GIRIRAJ PRASAD,KOTA V. INCOME TAX OFFICER, BUNDI

ITA 603/JPR/2025

AI Insights

The case revolves around the appeal by Giriraj Prasad against the order of the PCIT, Udaipur, which set aside the assessment order passed by the AO for the assessment year 2015-16. The AO had initially accepted the assessee's return declaring income from agricultural sources and capital gains from the sale of immovable property, claiming exemption under section 54F of the Income Tax Act. The PCIT later found the assessment order to be erroneous and prejudicial to the interests of the revenue, leading to the appeal. The Tribunal examined the documents and findings, including the agreement to sell and proof of payments, and concluded that the AO had made adequate inquiries and the assessment order was justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775667 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 18-04-2025
• Other Referred Cases: Sanjeev Lal Etc Vs CIT, Kishorbhai Harjibhai Patel Vs. Income Tax Officer, ACIT 25(2) v. Shri Keyur Hemant Shah, Praveen Gupta v. Assistant Commissioner of Income Tax, Commissioner of Income Tax vs Ajitsingh Khajanchi, Mrs. Madhu Kaul vs Commissioner of Income Tax, Sbs Biotech Unit Ii, Sirmour vs Principal Commissioner of Income Tax, Commissioner of Income-Tax vs Gabriel India Ltd., M/S Meerut Roller Flour Mills Pvt. Ltd vs The Commissioner Of Income Tax And ..., Commissioner of Income-Tax vs Hastings Properties
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALKA GAUTAM
• Assessee Lawyers: VINOK KUMAR GUPTA
• Keywords: Set aside; Difference of opinion; Change of opinion; Capital asset; Revenue expenditure; Question of law; Cost of acquisition; Capital expenditure; Audit objection; Assessment record; Revision of order
• Section: 147; 148; 143(3); 142(1); 263; 54F

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh xxu xks;y] ys[kk lnL;] ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 603/JPR/2025 fu/kZkj.k o\"kZ@Assessment Year : 2015-16 Giriraj Prasad Opp. ICICI Bank Jhalawar Kota, Kota. cuke Vs. Income Tax Officer, Ward-Bundi. Bundi. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AQLPG2357F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Vinok Kumar Gupta, C.A. jktLo dh vksj ls@Revenue by : Mrs. Alka Gautam, CIT lquokbZ dh rkjh[k@Date of Hearing: 14/08/2025 ?kks\"k.kk dh rkjh[k@Date of Pronouncement: 08/09/2025 vkns'k@ORDER PER DR. S. SEETHALAKSHMI, J.M. This appeal filed by assessee is arising out of the order of the Learned Principal Commissioner of Income Tax, Udaipur dated 18.02.2025 [here in after “ld. PCIT”] for assessment year 2015-16, which in turn arise from the order dated 25.03.2023 passed under section 147 of the Income Tax Act, by the AO. 2. In this appeal, the assessee has raised following grounds: - “1. The Ld. PCIT has erred in law as well as on the facts of the case by invoking jurisdiction, u/s 263 of the Act, and setting aside the order passed by Ld.AO u/s 147 Printed from counselvise.com 2 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. of the Income Tax Act, dated 25.03.2023 for A.Y. 2015-16. The Ld. PCIT has further erred by holding that the order passed, u/s 147 of the Act, is bad in law. Hence, the same kindly be quashed. 2. The Ld. PCIT has erred in law as well as on the facts of the case in setting aside the assessment order without appreciating the facts of the case and documentary evidences submitted by the appellant. The said action is contrary to the facts and material available on record. Hence, the order deserves to be quashed. 3. The Ld. PCIT has erred in law as well as on the facts of the case by invoking clause (a) and (b) of explanation 2 of Section 263 in the current case despite the fact that detailed inquiry has been made, by the Ld. AO, in the present case. Hence, the order deserves to be quashed 4. The Ld. PCIT has erred in law as well as on the facts of the case in directing the Ld. AO to again verify the verified claim made, u/s 54F of the Act, by the appellant. Hence, the said direction is unjustified. 5. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing.” 3. Brief fact of the case is that the assessee is a farmer deriving only agriculture income, hence was not required filed his return of income for the assessment year 2015-16. The case was opened u/s 147 of the Income Tax Act (in short ‘Act’) on the basis of information flagged as per the Risk Management Strategy, formulated by the CBDT through ITBA software mainly the following issues:- Assessee has received sales consideration of Rs. 57,00,000/- on the sale of immovable property during the F.Y. 2014-185 but the return of income has not been filed. In absence of return of Income, the same transaction remained unverified. Printed from counselvise.com 3 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. Post this, notices u/s 148was issued on 26.03.2022. In response, the appellant filed his return on 14.02.2023 declaring total income of Rs. 2,91,600 including agriculture income of Rs. 2,55,200/-. Thereafter, notice u/s 142(1) of the Act were issued. The assessee submitted his reply and furnished the required documents. The Ld. AO accepted the return of income filed by the assessee and assessment was completed u/s 147 of the Act after considering the explanation of the assessee and ultimately the assessment order was passed at the returned income filed by the assessee i.e. 2,91,600/-. 4. Subsequent to the assessment order, audit objection was raised by the ld. AO on 20.05.2024 where it was objected that the copy of registry of the property was not found attached with the assessment order. The assessee provided the copy of registry along with details of payment made for purchase of property vide response dated 04.10.2024 and 27.12.2024 to the ld. AO. 5. On culmination of the assessment proceeding the ld. PCIT called for & examined the assessment record. 6. On examination the ld. PCIT observed the following points:- 2.1 The assessee sold an immovable property at a sale consideration of Rs.57,00,000/- which resulted into Long Term Capital Gain of Rs.56,12,3961-. While computing the Long Term Capital Gain on the sale of such property, the assessee claimed deduction u/s 54F of the Act for new House Property purchased for Rs.51,50,000/- and cost of improvement Rs.5,50,000/- regarding the newly purchased property. Resultantly, the assessee declared nil LTCG on captioned transaction. Printed from counselvise.com 4 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 2.2 The AO, during the course of assessment proceedings, accepted the contentions of the assessee and assessed the total income same as declared in the ITR for the year under consideration vide the order u/s147 dated 25.03.2023. But, it is noticed that neither purchase deed in support of the claim of buying new residential property amounting toRs.51,50,000/- nor any documentary evidences in support of the claim regarding cost of improvement in the new property amounting toRs.5,50,000/- were submitted by the assessee during the course of assessment proceedings u/s 147 of the Act. 2.3 The assessee, during the course of assessment proceedings, submitted only an agreement dated 28.05.2015 regarding the purchase of house wherein it has been mentioned that house will be made registered in the name of the assessee. Further. the assessee did not produce any further document such as Registry till the date of passing the assessment order to establish his claim that full payment had been made and the New House Property was purchased by the assessee. 2.4 Furthermore, the assessee did not produce any documentary evidence which could prove that he deposited the unutilized funds in the Capital Gain Account Scheme latest by the due date of filing ITR for the relevant assessment year i.e. 31 .08.2015. 2.5 Therefore, the AO was not justified and correct in accepting the assessee's contentions in respect of the Deduction so claimed u/s 54Fof the Act amounting to Rs.56,12,3961- as the same were not supported by documentary evidences. As such, the Deductions so claimed by the assessee u/s 54F of the Act were liable to be disallowed and added back to the total income of the assessee for the AY 2015-16. 2.6 Since, the claim of the assessee amounting to Rs. 56,12,396/-regarding the Deductions u/s 54F of the Act has not been substantiated by the assessee with any documentary evidences during the course of assessment proceedings u/s 147 of the Act, the AO was required to disallow the same and add back to the total income of the assessee for the year under consideration and charge tax accordingly. However, the AO, vide the assessment order u/s 147 dated25.03.2023, failed to do so. 2.7 Such omission has resulted into underassessment of the total taxable income of the assessee to the tune of Rs.56,12,3961- and subsequent under charging of tax amounting to Rs.1 1,56,153 plus applicable interest as per the provisions of the income Tax Act, 1961 which is erroneous and prejudicial to the interest of revenue. Accordingly, the Assessing officer didn't appreciate the assumption of correct facts and the application of correct law while computing the Total income in course to complete the assessment proceedings u/s 147 of the Act on25.03.2023. Therefore, it was proposed to modify the Assessment order Printed from counselvise.com 5 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. dated 25.03.2023 on above terms under the power vested with the undersigned u/s 263 of the Income Tax Act, 1961. Based on the above observations the ld. PCIT formed a view that since the correct tax was not levied by the AO, therefore, due to incorrect assumption of facts and incorrect application of law, the income of the assessee was under assessed by Rs. 56,12,396/- resulting into undercharge of tax by Rs. 11,56,153/- plus applicable interest in the case while passing the assessment order on 25.03.2023. Therefore, the assessment order so passed was found to be erroneous in so far as it was prejudicial to the interests of the revenue within the meaning of Section 263 of the Act. 7. Aggrieved from the order of the ld. PCIT the assessee has preferred this appeal before this tribunal on the grounds as reiterated above. To support the grounds so raised the ld. AR appearing on behalf of the assessee has placed reliance on the written submission which is extracted herein below:- 1. The appellant is a Farmer and had, majority of his income from agriculture during the year under consideration. The appellant was not required to file a return of income u/s 139(1) of the Income Tax Act (‘Act’) for that year. 2. Subsequently, the case of the appellant was opened u/s 147 of the Act based on specific information flagged by the CBDT's Risk Management Strategy. The information pertained to receipt of sale consideration of Rs. 57,00,000/- for sale of immovable property during F.Y 2014-15, which remained unverified due to non- filing of return. 3. Notice u/s 148 was issued on 26.03.2022, the appellant filed his return of income on 14.02.2023 declaring total income of Rs. 2,91,600 (including agricultural income of Rs. 2,55,200). Copy of Income Tax Return is enclosed [PBP: 1 to 13] 4. Thereafter, notices u/s 142(1) of the Act were issued. In responses to the notices, the appellant provided all the required documents substantiating the sale of property, property purchased to claim deduction u/s 54F of the Act, confirmation from contractors substantiating the cost of improvement, and relevant bank statements. 5. The Ld. AO accepted the return income and completed the assessment under section, 147/143(3) of the Act, at Rs. 2,91,600. Copy of assessment order is enclosed [PBP: 14 to 16]. 6. Subsequently, an audit objection was received, on 20.05.2024, from the office of the Ld. AO concerning the appellant for the year under consideration [PBP: 17]. Printed from counselvise.com 6 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. According to it, the copy of the registry of the property purchased by the appellant during the assessment was not found attached to the assessment records. Consequently, a copy of the registry was requested. 7. In response to the audit objection, the appellant submitted a copy of the sale deed substantiating the property purchased for claiming the deduction under Section 54F, along with details of payments made for the property purchased and a copy of the UCO Bank passbook. These submissions were made via responses dated 04.10.2024 and 27.12.2024. Copy of responses is enclosed [PBP: 18 to 20]. 8. Thereafter, the Ld. PCIT, Udaipur reviewed the assessment records of the appellant for the year under consideration and held, that the assessment order was erroneous and prejudicial to the interest of the revenue u/s 263 of the Act, vide order dated18.02.2025 on the specific reason that the AO did not make adequate inquiries regarding the claim of deduction u/s 54F. 9. The Ld. PCIT passed an order, u/s 263 of the Act, setting aside the assessment order passed, u/s 147 of the Act, for the issue of “allowability of deductions claimed u/s 54F of the Act” and directed the AO to make a fresh assessment after conducting necessary inquiries and verifications. 10. Aggrieved with the above order, passed u/s 263 of the Act, appellant filed appeal before the Hon’ble ITAT, Jaipur. Grounds of Appeal No. 1 The Ld. PCIT has erred in law as well as on the facts of the case by invoking jurisdiction, u/s 263 of the Act, and setting aside the order passed by Ld.AO u/s 147 of the Income Tax Act, dated 25.03.2023 for A.Y. 2015-16. The Ld. PCIT has further erred by holding that the order passed, u/s 147 of the Act, is bad in law. Hence, the same kindly be quashed. Grounds of Appeal No. 2 The Ld. PCIT has erred in law as well as on the facts of the case in setting aside the assessment order without appreciating the facts of the case and documentary evidences submitted by the appellant. The said action is contrary to the facts and material available on record. Hence, the order deserves to be quashed. Grounds of Appeal No. 3 The Ld. PCIT has erred in law as well as on the facts of the case by invoking clause (a) and (b) of explanation 2 of Section 263 in the current case despite the fact that detailed inquiry has been made, by the Ld. AO, in the present case. Hence, the order deserves to be quashed. Grounds of Appeal No. 4 Printed from counselvise.com 7 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. The Ld. PCIT has erred in law as well as on the facts of the case in directing the Ld. AO to again verify the verified claim made, u/s 54F of the Act, by the appellant. Hence, the said direction is unjustified. Findings of Ld. PCIT (Para 4 on Page No. 4 of order passed u/s 263 of the Act): “……. (b) The AO, during the course of assessment proceedings, accepted the contentions of the assessee and assessed the total income same as declared in the ITR for the year under consideration vide the order u/s 147 dated 25.03.2023. But, it is noticed that neither purchase deed in support of the claim of buying new residential property amounting to Rs.51,50,000/- nor any documentary evidences in support of the claim regarding cost of improvement in the new property amounting to Rs.5,50,000/- were submitted by the assessee during the course of assessment proceedings u/s 147 of the Act. ….. (d) Furthermore, the assessee did not produce any documentary evidence which could prove that he deposited the unutilized funds in the Capital Gain Account Scheme latest by the due date of filing ITR for the relevant assessment year i.e. 31.08.2015. (e)Therefore, the AO was not justified and correct in accepting the assessee’s contentions in respect of the Deduction so claimed u/s 54F of the Act amounting to Rs.56,12,396/- as the same were not supported by documentary evidences. As such, the Deductions so claimed by the assessee u/s 54F of the Act were liable to be disallowed and added back to the total income of the assessee for the AY 2015-16. However, the AO, vide the assessment order u/s 147 dated 25.03.2023, failed to do so. (f)In view of the above, since the correct tax was not levied by the AO, therefore, due to incorrect assumption of facts and incorrect application of law, the income of the assessee was under computed/under assessed by Rs.56,12,396/- resulting into undercharge of tax by Rs.11,56,153 (Rs.11,22,479/- + E.C. of Rs.33,674) plus applicable interest in the case while passing the Assessment Order on 25.03.2023. Therefore, the assessment order so passed was found to be erroneous in so far as it was prejudicial to the Interest of Revenue within the meaning of Section 263 of the Act.” Submission of the Appellant: A careful examination of the order passed by the Ld. PCIT, Udaipur reveals that the primary grounds for invoking Section 263 of the Act against the appellant are as follows: Printed from counselvise.com 8 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 1. Alleged non-submission of the purchase deed for the property acquired to claim deduction under Section 54F, and lack of documentary evidence supporting the cost of improvement of the new property; 2. Alleged non-submission of documentary proof regarding deposit of the unutilized amount in the Capital Gain Account Scheme (CGAS); 3. The Ld. AO allegedly did not conduct proper inquiry or verification in this regard. The appellant, against the above allegation, respectfully submits as under: 1. Submission of Documents and Information Substantiating Claim under Section 54F: 1.1. During the year under consideration, the appellant sold an immovable property situated at Khasra No. 105, Land No. 58, Tilak Colony, Gram Khedli, for a total sale consideration of Rs. 57,00,000/-. The appellant has claimed exemption under Section 54F of the Income Tax Act, 1961, in respect of the entire capital gain arising from this transaction. 1.2. Computation of Longterm capital gain: Sr. No. Particulars Amount (Rs.) A. Sales Consideration 57,00,000 B. Indexed Cost of Acquisition and Improvement 87,604 C. Long Term Capital Gain [A-B] 56,12,396 D. Exemption u/s 54F* 56,12,396 E. Net Taxable Gain [C-D] Nil *The entire sale consideration of Rs. 57,00,000/- was invested, before the due date of return filing, in the purchase of a new residential house, and hence, full exemption under Section 54F has been claimed. 1.3. Compliance with the conditions laid down in Section 54F of the Act: a. Section 54F prescribes, inter alia, that:  The capital asset transferred should be a long-term capital asset (other than a residential house);  The assessee must purchase one residential house within one year before or two years after the date of transfer. Printed from counselvise.com 9 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. b. In the present case, the appellant purchased Residential House No. 19, Jaihind Nagar Ist, Gram Rampura, Baran Road, Tehsil Ladpura, Kota, to claim exemption under Section 54F. The payments for the purchase were made as follows: Date of Transaction Mode of payment Explanation Amount (Rs.) 25.05.2015 Cash Cash paid along with the agreement, out of agricultural income 50,000 26.05.2015 Cash Cash paid out of agricultural income 50,000 28.05.2015 Cash Cash paid out of withdrawals from UCO Bank Account 9,50,000 29.05.2015 Cash Cash paid out of withdrawals from UCO Bank Account 11,00,000 30.06.2015 Cheque Cheque given to seller cleared on 02.07.2015 30,00,000 Total 51,50,000 The copy of agreement and UCO Bank Statement already furnished before Ld. AO, available with Ld. PCIT, for verification is enclosed herewith for your ready reference [PBP: 21 to 27]. c. The due date for filing the return of income was 31.07.2015. The entire payment towards the purchase of the new residential property was made before this due date. 1.4. The Ld. AO duly verified the claim during assessment proceedings. The appellant submitted a copy of the notarized agreement to sell, executed between the seller, Shri Badri Lal Meena, and the appellant, which clearly evidences the payments made. The property was purchased for Rs. 51,50,000. Additionally, Rs. 5,50,000/- was incurred towards improvement of the property, for which the appellant submitted confirmation, duly signed by the contractor, before the Ld. AO and we are again furnishing the same before your honour [PBP: 28 to 29]. 1.5. The copy of the agreement to sell, along with proof of payments, constitutes sufficient evidence for claiming exemption under Section 54F. This position is well supported by judicial precedents, including:  Hon’ble Supreme Court in the case of Sanjeev Lal Etc Vs CIT [Civil Appeal Nos.5899-5900 of 2014], dated 01.07.2014: “20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on Printed from counselvise.com 10 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of theagreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word \"transfer\" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word \"transfer\" is as under: '2(47) \"transfer\", in relation to a capital asset, includes, - (i) xxxx xxxx (ii) the extinguishment of any rights therein; or......' 21. Now in the light of definition of \"transfer\" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. “  Hon’ble High Court of Gujarat in the case of Kishorbhai Harjibhai Patel Vs. Income Tax Officer dated 08.07.2019 [R/TAX APPEAL NO. 1378 of 2018] confirmed the principles laid down by Hon’ble Apex Court in Sanjeevlal (supra) and held as under: “28. Thus, in view of the aforesaid discussion, we are of the opinion that the Appellate Tribunal was not right in law in confirming the order of the CIT(A) denying the deduction under Section 54F of the Act on the premise that the land in question was not transferred within the stipulated period as provided under Section 54F of the Act. 29. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Supreme Court in the case of CCE v. Favourite Industries, [2012]7 SCC 153, has succinctly observed thus : … 42. So far as the question no.1 is concerned, the same is answered in favour of the assessee and against the Revenue.” Printed from counselvise.com 11 ITA No. 603/JPR/2025 Giriraj Prasad, Kota.  Hon’ble ITAT Mumbai in the case of ACIT 25(2) v. Shri Keyur Hemant Shah, ITA No. 6710/Mum/2017, held as under: “…5.3 The only surviving issue is assessee’s eligibility to claim deduction u/s 54F. The undisputed fact, in that respect, are that the assessee has made the payment within stipulated time as envisaged by Section 54F and the allotment in a specific property has been obtained by the assessee on 14/04/2012 which is evident from allotment letter as placed on page nos. 186 to 190 of the paper-book. Therefore, since all the conditions of Section 54F was fulfilled by the assessee, there could be no occasion to deny the benefit of deduction to the assessee. Therefore, no infirmity could be found in the impugned order.”  Hon’ble ITAT, Delhi, in the case of Praveen Gupta v. Assistant Commissioner of Income Tax, (2012) 20 Taxmann 308: “29.…it is not necessary that to constitute a capital asset the assessee must be the owner by way of a conveyance deed in respect of that asset for the purpose of computing capital gain. The assessee had acquired a right to get a particular flat from the builder and that right of the assessee itself is a capital asset. The word ‘held’ used in Section 2 (14) as well as Explanation to Section 48 clearly depicts that assessee must have some right in the capital asset which is subject to transfer. By making the payment to the builder and having received allotment letter in lieu thereof, the assessee will be holding capital asset.”  Hon’ble Madhya Pradesh High Court in the case of Commissioner of Income Tax vs Ajitsingh Khajanchi on 25 April, 2007 [297 ITR 95], held as under: “……We are fortified in the above view by the decision of the Delhi High Court in Balmj v. CIT to the effect that for the purpose of attracting the provision, it was not necessary that the assessee should have become the owner of the property. Section 54F spoke of purchase and registration was not imperative.”  Hon’ble Punjab Haryana High Court in the case of Mrs. Madhu Kaul vs Commissioner of Income Tax on 17 January, 2014 [ITA No. 89 of 1999], held as under: “…….The assessee paid the first installment on 04.07.1986, thereby conferring a right upon the appellant to hold a flat, which was later identified and possession delivered on a later date. The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.” Printed from counselvise.com 12 ITA No. 603/JPR/2025 Giriraj Prasad, Kota.  Hon’ble ITAT, Delhi in the case of Acit, Circle-69(1), New Delhi vs Sanjay Choudhary, Delhi on 23 January, 2023 [ITA No.1274/Del/2020] 10. The Bench is of considered opinion that execution of the sale deed or any document of Conveyance in favour of vendee, only transfers the ' legal title' for the purpose of civil consequences. The ownership of a property is a bundle of interests and apart from the registered sale deed or any other document of conveyance, vendee can acquire interest in semblance of right of owner by documents like GPA or agreement to sell. The 'purchase' of immovable property involves acquiring all those interests in the property. Same may be by some inchoate instruments in favour of the purchaser. Non execution of a registered document of transfer of title may have civil consequences in regard to his title, qua rights between the seller and purchaser but for the 1274.Del.2020 Sanjay Choudhary purpose of benefits of Section 54/54F, the assessee shall be deemed to have 'purchased' the properties. As for the purpose of Section 54/54F of the Act, the important question is that money out of LTCG should be paid/spent by the assessee, before the end of statutory period, for claiming exemption. When the Ld. AO had not doubted the payments out of LTCG made by assessee for purchase of three properties with inchoate documents executed in favour of the assessee. Then for not having the sale deed executed in his favour, assessee cannot be said to have not 'Purchased' the properties as a statutory compliance. Thus, the findings of Ld. CIT(A) in this regard require no interference.” 1.6. At the time of the assessment proceedings, the copy of the registered sale deed (registry) was not available with the appellant, as the registration process was pending due to certain internal issues related to land distribution by UIT, Kota, matters beyond the appellant’s control. However, the copy of the agreement to sell was duly submitted to the Ld. AO at that time. 1.7. However, it is pertinent to note that, subsequently, when an audit query was raised, vide audit objection letter dated 20.05.2024, the assessee, in his response dated 04.10.2024, submitted a copy of the registered deed of the house. A copy of the deed, as submitted to the office of the Income Tax Officer, Bundi, in response to the audit objection, is enclosed herewith for ready reference [PBP: 30 to 36]. 1.8. In view of the above facts, legal provisions, and judicial precedents, it is humbly submitted that the appellant has fully complied with the conditions laid down under section 54F of the Act and all relevant documents and evidence were submitted before the Ld. AO. Accordingly, the invocation of Section 263 is unwarranted and the order passed by the Ld. PCIT deserves to be set aside. Printed from counselvise.com 13 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 2. No requirement of deposition of money in the Capital Gain Account Scheme: 2.1. Section 54F (4) of the Act provides that only the unutilized portion of the net consideration, not appropriated towards purchase or construction of the new asset, before the due date of filing the return under Section 139, is required to be deposited in the Capital Gain Account Scheme. 2.2. As detailed above, the entire payment, for the new property, was made by 30.06.2015 which was well before the due date for filing the return (31.07.2015). Therefore, there was no requirement to deposit any amount in the Capital Gain Account Scheme. This contention of the Ld. PCIT is thus without merit and contrary to the facts. 3. Sufficiency of Inquiry by the Ld. AO in this regard: 3.1. The Ld. PCIT, Udaipur, has invoked Section 263 of the Income Tax Act, 1961, on the grounds that the Ld. AO did not make adequate inquiries regarding the appellant’s claim of exemption under Section 54F, allegedly resulting in under- assessment of income and tax. The PCIT has specifically relied on Explanation 2(a) and (b) to Section 263, which deems an order erroneous and prejudicial to the interests of the Revenue if it is passed without making necessary inquiries or verification, or if relief is allowed without proper inquiry. 3.2. Section 263 empowers the Principal Commissioner to revise an order only if it is both “erroneous” and “prejudicial to the interests of the Revenue.” Both conditions must be satisfied cumulatively. Mere possibility of a different view or a change of opinion does not confer jurisdiction under Section 263. 3.3. During the assessment proceedings in the current case, the Ld. AO specifically sought explanations and documentary evidence regarding the sale of immovable property and the exemption claimed under Section 54F. The appellant duly submitted all relevant documents, including the agreement to sell, proof of payments, and details of the cost of improvement. The Ld. AO examined these documents and made inquiries as required. Only after being fully satisfied with the explanations and evidence provided did the Ld. AO accept the appellant’s claim for exemption under Section 54F and pass the assessment order. 3.4. The statutory duty of the Ld. AO was to specifically inquire and verify the claim. He did not accept the claim mechanically or without inquiry; rather, he exercised his due diligence and applied his mind to the facts and evidence on record. Printed from counselvise.com 14 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 3.5. The case at hand is entirely factual. All material facts and supporting documents were placed before the Ld. AO. Once the relevant facts are on record and have been verified, there remains no further scope or necessity for additional inquiry. 3.6. The Hon’ble Apex Court and various High Courts have consistently held that Section 263 cannot be invoked merely because the PCIT has a different opinion or believes that further inquiry could have been made, especially when the AO has already conducted a reasonable inquiry and applied his mind to the issue. In support of our contention, we rely on the following judicial precedents:  Hon’ble Income Tax Appellate Tribunal, Jaipur in the case of Hariram Hospital, Alwar vs Pcit, Alwar, dated 17-04-2025, [ITA No. 1535/JPR/2024], held as under: “The Assessing Officer had taken a possible and plausible view after due verification and just because the PCIT may have a different perspective on the same issue, that cannot be a ground to term the order erroneous. The revisionary order is also vitiated by lack of application of mind. The show cause notice and final order are both vague and lack clarity. No independent inquiry was conducted by the PCIT to verify the correctness of the AO's findings or to establish any real prejudice to the revenue. This is in direct contravention of the principles laid down by various courts which require the Commissioner to act as a quasi-judicial authority and not merely issue mechanical directions. That the learned PCIT has erred in law and on facts in invoking revisionary jurisdiction under Section 263 of the Income Tax Act, 1961 by treating the unsecured loans received by the assessee as non-genuine. The action is unsustainable as the Assessing Officer had already conducted due inquiries and accepted the explanation furnished.”  Hon’ble ITAT, Kolkata in the case of Deepak Kr. Singh Vs PCIT, dated 17-05- 2022 [I.T.A. No. 25/PAT/2021], held as under: “30. Respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court, other settled judicial precedence as referred above and under the given facts and circumstances of the case, we are of the view that since the issue raised in the show-cause notice has already been examined by the ld. Assessing Officer in detail by conducting adequate enquiry calling for material evidence and other documents supporting the claim of deduction under section 54F of the Act, proper application of mind and taken a plausible view in light of the settled judicial precedence as referred by the ld. counsel for the assessee, there remains no scope for the ld. PCIT to invoke the jurisdiction under section 263 of the Act. We, therefore, quash the impugned proceedings carried out under section 263 of the Act and hold that assessment order under section 143(3) of the Act dated 13.12.2018 is neither Printed from counselvise.com 15 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. erroneous nor prejudicial to the revenue and thus deserves to be restored. Thus the grounds of appeal filed by the assessee are allowed. 31. In the result, the appeal of the assessee is allowed.”  Hon’ble ITAT, Chandigarh in the case of Sbs Biotech Unit Ii, Sirmour vs Principal Commissioner of Income dated 25-02-2025 [ITA NO. 413/Chd/2024], held as under: “48. In the entirety of facts and circumstances of the case, it is our considered opinion that the Assessing officer, after calling for required information/documentation and after duly considering the explanations and documentation submitted before him, reached a rightful conclusion that the assessee is eligible for claim of 100% deduction u/s 80IC of the Act for the impugned assessment year 2017-18. In our view, such a view is clearly a plausible view which a reasonable and prudent officer could have taken and in absence of any further enquiry conducted by the ld PCIT and merely for the purposes of re-verification and re-examination of claim so allowed, the view so taken and order so passed by the Assessing officer cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue and the exercise of revisional jurisdiction by the Ld. PCIT u/s 2263 cannot be sustained in the eyes of law. The order so passed by the ld PCIT is therefore set-aside and that of the AO is sustained. 49. In the result, the appeal of the assessee is allowed.”  Hon’ble Kolkata High Court in the case of CIT Vs Mukul Kumar reported in 2009(4) P.L.J.R. 417 “(10) On going through the statement of the case and other relevant materials this Court finds that the Income Tax Appellate Tribunal set aside the order of the Commissioner under section 263 of the Act on appreciation of a pure question of fact that the Assessing Officer had undertaken and held reasonable enquiry by calling for explanations from the assessee and in view of such finding it interfered with the order of Commissioner who had erroneously come to a finding that no enquiry was held by the Assessing officer. Thus, there being materials on record to show that enquiry was made regarding the expenditure claimed, this Court is of the view that the Income Tax Appellate Tribunal was justified in quashing the order of the Commissioner. The reference is answered accordingly”.  Hon’ble Bombay High Court in the case of Commissioner of Income-Tax vs Gabriel India Ltd. on 15 April, 1993 [1993]203ITR108(BOM) “15. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The Printed from counselvise.com 16 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be \"erroneous\" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re- examine the matter. That, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order. We do not find any infirmity in the above conclusion of the Tribunal. 16. In the light of the foregoing discussion, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the Revenue.”  Hon’ble Allahabad High Court in the case of M/S Meerut Roller Flour Mills Pvt. Ltd vs The Commissioner Of Income Tax And ... on 14 August, 2019 [INCOME TAX APPEAL No. - 223 of 2013], held as under: 21. It is clear that after the notice was issued by the Assessing Officer raising 28 queries from the assessee, which was also replied by him along with the documentary evidence in regard to each of the query, thus the assessment order passed under Section 143(3) of the Act would not render the same as erroneous and prejudicial to the interest of Revenue, unless the Commissioner exercising power under Section 263 brings on record to show that the order of the Assessing Officer is erroneous, as the same was passed without application of mind or the Assessing Officer had made an incorrect assessment of fact or incorrect application of law, but the same not being the case, and the CIT relying upon the reply and the documentary evidence submitted by the assessee granted partial relief, as such the order dated 09.02.2012 passed under Section 263 relegating back the matter to the Assessing Officer as regards unsecured loans and creditors is unsustainable. 22. Having examined the matter at length on facts as well as on the law, we are of the considered opinion that in the present case, it is abundantly clear that the order passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue. Printed from counselvise.com 17 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 23. In view of the above, the order dated 02.04.2013 passed by the Income Tax Appellate Tribunal, Delhi Bench \"E\" New Delhi and revisional order dated 09.02.2012 passed by Commissioner Income Tax, Meerut under Section 263 are set aside. 24. The question of law is therefore answered in favour of the assessee and against the Revenue. The appeal stands allowed.  Hon’ble Calcutta High Court in the case of Commissioner of Income-Tax vs Hastings Properties on 3 August, 2001 [253ITR124], held as under: “16. In view of the aforesaid facts it cannot be said that the findings of the Tribunal are unreasonable or perverse when the assessment orders were made after due verification and under the supervision of the Commissioner of Income-tax (Vigilance) and all relevant materials has been collected by the Assessing Officer. The assessment orders cannot be said to be erroneous and prejudicial to the interests of the Revenue. Thus we found no infirmity in the order of the Income-tax Officer. 17. In the result, we answer question No. 1 in the affirmative, that is, in favour of the assessee and against the Revenue. We answer question No. 2 in the negative, that is, also, in favour of the assessee and against the Revenue.” 3.7. Although the agreement to sell is sufficient proof of purchase for the purposes of Section 54F, as recognized by several judicial precedents, the appellant also submitted the registered sale deed in response to the audit objection, further substantiating the claim. 3.8. All documents relevant to the claim under Section 54F were submitted to the department, either during assessment or subsequently during audit objection. There is no concealment or suppression of facts. It is an admitted fact that all the required documents were furnished during the assessment proceedings, accordingly there remains no question of any further inquiry in this regard. Denying the exemption and treating the assessment order as prejudicial to the interests of the Revenue, despite full disclosure and inquiry, is not justified. 3.9. In view of above facts, it is clear that the order is neither erroneous nor prejudicial to the interests of the Revenue. Accordingly, the invocation of Section 263 is unwarranted and deserves to be quashed.” 8. The AR of the assessee submitted that the appellant sold an immovable property situated at Khasra No. 105, Land No. 58, Tilak Colony, Gram Khedli, for Printed from counselvise.com 18 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. a total sale consideration of Rs. 57,00,000/- and claimed exemption under Section 54F of the Act, in respect of the entire capital gain arising from this transaction. The entire sale consideration of Rs. 57,00,000/- (Rs. 51,50,000 against purchase of new property and Rs. 5,50,000/- against cost of improvement of new property) was invested, before the due date of return filing, in the purchase of Residential House No. 19, Jaihind Nagar Ist, Gram Rampura, Baran Road, Tehsil Ladpura, Kota. Hence, full exemption under Section 54F has been claimed. 9. In support of cost of Rs. 5,50,000/- incurred towards improvement of the property, the AR of the assessee invited our attention to the finding of the ld. AO in point no. 3 at page 2 of the assessment order where the ld. AO stated that “Further, on25.05.2015 the assessee has purchased new property at Rs.51,50,000/-. The copy of purchase deed enclosed for verification the same investment made by him. He has also made investment for improvement in new property and claimed cost of improvement of Rs.5,50,000/- for which assessee filed confirmation from contractor which is place in record. For verification of all above mentioned transactions, necessary documents received and placed in assessment record. Hence, the ld. AR of the assessee submitted that evidence in the form of confirmation, duly signed by the contractor, with respect to cost of improvement of Printed from counselvise.com 19 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. Rs. 5,50,000/- is also submitted before the Ld. AO which was duly acknowledged by the ld. 10. The AR of the assessee also submitted that during the assessment proceedings the assessee has produced all the relevant documents viz notarized agreement to sell, proof of payment and confirmation of contractors for cost of improvement in support of the claim of deduction under section 54F which was duly examined and verified by the AO and only when the AO was satisfied with the claim of assessee, the assessment order was passed accepting the returned income. 11. The ld. AR of the assessee also stated that the assessee, in response to audit objection raised by the ld. AO, submitted copy of the registered deed of the house to the ld. AO. 12. The ld. AR of the assessee also filed a detailed paper book in support of the contentions so raised in the written submission. Therefore, the AR of the assessee objected to the invoking of the provisions of section 263 by the ld. PCIT since the assessment order is not erroneous and prejudicial to the interests of the revenue. 13. Per contra, the ld. DR relied upon the order of the ld. PCIT. Printed from counselvise.com 20 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 14. We have heard the rival contentions, perused the material placed on record and gone through the judicial precedent cited by both the parties to drive home their respective contentions. The bench noted that the case of the assessee was opened u/s 147 of the Act based on the information flagged by the CBDT's Risk Management Strategy mainly on the issues consist of receipt of sale consideration on sale of immovable property amounting to Rs. 57,00,000/- and since the assessee was a non-filer of return of income for the year under consideration, the transaction remained unexamined. The assessment was completed on 25.03.2023 u/s 147 of the Act after considering the explanation/ documents of the assessee and the returned income filed by the assessee. 15. After the assessment the ld. PCIT on examination of the case record taken a view that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue by observing the following: “(e) Therefore, the AO was not justified and correct in accepting the assessee's contentions in respect of the Deduction so claimed u/s 54Fof the Act amounting to Rs.56,12,3961- as the same were not supported by documentary evidences. As such, the Deductions soclaimed by the assessee u/s 54F of the Act were liable to be disallowed and added back to the total income of the assessee for the AY 2015-16. However, the AO, vide the assessment order uls 147dated 25.03.2023, failed to do so. … 6. Considering the above facts, it is held that the order passed by the AssessingOfficer uls 147 of the Act dated 25.03.2023 is suffering from specific defects, hence,order so passed by the AO is erroneous and also prejudicial to the interest of therevenue. The order of the assessing officer is therefore, liable to revision underclause (a) & (b) of the Explanation (2) of section 263 of the lncome Tax Act, 1961.” Printed from counselvise.com 21 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 16. Thus, it is clear from the order passed by the ld. PCIT that the ld. PCIT has invoked the provisions of section 263 on the issue of allowability of deduction under section 54F in respect of the investment made by the assessee.Further, the ld. PCIT has alleged that the ld. AO has omitted to substantiate the claim of exemption by the assessee with any documentary evidence except the sale of agreement during the assessment proceedings. Hence, the order is erroneous and prejudicial to the interest of the revenue. 17. However, on perusal of the order of the ld. AO, we find that the assessee has submitted agreement to sell, proof of payments, and details of the cost of improvement along with confirmation of the contractors before the Ld.AO. Further the assessee also subsequently submitted copy of registry in support of the claim of exemption. Further, it is also coming from the assessment order that ld. AO has conducted adequate enquiry before allowing the claim of exemption u/s 54F to the assessee. Thus, once the ld. AO has conducted a proper enquiry and examined all the details and evidences connected with the claim of deduction u/s 54F and did not find any defect/ deficiency in the documents submitted, we don’t see any reason of terming the assessment order as erroneous and prejudicial to the interest of the revenue. Printed from counselvise.com 22 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 18. Further, the ld. PCIT herself in order passed u/s 263 admitted that the assessee has submitted agreement to sell dated 28.05.2015 during the assessment proceedings regarding the purchase of house wherein it was mentioned that house will be made registered in the name of the assessee. It is a settled law that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. In this regard, we draw strength from the following decisions:-  Hon’ble Supreme Court in the case of Sanjeev Lal Etc Vs CIT [Civil Appeal Nos.5899-5900 of 2014], dated 01.07.2014: “20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of theagreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word \"transfer\" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word \"transfer\" is as under: '2(47) \"transfer\", in relation to a capital asset, includes,- (ii) xxxx xxxx (ii) the extinguishment of any rights therein; or......' 21. Printed from counselvise.com 23 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. Now in the light of definition of \"transfer\" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset.“  Hon’ble High Court of Gujarat in the case of Kishorbhai Harjibhai Patel Vs. Income Tax Officer dated 08.07.2019 [R/TAX APPEAL NO. 1378 of 2018] confirmed the principles laid down by Hon’ble Apex Court in Sanjeevlal (supra) and held as under: “28. Thus, in view of the aforesaid discussion, we are of the opinion that the Appellate Tribunal was not right in law in confirming the order of the CIT(A) denying the deduction under Section 54F of the Act on the premise that the land in question was not transferred within the stipulated period as provided under Section 54F of the Act. 29. Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Supreme Court in the case of CCE v. Favourite Industries, [2012]7 SCC 153, has succinctly observed thus : … 42. So far as the question no.1 is concerned, the same is answered in favour of the assessee and against the Revenue.” Thus, considering the facts of the case, assessment order, documents submitted during assessment proceedings and above decision, we find the contention of the ld. PCIT to be invalid under the current case. 19. Furthermore, the law does not permit the PCIT to review the order of the ld. AO except the twin condition given in the section 263 is satisfied. The bench note that the prerequisite exercise of jurisdiction by the ld. PCIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The ld. PCIT has to be satisfied of twin Printed from counselvise.com 24 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any or both conditions are absent provision of section 263 cannot be invoked. 20. We noted that the ld. AO recorded his satisfaction in the assessment order and after examination of the details has passed the order which we would find that the same is in accordance with the law and does not attract the clause (a) or (b) to explanation 2 of section 263 of the Act. 21. In the light of the aforesaid discussion we hold that the order of the PCIT is not in accordance with the provisions of section 263 of the Act. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 08/09/2025. Sd/- Sd/- ¼ xxu xks;y ½ ¼MkWa-,l-lhrky{eh½ (Gagan Goyal) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 08/09/2025. *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant-Giriraj Prasad, Kota. 2. izR;FkhZ@The Respondent-ITO, Ward-Bundi, Bundi. Printed from counselvise.com 25 ITA No. 603/JPR/2025 Giriraj Prasad, Kota. 3. vk;dj vk;qDr@CIT 4. vk;dj vk;qDr@CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@Guard File {ITA No. 603/JPR/2025} vkns'kkuqlkj@By order, lgk;d iathdkj@Asst. Registrar Printed from counselvise.com "