Paras Chinubhai Jani Vs Pr. CIT (ITAT Ahmedabad)
In this case AO has not given any reason as to how purchase of land prior to transfer of capital asset is eligible for claim of deduction under s. 54B(1) of the Act. Thus, as a corollary, the AO has accepted the claim of deduction by oversight and without any application of mind in this regard. No evidence has been adduced before us to show that the issue was present to the mind of the AO. A wrong acceptance of claim of deduction would not given inference towards application of mind. Secondly, the eligibility of deduction under s.54B of the Act in respect of land acquired prior to transfer of capital asset is clearly opposed to the plain provision of the Act and thus apparently not sustainable having regard to express the provision of the statute. The legislature in its own wisdom has used the expression before the transfer of long term asset as well as after the transfer of capital asset at appropriate places viz. Section 54 of the Act. The intention of the legislature is thus quite clear. Therefore, claim of deduction accepted by the AO despite unequivocal language of the Act, in our view, is erroneous as contemplated under s. 263 of the Act. Such error on the part of the AO has caused definite prejudice to the interest of the Revenue. The action of the Pr.CIT is thus within the realm of powers vested under s.263 of the Act. The Pr.CIT has distinguished the case laws cited which is found to be in order. We do not see irregularity in the assumption of jurisdiction by the Pr.CIT under s.263 of the Act. We therefore decline to interfere.
FULL TEXT OF THE ITAT JUDGMENT
The captioned appeal has been filed at the instance of the assessee seeking to impugn the revisional order passed by the Principal Commissioner of Income Tax-5, Ahmedabad (‘Pr.CIT’ in short) under S. 263 of the Income Tax Act, 1961 (the Act) dated 17.03.2017 in connection with the assessment order passed by the AO under s. 143(3) of the Act dated 20.02.20 15 concerning AY. 20 12-13.
2. As per the grounds of appeal, the essential grievance of the assessee is that in the facts and the circumstances of the case the CIT was not justified in exercising revisionary powers under s.263 of the Act and thereby setting aside the assessment order passed under s.143(3) of the Act with a direction to the AO to frame assessment afresh after proper examination, inquiry and verification with reference to deduction under s.54B of the Act claimed by the assessee.
3. To adjudicate the grievance of the assessee, the relevant facts are taken note of as follows:
3.1 The assessee filed its return of income for AY 2012-13 declaring total income at Rs.21,86,120/-. The assessee inter alia claimed deduction under s. 54B of the Act to the tune of Rs.75,94,273/- against the sale of certain parcels of land. The return filed by the assessee was subjected to scrutiny assessment and assessment order was framed under s.143(3) of the Act dated 20.02.2015 wherein the AO inter alia revised the quantum of chargeable capital gains. The AO also disallowed an amount of Rs.23,06,723/- as excess claim of deduction under s.54B of the Act.
3.2 The assessment so framed by the AO under s.143(3) of the Act was sought to be modified by the Pr.CIT in the proceedings under s.263 of the Act. A show cause notice dated 22.02.2017 was issued to the assessee in this regard alleging the aforesaid assessment order to be erroneous and prejudicial to the interest of the Revenue. The relevant portion of the show cause notice is reproduced hereunder:
“…On verification of the assessment records, it is noticed that you have claimed deduction of Rs.41,09,160/- [Rs.29,75,580/- + Rs.11,33,580/-] u/s. 54B of the Act, against the properties purchased on 02/12/2011 and 01/12/2011. It is further seen from the records that the capital assets were sold on 21/02/2012 from which the gain arose. The provisions of Section 54B of the Act provides that the exemption is available under this section if the asset is purchased after the date of sale of asset from which the capital gain arose. As stated above, you have purchased the assets prior to the sale of land and hence the exemption claimed by you is not allowable. Failure to disallow your claim of Rs.41,09,160/- is incorrect.
From the above discussions, it appears that the said assessment order dated 20/02/2 015 is erroneous and prejudicial to the interest of revenue to the extent mentioned above. You are, therefore, requested to show cause as to why the total income assessed u/s. 143(3) of the Act should not be enhanced or modified u/s. 263 of the Act…”
3.3 The assessee filed a reply thereto contesting the show cause notice and also challenged the foundation of jurisdiction under s.263 of the Act sought to be assumed by the Pr.CIT. From the case record, it appears that the AO made an addition to the long term capital gains of Rs.49,55,300/-. The AO also verified the claim of deduction under s.54B of the Act against the aforesaid capital gain. The AO scaled down the deduction under s.54B of the Act from Rs.75,94,273/- to Rs.52,87,673/- and consequently, disallowed the deduction under s.54B of the Act to the extent of Rs.23,06,723/- in respect of investment in one of the parcels of the land made after the due date of filing of return.
3.4 The Pr.CIT noted that the assessee has purchased following property and had claimed exemption under s.54B of the Act thereon:
