Satyanarayan Sharma, Indore V. Principal Commissioner of Income Tax-I, Indore

ITA 426/Ind/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0293 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-10-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 08-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: GIRISH AGRAWAL; NISHA LAHOTI A RS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Revision of order; Depreciation; Opportunity of being heard; Question of law; Cost of acquisition; Fair market value; Difference of opinion; Valuation report; Prejudicial to interest; Change of opinion; Revenue expenditure; Set aside; Capital Gains
• Section: 143(3); 54B; 50C; 54F; 142(1); 143(2); 13; 22; 68; 263; 10; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.426/IND/2018 ASSESSMENT YEAR:2013-14 SATYANARAYAN SHARMA, 11/2, SOUTH TUKOGANJ, SWAPNALOK COLONY, INDORE / VS. PR. CIT - I, INDORE ( APPELLANT ) ( REVENUE ) P.A. NO. AEAPS5126D APPELLANT BY SHRI GIRISH AGRAWAL & MISS NISHA LAHOTI, ARS REVENUE BY SMT. ASHIMA GUPTA , CIT - DR DATE OF HEARING: 11.11.2020 DATE OF PRONOUNCEMENT: 28.12.2020 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. PR. COMMISSIONER OF INCOME TAX (IN SHORT LD. PR. C IT)-I, INDORE DATED 26.03.2018 PERTAINING TO ASSESSMENT YEAR 2013 -14. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L: SATYANARAYAN SHARMA /ITANO.426/IND/2018 2 1. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. PR. CIT- I, INDORE ERRED IN INVOKING THE PROVISION OF SECTIO N 263 OF THE ACT AND PASSING THE ORDER THEREIN BY HOLDING THAT ORDER PASSED BY LD. ASSESSING OFFICER UNDER SECTION 143(3) OF THE A CT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, WHICH IS ILLEGAL, BAD IN LAW AND DEVOID OF ANY MERIT. 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. PR. CIT- I, INDORE ERRED IN OBSERVING FOR THE PURPOSE OF PAS SING ORDER UNDER SECTION 263 OF THE ACT THAT THE VALUE ADOPTED BY THE LD. ASSESSING OFFICER FOR DETERMINATION OF COST OF CONS TRUCTION FOR THE PURPOSE OF CALCULATING OF ELIGIBLE DEDUCTION UNDER SECTION 54F OF THE ACT IS INCORRECT. 3. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. PR. CIT- I, INDORE ERRED IN DIRECTING LD. ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 54F OF THE ACT PROPORTIONAT ELY WHEN SUCH AN ACTION IS COVERED BY THE PROVISIONS OF SECT ION 154OF THE ACT AT THE END OF LD. ASSESSING OFFICER. 4. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. PR. CIT- I, INDORE ERRED IN SETTING ASIDE THE ORDER TO THE F ILE OF LD. ASSESSING OFFICER WITH A DIRECTION TO PASS A FRESH ORDER BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR OTHERWISE RAISE ANY OTHER GROUND OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT IN THIS CASE THE A SSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961(HER EINAFTER REFERRED AS THE ACT) VIDE ORDER DATED 23.03.2016. THE ASSESSING OFFICER COMPUTED TOTAL INCOME AT RS.16,50,920/-. SU BSEQUENTLY, THE LD. PR. CIT AFTER EXAMINING THE REPORT FOUND THAT T HE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, HE INITIATED PROCEEDINGS U/S SATYANARAYAN SHARMA /ITANO.426/IND/2018 3 263 OF THE ACT BY ISSUING A SHOW CAUSE NOTICE DATED 12.03.2018. IN RESPONSE TO THE NOTICE ISSUED BY THE LD. PR. CIT AS SESSEE FILED WRITTEN REPLY, THE REPLY BY THE ASSESSEE WAS NOT FO UND ACCEPTABLE. LD. PR. CIT, THEREFORE, SET ASIDE THE ASSESSMENT TO THE FILE OF ASSESSING OFFICER WITH DIRECTION ASSESSING OFFICER WOULD EXAMINE THE ISSUE IN THE LIGHT OF THE OBSERVATION MADE IN THE O RDER PASSED U/S 263 OF THE ACT. 3. AGGRIEVED AGAINST THIS THE ASSESSEE IS IN PRESEN T APPEAL 4. GROUNDS NO. 1 TO 4 ARE AGAINST INITIATING PROCEE DINGS U/S 263 OF THE ACT AND PASSING THE IMPUGNED ORDER, THEREBY DIR ECTING THE ASSESSING OFFICER TO MAKE ASSESSMENT AFRESH. 5. GROUND NO.5 IS GENERAL IN NATURE WHICH NEEDS NO SEPARATE ADJUDICATION. 6. APROPOS TO GROUNDS NO.1 TO 4 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN S UBMISSIONS. THE SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED AS UNDER : A. ENQUIRY CONDUCTED BY LD. AO NO LACK OF ENQUIRY 1. ORDER SHEET NOTING EVIDENTLY DEMONSTRATES THE DETAI LED AND EXTENSIVE ENQUIRY CONDUCTED BY THE LD. AO ON THE IS SUE RAISED BY LD. PR. CIT IN THE INSTANT REVISIONARY PROCEEDINGS U/S 263. CERTIFIED TRUE COPY OF THE SAME ARE PLACED ON RECORD. [PB 10- 12] SATYANARAYAN SHARMA /ITANO.426/IND/2018 4 2. LD. AO HAS CONDUCTED PROPER ENQUIRY TO VERIFY THE E NTIRE TRANSACTION OF SALE OF AGRICULTURAL LAND AND INVEST MENT MADE TOWARDS CONSTRUCTION OF RESIDENTIAL HOUSE. LD. PR. CIT HAS NOT POINTED OUT ANY SHORTCOMING IN THE VERIFICATION CON DUCTED BY LD. AO SO THAT THE ASSESSMENT ORDER BE TREATED AS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3. LD. AO HAS APPLIED HIS MIND WHILE CONDUCTING THE ASSESSMENT PROCEEDINGS WHICH IS EVIDENT [AO PAGE 2 PARA (II) & (III)] FROM THE REFERENCE MADE BY HIM TO THE LD. DVO FOR V ALUATION AND ADOPTING THE VALUE SO ARRIVED A. FROM THE VERIFICATION OF COPIES OF B-1 AND P-II FOR CARRYING OF AGRICULTURE ACTIVITY AND LAND USED FOR AGRICULTURE PURPOSES B. FROM VERIFICATION OF COPY OF LEDGER AND BILL PRODUC ED AS EVIDENCE OF COST OF INVESTMENT C. FROM THE VERIFICATION OF VALUATION REPORT OBTAINED FROM AN AUTHORIZED VALUER D. FROM VERIFICATION OF COPIES OF BILLS OF INTERIOR WO RK, ELECTRICAL EQUIPMENTS AND HOUSEHOLD INSTALLATIONS LIKE AC, SOF A SETS, ETC E. FROM THE AMOUNT OF ADDITION RE-WORKED TOWARDS TAXAB LE LTCG OF RS. 10,30,044 OUT OF WHICH RS. 3,75,152 WAS ALREADY REPORTED IN THE RETURN AND BALANCE RS. 6,54,892 WAS ADDED WHILE MAKING THE ASSESSMENT 4. LD. AO ALLOWED THE CLAIM ON BEING SATISFIED WITH TH E EXPLANATION OF ASSESSEE, ON AN ENQUIRY MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, THE DECISION OF LD. A O CANNOT BE HELD TO BE ERRONEOUS. 5. DISTINCTION IS TO BE APPRECIATED BETWEEN LACK OF EN QUIRY AND INADEQUATE ENQUIRY . IF THERE WAS ANY ENQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO LD. PR. CIT TO PASS ORDERS U/S 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF ENQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN FOR THE LD. PR. CIT. 6. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS A. HONBLE JURISDICTIONAL ITAT INDORE BENCH IN THE CAS E OF VINOD BHANDARI IN ITA 350/IND/2017 & OTHERS, ORDER DTD 20 .03.2020: SATYANARAYAN SHARMA /ITANO.426/IND/2018 5 43. HONBLE GUJARAT HIGH COURT IN THE CASE OF ARVI ND JEWELLERS (259 ITR 502) HELD THAT: HELD, THAT THE FINDING OF FACT BY THE TRIBUNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANAT IONS IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1 ) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANATIONS, THE INCOME-TAX OFFICER HAD COME TO A DEFINITE CONCLUSION. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME-TAX OFFICER A ND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW C AN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE ORDER OF REVISION WAS NOT JUSTIFIED. 44. HENCE, THE PREPOSITION AND RATIO LAID DOWN BY H ONBLE GUJARAT HIGH COURT IS THAT, WHEN THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF NO TICES U/S 143(2) AND 142(1) OF THE ACT AND AFTER CONSIDERING THE MAT ERIAL AND EXPLANATIONS, THE AO HAD COME TO A DEFINITE CONCLUS ION. THEIR LORDSHIP FURTHER HELD THAT IN THIS SITUATION, SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERE D BY THE AO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT A D IFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR A VALID ACTION U/S 263 OF THE ACT AND THEREFORE, DISMISSING THE APPEAL OF THE REVENUE THE HONBLE HIGH COURT HELD THAT THE ORDER U/S 263 OF THE ACT WAS NO T JUSTIFIED AND VALID. 45. IN THE LIGHT OF ABOVE JUDGMENTS AND APPLYING TH E FACTS OF THE INSTANT CASE AND PERUSAL OF THE ASSESSMENT ORDER, P APER BOOK AND THE NOTE-SHEET OF THE ASSESSMENT PROCEEDINGS SHOW T HAT THE AO HAS RAISED SEVERAL QUERIES BY WAY OF NOTE SHEET ENTRIES AND NOTICES. THE ASSESSEE SUBMITTED VARIOUS RELEVANT DOCUMENTS. IT I S ALSO PERTINENT TO NOTE THAT THE AO ADJUDICATED THE ISSUE OF QUERIE S AND REPLIES IN REGARD TO SAID CLAIM BY PASSING A DETAILED ORDER. F URTHER THE NOTE SHEET ENTRIES CLEARLY SHOWS THE DELIBERATIONS BETWE EN THE AO AND THE ASSESSEE COMPANY ON ALL THE ISSUES AND ADJUDICA TION BY THE AO WHICH WAS FURTHER GUIDED BY ORDER U/S 144A. THEREFO RE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, DETAILS SUBMITTE D BEFORE LD. A.O, ENQUIRIES CONDUCTED BY THE LD. A.O, ISSUING VARIOUS NOTICES, CONDUCTING ENQUIRY ABOUT THE LINKAGE OF THE SURREND ERED INCOME OF RS.7 CRORES, CONSIDERING ALL THE DETAILS OF HUNDIS FOUND DURING THE COURSE OF SURVEY, ALLEGED ADDITIONS MADE BY LINKING THE CASH DEPOSITED WITH THE UNEXPLAINED INCOME FROM VYAPAM S CAM EVEN THOUGH THE ASSESSEE IS HAVING SUFFICIENT CASH IN HA ND IN THE BOOKS OF ACCOUNTS, WE IN VIEW OF JUDGMENT IN THE CASE OF MAL ABAR INDUSTRIAL SATYANARAYAN SHARMA /ITANO.426/IND/2018 6 CO. (SUPRA) AS PER WHICH BEFORE INVOKING THE PROVIS IONS OF SECTION 263 OF THE ACT LD. PCIT SHOULD HAVE SATISFIED THE T WIN CONDITIONS, NAMELY ORDER OF THE LD. A.O STATED TO BE ERRONEOUS AND SECONDLY IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. BUT IN THE INSTANT CASE WHEREIN WE HAVE EXAMINED EACH AND EVERY ISSUE RAISED BY LD. PCIT IN THE LIGHT OF THE REPLY FILED BY THE ASSESSEE, INFORMATI ON CALLED BY THE LD. A.O AND THE FINDING IN THE ASSESSMENT ORDER, WE ARE OF THE CONSIDERED VIEW THAT UNDER THE GIVEN FACTS AND IN L AW THE VIEW TAKEN BY THE AO IN THE ORDER PASSED U.S143(3) OF TH E ACT DATED 24.3.2015 SEEMS TO BE REASONABLE AND PLAUSIBLE WHIC H CANNOT BE HELD AS LEGALLY UNSUSTAINABLE AND NOT IN ACCORDANCE WITH LAW. IN OUR VIEW IT IS PASSED WITH COMPLETE APPLICATION OF MIND AND THUS IT CAN NEITHER BE HELD AS ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE LD. PCIT UNDER THE GIVEN FACTS A ND CIRCUMSTANCES OF THE CASE ERRED IN ASSUMING JURISDICTION U/S.263 OF THE ACT SINCE THE LD. A.O HAS MADE SUFFICIENT ENQUIRY BY WAY OF Q UESTIONNAIRE TO WHICH DETAILED REPLY HAVE BEEN FILED FROM TIME TO T IME AND THE LD. A.O IN THE INTEREST OF REVENUE HAVE ALSO MADE ADDIT ION OF RS.7,74,12,941/- TO THE INCOME DISCLOSED BY THE ASS ESSEE. IT CLEARLY APPEARS THAT THE LD. A.O HAS APPLIED HIS MIND AND T HEREFORE THE ASSESSMENT ORDER IS NOT VITIATED ON THE GROUND THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E BECAUSE NO ENQUIRY WERE UNDERTAKEN. ACCORDINGLY WE FIND MERIT IN THE CONTENTION OF THE LEARNED SENIOR COUNSEL FOR THE AS SESSEE AND ARE OF THE CONSIDERED VIEW THAT LD. PCIT GROSSLY ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT ON THE BASIS O F ISSUES RAISED IN THE SHOW CAUSE NOTICE. THUS THE ORDER OF LD. PCIT O F SETTING ASIDE THE ASSESSMENT ORDER U/S 143(3) OF THE ACT UNDER CO NSIDERATION ARE BEYOND THE SCOPE OF SECTION 263 OF THE ACT AND HENC E NOT VALID AND WE ACCORDINGLY QUASH THE RELEVANT ORDER PASSED BY L D. PCIT U/S 263 OF THE ACT DATED 30.3.2017 AND RESTORE THE ASSE SSMENT ORDER U/S 143(3) DATED 24.3.2015. 46. IN THE RESULT ALL THE GROUNDS RAISED BY THE ASS ESSEE IN APPEAL NO.350/IND/2017 ARE ALLOWED. B. HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF NAROTTAM MISHRA [2015] 25 ITJ 206 EVEN THIS IS NOT THE CASE OF THE LD. CIT THAT CERT AIN EVIDENCES WERE OVERLOOKED WHICH WERE VERY MUCH ON RECORD OR IN THE KNOWLEDGE OF THE AO. EVEN THIS IS NOT THE CASE OF LD. CIT THAT C ERTAIN NEW FACTS OR EVIDENCES WERE BROUGHT TO THE NOTICE OF THE REVENUE DEPARTMENT WHICH WERE HAVING A DIRECT IMPACT ON THE INCOME ASS ESSED BY THE AO. NEITHER THERE WAS AN ESCAPEMENT OF EVIDENCE NOR THERE WAS ANY SATYANARAYAN SHARMA /ITANO.426/IND/2018 7 EVIDENCE NOW BROUGHT TO THE NOTICE OF THE REVENUE D EPARTMENT, THEREFORE IF THAT WAS NOT THE POSITION, THEN WE ARE NOT INCLINED TO GIVE OUR APPROVAL TO SUCH DIRECTIONS. C. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF KRISHNA CAPBOX (P) LTD [2015] 60 TAXMANN.COM 243 ORDER PRONOUN CED ON 23.02.2015 HEAD NOTE SECTION 263 OF THE INCOME -TAX ACT, 1961 - REVISION - OF ORDERS PREJUDICIAL TO INTEREST OF REVENUE (ERRONEOUS ORDER) - ASSESSMENT YEAR 2008-09 - ASSES SEE FILED ITS RETURN - CASE WAS SELECTED FOR SCRUTINY AND STATUTO RY NOTICE WAS ISSUED - ASSESSING OFFICER MADE CERTAIN QUERIES, WH ICH WERE REPLIED BY ASSESSEE AND AFTER INQUIRY, BEING SATISFIED IN R ESPECT TO QUERIES REPLIED BY ASSESSEE, ASSESSING OFFICER ACCEPTED DEC LARED INCOME AND PASSED ASSESSMENT ORDER - COMMISSIONER, HOWEVER, ISSUED A NOTICE UNDER SECTION 263 ON GROUND THAT ASSESSING O FFICER HAD NOT MADE INQUIRY ON CERTAIN ASPECTS AND ACCEPTED VERSIO N OF ASSESSEE WITHOUT MAKING ANY INQUIRY OR VERIFICATION, WHICH W AS SUBSTANTIALLY PREJUDICIAL TO REVENUE - ACCORDINGLY, HE PARTLY SET ASIDE ASSESSMENT - TRIBUNAL HELD THAT ONCE INQUIRY WAS MADE, A MERE NO N-DISCUSSION OR NON-MENTION THEREOF IN ASSESSMENT ORDER COULD NOT L EAD TO ASSUMPTION THAT ASSESSING OFFICER DID NOT APPLY HIS MIND OR THAT HE HAD NOT MADE INQUIRY ON SUBJECT AND THIS WOULD NOT JUSTIFY INTERFERENCE BY COMMISSIONER BY ISSUING NOTICE UNDE R SECTION 263 - WHETHER SINCE DEPARTMENT COULD NOT PLACE ANYTHING T O SHOW THAT FINDINGS RECORDED BY TRIBUNAL WERE PERVERSE OR CONT RARY TO RECORD, INVOKING OF REVISION PROCEEDINGS WAS UNJUSTIFIED - HELD, YES [PARA 13] [IN FAVOUR OF ASSESSEE] [EMPHASIS SUPPLIED] D. HONBLE DELHI HIGH COURT IN THE CASE OF VIKAS POLYM ERS [2010] 194 TAXMAN 57 ORDER PRONOUNCED ON 16.08.20 10 HEAD NOTE SECTION 263 OF THE INCOME-TAX ACT, 1961 - R EVISION - OF ORDERS PREJUDICIAL TO INTERESTS OF REVENUE - ASSESS MENT YEAR 1982-83 - WHETHER FOR EXERCISING POWER UNDER SECTION 263, I T IS A PREREQUISITE THAT COMMISSIONER MUST GIVE REASONS TO JUSTIFY EXER CISE OF SUO MOTU REVISIONAL POWERS BY HIM TO REOPEN A CONCLUDED ASSE SSMENT AND EXERCISE OF POWER BEING QUASI-JUDICIAL IN NATURE, R EASONS MUST BE SUCH AS TO SHOW THAT ENHANCEMENT OR MODIFICATION OF ASSESSMENT OR CANCELLATION OF ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLED FOR, AND MUST IRRESISTIBLY L EAD TO CONCLUSION THAT ORDER OF ASSESSING OFFICER WAS NOT ONLY ERRONE OUS BUT WAS ALSO PREJUDICIAL TO INTEREST OF REVENUE - HELD, YES - WH ETHER BEFORE EXERCISING REVISIONAL POWERS, ASSESSEE MUST BE CALL ED, HIS EXPLANATION SOUGHT FOR AND EXAMINED BY COMMISSIONER , AND THEREAFTER, IF COMMISSIONER STILL FEELS THAT ORDER IS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE, COMMISSIONER MA Y PASS REVISIONAL SATYANARAYAN SHARMA /ITANO.426/IND/2018 8 ORDERS - HELD, YES - WHETHER IF A QUERY WAS RAISED DURING COURSE OF SCRUTINY BY ASSESSING OFFICER, WHICH WAS ANSWERED T O SATISFACTION OF ASSESSING OFFICER, BUT NEITHER QUERY NOR ANSWER WAS REFLECTED IN ASSESSMENT ORDER, THAT WOULD NOT, BY ITSELF, LEAD T O CONCLUSION THAT ORDER OF ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVISION - HELD, YES [EMPHASIS SUPPLIED] E. HONBLE DELHI HIGH COURT IN THE CASE OF ASHISH RAJP AL [2009] 320 ITR 674 ORDER PRONOUNCED ON 14.05.2009 HEAD NOTE SECTION 263 OF THE INCOME-TAX ACT, 1961 - R EVISION - OF ORDERS PREJUDICIAL TO INTEREST OF REVENUE - ASSESSM ENT YEAR 2002-03 - WHETHER MERELY BECAUSE AN ASSESSMENT ORDER DOES NOT REFER TO QUERIES RAISED BY ASSESSING OFFICER DURING COURSE O F SCRUTINY AND RESPONSE OF ASSESSEE THERETO, IT CAN BE SAID THAT T HERE HAS BEEN NO ENQUIRY AND, HENCE, ASSESSMENT IS ERRONEOUS AND PRE JUDICIAL TO INTEREST OF REVENUE - HELD, NO - WHETHER IT IS REQUIREMENT OF SECTION 263 THAT ASSESSEE MUST HAVE AN OPPORTUNITY OF BEING HEARD IN RESPECT OF THOSE ERRORS WHICH COMMISSIONER PROPOSES TO REVISE - HELD, YES - WHETHER TO ACCORD SUCH AN OPPORTUNITY A FTER SETTING ASIDE ASSESSMENT ORDER WOULD MEET MANDATE OF SECTION 263 - HELD, NO - WHETHER WHERE NOTICE ISSUED BY COMMISSIONER BEFORE COMMENCING PROCEEDINGS UNDER SECTION 263 REFERRED TO FOUR ISSU ES AND FINAL ORDER PASSED REFERRED TO NINE ISSUES, REVISIONAL PROCEEDI NGS WERE VITIATED AS A RESULT OF BREACH OF PRINCIPLES OF NATURAL JUST ICE - HELD, YES [EMPHASIS SUPPLIED] F. HONBLE MUMBAI BENCH OF ITAT IN THE CASE OF ANIL SH AH [2007] 162 TAXMAN 39 ORDER PRONOUNCED ON 21.01.2006 HE AD NOTE SECTION 263, READ WITH SECTION 80HHC, OF THE INCOM E-TAX ACT, 1961 - REVISION - OF ORDERS PREJUDICIAL TO INTEREST OF R EVENUE - ASSESSMENT YEAR 2000-01 - WHETHER IF ALL RELEVANT DETAILS HAVE BEEN FILED BY ASSESSEE AND ASSESSING OFFICER ALLOWS ASSESSEES CL AIM, DECISION OF ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS SI MPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE ANY ELABORATE DISCUSSION IN THAT REGARD - HELD, YES [EMPHASIS SUPPLIED] B. APPLICATION OF MIND BY THE LD. AO 1. IN THE INSTANT CASE, LD. AO DURING THE ASSESSMENT PROCEEDINGS HAS MADE ENQUIRIES RELATED TO CLAIM OF DEDUCTION U/S 54B AND 54F AS IS EVIDENT FROM THE ASSESSMENT ORDER AND THE ENTRIES MADE IN THE ORDER SHEET. AFTER DUE VERIFICA TION OF THE EVIDENCES AND PROOFS PLACED ON RECORD AND TAKING IN TO ACCOUNT THE VALUATION REPORTS BY LD. DVO AND THE AUTHORIZED VAL UER, THE LD. AO MADE THE ADDITION AND ASSESSED THE TOTAL INCOME. SATYANARAYAN SHARMA /ITANO.426/IND/2018 9 2. IT IS NOT A CASE OF NON-APPLICATION OF MIND BY THE LD. AO. IT IS ALSO NOT A CASE WHERE LD. AO HAS ALLOWED THE RELIEF WITHOUT ENQUIRING IN THE CLAIM MADE BY THE ASSESSEE. INVOKI NG PROVISIONS OF SECTION 263 IS NOT IN ACCORDANCE WITH THE LAW. 3. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRECEDENTS A. HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF RATLAM COAL ASH CO. [1987] 34 TAXMAN 443 ORDER PRONOUNCED ON 17.08.1987 HELD IT IS WELL SETTL ED THAT WHERE THE ITO MADE THE ASSESSMENT IN UNDUE HURRY, ACCEPTI NG WHAT THE ASSESSEE STATES IN THE RETURN WITHOUT MAKING ANY EN QUIRIES IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER WOULD B E JUSTIFIED IN HOLDING THE ORDER OF THE ITO TO THE ERRONEOUS. HOWE VER, IN THE INSTANT CASE, THE TRIBUNAL HAD FOUND THAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE INFORMATION AND THAT THE ITO CONSIDERING ALL THE FACTS HAD COMPLETED THE ASSESSMENT. IT WAS FURTHER HELD THAT IN THE CIRCUMSTANCES OF THE CASE IT COULD NOT BE HELD THAT THE ITO HAD MADE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES. ACCORDI NGLY, THE TRIBUNAL WAS JUSTIFIED IN REVERSING THE ORDER PASSE D BY THE COMMISSIONER. [EMPHASIS SUPPLIED] B. HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR SHARMA [2010] 194 TAXMAN 504 ORDER PRONOUNCED ON 24.04.2 010 PARA 7 IN VIEW OF THE ABOVE DISCUSSION, IT IS APPARENT THAT THE TRIBUNAL ARRIVED AT A CONCLUSIVE FINDING THAT, THOUGH THE AS SESSMENT ORDER DOES NOT PATENTLY INDICATE THAT THE ISSUE IN QUESTI ON HAD BEEN CONSIDERED BY THE ASSESSING OFFICER, THE RECORD SHO WED THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND. ONCE SUCH A PPLICATION OF MIND IS DISCERNIBLE FROM THE RECORD, THE PROCEEDING S UNDER SECTION 263 WOULD FELL INTO THE AREA OF THE COMMISSIONER HA VING A DIFFERENT OPINION. WE ARE OF THE VIEW THAT THE FINDINGS OF FA CTS ARRIVED AT BY THE TRIBUNAL DO NOT WARRANT INTERFERENCE OF THIS CO URT. THAT BEING THE POSITION, THE PRESENT CASE WOULD NOT BE ONE OF 'LAC K OF INQUIRY' AND, EVEN IF THE INQUIRY WAS TERMED AS INADEQUATE, FOLLO WING THE DECISION IN SUNBEAM AUTO LTD.'S CASE (SUPRA), 'THAT WOULD NO T BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER S ECTION 263 OF THE SAID ACT, MERELY BECAUSE HE HAS A DIFFERENT OPI NION IN THE MATTER'. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONS IDERATION. CONSEQUENTLY, THE APPEAL IS DISMISSED. [EMPHASIS S UPPLIED] C. HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF MEHROTRA BROTHERS [2004] 270 ITR 157 S ECTION 263 OF THE INCOME-TAX ACT, 1961 REVISION OF ORDERS PREJUDI CIAL TO INTEREST OF REVENUE - COMMISSIONER INVOKED PROVISION OF SECTION 263 AGAINST SATYANARAYAN SHARMA /ITANO.426/IND/2018 10 ASSESSMENT ORDER PASSED IN CASE OF ASSESSEE-FIRM ON GROUND THAT ASSESSING OFFICER DID NOT MAKE PROPER ENQUIRY REGAR DING GENUINENESS OF CERTAIN CASH CREDITS FOUND IN BOOKS OF FIRM HOWEVER, TRIBUNAL HELD THAT SINCE ASSESSEE HAD EXPL AINED SATISFACTORILY CASH CREDIT IN BOOKS OF ACCOUNT AND DISCHARGED BURDEN AND DEPARTMENT HAD NOT BROUGHT OUT MATERIAL OR EVID ENCE TO REBUT SAME, CASH CREDITS WERE NOT INCOME OF ASSESSEE-FIRM AND, ACCORDINGLY, SET ASIDE ORDER OF COMMISSIONER PASSED UNDER SECTION 263 WHETHER IN VIEW OF FINDING OF FACT RECORDED BY TR IBUNAL, NO SUBSTANTIAL QUESTION OF LAW AROSE OUT OF IMPUGNED O RDER HELD, YES WHETHER, THEREFORE, INSTANT APPEAL WAS TO BE DISM ISSED HELD, YES [EMPHASIS SUPPLIED] D. HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIA L CO. LTD. [2000] 243 ITR 83 ORDER PRONOUNCED ON 10.02.200 0 HEAD NOTE 'SECTION 263 OF THE INCOME-TAX ACT, 1961 - REVISION - OF ORDERS PREJUDICIAL TO INTERESTS OF REVENUE - ASSESS MENT YEAR 1983-84 - WHETHER IN ORDER TO INVOKE SECTION 263 ASSESSING OFFICER'S ORDER MUST BE ERRONEOUS AND ALSO PREJUDICIAL TO REVENUE A ND IF ONE OF THEM IS ABSENT, I.E., IF ORDER OF INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO REVENUE OR IF IT IS NOT ERRONEOUS BU T IS PREJUDICIAL TO REVENUE, RECOURSE CANNOT BE HAD TO SECTION 263(1) - HELD, YES - WHETHER IF DUE TO AN ERRONEOUS ORDER OF ITO, REVENU E IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO INTERESTS OF REVENUE - HELD, YES - ASSESSEE-COMPANY ENTERED INTO AGREEMENT FOR SALE OF ESTATE OF RUBBER PLANTATION - AS PURCHASER COULD NOT PAY INSTALMENTS AS SCHEDULED IN AGREEMENT , EXTENSION OF TIME FOR PAYMENT OF INSTALMENTS WAS GIVEN ON CONDIT ION OF VENDEE PAYING DAMAGES FOR LOSS OF AGRICULTURAL INCOME AND ASSESSEE PASSED RESOLUTION TO THAT EFFECT - ASSESSEE SHOWED THIS RECEIPT AS AGRICULTURAL INCOME - RESOLUTION PASSED BY ASSESSEE WAS NOT PLACED BEFORE ASSESSING OFFICER - ASSESSING OFFICER ACCEPT ED ENTRY IN STATEMENT OF ACCOUNT FILED BY ASSESSEE AND ACCEPTED SAME - COMMISSIONER UNDER SECTION 263 HELD THAT SAID AMOUN T WAS NOT CONNECTED WITH AGRICULTURAL ACTIVITIES AND WAS LIAB LE TO BE TAXED UNDER HEAD 'INCOME FROM OTHER SOURCES' - WHETHER, W HERE ASSESSING OFFICER HAD ACCEPTED ENTRY IN STATEMENT OF ACCOUNT FILED BY ASSESSEE, IN ABSENCE OF ANY SUPPORTING MATERIAL WITHOUT MAKIN G ANY ENQUIRY, EXERCISE OF JURISDICTION BY COMMISSIONER UNDER SECT ION 263(1) WAS JUSTIFIED - HELD, YES [EMPHASIS SUPPLIED] E. HONBLE DELHI HIGH COURT IN THE CASE OF SUNBEAM AUT O LIMITED [2010] 189 TAXMAN 436 ORDER PRONOUNCED ON 11.09.2009 HEAD NOTE SECTION 263 OF THE INCOME-TAX ACT, 1 961 - REVISION - OF ORDER PREJUDICIAL TO INTEREST OF REVENUE - ASSES SMENT YEAR 2001- SATYANARAYAN SHARMA /ITANO.426/IND/2018 11 02 - WHETHER IF WHILE MAKING ASSESSMENT, ASSESSING OFFICER HAS MADE AN INADEQUATE ENQUIRY , THAT WOULD NOT, BY ITS ELF, GIVE OCCASION TO COMMISSIONER TO PASS ORDER UNDER SECTIO N 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN MATTER, IT IS O NLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE O PEN - HELD, YES - ASSESSEE-COMPANY WAS ENGAGED IN BUSINESS OF MANUFAC TURING AND SUPPLYING AUTO PARTS - IN ASSESSMENT FOR RELEVANT A SSESSMENT YEAR, IT HAD BEEN ALLOWED DEDUCTION OF EXPENDITURE INCURR ED ON TOOLS AND DYES AS REVENUE EXPENDITURE - COMMISSIONER, HOWEVER , SET ASIDE ASSESSMENT ORDER IN EXERCISE OF HIS POWERS UNDER SE CTION 263 ON GROUND THAT ASSESSING OFFICER HAD ALLOWED AFORESAID EXPENDITURE WITHOUT MAKING PROPER ENQUIRY - HE, ACCORDINGLY, RE MITTED MATTER BACK TO ASSESSING OFFICER TO RE-EXAMINE ISSUE - WHE THER WHEN FACTS CLEARLY SHOWED THAT ASSESSING OFFICER HAD UNDERTAKE N EXERCISE OF EXAMINING AS TO WHETHER EXPENDITURE INCURRED BY ASS ESSEE IN REPLACEMENT OF DYES AND TOOLS WAS TO BE TREATED AS REVENUE EXPENDITURE OR NOT AND ON BEING SATISFIED WITH ASSE SSEE'S EXPLANATION, HE ACCEPTED SAME, IT COULD BE SAID TO BE A CASE OF LACK OF INQUIRY - HELD, NO - WHETHER FURTHER, ON FACTS A ND LAW, VIEW TAKEN BY ASSESSING OFFICER WAS ONE OF POSSIBLE VIEWS AND, THEREFORE, ASSESSMENT ORDER PASSED BY ASSESSING OFFICER COULD NOT BE HELD TO BE PREJUDICIAL TO INTEREST OF REVENUE - HELD, YES - WHETHER, THEREFORE, TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE ORDER OF CO MMISSIONER - HELD, YES [EMPHASIS SUPPLIED] F. HONBLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN M ARKETING & ADVERTISING CO. LIMITED [2011] 196 TAXMAN 368 O RDER PRONOUNCED ON 21.09.2010 HEAD NOTE SECTION 263 OF THE INCOME-TAX ACT, 1961 - REVISION - OF ORDERS PREJUDI CIAL TO INTEREST OF REVENUE - ASSESSMENT YEARS 1983-84 AND 1984-85 - AS SESSEE- COMPANY WAS INCORPORATED WITH AN OBJECT OF CARRYING ON BUSINESS OF MARKETING AGENTS AND TO RENDER MARKETING SERVICES, ETC. - FOR RELEVANT ASSESSMENT YEARS, ASSESSEE FILED ITS RETUR NS AND ASSESSMENTS WERE FRAMED - COMMISSIONER SET ASIDE AS SESSMENT ORDERS HOLDING THAT ITO HAD NOT MADE ADEQUATE AND D ETAILED INVESTIGATIONS/ENQUIRIES IN RESPECT OF A MAJOR AREA OF ASSESSEE- COMPANYS OPERATION AND SOURCE OF ITS INCOME - TRIB UNAL QUASHED REVISIONAL ORDER PASSED BY COMMISSIONER - WHETHER I N VIEW OF FACT THAT ITO HAD MADE REASONABLY DETAILED ENQUIRIES, HA D COLLECTED RELEVANT MATERIAL AND DISCUSSED VARIOUS FACETS OF C ASE WITH ASSESSEE, ORDER OF COMMISSIONER TO DIRECT FRESH ASS ESSMENT BY GOING DEEPER INTO MATTER WOULD NOT FORM A VALID OR LEGAL BASIS TO EXERCISE JURISDICTION UNDER SECTION 263 - HELD, YES - WHETHER, THEREFORE, IMPUGNED ORDER OF TRIBUNAL WAS TO BE UPH ELD - HELD, YES [EMPHASIS SUPPLIED] SATYANARAYAN SHARMA /ITANO.426/IND/2018 12 G. HONBLE DELHI HIGH COURT IN THE CASE OF D.G. HOUSIN G PROJECTS LTD [2012] 20 TAXMANN.COM 587 ORDER PRONOUNCED ON 01.03.2012 HEAD NOTE SECTION 263 OF THE INCOME-TAX ACT, 1 961 - REVISION - OF ORDERS PREJUDICIAL TO INTERESTS OF REVENUE - ASS ESSMENT YEAR 2004- 05 - ASSESSEE SOLD AN IMMOVABLE PROPERTY AND CLAIME D CAPITAL LOSS AFTER INDEXATION - COMMISSIONER HAD DOUBTS ABOUT VA LUATION AND SALE CONSIDERATION RECEIVED BUT HE HAD NOT EXAMINED SAID ASPECT HIMSELF AND HAD MERELY GIVEN A FINDING THAT ORDER P ASSED BY ASSESSING OFFICER WAS ERRONEOUS AS ASSESSING OFFICE R HAD NOT PROPERLY EXAMINED CONSIDERATION RECEIVABLES - WHETH ER COMMISSIONER COULD NOT DIRECT ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER ORDER PASSED WAS ERRONEOUS OR NOT - HELD, YES [IN FAVOUR OF ASSESSEE] H. HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF FLEXITUFF INTERNATIONAL LIMITED ITA NO. 282/IND/2 017 ORDER PRONOUNCED ON 14.05.2019 PARA 18 .ASSESSEE MADE CORRECT CLAIM BY FIRSTLY TAKING THE BENEFIT OF SECT ION 10A OF THE ACT FOR THE PROFITS EARNED FROM SEZ UNITS AND REMAINING PRO FITS OF OTHER UNITS INCLUDING SEZ UNIT WERE UTILISED FOR SETOFF O F CURRENT AND BROUGHT FORWARD LOSSES. IT REMAINS AN UNDISPUTED FA CT THAT THE ASSESSING OFFICER HAD MADE ADEQUATE ENQUIRES AS NOT ED HEREIN ABOVE ADOPTING ONE OF PERMISSIBLE VIEW FOR ALLOWING THE ASSESSEES CLAIM FOR EXEMPTION U/S 10A OF THE ACT BEFORE THE C LAIM OF SET OFF OF BROUGHT FORWARD AND CURRENT YEAR LOSS. THE LD. PR. CIT TOOK A DIFFERENT VIEW OF THE MATTER. HOWEVER THAT WOULD NO T BE SUFFICIENT TO PERMIT LD. PR. CIT TO EXERCISE THE POWER U/S 263 OF THE ACT BECAUSE WHEN TWO VIEWS ARE POSSIBLE AND LD. PR.CIT DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER , ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER NOT UNACCEPTABLE IN LAW THIS ACTION OF THE LD. A.O CANNOT BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. WE THEREFORE SET ASIDE THE FINDING OF PR. COMMISSIONER OF INCOME TAX ON THIS ISSUE AS IT WAS A MERE CHANGE OF OPINION WHICH WOULD NOT ENA BLE LD. PR. COMMISSIONER OF INCOME TAX TO EXERCISE JURISDICTION U/S 263 OF THE ACT AS THE LD. A.O HAD CONSIDERED THE DETAILS AND T HE EXPLANATION OFFERED BY THE ASSESSEE BEFORE ACCEPTING THE CLAIM. WE THEREFORE REINSTATE THE ACTION OF THE LD. A.O ALLOWING THE AS SESSEES CLAIM OF EXEMPTION U/S 10A OF THE ACT AT RS. 12,51,79,200/- AGAINST THE PROFITS EARNED FROM SEZ UNITS. [EMPHASIS SUPPLIED] I. HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE C OMMUNICATION LIMITED [2016] 69 TAXMANN.COM 103 ORDER PRONOUN CED ON SATYANARAYAN SHARMA /ITANO.426/IND/2018 13 28.03.2016 HEAD NOTE SECTION 68, READ WITH SEC TION 263, OF THE INCOME-TAX ACT, 1961 - CASH CREDITS (FCCBS) - A SSESSEE RAISED FUNDS BY WAY OF FCCBS DURING YEAR UNDER CONSIDERATI ON - ASSESSING OFFICER COMPLETED ASSESSMENT ACCEPTING INCOME DECLA RED BY ASSESSEE - COMMISSIONER NOTICED THAT NO INVESTIGATI ON WAS CARRIED OUT BY ASSESSING OFFICER TO ESTABLISH NAME AND ADDR ESS, GENUINENESS AND CREDITWORTHINESS OF ACTUAL SUBSCRIB ERS TO FCCBS IN TERMS OF SECTION 68 - HE THUS PASSED A REVISIONAL O RDER SETTING ASIDE ASSESSMENT - TRIBUNAL NOTED THAT ASSESSING OFFICER HAD MADE DETAILED ENQUIRIES ABOUT AFORESAID ASPECT AND MERE FACT THAT HE DID NOT MAKE ANY REFERENCE TO SAID ISSUE IN ASSESSMENT ORDER, COULD NOT MAKE SAID ORDER ERRONEOUS AND PREJUDICIAL TO INTERE ST OF REVENUES - ACCORDINGLY, TRIBUNAL SET ASIDE REVISIONAL ORDER - WHETHER FINDING RECORDED BY TRIBUNAL BEING A FINDING OF FACT, NO SU BSTANTIAL QUESTION OF LAW AROSE THEREFROM - HELD, YES [PARA 11] [IN FAVOUR OF ASSESSEE] [EMPHASIS SUPPLIED] J. HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF DR . KODELA SIVA PRASADA RAO [2013] 29 TAXMANN.COM 18 ORDER PRON OUNCED ON 20.11.2012 PARA 12 FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSESSEE HAD RECEIVED A GIFT OF RS. 22,76,750/-IN U .S. DOLLARS FROM AN NRI, N.MOHAN AND THE ASSESSEE HAD FILED TWO CONF IRMATION LETTERS , ONE IN DECEMBER 2006 AND ANOTHER ON 10-07-2007 GI VEN BY THE DONOR STATING THAT HE HAD GIFTED THE ABOVE AMOU NT TO THE ASSESSEE, THAT THE ASSESSEE IS HIS CLOSE RELATIVE , THAT HE IS A MAN OF MEANS OWNING A SOFTWARE COMPANY OF A NET WORTH OF US $ 25 MILLION, THAT HE HAD GIFTED DURING THE YEAR 2002-03 RS. 2.00 CRORES TO REBUILD A GOVERNMENT SCHOOL, AND GOT CONSTRUCTED A GUEST HOUSE FOR SRI SITARAMACHANDRA SWAMI TEMPLE AT BHADRACHALA M. COPIES OF THE INCOME TAX RETURNS FILED BY THE DONOR IN USA WE RE ALSO FILED BY THE ASSESSEE. EVEN THOUGH THE ASSESSEE INFORMED THE DEPARTMENT THAT THE DONOR WAS AVAILABLE IN INDIA IN DECEMBER 2 006 ON ACCOUNT OF THE DEATH OF HIS MOTHER-IN-LAW AND THE CONTACT D ETAILS OF THE DONOR IN INDIA (ADDRESS AND MOBILE NUMBERS), THE DEPARTME NT DID NOT BOTHER TO CONTACT HIM AND VERIFY THE ABOVE FACTS. I N THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE ASSESSEE HAD DISCHARGE D THE BURDEN CAST ON HIM TO PROVE THE IDENTITY OF THE CRE DITOR, THE CREDITWORTHINESS OF THE CREDITOR AND THE GENUINENES S OF THE TRANSACTION. THEREFORE, THE CONTENTION OF THE REVEN UE THAT THE SAID SUM OUGHT TO BE ADDED TO THE INCOME OF THE ASSESSEE CANNOT BE ACCEPTED. THE FINDING RECORDED BY THE TRIBUNAL IS BASED ON APPRECIATION OF THE MATERIAL ON RECORD AND CANNOT B E SAID TO BE PERVERSE. IN OUR VIEW, NO QUESTION OF LAW, MUCH LES S A SUBSTANTIVE QUESTION OF LAW ARISES FOR CONSIDERATION IN THIS AP PEAL. SATYANARAYAN SHARMA /ITANO.426/IND/2018 14 C. MEANING OF COST OF NEW ASSET AS PER THE PROVISION S OF SECTION 54F 1. THE TERM OF COST OF NEW ASSET HAS NOT BEEN DEFINE D UNDER THE INCOME TAX ACT, 1961 (THE ACT). THE ACT DEFINES THE TERM COST OF ANY IMPROVEMENT U/S 55(1)(B) WHICH MEANS ALL EXPEN DITURE OF CAPITAL NATURE INCURRED IN MAKING ANY ADDITIONS OR ALTERNATIONS TO THE CAPITAL ASSET BY THE ASSESSEE AFTER IT BECAME H IS PROPERTY. FOR EXPENDITURE TO BE TERMED AS COST OF IMPROVEMEN T THE MOST ESSENTIAL ELEMENT IS THAT THERE SHOULD A TIME GAP B ETWEEN INCURRING THE EXPENSE AND THE ACQUISITION OF CAPITAL ASSET. I F THERE IS A TIME GAP BETWEEN INCURRING OF EXPENSES AND ITS ACQUISITI ON ONLY THEN WILL THE EXPENSE BE TREATED AS COST OF IMPROVEMENT. IN THE INSTANT CASE, THERE IS NO SUCH TIME GAP BETW EEN THE ACQUISITION OF CAPITAL ASSET (I.E. CONSTRUCTION OF A NEW RESIDENTIAL HOUSE) AND INCURRING EXPENSE TOWARDS INSTALLATION O F ELECTRIC EQUIPMENT AND OTHER ITEMS WHICH WORKS OUT TO A TOTA L INVESTMENT OF RS. 11,79,768. THERE EXISTS A PROXIMATE CAUSE. THUS , THIS AMOUNT OF RS. 11,79,768 FORMS PART OF COST OF NEW ASSET. 2. PROVISIONS OF SECTION 54F READ .OR HAS WITHIN A PERIOD OF THREE YEARS AFTE R THAT DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA (HEREIN AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH PROVISIONS OF SECTION 54F REQUIRE CONSTRUCTION OF O NE RESIDENTIAL HOUSE IN INDIA. CONSTRUCTION OF A RESIDENTIAL HOUSE MEANS ALL THE INVESTMENTS/EXPENSES INCURRED TO MAKE IT A HABITUAL PLACE TO LIVE. ALL THE INVESTMENTS MADE AT THE TIME OF CONSTRUCTIO N OF NEW RESIDENTIAL HOUSE TO GIVE IT AN ADEQUATE STANDARD O F LIVING SHALL ALSO FORM PART OF CONSTRUCTION OF RESIDENTIAL HOUSE FOR THE PURPOSE OF SECTION 54F. A RESIDENTIAL HOUSE OUGHT TO BE A BUIL DING IN HABITUAL STATE. LD. PR.CIT HAS NOT RAISED ANY DOUBT ON THE QUANTUM OF INVESTMENT MADE/EXPENSE INCURRED AND REFERS IT ONLY FOR THE PU RPOSE OF THE COMPUTATION OF DEDUCTION U/S 54F. 3. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRECEDENTS A. HONBLE AHMEDABAD BENCH OF ITAT IN THE CASE OF RAJA T B MEHTA [2018] 90 TAXMANN.COM 176 ORDER PRONOUNCE D ON 09.02.2018 SATYANARAYAN SHARMA /ITANO.426/IND/2018 15 PARA 7 IT IS IN THIS BACKDROP THAT THE QUESTION THAT WE HAVE TO ESSENTIALLY TAKE A JUDICIAL CALL ON IS AS TO WHAT I S THE COST OF THE NEW RESIDENTIAL HOUSE SO PURCHASED BY THE ASSESSEE AT C 6 ANANDVAN COMPLEX. AS WE DO SO, WE MUST BEAR IN MIND THE FACT THAT THE EXPRESSION USED IN THE STATUTE IS COST OF THE RESI DENTIAL HOUSE SO PURCHASED AND IT DOES NOT NECESSARILY MEAN THAT TH E COST OF THE RESIDENTIAL HOUSE MUST REMAIN CONFINED TO THE COST OF CIVIL CONSTRUCTION ALONE. A RESIDENTIAL HOUSE MAY HAVE MA NY OTHER THINGS, OTHER THAN CIVIL CONSTRUCTION AND INCLUDING THINGS LIKE FURNITURE AND FIXTURES, AS ITS INTEGRAL PART AND MAY ALSO BE ON S ALE AS AN INTEGRAL DEAL. THERE ARE, FOR EXAMPLE, SITUATIONS IN WHICH THE RE SIDENTIAL UNITS FOR SALE COME, AS A PACKAGE DEAL, WITH THINGS LIKE AIR-CONDITIONERS, GEYSERS, FANS, ELECTRIC FITTINGS, FURNITURE, MODULA R KITCHENS AND DISHWASHERS. IF THESE THINGS ARE INTEGRAL PART OF T HE HOUSE BEING PURCHASED, THE COST OF HOUSE HAS TO ESSENTIALLY INC LUDE THE COST OF THESE THINGS AS WELL. IN SUCH CIRCUMSTANCES, WHAT I S TO BE TREATED AS COST OF THE RESIDENTIAL HOUSE IS THE ENTIRE COST OF HOUSE, AND IT CANNOT BE OPEN TO THE ASSESSING OFFICER TO TREAT ONLY THE COST OF ONLY CIVIL CONSTRUCTION AS COST OF HOUSE AND SEGREGATE THE COS T OF OTHER THINGS AS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 54. [EMPHASIS SUPPLIED] B. HONBLE AHMEDABAD BENCH OF ITAT IN THE CASE OF SHRI NIWAS R DESAI ITA NO. 1245/AHD/2010 ORDER PRONOUNCED ON 07.09.2012 PARA 4 ..IN OUR VIEW ALTHOUGH THE COST OF I MPROVEMENT OF THE ASSET IS NOT ALLOWABLE, BUT IN A CASE WHERE THE ASSESSEE HAS PURCHASED NEW ASSET, WHICH IS NOT IN A HABITABLE CONDITION, THE EXPENSES INCURRED BY THE ASSESSEE TO MAKE IT HABITA BLE SHOULD BE ALLOWED UNDER SECTION 54(2) OF THE ACT [EMPHASIS SUPPLIED] IN THE INSTANT CASE, THE INVESTMENT MADE BY ASSESSE E OF RS. 11,79,768 TOWARDS INSTALLATION OF HOUSEHOLD ITEMS L IKE AIR CONDITIONER, SOFA SETS, ETC FORMS AN INTEGRAL PART OF THE NEW RESIDENTIAL HOUSE SO AS TO PUT IT IN A HABITABLE CO NDITION. THIS COST INCURRED IS AN INTEGRAL PART OF COST OF CONSTRUCTIO N OF THE NEW RESIDENTIAL HOUSE. D. NON APPLICATION OF MIND BY LD. PR.CIT 1. ORDER U/S 263 DATED 26.03.2018 PAGE 6, 2 ND PARA IT MAY BE MENTIONED THAT COLLECTOR, INDORE 2015-16 GUIDELINE RATE OF RS. 10,000/- PER SQ. MT. HAVE BEEN TAKEN FOR DETERM INING THE BASIC COST OF CONSTRUCTION OF RS.24,53,520/-. THIS HAS BEEN MENTIONED IN VALUATION REPORT ITSELF. THIS MAKES CLEAR THAT THIS WAS VALUATION AS SATYANARAYAN SHARMA /ITANO.426/IND/2018 16 ON 15.01.2016 WHILE THE ASSESSMENT PERTAINS TO A.Y. 2013-14. ACCORDINGLY, THE ABOVE VALUE HAS BEEN INCORRECTLY A DOPTED BY THE AO THEREBY MAKING THE ASSESSMENT ERRONEOUS AND PREJUDI CIAL TO INTEREST OF REVENUE. THE AO SHOULD HAVE DETERMINED THE CORRE CT COST OF CONSTRUCTION FOR A.Y. 2013-14 FOR PURPOSE OF ALLOWI NG THE DEDUCTION U/S 54F OF THE IT ACT . A. ASSESSEE SUBMITS THAT THE VALUATION IS DONE BY TAKI NG THE CURRENT GUIDELINE RATE FROM THE OFFICE OF COLLECTOR . FAIR MARKET VALUE IS ARRIVED AT AFTER APPLYING THE RATE OF DEPRECIATION. [PB 18] B. THE GOVERNMENT APPROVED VALUER PERSONALLY INSPECTED THE PROPERTY ON 15.01.2016 AND MADE THE VALUATION ON 15 .01.2016 AS NOTED IN HIS VALUATION REPORT. [CLAUSE 2 OF PART I AND CLAUSE (C ) OF PART III AT PB 13 AND 15] C. COST OF CONSTRUCTION CLAUSE 41 YEAR OF COMMENCE MENT AND YEAR OF COMPLETION: 2012-14 [PB 15] D. VALUATION REPORT ALSO STATES THAT VALUATION DONE F OR COST OF CONSTRUCTION ONLY. [PB 15] 2. LD. PR.CIT ERRED IN NOT APPLYING HIS MIND ON THE DO CUMENTS AVAILABLE ON RECORD AND STATING THAT VALUE ADOPTED BY AO ON THE BASIS OF VALUATION REPORT. RELIANCE IS PLACED ON TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF D G HOUSING PROJECTS LIMITED [2012] 20 TAXMANN.COM 587 ORDER PRONOUNCED ON 01.03 .2012 FOLLOWED BY HONBLE CO-ORDINATE BENCH IN THE CASE O F VIPIN CHAUHAN ITA NO. 52&53/IND/2018 ORDER PRONOUNCED ON 21.08.20 19. 3. LD. PR.CIT IN ORDER PASSED U/S 263 AT PAGE 7, 2 ND PARA HAS STATED WHAT IS TO BE EXAMINED IS THE WHETHER THE ITEM IS ESSENTIAL AND INTEGRAL PART OF NEW HOUSE OR IT IS JUST THE CONTEN TS OF NEW HOUSE. ANY NUMBER OF ITEMS MAY BE ADDED IN AS CONTENTS OF HOUSE WHICH MAY NOT BE INTEGRAL TO COST OF NEW ASSETS. THE CLAI M REGARDING ELECTRONIC ITEMS ADDED AND FURNITURE & FIXTURE WHIC H IS NOT INTEGRAL TO NEW ASSET IS NOT ALLOWABLE. [EMPHASIS SUPPLIED] LD. PR. CIT HAS DRAWN CONCLUSIONS MERELY ON THE BAS IS OF SURMISES AND CONJECTURES WITHOUT GIVING BASIS OF HOW THIS LE ADS TO ORDER BEING ERRONEOUS. SATYANARAYAN SHARMA /ITANO.426/IND/2018 17 E. APPLICABILITY OF PROVISIONS OF SECTION 154 FOR THE COMPUTATION MISTAKE OF DEDUCTION U/S 54F ON PROPORTIONATE BASIS 1. IT IS A SETTLED LAW THAT SCOPE OF SECTION 263 TO RE VISE AN ASSESSMENT IS DIFFERENT FROM SCOPE OF SECTION 154 T O RECTIFY ANY MISTAKE APPARENT FROM RECORD. PROVISIONS OF SECTION 263 GIVES JURISDICTIONAL POWE R WHEREAS PROVISIONS OF SECTION 154 GIVES POWER OF RECTIFICAT ION. IT IS NOT CORRECT TO SAY THAT RECTIFICATION IS EQUAL TO REVISION UNDER THE ACT. TERM ERRONEOUS USED IN THE SECTION 263 IS TO BE READ RELATING TO JURISDICTIONAL ERROR ON THE PART OF THE ASSESSING O FFICER IN EXERCISE OF HIS POWERS VESTED UNDER THE LAW. IT CANNOT BE READ AS TO A MISTAKE WHICH IS RECTIFIABLE UNDER THE PROVISIONS OF SECTIO N 154 EITHER SUO MOTO OR ON THE APPLICATION OF THE ASSESSEE. ERROR COMMITTED BY THE ASSESSING OFFICER MUST BE AN ERRO R OF JURISDICTION , FOR IF THE ORDER IS NOT KEPT CONFINED TO JURISDIC TIONAL ERROR, NO DISTINCTION WOULD BE LEFT BETWEEN THE CORRECTIVE POWERS CONFERRED UNDER SECTION 154 AND THE REVISIONARY POWERS EXERCI SABLE UNDER SECTION 263. IF SUCH A DISTINCTION BETWEEN THE CORRECTIVE POWERS AND REVISIONARY POWERS IS NOT RECOGNIZED, EVERY INCORRECT ORDER WOU LD BECOME AMENABLE TO REVISIONARY JURISDICTION AND THE FALL O UT WOULD BE THAT REVISIONARY JURISDICTION WOULD THEN BECOME EXERCISA BLE EVEN IN CASE WHERE THE PROVISIONS FOR RECTIFICATION ARE ATTRACTE D. SUCH AN EXERCISE OF PROVISIONS OF SECTION 263 WILL LEAD TO MAKING TH E PROVISIONS OF SECTION 154 REDUNDANT. THIS SURELY WAS NEVER THE IN TENT OF THE LEGISLATURE. 2. RECTIFICATION U/S 154 CAN BE DONE SUO MOTTO EITHER BY ASSESSEE HIMSELF OR BY ASSESSING OFFICER. IN THE IN STANT CASE, DURING THE IMPUGNED YEAR ASSESSEE SOLD AN AGRICULTURAL LAN D AND SUBSEQUENTLY MADE INVESTMENT BY PURCHASING ANOTHER AGRICULTURAL LAND AND ALSO CONSTRUCTED A NEW RESIDENTIAL HOUSE. DETAILS OF MANNER OF COMPUTATION OF LTCG ARE AS UNDER SR. NO PARTICULARS AMOUNT (RS.) REMARKS 1 FULL VALUE OF SALE CONSIDERATION 1,26,54,892 VALUE AS PER DVO IN ACCORDANCE WITH PROVISIONS OF SECTION 50C. THIS VALUE HAS NOT BEEN DISPUTED EITHER BY LD. AO OR BY LD. SATYANARAYAN SHARMA /ITANO.426/IND/2018 18 PR.CIT. 2 LESS: INDEXED COST OF ACQUISITION (FY 1981-1982) 4,26,000 NOT DISPUTED EITHER BY LD. AO OR BY LD. PR.CIT. 3 LONG TERM CAPITAL GAIN (LTCG) [3 = 1 - 2] 1,22,28,892 4 DEDUCTION CLAIMED U/S 54B 36,40,080 5 DEDUCTION CLAIMED U/S 54F [CORRECT] (1,22,28,892*75,58,768/1, 26,54,892) 73,04,318 LD. AO IN ASSESSMENT ORDER HAS CONSIDERED THE ENTIRE COST OF NEW RESIDENTIAL HOUSE I.E. RS. 75,58,768 AS DEDUCTION U/S 54F. COMPUTATION OF DEDUCTION U/S 54F IS IN DISPUTE * 6 DEDUCTION CLAIMED U/S 54F [ACTUAL] 75,58,768 7 EXCESS DEDUCTION ALLOWED BY LD. AO U/S 54F (OR SHORT LTCG COMPUTED BY LD. AO) [7 = 6 - 5] 2,54,450 THE EXCESS DEDUCTION ALLOWED U/S 54F IS RECTIFIABLE UNDER THE PROVISIONS OF SECTION 154. * WHILE COMPUTING THE DEDUCTION CLAIMED U/S 54F LD. PR. CIT TOOK THE FMV OF COST OF CONSTRUCTION OF BUILDING (ONLY) I.E. RS. 63,79,000 FOR THE PURPOSE OF CALCULATION OF PROPORTIONATE DEDUCTION A S PER PROVISIONS OF SECTION 54F(1). LD. PR. CIT COMPUTED THE DEDUCTION U/S 54F AT RS. 6 1,64,265/- (1,22,28,892*63,79,000/1,26,54,892). THUS, EXCESS D EDUCTION ALLOWED U/S 54F AS PER LD. PR. CIT IS RS. 13,94,503. FROM THE ABOVE TABLE IT IS EVIDENT THAT WHAT HAS BE EN DISPUTED BY LD. PR. CIT IS THE COST OF NEW RESIDENTIAL HOUSE WHICH HAS TO BE TAKEN FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 54F AND THAT THE DEDUCTION SHOULD BE COMPUTED ON PROPORTIONATE BASIS AS PER PROVISIONS OF SECTION 54F(1). NO DOUBT HAS BEEN RAISED ON VALUE OF INVESTMENT MAD E BY ASSESSEE ON THE NEW RESIDENTIAL HOUSE I.E RS. 75,58,768. WHAT I S UNDER DISPUTE IS THE AMOUNT THAT HAS TO BE TAKEN AS COST OF NEW ASSE T FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S 54F. THE MATTER WAS OP EN BEFORE LD. AO TO TAKE APPROPRIATE MEASURES FOR RECTIFICATION OF MIST AKE APPARENT FROM RECORDS, IF HE SO BELIEVED TO EXIST. SATYANARAYAN SHARMA /ITANO.426/IND/2018 19 3. IN ORDER PASSED U/S 263 BY LD. PR. CIT NO DOUBT HAS BEEN RAISED ON VERIFICATION AND ENQUIRY CONDUCTED BY LD. AO DURING THE ASSESSMENT PROCEEDINGS OF VARIOUS ITEMS NAMELY A. MANNER OF VERIFICATION OF THE TRANSACTION OF SALE O F AGRICULTURAL LAND B. INVESTMENT MADE TOWARDS PURCHASE OF ANOTHER AGRICUL TURAL LAND (FOR WHICH DEDUCTION CLAIMED U/S 54B IS NOT UNDER DOUBT BY LD. PR. CIT) C. INVESTMENT MADE TOWARDS COST OF NEW RESIDENTIAL HOU SE (LD. PR. CIT HAS TAKEN FMV OF COST OF CONSTRUCTION OF BUILDING O NLY FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 54F). ALL THE BILLS AN D VOUCHERS AS EVIDENCE FOR THE INVESTMENT IN CONSTRUCTION OF RESI DENTIAL HOUSE WERE PRODUCED BEFORE LD. AO AND DULY VERIFIED. 4. LD. PR. CIT IN ORDER PASSED U/S 263 HAS STATED AT P ARA 4.4 IN VIEW OF ABOVE DISCUSSION IT IS APPARENT THAT TH E ORDER PASSED BY AO IS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE IN REGARD TO DETERMINATION OF COST OF NEW ASSET ACQUIRED AS WELL AS COMPUTATION OF ELIGIBLE AMOUNT U/S 54F OF I.T.ACT. LD. PR. CIT HAS FAILED TO MAKE OUT OF THERE IS ANY JURISDICTIONAL ERROR. WHAT HAS BEEN POINTED OUT BY LD. PR.CIT IS ONLY COM PUTATIONAL ERROR RECTIFIABLE U/S 154. 5. THUS, TWIN CONDITIONS REQUIRED TO INVOKE THE PROVISIONS OF SECTION 263 I.E. ORDER SHOULD BE ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE ARE NOT SATISFIED. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, SUBMISSIONS MADE, JUDICIAL PRECEDENTS AND DOCUMENTS ON RECORD, APPEAL OF THE ASSESSEE BE ALLOWED . 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY OPPOSED THESE SUBMISSIONS AND SUPPORTED THE ORDER O F THE LD. PR. CIT. LD. CIT-DR SUBMITTED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WHICH IS EVIDENT FROM THE FACT THAT THERE WAS A COMPUTATIONAL ERROR. FURTHER, LD. DR TOOK US SATYANARAYAN SHARMA /ITANO.426/IND/2018 20 THROUGH THE IMPUGNED ORDER AND THE OBSERVATION MADE BY THE LD. PR. CIT. 8. IN REJOINDER LD. COUNSEL FOR THE ASSESSEE SHRI G IRISH AGRAWAL SUBMITTED THAT THE COMPUTATION ERROR COULD BE RECTI FIED BY PASSING ORDER U/S 154. THE COMPUTATION ERROR COULD BE RECTI FIED U/S 154 SUCH ERROR WOULD NOT CONFER JURISDICTION ON THE LD. PR. CIT TO REVISE THE WELL-CONSIDERED ASSESSMENT ORDER. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT LD. PR. CIT ISSUED SHOW CAUSE N OTICE DATED 12.03.2018. THE RELEVANT CONTENTS OF THE NOTICE REC ORDED IN THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: A) ON PERUSAL AND EXAMINATION OF RECORDS, IT IS FOUND THAT AFORESAID ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE IN TEREST OF REVENUE ON ACCOUNT OF FAILURE OF THE ASSESSING OFFICER IN ALLO WING EXCESS DEDUCTION U/S 54F BY TAKING EXCESS VALUE OF THE ELIGIBLE INVE STMENT AS WELL AS MAKING A CALCULATION ERROR BY ALLOWING ENTIRE INVES TMENT VALUE AS DEDUCTION RATHER THAN ALLOWING ON PROPORTIONATE BAS IS AS PRE SECTION 54F(L). ACCORDINGLY, 1 AM SATISFIED THAT PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 1961 ARE REQUIRED TO BE INVOKED IN YOUR CASE, HENCE THIS SHOW CAUSE NOTICE IS ISSUED AND OPPORTUNITY OF BEIN G HEARD IS PROVIDED TO YOU. THE DETAILED REASONS FOR THE SAME ARE DESCR IBED AS UNDER: ON PERUSAL OF RECORD IT IS FOUND THAT DURING THE YE AR THE ASSESSEE HAS SOLD A PROPERTY CLAIMED TO BE AGRICULTURAL LAND FOR A SALE CONSIDERATION OF RS. 1,20,00,000/-. THE PROPERTY WAS VALUED AT RS1,9 2,88,000/- FOR STAMP DUTY PURPOSES. DURING ASSESSMENT PROCEEDINGS THE VALUATION WAS CHALLENGED AND THE MATTER WAS REFERRED TO THE DVO F OR VALUATION OF THE PROPERTY. THE DVO DETERMINED THE VALUE OF THE PROPE RTY AT RS.1,26,54,892/-. SATYANARAYAN SHARMA /ITANO.426/IND/2018 21 THE ASSESSEE HAS CLAIMED DEDUCTION U/S 54B AND 54F AGAINST THE CAPITAL GAINS ACCRUING ON THE SALE OF THE PROPERTY. FOR THE CLAIM OF SECTION. 54F THE ASSESSEE CLAIMED TO HAVE CONSTRUCT ED A NEW RESIDENTIAL HOUSE. HE HAS CLAIMED TO HAVE INVESTED TOTAL OF RS. 75,58,768/- BY THE 31.07.2013 (I.E. BEFORE DATE OF FILING OF RETURN). ON PERUSAL OF THE RECORD IT IS SEEN THAT THE ASSESS EE HAS SUBMITTED A VALUATION REPORT BY THE REGISTERED VALUER WHO HAS V ALUED THE COST OF CONSTRUCTION IN RESPECT OF THE RESIDENTIAL PROPERTY AT RS.63,79,000/-. APART FROM THIS THE ASSESSEE HAS SUBMITTED A LIST O F ITEMS LIKE HOUSEHOLD INSTALLATIONS, ACS, SOFA ELECTRICAL EQUIPMENT OF V ALUE OF RS.12 LACS. IT IS OBSERVED THAT THE VALUATION OF THE PROPERTY HAS BEE N DONE AS PER COLLECTOR GUIDELINES FOR FINANCIAL YEAR 2015-15 EXP ENSES ON ACCOUNT OF PURCHASE OF AIR CONDITIONERS, FITTING OF AC, WAL LPAPERS, CURTAINS, SO FAR AND RUNNERS ARE NOT ALLOWABLE EXPENDITURE UNDER SEC TION 54F. THE EXPENDITURE ON THESE ITEMS WAS DONE BEFORE THE DATE OF VALUATION WHICH IS ALREADY INCLUDED IN THE VALUATION REPORT. THEREF ORE, THE EXTENT OF DEDUCTION ALLOWED AGAINST THESE EXPANSES IN THE NEW PROPERTY ACQUIRED WAS NOT IN ORDER. FURTHER, THE COMPUTATION OF INCOME WAS DONE ALLOWIN G DEDUCTION OF ENTIRE AMOUNT INVESTED I.E. RS.75,58,768/- UNDER SECTION 5 4F, WHICH WAS NOT CORRECT. AO WAS ONLY TO ALLOW PROPORTIONATE AMOUNT OF MONEY ACTUALLY INVESTED RS.63,79,000/-) TO THE LONG TERM CAPITAL G AIN I.E. RS.1,22,28,892/-. THE ALLOWABLE DEDUCTION WOULD BE {1,22,28,892X6379,000/1,26,54,892} I.E. RS.61,63,26 5/-. THEREFORE, THERE WAS EXCESS DEDUCTION ALLOWED OF RS.13,94,503/ - FROM THE ABOVE, IT CAN BE SEEN THAT WHILE TAKING V ALUE OF INVESTMENT FOR THE PURPOSE OF DEDUCTION U/S 54F, THE AO HAD ADOPTE D THE VALUE OF RS.75,58,768/- WHEREAS AS PER THE REPORT OF THE REG ISTERED VALUER, THE AMOUNT OF INVESTMENT STANDS AT RS.63,97,000/-. THE AMOUNT STATED TO BE SENT ON VARIOUS FURNITURE AND ELECTRONIC ITEMS C LAIMED BY THE ASSESSEE WOULD HAVE BEEN TAKEN INTO ACCOUNT BY THE REGISTERED VALUER WHILE MAKING VALUATION. HENCE, TO THAT EXTENT THE A OS ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. ALTERNATIVELY, THE AO OUGHT TO HAVE EXAMINED THE GENUINENESS OF THE INVES TMENT CLAIMED TO HAVE BEEN MADE IN FURNITURE AND ELECTRONIC ITEMS AN D ALSO WHETHER SUCH AMOUNT IS ALLOWABLE AS DEDUCTION U/S 54F, HOWEVER, THE SAME HAS NOT BEEN DONE. THE B) AS PER PROVISIONS OF SECTION 54F(1), THE QUA NTUM OF DEDUCTION HAS TO BE CALCULATED BASED ON THE PROPORTION OF CAPITAL GAIN TO THE INVESTMENT IN NEW ASSET WITH REGARD TO NET CONSIDERATION RECEI VED FROM SALE OF ORIGINAL ASSET. HOWEVER, THE AO HAS ALLOWED THE ENT IRE AMOUNT CLAIMED TO HAVE BEEN INVESTED U/S 54F. IN THIS WAY THE AD ALLOWED EXCESS DEDUCTION AMOUNTING TO RS 13,94,5031- AS PER WORKIN G GIVEN ABOVE. 2.2 FURTHER, IT IS NOTED FROM THE VALUATION REPORT SUBMITTED BY THE ASSESSEE THAT SATYANARAYAN SHARMA /ITANO.426/IND/2018 22 THE VALUE OF THE NEWLY ACQUIRED HOUSE HAS BEEN DETE RMINED AT RS.63,79,000/-. IT HAS BEEN MENTIONED IN THE VALUATION REPORT THAT THE ABOVE VALUE IS FAIR MARKET VALUE (COST OF CONSTRUCTION ONLY) AS ON 15.01.2016. THE ASSESSEE WAS ASKED AS TO WHY THE COST OF CONSTRUCTION AS ON 31.07.2013 WHICH IS DUE DATE OF RETURN SHOULD BE ADOPTED. 10. IN RESPONSE THERETO THE ASSESSEE FILED THE REPL Y THE CONTENTS OF THE SAME ARE RECORDED IN THE IMPUGNED ORDER: A. REGARDING THE CALCULATION OF ALLOWABLE DEDUCTION ON PROPORTIONATE AMOUNT OF MONEY ACTUALLY INVESTED IN THE CONSTRUCTI ON OF HOUSE UPTO THE DUE DATE OF FILING OF IT RETURN, IT IS ACCEPTED THA T THE DEDUCTION CLAIMED &,' ALLOWED U/S 54F AT RS.75587681- WAS AN INADV ERTANT ERROR WHICH NEEDS TO BE CORRECTED. THE CORRECT CALCULATIO N OF ALLOWABLE DEDUCTION U/S 54F, THEREFORE IS AS UNDER- TOTAL SALE CONSIDERATION U/S 50C 12654892/- LONG TERM CAPITAL GAINS 12228892/- AMOUNT INVESTED IN CONSTRUCTION OF HOUSE TILL 31.07 .2013 7558768/- ALLOWABLE DEDUCTION U/S 54F (12228892 X 7558768/12654892) 7304318/- ACCORDINGLY THE AD HAS ALLOWED EXCESS DEDUCTION OF RS.254450/-. B. REGARDING YOUR OBSERVATION THAT, THE AMOUNT OF INVE STMENT IN THE RESIDENTIAL HOUSE WHICH IS ELIGIBLE FOR DEDUCTION U/S 54F IS RS. 63,97,000/-, IT IS RESPECTFULLY SUBMITTED THAT THIS FIGURE OF RS. 63, 97, 0001- IS NOT THE AMOUNT ACTUALLY INVESTED IN CONSTR UCTION OF RESIDENTIAL HOUSE BUT IS THE FAIR MARKET VALUE (COST OF CONSTRUCTION ONLY) A S ON 15.01.16 OF THE RESIDENTIAL HOUSE BELONGING TO THE ASSESSEE AS PER THE VALUATION REPORT DT.16.02.16. IT IS VERY IMPORTANT TO NOTE HERE THAT THE VALUER HAS ONL Y MADE THE VALUATION OF COST OF CONSTRUCTION ONLY. THEREFORE Y OUR OBSERVATION THAT 'AO WAS ONLY TO ALLOWED PROPORTIONATE AMOUNT OF MON EY ACTUALLY INVESTED (RS. 63, 97, 000/-) IS CONTRARY TO THE FAC TS OF THE CASE. THE ENTIRE DETAILS OF DATE WISE INVESTMENT IN CONST RUCTION OF RESIDENTIAL HOUSE PROPERTY WAS DULY SUBMITTED BEFORE THE AO DUR ING THE ASSESSMENT PROCEEDINGS AND IS AVAILABLE ON THE ASSE SSMENT RECORDS. ALL THE BILLS 1 VOUCHERS RECEIPTS REGARDING THE PRO OF OF INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY WERE DUL Y PRODUCED BEFORE THE AO AND WERE EXAMINED BY HIM. AS PER THE DATE WISE DETAILS OF INVESTMENT IN CONST RUCTION OF RESIDENTIAL HOUSE PROPERTY SUBMITTED BEFORE THE AO, THE TOTAL AMOUNT INCURRED STANDS AT RS.75,58,768/- AND NOT RS. 63, 97,000/- AS MENTIONED IN SATYANARAYAN SHARMA /ITANO.426/IND/2018 23 YOUR SHOW CAUSE NOTICE. C . YOUR HONOUR'S OBSERVATION REGARDING NON ALLOWABILIT Y OF EXPENDITURE INCURRED ON ACCOUNT OF PURCHASE OF AIR CONDITIONERS, FITTING OF AC, WALL PAPERS, CURTAINS, SOFA AND RUNNERS ETC. IS ALSO CONTRARY TO THE LAW. THE PROVISIONS OF SEC. 54F ARE REPRODUCED FOR THE S AKE OF CONVENIENCE AS UNDER.- 54F. CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL AS SETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE.-(J) WHE RE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL, THE CAPITAL GAIN ARIS ES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDEN TIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DAT E ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERI OD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE (H EREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHA LL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SE CTION, THAT IS TO SAY,- (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45, (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS TH E COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY WHERE THE ASSESSEE OWNS ON THE DATE OF THE TRANSFER OF TH E ORIGINAL ASSET, OR PURCHASES, WITHIN THE PERIOD OF ONE YEAR AFTER SUCH DATE, OR CONSTRUCTS, WITHIN THE PERIOD OF THREE YEARS AFTER SUCH DATE, A NY RESIDENTIAL HOUSE, THE INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD & NOT,-INCOME FROM HOUSE PROPERTY & N OT; OTHER THAN THE NEW ASSET. EXPLANATION.-FOR THE PURPOSES OF THIS SECTION,- (I) 'LONG-TERM CAPITAL ASSET ' MEANS A CAPITAL ASSET WH ICH IS NOT A SHORT-TERM CAPITAL ASSET, (II) 'NET CONSIDERATION ', IN RELATION TO THE TRANSFER O F A CAPITAL ASSET, MEANS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDU CED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER. THE AMOUNT ELEGIBLE FOR DEDUCTION U/S 54F IS 'COST OF NEW ASSET' I.E.RESIDENTIAL HOUSE AND NOT THE COST OF CONSTRUCT ION ONLY. SIR, IT IS A VERY COMMON KNOWLEDGE THAT A RESIDENTIAL HOUSE MEAN S A HOUSE WHICH IS HABITABLE. FOR MAKING A HOUSE HABITABLE, ALL THE NECESSITIES REQUIRED FOR LIVING ARE TO BE INSTALLED. AIR CONDITIONERS, F ITTING OF AC, WALL PAPERS, CURTAINS, SOFA AND RUNNERS ETC. ARE ALL NECESSITIES REQUIRED FOR MAKING A SATYANARAYAN SHARMA /ITANO.426/IND/2018 24 HOUSE INHABITABLE. THEREFORE ALL THESE THINGS ARE P ART & PARCEL OF A RESIDENTIAL HOUSE THE COST OF NEW ASSET I.E. THE RESIDENTIAL HOUSE OU GHT TO INCLUDE ALL THE COST INCURRED FOR MAKING A HOUSE INHABITABLE. T HEREFORE YOUR OBSERVATION THAT THE EXPENSES ON ACCOUNT 0/ PURCHASE OF AIR CONDITIONERS. FITTING OF AC, WALL PAPERS. CURTAINS. SOFA AND RUNNERS ETC. ART NOT ALLOWABLE EXPENDITURE U/S 54F IS ERRON EOUS. RELIANCE IS PLACED ON THE CASE OF SHRI SHRINIWAS R. DESAI VS. A CIT - ITA NO. 1245 & 2432/AHD/20L0 (COPY OF JUDGMENT ENCLOSED) WHEREIN THE HON'BLE TRIBUNAL HELD THAT 'THE AO IS DIRECTED TO ALLOW DEDUCTION OF THE COST OF NEW ASSET PURCHASED BY HIM AND THE ................................................... .................................. EXPENSES. IF ANY. INCURRED BY HIM TO MAKE THE SAME INHABITABLE .. ' RELIANCE IS ALSO PLACED ON A VERY RECENT JUDGMENT I N THE CASE OF RAJAT B. MEHTA VS. ITO (2018) 90 TAXMANN.COM 176 (AHD-TRIB) (COPY ENCLOSED) WHEREIN THE HON'BLE TRIBUNAL HELD T HAT THE PAYMENT ON ACCOUNT OF FURNITURE &;FIXTURE WAS ALSO ALLOWABL E FOR DEDUCTION U/S 54F. D. AS EXPLAINED HEREIN ABOVE. AS PER THE FACTS OF T HE CASE AND AS PER THE ABOVE CITED JUDGMENTS, IT IS ESTABLISHED THAT THE COST OF NEW ASSET (I. E. RESIDENTIAL HOUSE) COMPRISES OF COST O F CONSTRUCTION OF RESIDENTIAL HOUSE & EXPENSES INCURRED ON FURNIT URE FIXTURES ETC. FOR, MAKING THE RESIDENTIAL HOUSE HABITABLE. ACCORD INGLY EXPENSES ON ACCOUNT OF PURCHASE OF AIR CONDITIONERS. FITTING OF AC, WALL PAPERS, CURTAINS, SOFA AND RUNNERS ETC. QUALIFY FOR DEDUCTION U/S 54F. 11. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO T HE RIVAL CONTENTIONS OF THE PARTIES. SO FAR EXERCISING OF P OWERS U/S 263 OF THE ACT IS CONCERNED, WE FIND NO INFIRMITY IN THE O RDER OF LD. PCIT AS THE ASSESSING OFFICER HAS WRONGLY ALLOWED THE CLAIM WITHOUT EXAMINING THAT HOW MUCH DEDUCTION CAN BE ALLOWED. LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THIS ORDER COULD BE RE CTIFIED BY THE ASSESSING OFFICER U/S 154 OF THE ACT. HOWEVER LD. COUNSEL FOR THE SATYANARAYAN SHARMA /ITANO.426/IND/2018 25 ASSESSEE DID NOT BRING TO OUR NOTICE ANY SUCH ACTIO N BEING TAKEN BY THE ASSESSING OFFICER. HENCE ON THIS GROUND REVISI ON OF THE ORDER IS JUSTIFIED. ANOTHER GROUND FOR EXERCISING OF POWER U/S 263 OF THE ACT WAS REGARDING ADOPTION OF THE COST OF ACQUISITION O F NEW ASSET. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE COST OF FURNITURE, AIR CONDITIONERS IS ALLOWABLE AND THE SAME WOULD FORM P ART OF ACQUISITION OF NEW ASSETS. TO BUTTRESS THIS CONTEN TION LD. COUNSEL HAS PLACED RELIANCE ON THE DECISION OF THE CO-ORDIN ATE BENCH RENDERED IN THE CASE OF SHRINIWAS R DESAI V/S ACIT, ITA NO.1245 AND 2432/AHD/2010 WHEREIN THE CO-ORDINATE BENCH HAS HELD THAT COST OF THE ASSET IS NOT ALLOWABLE BUT IN A CASE WH ERE THE ASSESSEE HAS PURCHASED A NEW ASSET, WHICH IS NOT HABITABLE C ONDITION THE EXPENSES INCURRED BY THE ASSESSEE TO MAKE IT HABITA BLE SHOULD BE ALLOWED U/S 54(2) OF THE ACT. RELIANCE HAS ALSO PL ACED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF RAJAT B MEHTA V/S ITO (2018) 90 TAXMANN.COM 176 WHEREIN IT HAS BEEN HELD THAT THE EXPRESSION USED IN STATUTE IS COST OF THE RESIDENTI AL HOUSE SO PURCHASED AND IT DOES NOT NECESSARILY MEAN THAT THE COST OF RESIDENTIAL HOUSE MUST REMAIN CONFINED TO THE COST OF CIVIL CONSTRUCTION ALONE. A RESIDENTIAL HOUSE MAY HAVE M ANY OTHER SATYANARAYAN SHARMA /ITANO.426/IND/2018 26 THINGS, OTHER THAN CIVIL CONSTRUCTION AND INCLUDING THINGS LIKE FURNITURE AND FIXTURES, AS ITS INTEGRAL PART AND MA Y ALSO BE ON SALE AS AN INTEGRAL DEAL. FURTHER THE TRIBUNAL HELD TH AT IF THESE THINGS ARE INTEGRAL PART OF HOUSE BEING PURCHASED, THE COS T OF HOUSE HAS TO ESSENTIALLY INCLUDE THE COST OF THESE THINGS AS WEL L. IN SUCH CIRCUMSTANCES, WHAT IS TO BE TREATED AS COST OF THE RESIDENTIAL HOUSE IS THE ENTIRE COST OF HOUSE AND IT CANNOT BE OPEN T O THE ASSESSING OFFICER TO TREAT ONLY THE COST OF ONLY CIVIL CONSTR UCTION AS COST OF HOUSE AND SEGREGATE THE COST OF OTHER THINGS AS NOT ELIGIBLE FOR DEDUCTION U/S 54. IN THIS CASE IT WAS NOT A COMPOS ITE DEAL, WE FIND THAT THE LD. PCIT HAS ALSO CONSIDERED THESE CASE LA WS. HOWEVER IT IS NOT CLEAR WHETHER THE ASSESSEE HAD ENTERED INTO WITH A CONTRACT WITH THE CONTRACTOR THAT INCLUDED THE COST OF FURNI TURE AND OTHER FIXTURES. LD. PCIT HAS ALSO NOT BROUGHT ANY SUCH E VIDENCE ON RECORD. UNDER THESE FACTS WE MODIFY THE DIRECTION OF LD. PCIT TO THE EXTENT THAT THE LD. ASSESSING OFFICER WOULD ALLOW T HE EXPENSES INCURRED FOR FURNITURE AND AIR CONDITIONERS IF IT I S PART AND PARCEL OF THE CONTRACT FOR CONSTRUCTION OF NEW HOUSE. THIS G ROUND OF THE ASSESSEE IS PARTLY ALLOWED. SATYANARAYAN SHARMA /ITANO.426/IND/2018 27 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.12.2 020. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 28/12/2020 /DEV COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE