SHRI MOHAN LAL GUPTA,SHIMLA vs. PR.CIT-1, CHANDIGARH

“That in the facts and circumstances of the case the Ld. Principal Commissioner of Income Tax is not justified in setting aside the order passed by the Ld. Income Tax Officer, Ward-1, Shimla holding the same to be erroneous and prejudicial to the interest of the Revenue under section 263 of the Income Tax Act, 1961. 2. That the order of the Ld. Principal Commissioner of Income Tax is bad in law and facts of the case.

That the appellant craves leave to add, amend or delete any of the grounds of appeal at the time of hearing of appeal or before the appeal is being heard and disposed off.”

Briefly the facts of the case are that the assessee originally filed his return of income declaring total income of Rs. 3,31,640/- which was assessed to tax under section 143(3) vide order dt. 18/02/2014 wherein the assessed income was determined at Rs. 3,69,540/-. Subsequently, proceedings under section 147(a) were initiated and notice under section 148 was issued. In response to the notice, the assessee filed his return of income and thereafter, the reassessment proceedings were completed vide order dt. 21/12/2017 passed under section 143(3) r.w.s 147 of the Act.

In the reassessment order so passed under section 143(3) r.w.s 147 of the Act, the AO brought to tax capital gains on sale of the land and super structure situated in Mohal Bakhai Tehsil Shimla amounting to Rs. 2,36,10,000/- and thereafter, after allowing transfer expenses of Rs. 27,00,000/-, index cost of Rs. 14,37,717/- (including CLU expenses of Rs 234,614) and deduction under Section 54F amounting to Rs. 37,00,000/-, the Long Term Capital Gains were determined at Rs. 1,57,62,283/- and after taking into consideration, the income originally assessed under section 143(3) amounting to Rs. 3,69,540/-, the reassessed income was determined at Rs. 1,61,31,823/-.

The assessment records were subsequently called for and examined by the Ld. Pr. CIT and a show cause under section 263 was issued as to why the reassessment order framed by the AO dt. 21/12/2017 should not be set aside being erroneous in so far as prejudicial to the interest of the Revenue. Thereafter, after considering the submissions filed by the assessee but not founding the same acceptable, the reassessment order dt. 29/12/2017 was cancelled with the direction to the AO to pass the order afresh in accordance with law after allowing opportunity of being heard to the assessee.

Being aggrieved against the said order and the findings of the Ld. Pr. CIT, the assessee is in appeal before us.

During the course of hearing, Shri Vishal Mohan, Sr. Advocate submitted that the Ld. Pr. CIT in the show cause notice and thereafter while recording his findings in the impugned order has contested the action of the AO in allowing the transfer expenses of Rs. 27,00,000/-, CLU expenses of Rs. 2,34,614/- and deduction under Section 54F of the Act while computing the Long Term Capital Gain on sale of the land. Separately, the Ld. Pr. CIT has referred to the sale of an immovable property situated at Village Jagjit Nagar(Solan) which was sold for a consideration of Rs. 23,99,000/-.

Firstly, it was submitted that the subject matter of reassessment proceedings and in particular, the reasons for initiating the reassessment proceedings was excess claim of deduction u/s 54F of the Act. Therefore, except for the issue pertaining to claim of deduction u/s 54F of the Act, rest all issues that have been raised by the ld PCIT have attained finality at the time of passing of the original assessment order u/s 143(3) dated 18/02/2014. It was submitted that these issues were not the subject matter of the reassessment proceedings, the period of limitation for the completion of proceeding under section 263 have to be read from the completion of the original assessment proceedings and even on this count, the order so passed is clearly barred by limitation as so provided in the statute u/s 263(2) of the Act which provides that no order shall be passed under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.

Regarding the sale of the immovable property situated at Village Jagjit Nagar Solan, it was further submitted that, the assessee had sold the said piece of agricultural land at Jagjit Nagar, Solan for a consideration of Rs. 23,99,000/-

It was submitted that the assessee had sold agriculture land which does not fall within the definition of capital asset u/s 2(14) of the Act and the matter was duly examined by the AO while passing original assessment order dt. 18/02/2014. It was submitted that it is therefore not a case where the matter has not been examined by the AO and the Ld. Pr. CIT is thus not correct where he has held that the matter has not been examined and remain unverified by the Assessing officer.

It was submitted that merely because there is no discussion in the body of the assessment order, it does not make the assessment order as erroneous and prejudicial to the interest of the Revenue so long as the matter has been duly examined during the course of original assessment order and which also found mentioned in the office note appended as part of the assessment order which apparently has escaped the attention of the Ld. Pr. CIT.

Regarding the transfer expenses of Rs. 27,00,000/- and CLU charges of Rs. 2,34,614/-, our reference was drawn to the pages 51 to 53 of the paperbook regarding details of the transfer expenses and pages 54 to 55 regarding details of the CLU charges which were duly submitted before the AO and form part of the assessment records. It was submitted that the matter was duly examined by the AO and therefore the findings of the Ld. PCIT that no documentary

Regarding quantum of deduction under section 54F of the Act, it was submitted that there is no dispute that the assessee is eligible for deduction under section 54F of the Act as the same has not been disputed by the Ld. Pr. CIT. As far as the quantum of deduction is concerned wherein the Ld. Pr. CIT has determined the quantum of deduction at Rs. 30,49,998/- as against Rs. 37,00,000/- allowed by the AO, it was fairly submitted that the ld PCIT has rightly computed the quantum of deduction and he has no objection where the deduction is restricted to Rs. 30,49,998 as so computed by the ld PCIT.

Per contra, Smt. Kusum, the Ld. CIT/DR submitted that the plea of the assessee regarding limitation was duly addressed by the ld PCIT wherein he has held that reassessment proceedings were completed by passing of order u/s 147 r/w 143(3) dated 21/12/2017 and therefore, the revisionary proceedings were initiated by issuance of show-cause on 4/01/2021 within the limitation period. It was submitted that the order so sought to be revised is the reassessment order and not the original assessment order and therefore, it is open to the AO to examine any other matter which come to his notice during the course of reassessment proceedings and need not restrict himself to the matter for which the proceedings were reopened and reasons recorded. It was submitted that where the relevant facts are on record and during the reassessment proceedings, the AO failed to examine certain matter and the ld PCIT noticing the same invoked his juri iction u/s 263, there is no infirminity in the action of the ld PCIT in invoking his juri iction and passing the impugned order. It was further submitted that given the Covid 19 pandemic, the limitation period was extended by the Hon’ble Supreme Court and subsequently by the CBDT

Regarding sale of the immovable property at Village Jagjit Nagar, Solan, it was submitted that the reassessment order passed under section 143(3) read with section 147 is totally silent on the said matter and even there is no inquiry whatsoever which have been conducted by the AO during the reassessment proceedings and therefore the order so passed by the AO is clearly erroneous in so far as prejudicial to the interest of the Revenue.

Regarding transfer expenses and CLU charges, it was submitted that no documentary evidence in respect of transfer expenses and CLU charges have been filed by the assessee during the course of reassessment proceedings and therefore it is clearly a case where the AO did not verify the said claim of the assessee and the same has been allowed merely basis the claim made by the assessee and therefore the order so passed is clearly erroneous in so far as prejudicial to the interest of the Revenue.

Regarding claim of deduction u/s 54F, it was submitted that the ld PCIT has rightly determined the quantum of deduction which the assessee is eligible for and even in his submissions before the Bench, the ld AR has fairly accepted the quantum of deduction as so computed by the ld. PCIT.

The ld CIT/DR accordingly supported the order and the finding of the Ld. Pr. CIT and submitted that the various contentions so raised on behalf of the assessee deserve to be rejected.

We have heard the rival contentions and purused the material available on record. In the instant case the assessee originally filed his return of income

Therefore if any of the aforesaid issues which is found to be erroneously dealt with by the AO and therefore call for revisionary proceedings under section 263 of the Act, then the requisite action should been completed by 31/03/2016 i.e; within two years from the end of the financial Year in which the assessment order was passed which is F.Y. 2013-14. 21. Thereafter, instead of any revisionary proceedings being initiated u/s 263, the reassessment proceedings were initiated u/s 147 by the AO and the reasons so recorded by the AO dt. 03/06/2016 read as under:

It is apparent from the reasons so recorded that the case of the assessee was reopened on account of excess claim of deduction under section 54F by an amount of Rs. 79,80,694/- in respect of purchase of an immovable property situated at New Shimla.

Further, during the course of reassessment proceedings, the AO also brought the tax capital gains arising on sale of the land and super structure amounting to Rs. 2,36,10,000/-. While doing so, the AO rejected the contention advanced by the assessee that all the details / information were submitted

At the same time, we find that the matter relating to sale of land situated at Jagjit Ngar, Dharta, Teh. Krishan Nagar, Distt. Solan for Rs. 23.99 lacs was not the issue for which the case of the assessee was reopened under section 147 of the Act or has resulted in any escapement of income and came to the notice of the AO during the course of reassessment proceedings under section 147. Infact, we find that in the original assessment proceedings, both the transactions

In this regard, useful guidance can be drawn from the decision of Hon’ble Supreme Court in case of CIT Vs. Alagendran Finance Ltd. [2007] 162 Taxman

The issue which arose for consideration before the Supreme Court was whether, for the purpose of computing the period of limitation envisaged under sub-section (1) of Section 263, the date of the order of assessment or of the order of reassessment is to be taken into consideration. In the order of assessment, the return of the assessee under the head of "Lease Equalisation Fund" was accepted. Thereafter, the proceedings for reassessment were initiated by the Assessing Officer and orders of reassessment were passed in respect of the following items namely (i) expenses claimed for share issue; (ii) bad and doubtful debts; and (iii) excess depreciation on gas cylinders and goods containers. Though the return of income in respect of the "Lease

We therefore find that as far as the matter pertaining to sale of the land situated at District Solan for Rs. 23.99 Lacs, the same is subject matter of original assessment proceedings and not the subject matter of reassessment proceedings and therefore, the period of limitation for passing the revisionary order under section 263 would run from the date of the original assessment order and not the reassessment order. Thus, to this extent of subject transaction of Rs 23.99 lacs, the present revisionary proceedings under Section 263 are barred by limitation and the findings of the Ld. PCIT are hereby set aside as not sustainable in the eyes of law.

Regarding transfer expenses of Rs. 27,00,000/- and CLU charges of Rs. 2,34,614/-, we find that the relevant material is available on the record at page 51 to 55 of the assessee’s paper book and are admittedly part of the assessment records. Therefore the finding of the Ld. Pr. CIT that no documentary evidence is available on the record is not factually correct. Further, in absence of any adverse finding recorded by the Ld. Pr. CIT regarding contents of the material so available on record and which has apparently been considered by the AO while allowing the claim of the assessee, the order so passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue.

Regarding quantum of deduction under Section 54F of the Act, as submitted by both the parties, we upheld the findings of the Ld. Pr. CIT and the claim of deduction under Section 54F should therefore be restricted to Rs. 30,49,998/- as so computed by the Ld. Pr. CIT and therefore to this extent, the order of the Ld. Pr. CIT is sustained.

In the result, appeal of the Assessee is partly allowed. Order pronounced in the open Court on 04/01/2024 आकाश दीप जैन िव"म "सह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा"य" / VICE PRESIDENT लेखा सद"य/ ACCOUNTANT MEMBER AG Date: 04/01/2024 आदेश क" "ितिलिप अ"ेिषत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant

""यथ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File