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IN THE INCOME TAX APPELLATE TRIBUNAL " H " BENCH, MUMBAI
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BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM
./I.T.A. No. 1122/Mum/2014
( [ [ / Assessment Year : 2009-10
Mr. Hari L. Mundra, The Commissioner of
A-61, Twin Towers, Income-Tax , Circle-5,
Off Veer Savarkar Marg, Aayakar Bhavan,
Prabhadevi, Mumbai-400 020
Mumbai
. / . /PAN/GIR No. :AAHPM 7832R
( /Appellant) .. (× / Respondent)
/ Appellant by: ` Shri Vijay Mehta
× /Respondent by : Shri Surinderjeet Singh
/ Date of Hearing :26.02.2015
/Date of Pronouncement :26.02.2015
/ O R D E R
PER N.K. BILLAIYA, AM:
This is an appeal by the assessee preferred against the order of the
CIT-5, Mumbai made u/s. 263 of the Act dt. 31.12.2013.
2. The only grievance of the assessee is that the Ld. CIT erred on the
facts holding that the AO has not applied his mind while passing the
assessment order and therefore the order is erroneous and prejudicial to
the interest of Revenue.
2 ITA No.1122/M/2014
3. In this case, assessment order was made u/s. 143(3) of the Act vide
order dt. 25.11.2011. The return was selected for scrutiny under CASS.
The assessee has returned income from pension, interest, income from
house property and capital gains. After examining the details, the
returned income was accepted.
3.1. The Commissioner assuming the jurisdiction u/s. 263 of the Act
issued show cause notice for revision of order. The reasons for the
proposed revision read as under:
" On verification of assessment records, the following facts
are noticed:
(i) That the assessee has entered into `agreement for sale'
with M/s Macrotech Constructions P Ltd to acquire a
premises situated at 1001, 10th floor, Lodha Bellissimo, in
the month of January 2007 for a total consideration of
Rs.3,95,95,500/-. The said agreement was registered on
07/03/2007.
(ii) That the assessee had sold two residential flats
alongwith parking space in October 2008 resulting in Long
Term Capital Gain of Rs.2,08,02.540/- (with indexation
benefit). He claimed the said Long Term Capital Gain as
exempt u/s 54 of the I.T Act. During the course of assessment
proceedings, the claim of the assessee was allowed by the
then Assessing Officer.
(iii) That the assessee had taken possession of the said fiat n
13/05/2011 though the agreement was registered on
07/03/2007.
(iv) That as per the agreement for sale, the assessee had to
pay Rs.39,59,550/- at the time of booking on or before the
execution of the agreement for sale.
3. From the above facts it is evident that the Long Term
Capital Gain has arisen on 06/10/2008 i.e. on the date of
3 ITA No.1122/M/2014
sale/transfer of two residential flats and the assessee had
entered into an agreement for purchase of flat in January
2007 and registered on 07/03/2007. However, the assessee
has taken the possession of the said flat on 13/05/2011. For
claim of exemption u/s 54, the assessee has to purchase new
asset within one year before or two years after the date of
long term capital gain or in the case of construction within a
period of three years after the date of transfer of old asset.
4. Thus in this case the new asset was purchased in January
2007 which is much earlier from the date of transfer and
beyond one year as prescribed in section 54 of the Act. In
view of the above facts, it is observed that the assessee is not
eligible for deduction u'/s 54 of the Act in respect of capital
gain of Rs.2,08,02,540/-."
4. During the course of the revision prodceedings, it was explained
that the conditions for purchase of new asset i.e. one year before or 2
years after the transfer of the property does not apply in the case of the
assessee, since the property was constructed and therefore period within
which the capital gain needed to be invested should be considered as 3
years from the date of transfer. It was explained that the assessee took
final possession on 13.5.2011 which was well within 3 years period as
provided u/s. 54 of the Act. Therefore the exemption was rightly claimed
u/s. 54 of the Act and there is no requirement to set aside/cancel the
exemption allowed by the AO.
5. After considering the facts and the submissions, the Ld. CIT
observed that the AO has not examined the claim of the assessee u/s. 54
of the Act properly which has resulted the order as erroneous and
prejudicial to the interest of the Revenue. The Ld. CIT proceeded by
setting aside the assessment order and directing the AO to decide the
issue by fresh assessment.
4 ITA No.1122/M/2014
6. Aggrieved by this, the assessee is before us.
7. The Ld. Counsel for the assessee drew our attention to the replies
filed during the assessment proceedings. It is the say of the Ld. Counsel
that during the course of the assessment proceedings itself, the AO has
called for the necessary information relating to the claim of exemption
u/s. 54 of the Act and after thoroughly examining the details, the
exemption was allowed, therefore the action of the Ld. CIT u/s. 263 of
the Act is unlawful.
8. Per contra, the Ld. Departmental Representative strongly relied
upon the order of the Ld. CIT.
9. We have carefully considered the rival submissions and perused
the assessment order and the order of the learned Commissioner. The
first thing which has to be considered is whether the Learned
Commissioner has rightly assumed the power under section 263 of the
Act. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. 243
ITR 83 has laid down the following ratio:-
"A bare reading of section 263 of the Income-tax Act, 1961,
makes it clear that the prerequisite for the exercise of jurisdiction
by the Commissioner suo motu under it, is that the order of the
Income-tax Officer is erroneous in so far as it is prejudicial to the
interests of the Revenue. The Commissioner has to be satisfied of
twin conditions, namely, (i) the order of the Assessing Officer
sought to be revised is erroneous ; and (ii) it is prejudicial to the
interests of the Revenue. If one of them is absent--if the order of
the Income-tax Officer is erroneous but is not prejudicial to the
Revenue or if it is not erroneous but is prejudicial to the Revenue--
recourse cannot be had to section 263(1) of the Act. The provision
cannot be invoked to correct each and every type of mistake or
error committed by the Assessing Officer, it is only when an order
is erroneous that the section will be attracted. An incorrect
5 ITA No.1122/M/2014
assumption of facts or an incorrect application of law will satisfy
the requirement of the order being erroneous"
10. Now, let us see in the light of the above ratio whether the
assessment has been made on an incorrect assumption of facts or an
incorrect application of law.
11. A perusal of the assessment order clearly shows that the assessee
has claimed deduction u/s. 54 of the Act. Further, the assessment order
clearly show that the AO has examined this fact so there is no error on
the fact.
12. Now coming to the claim of deduction u/s. 54 of the Act, there is
no adverse finding which means that the AO has allowed the deduction
u/s. 54 of the Act as per the provisions of the law. Thus, the allowability
of the claim is as per the provisions of the law. Therefore, there is no
incorrect application of law.
13. The AO has taken a view which may be different from the view of
the Ld. Commissioner and assuming that the view taken by the AO is a
loss to the Revenue but the Hon'ble Supreme Court in Malabar Industrial
Co. Ltd. (supra) has held that " every loss of revenue as a consequence of
an order of the AO cannot be treated as prejudicial to the interest of the
Revenue," for e.g. when an Income Tax Officer adopted one of the
courses permissible in law and it has resulted in loss of revenue or where
two views are possible and the Income Tax Officer has taken one view
with which the Ld. Commissioner does not agree, it cannot be treated as
an order which is erroneous or prejudicial to the interest of Revenue
unless the view taken by the Income Tax Officer is unsustainable in law.
6 ITA No.1122/M/2014
14. The Bombay High Court in CIT Vs Gabrial India Ltd., (1993) 203
ITR 108 has held that "the decision of the Income Tax Officer could not
be held to be erroneous simply because in his order, he did not make an
elaborate discussion in that regard".
15. Considering the facts in totality in the light of the judicial
decisions discussed hereinabove, in our understanding of law, the
assessment order is neither erroneous nor prejudicial to the interest of the
revenue. We, therefore, set aside the impugned order passed by the Ld.
Commissioner u/s. 263 and restore that of the Assessing Officer passed
u/s. 143(3) of the Act.
16. In the result, the appeal filed by the assessee is allowed.
.
Û 26.2.2015
Order pronounced in the Open Court at the time of hearing on 26th
February, 2015.
Sd/- Sd/-
(H.L. KARWA ) (N.K. BILLAIYA)
Ú¢/ PRESIDENT / ACCOUNTANT MEMBER
Mumbai; Dated 26th February, 2015
.../ RJ , Sr. PS
7 ITA No.1122/M/2014
/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , ,
/ DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
/
(Dy./Asstt. Registrar)
, / ITAT, Mumbai
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