date of transfer i.e. 02.01.2015, the assessee was owner of only 1 residential house being a “flat at Aakriti” enumerated in the preceding paragraph at S.No. (iii). Ld. AR conceded that it is true that the section 54F does not grant exemption if the assessee is owner of more than 1 residential house on the date of transfer. But in the present case, the assessee was owner of only 1 residential house and hence the exemption u/s 54F was rightly claimed by assessee and allowed by AO. At that stage, the Bench posed a question as to who is owner of “flat at Pune” enumerated at S.No. (ii) in preceding paragraph? In response, the Ld. AR submitted that the said “flat at Pune” is owned by Smt. Meera Kotwani, mother-in-law of assessee, but it is wrongly shown as fixed asset in assessee’s Balance-Sheet. Ld. AR also invited attention to the registered
Smt. Neera Kotwani Assessment year 2015-16 document of the said flat at Pune, placed at Page No. 48 to 57 in Paper- Book, which is in the name of Smt. Meera Kotwani and not in the name of assessee. Thus, as far as registered owner is concerned, it is Smt. Meera Kotwani and not the assessee. But, however, the Bench raised a query as to who has made investment in the said property? It was further brought to the notice of Ld. AR that the Balance-Sheet is based on double-entry system and therefore if an asset appears in the Balance-Sheet of assessee, the assessee must have made investment although the impugned property is registered in the name of Smt. Meera Kotwani. It was further conveyed to the Ld. AR that unless some documentary evidence is brought on record to prove that the investment in impugned property was really made by Smt. Meera Kotwani, it would be safely presumed that the investment has been made by assessee and the assessee is de facto owner of property. To address this query of Bench, Ld. AR sought adjournments from time to time to bring on record the bank statement from which investment would have been made in the impugned property. But, however, ultimately the Ld. AR admitted inability of assessee to submit the same. Therefore, we have no option except to concludethat since the “flat at Pune” is appearing in the Balance-Sheet of assessee, the investment had also been made by assessee. That means, the assessee was owner of at least 2 residential houses, viz. one at S.No. (iii) admitted by assessee; and another at S.No. (ii) being the “flat at Pune”.
Having found that the assessee was owner of at least 2 residential houses, we are in agreement with the twin-issues raised by Ld. PCIT i.e. (i) the exemption u/s 54F has been wrongly allowed to assessee; (ii) by not declaring notional income from properties under “Income from house property” head, there was underassessment of taxable income. Therefore, the Ld. PCIT has rightly termed the assessment-order as erroneous in so far it is prejudicial to the interest of revenue.
In view of above discussion and for the reasons stated therein, we uphold the impugned revision-order and decline to interfere in the matter.
Smt. Neera Kotwani Assessment year 2015-16 As we do so, we make it clear that our expression of view on merits of the case is only a prima facie impression, and it must not, therefore, influence the decision of the AO on merits. Uninfluenced with these observations, the Assessing Officer will take a call on the merits of the matter.
In the result, this appeal of assessee is allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 28/03/2023 Order pronounced in the open court on ….../……/2023