G. Manjunatha, Accountant Member - This appeal filed by the assessee is directed against the order of Commissioner of Income Tax, Rajahmundry dated 13.3.2014 u/s 263 of the Income-Tax Act, 1961 (hereinafter called as 'the Act') and it pertains to the assessment year 2009-10.
2. The brief facts of the case, are that the assessee is an individual deriving income from business, income from capital gains and other sources, has filed her return of income for the assessment year 2009-10 on 29.9.2009 declaring a total income of Rs.5,41,680/-. The case was selected for scrutiny and accordingly notice u/s 143(2) & 142(1) of the Act were issued. In response to notice, the assessee's authorized representative appeared from time to time and furnished the information called for along with books of accounts, bills and vouchers. During the course of assessment proceedings, the A.O. noticed that the assessee has sold a property and computed capital gains after claiming exemption u/s 54F of the Act. To ascertain the correctness of the claim made by the assessee, the A.O. issued a show cause notice dated 29.7.2011 and asked to furnish the details with regard to sale of property, investment made in residential house property so as to claim exemption u/s 54F of the Act. In response to show cause notice, the assessee has filed the relevant details before the assessing officer. The A.O., after considering the explanations offered by the assessee accepted the claim of exemption u/s 54F of the Act and completed the assessment.
3. The CIT, Rajahmundry issued a show cause notice u/s 263 of the Act dated 28.11.2013 and proposed to revise the assessment order. The CIT proposed to revise the assessment order for the reason that on examination of the assessment record, certain omissions and commissions were noticed, which rendered the assessment order erroneous, in so far as it is prejudicial to the interest of the revenue, in terms of section 263 of the Act. The CIT, in the said show cause notice, observed that the A.O. has not verified all the bank accounts operating by the assessee during the year under consideration. The CIT further observed that the A.O. has allowed exemption u/s 54F of the Act for re- investment in purchase/construction of residential house property which is otherwise not allowable to the assessee. With these observations, the CIT was of the opinion that the order u/s 143(3) of the Act passed by the A.O., is erroneous in so far as it is prejudicial to the interest of the revenue, on these counts. Therefore, issued a show cause notice and asked as to why the order should not be revised u/s 263 of the Act.
4. In response to show cause notice, the assessee has filed written submissions vide her letter dated 19.12.2015 and contended that the order passed by the A.O. is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has verified all the issues at the time of assessment proceedings. The assessee further submitted that the A.O. has issued a show cause notice and asked details about all the bank accounts operated by the assessee and chose to verify the bank accounts at the time of assessment proceedings.
5. As far as the issue of exemption u/s 54F of the Act is concerned, the assessee submitted that during the relevant financial year, she has sold a property and re invested the sale consideration for purchase of another residential site and also made investments in capital gain deposit scheme, before the due date of furnishing the return of income u/s 139(1) of the Act. Therefore, the claim made by her u/s 54F of the Act was correct and which was verified by the A.O. at the time of assessment proceedings. The assessee further submitted that though she made investment in capital gain deposit scheme, because of unforeseen reasons she could not complete the construction of the house property within the specified period allowed under the Act. She further submitted that since, she could not construct the house property, the entire capital gain was offered to tax for the assessment year 2012-13 as per proviso to sub section 4 of section 54F of the Act.
6. The CIT, however, did not satisfied with the explanation furnished by the assessee, revised the assessment order. While doing so, the CIT observed that the A.O. did not examined the issues as discussed above at the time of completing the assessment u/s 143(3) of the Act, therefore, the assessment order needs to be revised u/s 263 of the Act. Accordingly, the CIT revised the assessment order u/s 263 of the Act and directed the A.O. to pass consequential order within the time allowed and after giving opportunity of being heard to the assessee. Aggrieved by the CIT order, the assessee is in appeal before us.
7. The authorized representative of the assessee submitted that the assessment order is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has made detailed enquiries with regard to the issues raised by the CIT. The A.R. further submitted that during the course of assessment proceedings, the A.O. has issued a detailed questionnaire, wherein he has examined the issue with regard to exemption u/s 54F of the Act. The A.R. further submitted that the A.O. has passed a consequential order giving effect to CIT's directions u/s 263 of the Act and has accepted all the issues raised by the CIT, except the issue with regard to the exemption u/s 54F of the Act. Therefore, it is abundantly clear that the CIT has revised the assessment order purely on suspicious and surmises, without being any valid reasons.
8. The A.R. further submitted that as far as the issue of exemption u/s 54F of the Act is concerned, the A.O. has examined the issue and called for the details of reinvestment made in purchase of residential site and also the amount deposited under capital gain deposit scheme. The A.R. further submitted that the assessee has sold a property and reinvested the sale consideration in purchase of another residential site for construction of residential house. Since, she could not utilized the full sale consideration before the due date of filing of return u/s 139(1) of the Act, she has deposited the unutilized sale consideration under capital gain deposit scheme and furnished the proof of such deposit along with return of income. However, she could not complete the construction of the residential house within the time allowed under the Act, therefore, offered the entire capital gain for taxation for the assessment year 2012-13. The A.R. further submitted that this fact clearly indicates that there is no loss of revenue, to brand the assessment order as prejudicial to the interest of revenue. Therefore, for the same reasons, the CIT was not correct in directing the A.O. to redo the assessment. On the other hand, the Ld. D.R. strongly supported the order of CIT.
9. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. The CIT assumed the jurisdiction to revise the assessment order for the reason that the A.O. has not conducted property enquiry at the time of assessment, thereby the assessment order is erroneous in so far as it is prejudicial to the interest of the revenue. The CIT has raised number of issues in the revision proceedings, right from non verification of bank accounts to exemption u/s 54F of the Act. On perusal of the show cause notice issued by the CIT, assessment order and paper book filed by the assessee, we find that all the issues questioned by the CIT in the revision proceedings, were already examined by the A.O. at the time of assessment proceedings. Therefore, the CIT is not correct in observing that the A.O. did not conduct proper enquiry on the issues before completion of assessment.
10. The CIT assumed the jurisdiction to revise the assessment order on the sole ground that there is a lack of enquiry on the part of A.O. in examining the issues with regard to exemption u/s 54F of the Act. The Ld. A.R. of the assessee submitted that the A.O. has examined the exemption u/s 54F of the Act at the time of assessment proceedings and allowed the claim of the assessee. Therefore, the CIT was not correct in coming to the conclusion that the A.O. did not conduct any enquiry. The CIT questioned the allowability of exemption u/s 54F of the Act. The CIT was of the opinion that the assessee has invested the sale consideration for purchase of land and the construction was not completed within the time allowed u/s 54F of the Act, therefore, she is not eligible for exemption for the assessment year 2009-10. The contention of the assessee was that the A.O. has rightly allowed the exemption u/s 54F of the Act, as she has complied with the provisions of section 54F of the Act by reinvesting the sale consideration in purchase of another residential site and deposited the unutilized sale consideration in capital gain deposit scheme.
11. The question before us is whether exemption u/s 54F of the Act can be denied for the assessment year 2009-10, for failure to construct the property within the period of 3 years from the date of sale of original asset. Before we proceed, let us understand the position of law as explained under proviso to sub section 4 of section 54F of the Act.
"Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—
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 utilized 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 unutilized amount in accordance with the scheme aforesaid." |
12. On careful consideration of the provisions of section 54F of the Act, it is abundantly clear that sub section 4 of section 54F of the Act, provides for, where the assessee has not utilized the full value of consideration for purchase/construction of residential house property within the due date specified u/s 139(1) of the Act, then the assessee shall invest the unutilized portion of sale consideration under the capital gain deposit scheme and furnished the proof along with return of income. The proviso to sub section 4 of section 54F of the Act provides that in case the assessee failed to utilize the amount invested under sub sec. 4 for construction of house property within a period of 3 years from the date of sale of original asset, then the assessee is required to pay the tax on the whole capital gain in the previous year in which the period of 3 years from the date of transfer of the original asset expires. In the present case on hand, on perusal of the facts, it is clear that the assessee has purchased another residential site within a period of 3 years and the balance amount was also invested under capital gain deposit account scheme.
13. It was the contention of the assessee that she could not complete the construction of house property, because of various reasons therefore, she has offered the entire capital gain for tax for the assessment year 2012-13 and furnished the copy of return filed for the assessment year 2012-13 for having proof of offering the capital gain. On examination of the paper book filed by the assessee, we find that the assessee has offered the entire capital gain for the assessment year 2012-13. The contention of the CIT was that as per section 54F of the Act, only unutilized portion of sale consideration is taxable in the previous year in which the period of 3 years expires from the date of sale of original asset. But, the investment made in vacant site is to be taxed in the year in which the capital gain arises. We do not see any merits in the arguments of the CIT for the reason that the opinion of the CIT is quite contrary to law specified under section 54F of the Act. In the present case on hand, from the facts it is very clear that the assessee has offered the capital gain, to tax after completion of 3 years from the date of sale of the original assets and which is in accordance with law. Therefore, we are of the opinion that the CIT was not correct in coming to the conclusion that the claim made by the assessee u/s 54F of the Act is not correct.
14. Having said that let us now examine, whether the order passed by the A.O. u/s 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the revenue. The assessment order is not prejudicial to the interest of the revenue as there is no loss of revenue because, the A.O. has accepted the claim of assessee which is in accordance with law. We further observed that the A.O. has examined the issue at the time of assessment and chose to allow the claim of the assessee. Once, the A.O. has allowed the claim after being satisfied with the explanation of the assessee, then the, CIT cannot revise the assessment order for the same reason with a different opinion. As far as the other issues which leads to revision u/s 263 of the Act is concerned, the A.O. has passed consequential order as per the directions of the CIT u/s 263 of the Act and has accepted the issues which leads to the revision. From this, it is clear that there is no reason of whatsoever for the CIT to revise the assessment order.
15. The CIT, u/s 263 of the Act has power to revise the assessment order. But, to invoke the provisions of section 263 of the Act, the twin conditions must be satisfied. (1) The order of the assessing officer is erroneous (2) in so far as it is prejudicial to the interest of the revenue. Unless both conditions are satisfied, the CIT cannot assume jurisdiction u/s 263 of the Act. It is not necessary that every order which is erroneous may not be prejudicial to the interest of the revenue or vice versa. Unless the A.O.'s order is not erroneous, no action can be taken by the CIT u/s 263 of the Act. This is because the twin conditions i.e. the order is erroneous and the same is also prejudicial to the interest of the revenue are co exist. In the present case on hand, the A.O. has conducted detailed enquiry and also examined the points on which the CIT wants further verification. The assessing officer, after verification of books of accounts and relevant details furnished by the assessee, allowed the claim of assessee u/s 54F of the Act. The contention of the CIT was that the A.O. has not conducted proper enquiry and also not applied his mind before allowing the exemption. We do not see any merits in the contention of the CIT for the reason that there is a distinction between lack of enquiry and inadequate enquiry. If there is inadequate enquiry, that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion on the issue. The CIT can do this, when there is a lack of enquiry by the assessing officer. In the present case on hand, there is no reason of whatsoever for the Commissioner to revise assessment order, as on both counts i.e. the order is not erroneous as the A.O. has verified the issues and allowed the claim made by the assessee u/s 54F of the Act. The order is also not prejudicial to the interest of the revenue, as the issue of exemption u/s 54F of the Act claimed by the assessee was in accordance with law. Therefore, we are of the opinion that the CIT without any justification assumed the jurisdiction to revise the assessment order which is not permissible under the law.
16. Now, it is pertinent to mention here the case laws relied upon by the assessee. The assessee relied upon the coordinate bench decision of this Tribunal in the case of Sri Sai Contractors v. ITO [IT Appeal No.109 (Vizag) of 2012, dated 30-9-2015] wherein the Tribunal, after considering the ratio laid down by the Hon'ble High Court of Andhra Pradesh in the case of Spectra Shares & Scrips (P.) Ltd. v. CIT[2013] 354 ITR 35/219 Taxman 61/36 taxmann.com 348 (AP) and Hon'ble Delhi High Court decision in the case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436, held that once the A.O. examined the issues, the CIT cannot assume jurisdiction on the same issues which is already considered by the A.O., by stating that the A.O. has conducted inadequate enquiry or there is a lack of enquiry. The relevant portion is reproduced as under:—
"10. To invoke the provisions of section 263 of the Act, the twin conditions must be satisfied i.e. the order of the assessing officer is erroneous and further it must be prejudicial to the interest of the revenue. Unless both conditions are satisfied, the CIT cannot assume jurisdiction to pass order u/s 263 of the Act. It is not necessary that every order which is prejudicial to the interest of revenue is also erroneous. Unless the A.O's order is not erroneous, no action can be taken by the CIT u/s 263 of the Act, this is because the twin conditions i.e. (1) the order is erroneous and (2) the same is also prejudicial to the interest of the revenue are not co-exists. In the present case, the A.O. has conducted enquiry before allowing deduction towards wages and centering expenses and also examined the points on which the CIT wants further verification. The assessing officer after carefully examined the books of accounts and relevant vouchers furnished by the assessee passed the assessment order as indicated in his order, which is clearly evident from the assessment order. The contention of the CIT was that the A.O. has not conducted proper enquiry and also not applied his mind before allowing the deduction. But, we do not agree with the CIT for the reason that there is a distinction between lack of enquiry and inadequate enquiry. If there is an inadequate enquiry that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion in the matter. The CIT can do this only, when there is a lack of enquiry by the assessing officer. In the present case, the assessment order is detailed one and also, the A.O. has passed a remarks in the assessment order on two issues, on which the CIT assumed jurisdiction, i.e. disallowance of round some expenditure of Rs. 1,00,000/- under the head wages and centering charges and also partner's capital accounts, where the addition was Rs. 66,825/-.The A.O. had called for explanation and the assessee has furnished its explanation. But, the CIT was of the opinion that the assessing officer could have do well to explore the possibility of rejecting the books of accounts and estimate the profit. According to CIT, the assessing officer has conducted enquiry but, in adequate, therefore he wanted further enquiry on the issue on which he assumed jurisdiction. This fact had not been disputed by the revenue. The Commissioner cannot initiate revision proceedings, with a view to conduct fishing and revolving enquiry in the matters which are already examined by the A.O. The Department cannot do fresh assessment in the guise of revision on the matters which are examined and concluded by the A.O. The A.O. being a Quasi Judicial authority, shall have the authority to exercise right judgement and discretion on the basis of information available before him. In the present case on hand, the Assessing Officer after considering vouchers, made an round some addition of Rs.1,00,000/- which is one of the possible view available for him, which the CIT shall not term it as lack of enquiry or non application of mind. Thus, it cannot be said that it is a case of lack of enquiry or non application of mind."
17. Considering the facts and circumstances of the case and also applying the ratio of the coordinate bench, we are of the opinion that the assessment order u/s 143(3) of the Act passed by the A.O. is not erroneous in so far as it is prejudicial to the interest of the revenue. Therefore, we quashed the order passed by the CIT u/s 263 of the Act and restore the assessment order.
18. In the result, the appeal filed by the assessee is allowed.