S. Baljit Singh Ryait Vs. ITO (ITAT Chandigarh)
Invocation of jurisdiction under section 263 by successor commissioner on same issue having already been examined by predecessor Commissioner is invalid.
The issue and the error as per the learned Commissioner which had occurred in the order of the assessing officer which required initiation of review proceedings in the present case was that the assessee had wrongly claimed and been allowed deduction under section 54F of the Act from the long-term capital gain earned by it on account of construction of house undertaken by it to the extent of Rs. 15,06,457. The reasoning being that the deduction on account of purchase of land and construction undertaken on the said land, under sections 54 and 54F, had been claimed and been allowed to the assessee in the preceding assessment year, i.e., assessment year 2004-05. The contention of the Revenue is that once the deduction under sections 54 and 54F of the Act has been claimed on account of house constructed against capital gains earned during the year, any surplus remaining therefrom cannot be carried over to the next year and claimed as deduction from capital gain earned in the succeeding year.
Clearly and undisputedly this issue was examined by the Commissioner in proceeding initiated under section 263 of the Act vide his notice dated 14-12-2007 and due reply filed by the assessee, after considering which and after being satisfied by which the proceedings were dropped. The present proceeding having been initiated on the identical issue are clearly unsustainable in law since it simply tantamounts to review of the order of the Commissioner and not of the assessing officer. The co-ordinate Bench of the Income Tax Appellate Tribunal in the case of Satya Prakash Gupta (supra) has in identical circumstances held that the successor Commissioner becomes functus officio in this regard after the exercise conducted by the predecessor Commissioner. Therefore, we have no hesitation in holding that the order passed under section 263 is not sustainable on this ground alone.
Surplus left after claiming deduction U/s. 54F can be set off against LTCG in succeeding year
A bare reading of sections 54 and 54F of the Act nowhere states that the surplus remaining after claiming deduction under section 54/54F on account of construction of house property undertaken in a year, would not be allowed set off against long-term capital gain earned in the succeeding year. There is no such specific bar provided in the section. The learned Departmental Representative also agreed to this. Therefore, as long as the conditions specified under section 54F are fulfilled, the interpretation and understanding of section as taken by the assessee and also by the earlier Commissioner cannot be said to be perverse and grossly against law.
Full Text of the ITAT Order is as follows:-
Both the appeals have been filed by the same assessee. While the appeal in I.T.A. No. 667/Chd/2010 is against the order of the Commissioner-III, Ludhiana dated 23-3-2010 passed under section 263 of the Income Tax Act, 1961 (in short “the Act”) relating to the assessment year 2005-06, the appeal in I.T.A. No. 954/Chd/2016 is against the order passed by the Commissioner levying penalty under section 271(1)(c) on account of addition made in the order passed under section 263 of the Act.
2. Since both the appeals are interconnected, they were heard together and are being decided by this common order. We shall be first taking up the appeal filed by the assessee against the order passed by the Commissioner under section 263 of the Act in I.T.A. No. 667/Chd/2010.
I.T.A. No. 667/Chd/2010
3. At the outset, it may be pointed out that the present appeal was dismissed in limine for want of prosecution vide order dated 10-6-2013 but was thereafter called in consequence to a miscellaneous application filed by the assessee, vide order of the Income Tax Appellate Tribunal dated 21-10-2016 in M.A. No. 11/2016. In pursuance of the said order, the case was fixed for hearing before us.
4. The facts of the present case are that initially the assessment under section 143(3) of the Act was passed in the case of the assessee for the impugned assessment year i.e., the assessment year 2005-06 vide order dated 25-6-2007. Thereafter on a perusal of the assessment record, the learned Commissioner found that the order passed by the assessing officer was erroneous causing prejudice to the interests of the Revenue since the assessee had been incorrectly allowed the claim of exemption of long-term capital gains under section 54F of the Act to the extent of Rs. 15,06,457. The learned Commissioner found from the records that the assessee had shown long-term capital gains amounting to Rs. 35,13,572 during the impugned year and has reduced therefrom a sum of Rs. 15,06,457 which was claimed as deduction under section 54F of the Act. The learned Commissioner found from the records that in the preceding assessment year also, i. e., the assessment year 2004-05 the assessee had earned long-term capital gains and had claimed deduction under section 54 and section 54F of the Act. The assessee, he found, had started the construction of the house property in the assessment year 2004-05 and had claimed deduction under section 54F on the capital gains computed for the said assessment year, i. e., the assessment year 2004-05. It was further noticed that the assessee had continued to take exemption of the same construction in the assessment year 2005-06 also to the extent of Rs. 15,06,457, which claim had not exhausted in the preceding year. The learned Commissioner found the aforesaid claim to be ineligible as per the provisions of law and, therefore, issued notice under section 263 of the Act for reviewing the order passed by the assessing officer. The contents of the notice issued to the assessee are as under :–
“(II) After the perusal of the assessment record for the assessment year 2005-06, the order is found to be erroneous so far prejudicial to the interests of the Revenue on the following point :–
During the year under consideration the assessee has sold various new long-term capital gains assets on which deduction under section 54F of Rs. 15,06,457 has been claimed which pertains to the transaction of original assets made in the assessment year 2004-05. The deduction of Rs. 15,06,457 pertaining to the last year’s transaction appears to have been wrongly claimed against the long-term capital gains of this year. The details of the transactions shown in the assessment year 2004-05, as per the copy of computation of taxable income filed by the assessee for the assessment year 2004-05 is as under :–
