Smt. Harpreet Kaur, Mohali V. CIT II, Chandigarh

ITA 293/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90156 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARICIT
• Keywords: Unexplained investment; Capital asset; Opportunity of being heard; Difference of opinion; Assessment record; Benefit of exemption; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 54F; 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 293/CHD/2014 (ASSESSMENT YEAR : 2009-10) SMT.HARPREET KAUR, VS. THE CIT-II, #1610, SECTOR 79, CHANDIGARH. MOHALI. PAN: AAWPK4507E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SMT.JYOTI KUMARI,CIT DR DATE OF HEARING : 27.05.2015 DATE OF PRONOUNCEMENT : 03.06.2015 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX-II, CHANDIGARH DATED 5.2.2014 FOR ASSESSMENT YEAR 2009- 10, CHALLENGING THE ORDER UNDER SECTION 263 OF THE INCO ME TAX ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR UNDER AP PEAL I.E. 2009-10 ON 31.7.2009 DECLARING TAXABLE INCOME OF RS.31,66,210/- CONSISTING OF CAPITAL GAINS AND INCO ME FROM 2 OTHER SOURCES. THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY. THE ASSESSING OFFICER ISSUED STATUTORY NOTICE TO THE ASSESSEE ALONGWITH QUESTIONNAIRE AND THE ASSESS EE FURNISHED DETAILS/INFORMATION CALLED FOR BY THE ASS ESSING OFFICER. THE ASSESSING OFFICER NOTED THAT THE ASS ESSEE DERIVED LONG TERM CAPITAL GAINS AND INCOME FROM OTH ER SOURCES. THE ASSESSEE ALSO INVESTED PART OF CAPIT AL GAINS IN ACCORDANCE WITH SECTION 54 OF THE ACT. THE DETAIL S FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE EX AMINED BY THE ASSESSING OFFICER AND AFTER MAKING INVESTIGA TION AND ENQUIRIES THE ASSESSING OFFICER NOTED THAT THE ASSE SSEE SOLD FARM HOUSE DURING THE YEAR. THE PROPERTY WAS ACQU IRED BY THE ASSESSEE DURING THE YEAR 1996-97. THE ASSESSE E HAS CLAIMED BENEFIT OF INDEXATION ON EXPENSES INCURRED FOR THE CONSTRUCTION WORK CARRIED OUT IN THE YEARS 1997-98 AND 1998- 99. THE ASSESSEE WAS ASKED TO FURNISH THE EVIDENC E OF INCURRING EXPENSES ON CONSTRUCTION OF FARM HOUSE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE CONSTRUCTION WAS INCURRED WAY BACK IN 1997-98 AND 1998-99 AND IT IS NOT POSSI BLE TO PROVIDE THE REQUISITE EVIDENCE OF EXPENSES AT THE S TAGE. THE LEARNED COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN SHOWING RENTAL INCOME FROM THIS P ROPERTY REGULARLY IN THE RETURN OF INCOME AND, THEREFORE, T HE COST OF CONSTRUCTION MAY BE ACCEPTED. THE ASSESSING OFFIC ER AFTER DETAILED DISCUSSION WITH THE LEARNED COUNSEL FOR AS SESSEE NOTED THAT THE ASSESSEE AGREED FOR ADDITION OF RS.2 LACS TO THE LONG TERM CAPITAL GAINS TO COVER UP ANY DISCREPANCY ON ACCOUNT OF COST OF CONSTRUCTION SHOWN BY THE ASSESS EE. THE 3 ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.2 LACS TOWARDS LONG TERM CAPITAL GAINS AND AFTER EXAMINING THE DETAILS ACCEPTED THE CLAIM OF THE ASSESSEE BY MAKIN G PART ADDITION ON THE SAME ISSUE. 3. THE LEARNED COMMISSIONER OF INCOME TAX-II, CHANDIGARH, HOWEVER, ISSUED A SHOW CAUSE NOTICE DAT ED 10.1.2014 UNDER SECTION 263 OF THE ACT (PB-60) INTI MATING THE ASSESSEE THAT AS PER RECORD THE ASSESSEE HAS SOLD F ARM HOUSE ON 24.10.2008 FOR TOTAL SALE CONSIDERATION OF RS.4, 10,00,000/- ON 22.10.2008 AND DECLARED LONG TERM CAPITAL GAINS OF RS.3,70,43,706/- THE DETAIL IS REPRODUCED IN THE NOTICE. IT WAS FURTHER NOTED THAT OUT OF THE ABOVE DECLARED LO NG TERM CAPITAL GAINS OF RS.3,70,43,706/-, THE ASSESSEE HAS CLAIMED BENEFIT OF EXEMPTION UNDER SECTION 54 OF THE ACT TO THE TUNE OF RS.3,56,96,300/-, WHEREAS THE ASSESSEE HAD PURCHASE D HOUSE NO.54, SECTOR 69, MOHALI FOR CONSIDERATION OF RS.1,65,00,000/- ON 18.6.2009 AND INCURRED EXPENSES OF RS.9,80,000/- ON STAMP DUTY. FURTHER THE ASSESSEE ALSO PURCHASED A 12 MARLA PLOT NO.1610, SECTOR 79, MOHAL I FOR CONSIDERATION OF RS.69,00,000/- ON 23.7.2009 AND S PENT RS.10,82,812/- FOR RE-ALLOTMENT OF THE SAME FROM GA MADA. IT WAS, THEREFORE, NOTED THAT OVERALL THE ASSESSEE CLAIMED WRONG EXEMPTION OF RS.3,56,96,300/- AGAINST THE TOT AL INVESTMENT OF RS.2,54,62,812/- UNDER SECTION 54 OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX ALSO NOTED I N THE SHOW CAUSE NOTICE THAT THE ASSESSEE HAD SOLD FARM H OUSE, THEREFORE, CANNOT CLAIM DEDUCTION UNDER SECTION 54 OF THE ACT 4 AND FURTHER THE ASSESSEE IS NOT ENTITLED FOR DEDUCT ION UNDER SECTION 54F OF THE ACT BECAUSE OF THE PROVISO PROVI DED IN THE ABOVE SECTION 54F OF THE ACT. IT WAS FURTHER NOTE D IN THE NOTICE THAT THE ASSESSEE HAD FAILED TO PROVIDE ANY PROOF IN RESPECT OF THE AMOUNT TO THE TUNE OF RS.8,70,000/- CLAIMED TO HAVE BEEN INCURRED ON TRANSFER EXPENSES IN RESPECT OF SALE OF PROPERTY. IT WAS ALSO SEEN THAT THE ASSESSEE FAIL ED TO PROVIDE THE CORROBORATIVE EVIDENCE JUSTIFYING THE CLAIM OF HAVING INCURRED RS.4,50,000/- AND RS.12,00,000/- IN FINANC IAL YEARS 1997-98 AND 1998-99 RESPECTIVELY FOR CONSTRUCTION P URPOSES UNDER THE HEAD CONSTRUCTION COST. IT WAS ALSO N OTED THAT NO DOCUMENTARY EVIDENCE WAS CALLED FOR BY THE ASSES SING OFFICER IN RESPECT OF THE CARRY FORWARD LONG TERM C APITAL LOSS OF RS.23,057/- PERTAINING TO ASSESSMENT YEAR 2005-0 6. IN VIEW OF THE ABOVE FACTS, THE LEARNED COMMISSIONER O F INCOME TAX HELD THAT THE ASSESSMENT FRAMED UNDER SECTION 1 43(3) ON 27.5.2011 IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE EXPLANATION OF THE ASSESSEE WAS CALLED FOR. THE ASSESSEE IN RESPONSE TO THIS NOTICE FILED REPLY ON 29.1.2014, WHICH IS REPRODUCED IN THE IMPU GNED ORDER HIGHLIGHTING ALL THE FACTS TO CHALLENGE THAT THE REVISION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT ARE NOT CALLED FOR AND THE MATTER MAY BE DROPPED. THE ASSESSEE RELIE D UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION. W E WOULD DEAL WITH THE REPLY OF THE ASSESSEE LATER ON IN THI S ORDER. THE LEARNED COMMISSIONER OF INCOME TAX, HOWEVER, WAS NO T SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND CANCELLED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE AC T DATED 5 27.5.2011 AND DIRECTED THE ASSESSING OFFICER TO PAS S ASSESSMENT ORDER AFRESH AFTER MAKING NECESSARY ENQU IRIES IN ACCORDANCE WITH LAW BY GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE FINDINGS OF THE LEARNED COMMISS IONER OF INCOME TAX IN PARAS 3 TO 6 OF HIS ORDER ARE REPRODU CED AS UNDER : 3. REPLIES OF THE ASSESSEE HAVE BEEN CONSIDERE D. HOWEVER, THE SAME ARE NOT ACCEPTABLE IN VIEW OF THE F OLLOWING REASONS: - 3.1 NO SUPPORTING DOCUMENTS HAVE BEEN ATTACHED TO THE A BOVE REPLY. 3.2 AS PER REGISTERED SALE DEED DATED 17.10.2008, TH E TYPE OF LAND SOLD IS GAIRMUMKIN SHED WHEREAS ASSESSEE IS CLAIMING IT TO BE A RESIDENTIAL HOUSE. AS NO DOCUMENT HAS BEEN FURNISHED BY THE ASSESSEE IN RESPECT TO HIS CLAIM OF T HE PROPERTY SOLD BEING A RESIDENTIAL HOUSE, SO HIS CLA IM REMAINS UNSUBSTANTIAL AND THUS HE HAS BEEN UNABLE TO PROVE THAT WHAT IS APPARENT (A SHED AS PER REGISTERED SALE DEED) IS NOT THE REAL. FOR CLAIMING EXEMPTION U/S 54, THE ASSETS SOL D MUST BE RESIDENTIAL HOUSE AND THUS THE ORDER PASSED U/ S 143(3) BY THE ASSESSING OFFICER ALLOWING EXEMPTION U/S 54 TO THE ASSESSEE IS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE. 3.3 NOT WITHSTANDING THE ABOVE, THOUGH THE ASSESSE E HAS CLAIMED VIDE PARA 2(B) OF HIS REPLY THAT HE HAS INV ESTED RS.1,00,00,000/- IN THE FDR UNDER CAPITAL GAIN SCH EME BUT THERE IS NO DOCUMENTARY EVIDENCE ON THE ASSESSMENT RECORD AND THE ASSESSEE HAS ALSO NOT SUBMITTED NOW ANY PRO OF OF THE AMOUNT OF RS.1,00,00,000/- INVESTED IN THE CAP ITAL GAINS ACCOUNT. SO, THIS PLEA OF THE ASSESSEE HAS ALSO REMAINED UNSUBSTANTIATED BY HIM. 3.4 THE ASSESSEE, VIDE PARA 2(C) OF HIS REPLY HAS AGAIN SUBMITTED THAT AMOUNT OF RS.8,70,000/- WAS GIVEN TO ONE SHRI KESAR SINGH THROUGH BANK ON 07.11.2008. BUT THERE IS STILL NO DOCUMENT ON RECOR D TO PROVE THE GENUINENESS OF THIS CLAIM AS ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE REGARDING RENDERING OF ANY SERVICE BY THE SAID PERSON OR EVEN OF ANY INVOLVEMENT OF THIS PERSON IN ANY MANNER FOR SA LE OF THE SAID PROPERTY DURING ASSESSMENT PROCEEDINGS AS WELL AS IN REPLY TO THIS SHOW CAUSE. 3.5 THE ASSESSEE, VIDE PARA 2(D) OF HIS REPLY, HAS CLAIMED THAT EXPENSES IN THE CONSTRUCTION WAS MADE OF RS.4,50,000/- AND OF RS.12,00,000/- IN F.Y. 1997 - 98 AND F.Y 1998-99 RESPECTIVELY AND ASSESSEE COULD NOT SAVE THE VOUCHERS/BILLS AFTER THE SALE OF THE S AID HOUSE. AGAIN THE FACTS ON RECORD SUGGEST THAT NO 6 CONSTRUCTION HAS TAKEN PLACE AS IS EVIDENT FROM ENT RIES IN PURCHASE AS WELL AS SALE DEED OF THIS PROPERTY WHERE TYPE OF LAND HAS BEEN MENTIONED AS GAIRMUMKI N SHED. THEREFORE, ONLY A SHED EXISTED AT THE TIME O F PURCHASE AS WELL AS SALE OF THE ALLEGED LAND/FARMHOUSE. IN VIEW OF THE ABOVE, THE CLAIM OF THE ASSESEE THAT THIS ISSUE WAS EXPLAINED BY HIM AND GO T EXAMINED BY THE ASSESSING OFFICER IS CONTRARY TO FA CTS ON RECORD AND ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO THAT WHAT IS APPARENT IS NOT THE REAL A ND ASSESSING OFFICER HAS ALSO FAILED TO EXAMINE THE IS SUE PROPERLY. 3.6 THOUGH THE ASSESEE CLAIMED THAT LONG TERM CAP ITAL LOSS WAS DECLARED IN HER RETURN FOR A.Y. 2005-06 BU T THERE IS NO DOCUMENT IN ASSESSMENT RECORD OR SUBMITTED BY THE ASSESSEE NOW TO SUPPORT HIS CLAIM/SUBMISSION. 3.7 THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE TRANSACTIONS DISCUSSED IN THE FOREGOING PARAGRAPHS SO MUCH SO THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD THE BANK ACCOUNTS INVOLVED IN THESE TRANSACTIONS. FROM THE AFORESAID, IT IS ALSO CLEAR THAT THE ASSES SING OFFICER HAS FAILED TO CONDUCT THE ENQUIRIES EMANATI NG FROM THE MATERIAL AND ISSUES BEFORE HIM WHICH WERE NECESSARY FOR THE ASSESSMENT. 3.8 THE ASSESSEE HAS RELIED UPON THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD. VS CIT (SC) 243 1TR 83. HE HAS INTER-ALIA , MENTIONED THAT WHERE TWO VIEWS ARE POSSIBLE AND TH E ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE. IT CANNOT BE TREATED AS AN ERRONEOU S ORDER PREJUDICIAL TO THE INTEREST OF REVENUE. HOWE VER, IT IS SEEN THAT NO VIEW WAS TAKEN BY THE ASSESSING OFF ICER ON THE ISSUE AS DETAILED ABOVE DURING THE ASSESSMENT PROCEEDINGS. THE FACT REMAINS THAT THE ASSESSING OFFICER FAILED TO MAKE INQUIRIES NECESSAR Y FOR MAKING A PROPER ASSESSMENT. FURTHER, THE ASSESSEE HAS MENTIONED THAT THE HON'BLE SUPREME COURT HAS ALSO HELD THAT THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASSED BY THE I TO WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSESSMENTS. THE ASSESSEES CONTENTION IS MISPLACED. THE HON'BLE SUPREME COURT IN THIS CASE (SUPRA) HAS RATHER OBSERVED THAT IN OUR VIEW, THIS INTERPRETATION IS TOO NARROW TO MERIT ACCEPTANCE. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVE NUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ASSESSEE HAS ALSO STATED THAT IT IS THEREFORE MOST RESPECTFULLY PRAYED THAT THE NOTICE ISSUED UNDER SE CTION 263 DOES NOT FULFILL THE REQUISITES ATTACHED TO IT AND 7 THEREFORE BE VACATED IN THE INTEREST OF JUSTICE. T HE ASSESSEES CONTENTION IS NOT CORRECT BECAUSE THE ASSESSING OFFICER HAS NOT MADE ENQUIRY ON THE VARIO US ISSUES AS DETAILED IN THE NOTICE DATED 10.01.2014. HENCE, THE ORDER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. SIMILAR VIEW WAS TAKEN BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SWARUP VEGETABLE PRODUCTS INDUSTRIES LIMITED VS COMMISSION ER OF INCOME TAX (1990) 187 ITR 412 WHERE IT WAS HELD THA T IT IS BEYOND DISPUTE THAT, UNDER SECTION 263 OF THE INCOM E-TAX ACT, THE COMMISSIONER DOES HAVE THE POWER TO SET AS IDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR A FRES H ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY, AND THAT THE ORDER OF THE INCOME-TAX OFF ICER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 4. OTHER CASE LAWS AS REFERRED TO BY THE ASSESSEE IN HIS REPLY ARE DISTINGUISHABLE ON THE FACTS OF THE CASE AND SAME ARE NOT DISCUSSED HERE AGAIN FOR THE SIMPLE REASON THAT THE ASSESSEE HAS NOT EVEN BROUGHT ON RE CORD THE NECESSARY EVIDENCES IN SUPPORT OF HIS CLAIMS/EXPLANATIONS EITHER BEFORE THE AO OR BEFORE THE UNDERSIGNED AS DISCUSSED ABOVE. 5. THE EXPLANATION OF THE ASSESSEE COULD, THEREFOR E, NOT BE SAID TO BE SATISFACTORY AS HELD BY THE HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LAL CHAND TIRATH RAM 225 ITR 675 THAT MERE OFFERING EXPLANATI ON IS NOT SUFFICIENT; EXPLANATION IS TO BE SUBSTANTIATED BY COGENT AND RELIANCE EVIDENCES. 6. IN VIEW OF THE ABOVE, IT IS HELD THAT THE SAID ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS PREJUDIC IAL TO THE INTEREST OF REVENUE FOR THE REASONS MENTIONED A BOVE. ACCORDINGLY, THE ASSESSMENT ORDER U/S 143(3) DATED 27.05.2011 IS CANCELLED WITH A DIRECTION TO THE ASS ESSING OFFICER TO PASS AN ORDER AFRESH AFTER MAKING NECESS ARY ENQUIRIES IN ACCORDANCE WITH LAW KEEPING IN VIEW TH E ABOVE OBSERVATIONS AND ALLOWING OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. 4. THE ASSESSEE FEELING AGGRIEVED AGAINST THE IMPU GNED ORDER UNDER SECTION 263 OF THE ACT FILED THE PRESEN T APPEAL. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED D.R FOR THE REVENUE PRODUCED ASSESSMENT RECORD AS W ELL AS REVISION FOLDER OF COMMISSIONER OF INCOME TAX UNDER SECTION 8 263 OF THE ACT AND ALSO PLACED ON RECORD COPIES OF THE ORDER- SHEET OF THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. THE LEARNED COUN SEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE TH E LEARNED COMMISSIONER OF INCOME TAX AND ALSO REFERRED TO VAR IOUS DOCUMENTS AND REPLIES FILED BEFORE THE ASSESSING OF FICER AND SUBMITTED THAT THE ASSESSING OFFICER AFTER MAKING D ETAILED ENQUIRIES ON THE ISSUE OF LONG TERM CAPITAL GAINS C ORRECTLY ACCEPTED THE CLAIM OF THE ASSESSEE UNDER SECTION 54 OF THE ACT AND MADE PART ADDITION. THEREFORE, THE LEARNED COM MISSIONER OF INCOME TAX SHOULD NOT HAVE REVISED THE ASSESSMEN T ORDER. THE LEARNED COUNSEL FOR ASSESSEE REFERRED TO VARIOU S DETAILS AND REPLIES PLACED ON THE PAPER BOOK AND ALSO FILED COPY OF ACKNOWLEDGEMENT OF FILING OF THE RETURNS OF INCOME ALONGWITH COMPUTATION OF INCOME OF EARLIER YEARS IN SUPPORT O F THE CONTENTION. THE LEARNED COUNSEL FOR ASSESSEE ALSO SUBMITTED THAT THE ISSUE OF TWO PROPERTIES PURCHASED BY THE A SSESSEE WAS NOT RAISED IN SHOW CAUSE NOTICE ISSUED BY THE L EARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT AND NO FINDINGS HAVE ALSO BEEN RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX. THEREFORE, SUCH ISSUE CANNOT BE RAISED BY THE LEARNED D.R FOR THE REVENUE DURING THE COURSE OF ARGUMENTS. THE LEARNED COUNSEL FOR ASSE SSEE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME T AX MERELY RAISED THE ISSUE OF DIFFERENCE OF RS.1 CRORE , WHICH WAS INVESTED UNDER CAPITAL GAIN SCHEME, FOR WHICH PROPE R EVIDENCE WAS FILED BEFORE THE ASSESSING OFFICER AND WAS ALSO EXPLAINED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX. 9 THEREFORE, THE ASSESSMENT ORDER COULD NOT BE SAID T O BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6. ON THE OTHER HAND, THE LEARNED D.R FOR THE REVE NUE RELIED UPON THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT AND SUBMITTED THAT THE ASSESSEE HAS SOLD ONLY THE F ARM HOUSE, WHICH IS NOT SUBSTANTIATED BECAUSE THE SALE DEED CO NTAINED GAIRMUMKIN SHED. THEREFORE, IT CANNOT BE TREATED AS RESIDENTIAL HOUSE AND AS SUCH, THE ASSESSEE WOULD N OT BE ENTITLED FOR EXEMPTION UNDER SECTION 54 OF THE ACT. THE LEARNED D.R FOR THE REVENUE ALSO SUBMITTED THAT SIN CE THE ASSESSEE HAS PURCHASED TWO PROPERTIES, THEREFORE, T HE ASSESSEE WOULD NOT BE ENTITLED FOR EXEMPTION AS CLA IMED. THE LEARNED D.R FOR THE REVENUE RELIED UPON THE FOLLOWI NG DECISIONS : I) DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF RAJESH SURANA VS. CIT, 306 ITR 368, IN WHI CH IT WAS HELD THAT A PLOT WITH BOUNDARY WALLS AND A GARAGE- CUM-ROOM CONSTRUCTED OVER IT IS NOT A RESIDENTIAL H OUSE, HENCE CAPITAL GAIN ARISING FROM SALE THEREOF IS NOT EXEMPT UNDER SECTION 53 . II) DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ASHOK SYAL VS. CIT, 209 TAXMA N 376, IN WHICH IT WAS HELD THAT EXEMPTION U/S 54 IS NOT AVAILABLE WHEN PROPERTY IN QUESTION IS NOT A HOUSE OR DWELLING UNIT . 10 III) DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DR.A.S. ATWAL VS. CIT, 277 IT R 462, IN WHICH IT WAS HELD THAT PROPERTY SOLD BY ASSESSEE I.E., PLOT WITH A TIN SHED, WAS NOT A HOUSE AS THE TIN SH ED HAD NOT BATHROOM OR KITCHEN OR ELECTRICITY CONNECTION, AND EVEN IF THE SAME IS CONSIDERED AS A HOUSE, ASSESSEE IS N OT ENTITLED TO EXEMPTION UNDER S.54 ON THE SALE OF SAI D PROPERTY AS IT WAS NOT OCCUPIED BY THE ASSESSEE OR A PARENT OF HIS FOR THEIR RESIDENCE IN THE TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER . IV) ORDER OF I.T.A.T., HYDERABAD BENCH IN THE CASE OF ITO VS. SMT.ROHINI REDDY, 122 ITD 1, IN WHICH IT WA S HELD THAT : BENEFIT OF EXEMPTION UNDER S. 54 IS ALLOWABLE ONLY WHEN THE PROPERTY SOLD AS WELL AS THE PROPERTY PURCHASED BY THE ASSESSEE ARE INTENDED TO BE USED AS RESIDENTIAL HOUSE; NEITHER THE ROOFED STRUCTURE BUILT ON THE LAND SOLD BY THE ASSESSEE WAS SELF- OCCUPIED OR LET OUT OR INTENDED TO BE USED AS RESIDENCE, NOR THE TWO PLOTS PURCHASED BY THE ASSESSEE WITH SMALL TEMPORARY STRUCTURES COVERED WITH ASBESTOS ROOFING WERE MEANT TO BE USED AS RESIDENTIAL HOUSES AND, THEREFORE ASSESSEE IS NOT ENTITLED TO EXEMPTION UNDER S. 54 . V) DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PAWAN ARYA VS. CIT, 237 CTR 2 10, IN WHICH IT WAS HELD THAT : 11 CAPITAL GAINS- EXEMPTION UNDER S.54-INVESTMENT IN TWO HOUSES-EXEMPTION UNDER S.54 IS AVAILABLE IN RESPECT OF ONE HOUSE ONLY - TRIBUNAL WAS THEREFORE JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION IN RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSES SITUATED AT DIFFERENT LOCATIONS- CIT VS. D.ANANDA BASAPPA (2009), 223 CTR (KAR) 186 :(2009) 309 ITR 329 (KAR) DISTINGUISHED. VI) ORDER OF THE I.T.A.T. MUMBAI (SPECIAL BENCH) IN THE CASE OF ITO VS. M/S SUSHILA M.JHAVERI, 107 ITD 321 (SB) IN WHICH IT WAS HELD THAT : EXPRESSION A RESIDENTIAL HOUSE IN SS.54 AND 54F MEANS ONE RESIDENTIAL HOUSE; ASSESSEE HAVING INVESTED CAPITAL GAINS IN TWO RESIDENTIAL HOUSES SITUATED IN DIFFERENT LOCALITIES OF THE SAME CITY, SHE WAS ENTITLED TO EXEMPTION UNDER S.54/54F IN RESPECT OF INVESTMENT IN ONE HOUSE AS PER HER CHOICE BUT WA S NOT ENTITLED TO EXEMPTION IN RESPECT OF INVESTMENT IN BOTH THE RESIDENTIAL HOUSES. 7. THE LEARNED D.R FOR THE REVENUE, THEREFORE SUBMITTED THAT THE APPEAL OF THE ASSESSEE MAY BE DI SMISSED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE LEARNED COMMISSIONER OF INCOME TAX NOTED THAT THE R ECORD REVEALED THAT SINCE THE ASSESSEE HAD SOLD FARM HOUS E, THEREFORE, CANNOT CLAIM EXEMPTION UNDER SECTION 54 OF THE ACT. THE ASSESSEE IN REPLY TO THIS OBJECTION SUBMITTED B EFORE THE LEARNED COMMISSIONER OF INCOME TAX THAT THE FARM HO USE IS NOTHING ELSE BUT RESIDENTIAL HOUSE AND LAND APPURTE NANT THERETO. THE ASSESSEE HAD CONSTRUCTED A RESIDENTIA L HOUSE ON A PIECE OF LAND AND HAD BEEN OCCUPYING THE SAME AND ALSO 12 EARNING RENTAL INCOME UPTO 31.3.2008 FROM PORTION O F SUCH HOUSE. THE ASSESSEE HAS BEEN REGULARLY SHOWING TH E RENTAL INCOME FROM SUCH HOUSE UNDER THE HEADING INCOME FR OM HOUSE PROPERTY IN HER INCOME TAX RETURNS UPTO ASSE SSMENT YEAR 2008-09. THE ASSESSEE REFERRED LANGUAGE OF S ECTION 54 OF THE ACT, WHICH PROVIDES THAT IN CASE OF AN ASSES SEE BEING AN INDIVIDUAL OR HUF, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET BEING BUILDING OR LAND AP PURTENANT THERETO AND BEING A RESIDENTIAL HOUSE, THE INCOME O F WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. THE ASSESSEE SUBMITTED THAT SINCE THE HOUSE WAS OCC UPIED BY THE ASSESSEE AND HIS PARENTS AND RENTAL INCOME WAS ALSO EARNED FROM LETTING OUT OF SOME PORTION AND WAS DUL Y DECLARED IN THE RETURN OF INCOME, THEREFORE, THE ASSESSEE WA S ENTITLED FOR BENEFIT CONTAINED UNDER SECTION 54 OF THE ACT. THE ASSESSEE ALSO RELIED UPON THE ORDER OF THE I.T.A.T. , DELHI BENCH IN THE CASE OF MAHAVIR PRASAD GUPTA VS. CIT, 5 SOT 355 ON THE PROPOSITION THAT EVEN FARM HOUSE CAN BE A RESIDENTIAL HOUSE AND INVESTMENT IS ELIGIBLE FOR BE NEFIT UNDER SECTION 54 OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX, HOWEVER, CONSIDERED THE SALE DEED OF THE PROPE RTY IN QUESTION DATED 17.10.2008 AND FOUND THAT THE TYPE O F THE LAND SOLD IS GAIRMUMKIN SHED, WHEREAS THE ASSESSEE CLA IMED IT TO BE RESIDENTIAL HOUSE AND AS PER THE SALE DEED, SINC E IT WAS A SHED, THEREFORE, THE ASSESSEE CANNOT CLAIM EXEMPTIO N UNDER SECTION 54 OF THE ACT BECAUSE FOR MAKING SUCH CLAIM UNDER SECTION 54 OF THE ACT THE ASSET SOLD MUST BE RESIDE NTIAL HOUSE. WE HAVE GONE THROUGH THE COPY OF THE SALE DEED IN Q UESTION 13 WHICH PERTAINED TO THE PROPERTY SITUATED IN VILLAGE BALOMAJRA AND IN THE SALE DEED THE TYPE OF THE LAND IS MENTIO NED AS GAIRMUMKIN SHED, THE COPY OF THE SAME IS FILED ON PAGES 5 TO 19 OF THE PAPER BOOK. IN THE SALE DEED THE PROPER TY DESCRIBED WAS REFERRED TO AS IS MENTIONED IN JAMABA NDI FOR THE YEAR 2003-04. THE COPY OF THE JAMABANDI IS ALSO P LACED ON RECORD ALONGWITH TRANSLATED COPY IN WHICH THE PROPE RTY IN QUESTION IS SHOWN AS GAIRMUMKIN SHED AND HOUSE. IT, THEREFORE, APPEARS THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS NOT PROPERLY GONE THROUGH THE SALE DEED OF THE PROPERTY IN QUESTION BECAUSE WHEN THE DETAILS OF TH E PROPERTY ARE MENTIONED AS PER JAMABANDI FOR ASSESSMENT YEAR 2003-04 UNDER SALE, THE LEARNED COMMISSIONER OF INCOME TAX SHOULD HAVE ALSO GONE THROUGH THE COPY OF THE JAMABANDI FO R THE YEAR 2003-04 AS NOTED ABOVE AND SINCE THE JAMABANDI SHOW S THE PROPERTY IN QUESTION AS GAIRMUMKIN SHED AND HOUSE , THEREFORE, THERE IS NO QUESTION OF CONSIDERING IT T O BE ONLY GAIRMUMKIN SHED. THE ASSESSEE HAS ALSO PLACED C OPY OF THE ACKNOWLEDGEMENT OF FURNISHING OF THE RETURNS FROM ASSESSMENT YEARS 2002-04 TO 2008-09 ALONGWITH COMPU TATION OF INCOME, IN WHICH THE ASSESSEE HAS DECLARED RENTA L INCOME FROM THE PROPERTY IN QUESTION SITUATED IN VILLAGE B ALOMAJRA. SINCE THE ASSESSEE HAS BEEN DECLARING RENTAL INCOME FROM THE SAME PROPERTY IN QUESTION UNDER THE HEAD INCOME FR OM HOUSE PROPERTY, WHICH IS ALSO NOT DISPUTED BY THE REVENU E AUTHORITIES IN EARLIER YEARS, WOULD CLEARLY SHOW TH AT THE REVENUE DEPARTMENT HAS ACCEPTED THE PROPERTY IN QUE STION TO BE RESIDENTIAL HOUSE PROPERTY. THEREFORE, WHEN TH E 14 RESIDENTIAL HOUSE IS SURROUNDED BY LANDS, WHICH WER E UNDER SALE, WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 54 OF THE ACT. IT MAY ALSO BE NOTED HERE THAT THE ASSESSEE HAD FILED COPY OF ESTIMATED ASSETS AND LIABILITIES STATEMENTS AS ON 1.4.2008 AND 31.3.2009 IN THE PAPER BOOK AT PAGES 2 0 AND 21, WHICH ACCORDING TO THE LEARNED COUNSEL FOR ASSE SSEE WERE FILED WITH THE RETURN OF INCOME, WOULD SHOW THAT TH E FARM HOUSE SITUATED AT VILLAGE BALOMAJRA WAS HAVING VALU E OF RS.18,10,000/-. THESE FACTS WOULD CLEARLY INDICAT E THAT THE PROPERTY IN QUESTION WAS GAIRMUMKIN SHED AND HOUS E, ON WHICH ON LETTING OUT PART OF ITS PORTION INCOME WAS ALSO ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THEREFORE, THE ASSESSEE HAS BEEN ABLE TO PROVE THAT THE CAPITAL GAINS ARISES FROM TRANSFER OF LONG TERM CAPITAL ASS ETS BEING BUILDING OR LAND APPURTENANT THERETO AND BEING A RE SIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFORE, THE CONDI TIONS OF SECTION 54 OF THE ACT HAVE BEEN SATISFIED IN THE CA SE OF THE ASSESSEE. THEREFORE, THE DECISIONS RELIED UPON BY THE LEARNED D.R FOR THE REVENUE WOULD NOT SUPPORT THE CASE OF T HE REVENUE. 9. THE LEARNED COMMISSIONER OF INCOME TAX NOTED TH AT EVEN IN THE ABOVE FACTS WHEN THE PROPERTY SOLD WAS FARM HOUSE, THE ASSESSEE WOULD NOT BE ENTITLED FOR DEDUC TION UNDER SECTION 54F OF THE ACT BECAUSE THE PROVISO IS AGAIN ST THE ASSESSEE. SINCE THE ASSESSEE CLAIMED LONG TERM CA PITAL GAINS ON TRANSFER OF RESIDENTIAL HOUSE, THEREFORE, THE LE ARNED 15 COUNSEL FOR ASSESSEE ARGUED THAT THE CLAIM OF THE A SSESSEE WOULD FALL UNDER SECTION 54 OF THE ACT. THE PROVI SIONS OF SECTION 54F OF THE ACT DO NOT APPLY IN THE CASE OF THE ASSESSEE. THEREFORE, THERE IS NO QUESTION OF APPL YING THE PROVISO OF SECTION 54F OF THE ACT IN THE CASE OF TH E ASSESSEE. WE FIND FORCE IN THE SUBMISSION OF THE LEARNED COUN SEL FOR ASSESSEE THAT SINCE THE CASE OF THE ASSESSEE FALLS UNDER SECTION 54 OF THE ACT, THEREFORE, THE PROVISIONS OF SECTION 54F OF THE ACT WOULD NOT APPLY IN THE CASE OF THE ASSE SSEE. THUS THIS OBJECTION OF THE LEARNED COMMISSIONER OF INCOM E TAX WOULD NOT BE RELEVANT AND IS ALSO AGAINST THE COMPU TATION OF INCOME FILED BY THE ASSESSEE ALONGWITH THE RETURN O F INCOME, COPY OF WHICH IS FILED AT PAGE 22 OF THE PAPER BOOK . 10. THE LEARNED COMMISSIONER OF INCOME TAX FURTHER OBJECTED TO THE INVESTMENT IN A SUM OF RS.3,56,96,3 00/- AS ACCORDING TO HIM, THE TOTAL INVESTMENT MADE BY THE ASSESSEE UNDER SECTION 54 OF THE ACT WAS RS.2,54,62,812/-. THE ASSESSEE EXPLAINED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX THAT THE INVESTMENT WAS MADE IN THE FDR UNDER C APITAL GAIN SCHEME FOR RS.1 CRORE AND CERTAIN OTHER INVEST MENTS MADE BY THE ASSESSEE FOR AVAILING BENEFIT UNDER SEC TION 54 OF THE ACT AS EXPLAINED IN THE REPLY GIVEN BEFORE THE ASSESSING OFFICER DURING THE SCRUTINY PROCEEDINGS, HAVE NOT B EEN CONSIDERED WHILE ISSUING NOTICE UNDER SECTION 263 O F THE ACT. THE CORRECT DETAILS OF INVESTMENT MADE UNDER SECTIO N 54 OF THE ACT AS EXPLAINED BY THE ASSESSEE IS REPRODUCED AT P AGE 4 OF THE IMPUGNED ORDER, IN WHICH THE ASSESSEE HAS GIVEN COMPLETE 16 DETAILS OF INVESTMENT MADE IN THE PROPERTIES AND AL SO EXPLAINED THAT RS.1 CRORE IS DEPOSITED IN THE FDR U NDER CAPITAL GAIN SCHEME ACCOUNT FOR CONSTRUCTION OF THE ABOVE PLOT. THUS ACCORDING TO THE ASSESSEE, THE TOTAL I NVESTMENT ELIGIBLE UNDER SECTION 54 OF THE ACT WAS RS.3,56,96 ,300/- AS WAS CLAIMED IN THE RETURN OF INCOME AS WELL AS IN T HE COMPUTATION OF INCOME. THE LEARNED COMMISSIONER O F INCOME TAX INSTEAD OF EXAMINING THE DETAILS AVAILABLE ON R ECORD, MERELY NOTED THAT NO DOCUMENTARY EVIDENCE OF MAKING FDRS IS AVAILABLE ON RECORD FOR INVESTING RS.1 CRORE IN CAP ITAL GAIN ACCOUNT. THE LEARNED CIT DR PRODUCED ASSESSMENT R ECORD BEFORE US DURING THE COURSE OF HEARING FROM WHICH W E FIND THAT THE COPY OF FDR UNDER CAPITAL GAIN SCHEME OF R S.1 CRORE IS AVAILABLE ON RECORD, COPY OF WHICH IS ALSO FILED IN THE PAPER BOOK AT PAGE 42. THEREFORE, THE FINDINGS OF THE LE ARNED COMMISSIONER OF INCOME TAX ARE WHOLLY INCORRECT AND CANNOT BE SUSTAINED. THUS THE ASSESSEE WOULD BE ENTITLED FOR BENEFIT OF RS.1 CRORE UNDER SECTION 54 OF THE ACT ON MAKING FDR UNDER CAPITAL GAIN SCHEME. THE LEARNED COMMISSIO NER OF INCOME TAX THUS HAS NOT PROPERLY EXAMINED THIS ISSU E BEFORE TAKING ANY ADVERSE VIEW AGAINST THE ASSESSEE. 11. THE LEARNED COMMISSIONER OF INCOME TAX ALSO NO TED THAT THE ASSESSEE HAS FAILED TO PROVIDE ANY PROOF I N RESPECT OF THE AMOUNT TO THE TUNE OF RS.8,70,000/- CLAIMED AS TRANSFER EXPENSES IN RESPECT OF SALE OF PROPERTY. THE ASSES SEE SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX THAT THE COPIES OF ALL THE BANK ACCOUNTS WITH NARRATIONS OF DEBIT 17 AND CREDIT ENTRIES WERE GIVEN TO THE ASSESSING OFFI CER ALONWITH REPLY, WHICH SHOWS THAT THIS AMOUNT WAS PAID THROUG H ACCOUNT PAYEE CHEQUE DRAWN ON PUNJAB & SIND BANK, P HASE-5, MOHALI TO SHRI KESAR SINGH FOR FACILITATING THE COM PLETION OF THE SAID DEAL. THIS POINT WAS ALSO CLARIFIED TO T HE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX, HOWEVER, NOTED THAT NO DOCUMENT IS FILED ON RECORD TO PROVE THE GENUINENESS OF THE CLAIM OF THE ASSESSEE. THE ASS ESSEE IN THE PAPER BOOK HAS FILED COPY OF THE SAME BANK ACCO UNT AT PAGE 3, WHICH SHOWS THAT THE AMOUNT IN QUESTION HAS BEEN PAID AS COMMISSION FOR TRANSFER OF PROPERTY THROUGH BANKING CHANNEL. THIS BANK ACCOUNT WAS PLACED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER ON EXAMINING THE SAME WAS SATISFIED WITH THE CONTENTION OF THE ASSESSEE. THE REFORE, THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIE D IN TAKING ADVERSE VIEW AGAINST THE ASSESSEE ON THIS IS SUE. 12. THE LEARNED COMMISSIONER OF INCOME TAX FURTHER NOTED THAT THE ASSESSEE HAS ALSO FAILED TO PROVIDE ANY CORROBORATIVE EVIDENCE FOR INCURRING RS.4,50,000/- AND RS.12,00,000/- IN FINANCIAL YEARS 1997-98 AND 1998- 99 RESPECTIVELY FOR CONSTRUCTION PURPOSES UNDER THE HE AD COST OF CONSTRUCTION. THE ASSESSEE EXPLAINED THAT THE CO NSTRUCTION WAS RAISED SO MANY EARLIER YEARS BACK AND THE ASSES SING OFFICER AFTER DISCUSSING THE ISSUE AT LENGTH HAS MA DE ADDITION OF RS.2 LACS ON THIS ISSUE. THEREFORE, WHEN THE A SSESSING OFFICER EXAMINED THE ISSUE IN DETAIL, THE LEARNED COMMISSIONER OF INCOME TAX SHOULD NOT SUBSTITUTE TH E OPINION 18 OF THE ASSESSING OFFICER WITH HIS OPINION WHEN PART ADDITION IS MADE BY THE ASSESSING OFFICER ON THIS ISSUE AND WHE N THE RETURN OF INCOME SHOWS THAT THE ASSESSEE EARNED REN TAL INCOME FROM THE HOUSE PROPERTY, IT SHOULD HAVE BEEN INFERRED THAT THE ASSESSEE HAS RAISED CONSTRUCTION ON THE FA RM HOUSE. THEREFORE, THE VIEW OF THE ASSESSING OFFICER WAS CO RRECT IN FOLLOWING THE RULE OF PREPONDERANCE OF PROBABILITIE S. THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX S HOULD NOT SUBSTITUTE HIS OPINION TO THAT OF THE ASSESSING OFF ICER FOR THE PURPOSE OF MAKING ADDITION ONLY. 13. THE LEARNED COMMISSIONER OF INCOME TAX FURTHER NOTED THAT NO DOCUMENTARY EVIDENCE HAVE BEEN CALLED FOR BY THE ASSESSING OFFICER IN SUPPORT OF CARRIED FORWAR D LONG TERM CAPITAL LOSS OF RS.23,057/- PERTAINING TO ASSESSMEN T YEAR 2005-06. THE ASSESSEE SUBMITTED THAT THE LONG TE RM CAPITAL LOSS OF RS.23,057/- OCCURRED FOR ASSESSMENT YEAR 20 05-06 AND WAS DECLARED IN THE INCOME-TAX RETURN FOR ASSESSME NT YEAR 2005-06 AND DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER WAS SATISFIED ABOUT SUCH CLAIM MA DE IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06. THE LEARNED COUNSEL FOR ASSESSEE PLACED COPY OF THE ACKNOWLEDGE MENT OF RETURNS AND COMPUTATION OF INCOME FOR MANY YEARS O N RECORD TO SHOW THAT FROM THE ASSESSMENT YEAR 2005-06 SUCH CLAIM OF CAPITAL LOSS WAS MADE IN THE RETURNS OF INCOME IN A LL THE EARLIER YEARS. THEREFORE, THERE WAS NO QUESTION O F EXAMINING SUCH ISSUE WHICH HAS HAPPENED IN THE EARLIER YEARS 2005-06 ONWARDS. SINCE ALL INFORMATIONS HAVE BEEN GIVEN IN THE 19 COMPUTATION OF INCOME AND RETURNS OF INCOME TO THE REVENUE DEPARTMENT AND THE ASSESSING OFFICER EXAMINED THE I SSUE OF LONG TERM CAPITAL GAIN IN DETAIL, THEREFORE, NO FAU LT COULD BE FOUND WITH THE ORDER OF THE ASSESSING OFFICER. 14. THE LEARNED D.R FOR THE REVENUE FILED COPY OF ORDER- SHEET FROM THE ASSESSMENT RECORD, WHICH WOULD SHOW THAT THE ASSESSING OFFICER ISSUED SEVERAL STATUTORY NOTICES TO THE ASSESSEE AND ALSO ISSUED QUESTIONNAIRE TO THE ASSES SEE FOR CLAIMING DEDUCTION UNDER SECTION 54 OF THE ACT IN R ESPECT OF LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER CON DUCTED ENQUIRIES ON SEVERAL DATES OF HEARING AND AFTER EXA MINING THE ISSUE OF LONG TERM CAPITAL GAIN IN DETAIL HAS MADE THE ADDITION OF RS.2 LACS ON THAT ACCOUNT. THE COPY OF THE ORD ER-SHEET OF THE LEARNED COMMISSIONER OF INCOME TAX IS ALSO FILE D ON RECORD, WHICH SHOWS THAT AFTER ISSUE OF SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT DATED 10.1.2014, THE A SSESSEE FILED REPLY BEFORE THE LEARNED COMMISSIONER OF INCO ME TAX ON 29.1.2014 AND THEREAFTER STRAIGHTAWAY THE IMPUGNED ORDER HAS BEEN PASSED ON 5.2.2014. IT IS, THEREFORE, APPEAR ED THAT THE DETAILED REPLY FILED BEFORE THE LEARNED COMMISSIONE R OF INCOME TAX WAS NOT CONSIDERED PROPERLY AND NO FURTHER QUER Y WAS RAISED BY THE LEARNED COMMISSIONER OF INCOME TAX. THE REPLY OF THE ASSESSEE DATED 29.1.2014 IS QUOTED IN DETAIL IN THE IMPUGNED ORDER SUPPORTS THE CASE OF THE ASSESSEE TH AT EACH AND EVERY OBJECTION RAISED BY THE LEARNED COMMISSIO NER OF INCOME TAX HAVE BEEN PROPERLY EXPLAINED WHICH WERE ALSO TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER. THEREFORE, 20 IF THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT S ATISFIED WITH THE REPLY OF THE ASSESSEE, HE SHOULD HAVE CALL ED FOR FURTHER EXPLANATION OF THE ASSESSEE AND SHOULD HAVE GONE INTO THE DETAILS OF MATERIAL PRODUCED BEFORE HIM AS WELL AS AVAILABLE ON ASSESSMENT RECORD. THE LEARNED COMMIS SIONER OF INCOME TAX, HOWEVER, FAILED TO CONSIDER THE REPLY O F THE ASSESSEE IN PROPER PERSPECTIVE. SINCE THE EXPLAN ATION OF THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION 26 3 OF THE ACT HAS NOT BEEN CONSIDERED BY THE LEARNED COMMISSI ONER OF INCOME TAX IN PROPER PERSPECTIVE, THEREFORE, THE OR DER OF REVISION WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE WOULD NOT BE VALID. WE RELY UPON THE DECISION OF THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF SMT.LILA CHOUDHU RY VS. CIT & OTHERS, 289 ITR 226, IN WHICH IT WAS HELD AS UNDER : HELD, THAT IN THE ORDER THE COMMISSIONER HAD NOT R ECORDED ANY OPINION THAT THE ORDER OF ASSESSMENT OF THE PET ITIONER FOR THE ASSESSMENT YEAR 1992-93 WAS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF THE REVENUE. THAT WAS THE OPINION RECORDED IN THE NOTICE DATED AUGUST 14/19, 1996, BUT THE OPINION BEING RECORDED IN A NOTI CE ISSUED TO THE PETITIONER ASKING TO SHOW CAUSE, MUST BE UNDERSTOOD TO BE REBUTTABLE. SUCH OPINION WAS REQUIRED TO BE REITERATED AFTER HEA RING THE PETITIONER AND AFTER HOLDING THE NECESSARY ENQUIRY. ON RECEIPT OF THE SHOW-CAUSE NOTICE, THE PETITIONER SUBMITTED AN ELABORATE REPLY. T HE COMMISSIONER ON RECEIPT OF THE REPLY OF THE PETITIONER COULD NOT HAVE IGNORED THE SAME. RATHER, IT WAS INCUMBENT ON THE COMMISSIONER TO CONSID ER THE EXPLANATIONS OFFERED AND ON THAT BASIS TO RECORD HIS OPINION/CONCLUSION. MOREOVER, THE COMPETENT CRIMINAL COURT HAD EXONERAT ED THE SON-IN-LAW OF THE PETITIONER FROM ANY LIABILITY ON ACCOUNT OF THE HOUSE PROPERTY IN QUESTION HOLDING IT TO BELONG TO THE PETITIONER. THE FINDINGS RECORDED BY THE CRIMINAL COURT IN THIS REGARD COULD NOT BE BRUSHED ASIDE. HENCE, ANY DE NOVO PROCEEDINGS AT THIS STAGE WOULD BE FUTILE. TH E ORDER OF REVISION HAD TO BE QUASHED. THE ASSESSMENT OF THE PETITIONE R FOR THE ASSESSMENT 21 YEAR 1992-93 MADE BY ORDER DATED MAY 16, 1994, HAD TO BE CONSIDERED COMPLETE AND FINAL. 15. CONSIDERING THE ABOVE DISCUSSION AND MATERIAL ON RECORD, IT IS CLEAR THAT THE SPECIFIC QUERIES WERE RAISED BY THE ASSESSING OFFICER AT ASSESSMENT STAGE REGARDING LON G TERM CAPITAL GAINS AND THE ASSESSING OFFICER WAS SATISFI ED WITH THE EXPLANATION OF THE ASSESSEE. THIS ITSELF WOULD BE AN INDICATION OF APPLICATION OF MIND BY THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER. WHEN THE ASSE SSING OFFICER WAS SATISFIED WITH THE EXPLANATION OF THE A SSESSEE WITH REGARD TO THE CLAIM MADE UNDER SECTION 54 OF THE AC T AND HE MADE PART ADDITION ON THE SAME, THEREFORE, NO FAULT COULD BE FOUND WITH THE ORDER OF THE ASSESSING OFFICER. WH EN THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PE RMISSIBLE IN LAW AND THE COMMISSIONER DO NOT AGREE WITH HIM, IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. WE RELY UPON THE DECISION O F THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. F INE JEWELLERY (INDIA) LTD., 372 ITR 303, IN WHICH IT WA S HELD AS UNDER : HELD, DISMISSING THE APPEAL, THAT THE ORDER OF THE TRIBUN AL DID RECORD THE FACT THAT SPECIFIC QUERIES WERE MADE DURING THE ASS ESSMENT PROCEEDINGS WITH REGARD TO THE DETAILS OF EXPENDITURE CLAIMED U NDER THE HEAD 'MISCELLANEOUS EXPENSES' AGGREGATING TO RS. 2.94 CRORES. THE ASSE SSEE HAD RESPONDED TO THE QUERIES AND ON CONSIDERATION OF ITS RESPONSE, THE A SSESSING OFFICER HELD THAT ONLY AN AMOUNT OF RS. 17.98 LAKHS INCURRED ON ACCOUNT OF REPAIRS AND MAINTENANCE OUT OF RS. 2.94 CRORES WAS CAPITAL EXPENDITURE. THI S ITSELF WOULD AN INDICATION OF 22 APPLICATION OF MIND BY THE ASSESSING OFFICER WHILE PASSING THE ORDER. THE FACT THAT THE ASSESSMENT ORDER DID NOT CONTAIN ANY DISCU SSION WITH REGARD TO THE BALANCE AMOUNT OF EXPENDITURE OF RS, 1.76 CRORES, I .E., RS.2.94 CRORES LESS RS. 17.98 LAKHS CLAIMED AS REVENUE EXPENDITURE WOULD NO T BY ITSELF INDICATE NON- APPLICATION OF MIND TO THIS ISSUE BY THE ASSESSING OFFICER IN VIEW OF THE SPECIFIC QUERIES MADE DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE'S RESPONSE TO IT. MOREOVER, FROM THE NATURE OF EXPENDITURE AS EXPLAINED BY THE ASSESSEE TO THE ASSESSING OFFICER DURING THE ASSESSMENT PROC EEDINGS THE VIEW THAT THE EXPENSES WERE IN THE REALM OF REVENUE EXPENDITURE, WAS A POSSIBLE VIEW. THEREFORE, THERE WAS NO FAULT IN THE ORDER OF THE T RIBUNAL HAVING FOLLOWED THE BINDING DECISION OF THE SUPREME COURT WHILE ALLOWIN G THE APPEAL BEFORE IT. 16. THE HON'BLE SUPREME COURT IN THE CASE OF MALA BAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83, IN WHICH I T WAS HELD AS UNDER : EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJ UDICIAL TO THE INTERESTS OF THE REVENUE FOR EXAMPLE, WHEN A N INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMI SSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR W HERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAD T AKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT B E TREATED AS AN ERRONEOUS ORDER PREJUDICIA L TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 17. SAME VIEW HAS BEEN TAKEN BY THE HON'BLE SUPREM E COURT IN ITS SUBSEQUENT DECISION IN THE CASE OF CI T VS. MAX INDIA LTD., 295 ITR 282. THE HON'BLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF CIT VS. DEEPAK MITTAL, 324 IT R 411, HAS HELD AS UNDER : 23 CHANGE OF OPINION BY REAPPRAISING THE EVIDENCE IS NOT WITHIN THE PARAMETERS OF REVISIONAL JURISDICTIO N OF THE COMMISSIONER UNDER SECTION 263 OF THE INCOME-TAX AC T, 1961. HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD FOUND THAT THE ASSESSING OFFICER HAD GIVEN A CATEGO RICAL FINDING THAT THE ASSESSEE WAS ENGAGED IN THE PROCES S OF MANUFACTURING OF PRODUCTS AND ACCORDINGLY HE HAD GR ANTED CON CESSION UNDER SECTION 80-IB. THE CLAIM OF THE A SSESSEE HAD BEEN FOUND TO BE GENUINE. THE ASSESSING OFFIC ER HAD ALSO EXAMINED THE VARIOUS WORKERS OF THE ASSESSEE A ND THEN RECORDED THE FINDING. THE ASSESSING OFFICER W AS JUSTIFIED IN GRANTING THE SPECIAL DEDUCTION UNDER S ECTION 80-IB. THE ORDER OF REVISION DISALLOWING THE SPEC IAL DEDUCTION WAS NOT VALID. 18. THE LEARNED D.R FOR THE REVENUE LASTLY ARGUED THAT SINCE THE ASSESSEE PURCHASED TWO PROPERTIES, THEREF ORE, THE ASSESSEE WOULD NOT BE ENTITLED TO CLAIM OF EXEMPTIO N UNDER SECTION 54 OF THE ACT IN RESPECT OF THE TWO RESIDEN TIAL HOUSES. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THI S ISSUE IS NOT RAISED IN THE SHOW CAUSE NOTICE ISSUED BY THE L EARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT AND NO FINDINGS HAVE BEEN GIVEN. THEREFORE, SUCH AN I SSUE CANNOT BE RAISED BEFORE THE TRIBUNAL. WE AGREE WITH THEN SUBMISSION OF THE LEARNED COUNSEL FOR ASSESSEE THAT THE ISSUE WHICH IS NOT RAISED IN THE SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT COULD NOT BE SUBJECT MATTER OF REVIS ION BY THE LEARNED COMMISSIONER OF INCOME TAX. THE HON'BLE M ADRAS HIGH COURT IN THE CASE OF CIT VS. SMT.R.G. UMARANE E, 262 ITR 507, IN WHICH IT WAS HELD AS UNDER : 24 HELD, (I) THAT IN THE ABSENCE OF ANY NOTICE BY THE COMMISSIONER TO TREAT THE COST OF CONSTRUCTION OF T HE BUILDING AS UNDISCLOSED INCOME OF THE ASSESSEE IT W AS NOT OPEN TO THE COMMISSIONER TO HOLD THAT THE COST OF CONSTRUCTION OF THE BUILDING WOULD REPRESENT UNDISC LOSED INCOME OF THE ASSESSEE AND HENCE THE COMMISSIONER W AS NOT JUSTIFIED IN DIRECTING THE INCOME-TAX OFFICER T O INITIATE AN ENQUIRY REGARDING THE COST OF CONSTRUCTION OF TH E BUILDING, AND AFTER ASCERTAINING THE VALUATION, TRE AT THE UNEXPLAINED INVESTMENT AS THE UNDISCLOSED INCOME OF THE ASSESSEE. 19. IN THE PRESENT CASE, THIS ISSUE IS NOT RAISED IN THE SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT AS W ELL AS THE LEARNED COMMISSIONER OF INCOME TAX DID NOT PASS ANY ORDER. THEREFORE, THE LEARNED CIT DR COULD NOT RAISE THIS POINT BEFORE THE TRIBUNAL. THE LEARNED COMMISSIONER OF INCOME TAX MERELY FOUND THAT THE ASSESSEE HAD MADE EXCESS CLAIM WITH REGARD TO THE INVESTMENT OF RS.1 CRORE IN FDR UNDER CAPITAL GAIN SCHEME. THEREFORE, SUCH AN ISSUE CAN NOT NOT BE RAISED BY THE LEARNED CIT DR AT THIS STAGE. THE C ONTENTION OF LEARNED CIT DR ON THIS POINT IS ACCORDINGLY REJECTE D. 20. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER EXAMINED THE IS SUE OF LONG TERM CAPITAL GAIN IN ACCORDANCE WITH SECTION 54 OF THE ACT AT ASSESSMENT STAGE, THEREFORE, ASSESSMENT ORDER CANNO T BE SAID TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INT ERESTS OF THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX WAS, THEREFORE, NOT JUSTIFIED IN CANCELING THE ASSESSMEN T ORDER 25 UNDER SECTION 143(3) OF THE ACT. HE SHOULD NOT HAV E EXERCISED THE JURISDICTION UNDER SECTION 263 OF THE INCOME TA X ACT. 21. IN VIEW OF THE ABOVE, WE SET ASIDE THE IMPUGNE D ORDER DATED 5.2.2014 UNDER SECTION 263 OF THE ACT A ND QUASH THE SAME. RESULTANTLY THE ASSESSMENT ORDER UNDER SECTION 143(3) DATED 27.5.2011 IS RESTORED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF JUNE, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 RD JUNE, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH