HARI L.MUNDRA, MUMBAI V. CIT 5, MUMBAI

ITA 1122/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88466 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDERJEET SINGH
• Keywords: Revision of order; Assessment record
• Section: 143(3); 54; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . . , !'#$ , % &' 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, A-61, TWIN TOWERS, OFF VEER SAVARKAR MARG, PRABHADEVI, MUMBAI THE COMMISSIONER OF INCOME-TAX, CIRCLE-5, AAYAKAR BHAVAN, MUMBAI-400 020 ') % ./ *+ ./PAN/GIR NO. :AAHPM 7832R ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI VIJAY MEHTA -.), 0 / /RESPONDENT BY : SHRI SURINDERJEET SINGH 0 12% / DATE OF HEARING :26.02.2015 34( 0 12% / DATE OF PRONOUNCEMENT :26.02.2015 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS IS AN APPEAL BY THE ASSESSEE PREFERRED AGAINS T THE ORDER OF THE CIT-5, MUMBAI MADE U/S. 263 OF THE ACT DT. 31.12.20 13. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT ERRED ON THE FACTS HOLDING THAT THE AO HAS NOT APPLIED HIS MIND WHILE PASSING THE ASSESSMENT ORDER AND THEREFORE THE ORDER IS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO.1122/M/2014 2 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, INT EREST, 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. TH E REASONS FOR THE PROPOSED REVISION READ AS UNDER: ON VERIFICATION OF ASSESSMENT RECORDS, THE FOLLOW ING FACTS ARE NOTICED: (I) THAT THE ASSESSEE HAS ENTERED INTO AGREEMENT F OR SALE WITH M/S MACROTECH CONSTRUCTIONS P LTD TO ACQUIRE A PREMISES SITUATED AT 1001, 10TH FLOOR, LODHA BELLIS SIMO, 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 FLA TS ALONGWITH PARKING SPACE IN OCTOBER 2008 RESULTING I N LONG TERM CAPITAL GAIN OF RS.2,08,02.540/- (WITH INDEXAT ION BENEFIT). HE CLAIMED THE SAID LONG TERM CAPITAL GA IN 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 ASSESS EE HAD TO PAY RS.39,59,550/- AT THE TIME OF BOOKING ON OR BEF ORE 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 D ATE OF ITA NO.1122/M/2014 3 SALE/TRANSFER OF TWO RESIDENTIAL FLATS AND THE ASSE SSEE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF FLAT IN J ANUARY 2007 AND REGISTERED ON 07/03/2007. HOWEVER, THE ASS ESSEE HAS TAKEN THE POSSESSION OF THE SAID FLAT ON 13/05/ 2011. FOR CLAIM OF EXEMPTION U/S 54, THE ASSESSEE HAS TO PURC HASE NEW ASSET WITHIN ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF LONG TERM CAPITAL GAIN OR IN THE CASE OF CONSTRUCTI ON 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 TRANSFE R AND BEYOND ONE YEAR AS PRESCRIBED IN SECTION 54 OF THE ACT. IN VIEW OF THE ABOVE FACTS, IT IS OBSERVED THAT THE AS SESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 54 OF THE ACT IN RESPEC T 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 A PPLY IN THE CASE OF THE ASSESSEE, SINCE THE PROPERTY WAS CONSTRUCTED AND TH EREFORE 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 EXEMPTI ON 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 O F 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 L D. CIT PROCEEDED BY SETTING ASIDE THE ASSESSMENT ORDER AND DIRECTING TH E AO TO DECIDE THE ISSUE BY FRESH ASSESSMENT. ITA NO.1122/M/2014 4 6. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE REPLIES FILED DURING THE ASSESSMENT PROCEEDINGS. IT IS THE SAY OF THE LD. COUNSEL THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S ITSELF, THE AO HAS CALLED FOR THE NECESSARY INFORMATION RELATING TO TH E CLAIM OF EXEMPTION U/S. 54 OF THE ACT AND AFTER THOROUGHLY EXAMINING T HE 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 SUBMISSIO NS AND PERUSED THE ASSESSMENT ORDER AND THE ORDER OF THE LEARNED C OMMISSIONER. THE FIRST THING WHICH HAS TO BE CONSIDERED IS WHETHER T HE LEARNED COMMISSIONER HAS RIGHTLY ASSUMED THE POWER UNDER SE CTION 263 OF THE ACT. THE HONBLE SUPREME COURT IN MALABAR INDUSTR IAL CO. LTD. 243 ITR 83 HAS LAID DOWN THE FOLLOWING RATIO:- A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCI SE 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 B E SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSES SING 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 PREJ UDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIA L 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 ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ITA NO.1122/M/2014 5 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 O F THE ACT, THERE IS NO ADVERSE FINDING WHICH MEANS THAT THE AO HAS ALLO WED THE DEDUCTION U/S. 54 OF THE ACT AS PER THE PROVISIONS OF THE LA W. 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 TAK EN BY THE AO IS A LOSS TO THE REVENUE BUT THE HONBLE SUPREME COURT I N 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 O F THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER H AS 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 I NTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. ITA NO.1122/M/2014 6 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 T HE JUDICIAL DECISIONS DISCUSSED HEREINABOVE, IN OUR UNDERSTANDI NG OF LAW, THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICI AL TO THE INTEREST OF THE REVENUE. WE, THEREFORE, SET ASIDE THE IMPUGNED ORD ER PASSED BY THE LD. COMMISSIONER U/S. 263 AND RESTORE THAT OF THE ASSES SING OFFICER PASSED U/S. 143(3) OF THE ACT. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. . &5 0 4( % 6 7&8 26.2.2015 4 0 9 ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 26 TH FEBRUARY, 2015. SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 26 TH FEBRUARY, 2015 . . ./ RJ , SR. PS ITA NO.1122/M/2014 7 &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI