Smt. Geetaben Bharatkumar Shah, Petlad V. The Dy.CIT, Circle-3, Baroda

ITA 528/AHD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9791 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: P M MEHTA WITH SHRI G M THAKOR
• Keywords: Capital asset; Cost of acquisition; Corroborative evidences; Assessment record
• Section: 143(3); 54F; 263; 10; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.528/AHD/2014 / ASSTT. YEAR: 2009-2010 SMT.GEETABEN BHARATKUMAR SHAH C/O.SHAH HARILAL BHIKHABHAI & CO. NARIAPADA PETLAD 388 450. PAN : AGLPS 9672 F VS. ITO, WARD - 4(1) AHMEDABAD. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI P.M. MEHTA WITH SHRI G.M. THAKOR, AR REVENUE BY : SHRI JAGDISH, CIT-DR / DATE OF HEARING : 04/10/2016 / DATE OF PRONOUNCEMENT: 09/12/2016 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT-I, BARODA DATED 11.12.2013 PASSED FOR ASSTT.YEAR 2000- 10 UNDER SECTION 263 OF INCOME TAX ACT, 1961. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT LD.COMMIS SIONER HAS ERRED IN TAKING COGNIZANCE UNDER SECTION 263 OF THE INCOME T AX ACT, 1961 AND THEREBY SETTING ASIDE WELL REASONED ORDER OF LD.AO FOR PASS ING A FRESH ASSESSMENT ORDER WITH REGARD TO COMPUTATION OF LONG TERM CAPIT AL GAIN. ITA NO.528/AHD/20143 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HER RETURN OF INCOME ON 25.9.2009 DECLARING TOTAL INCOME AT RS.28 ,30,590/-. THE ASSESSEE WAS OWNER AND IN POSSESSION OF BUNGALOW AT AMBAWADI . HALF-SHARE OF THIS BUNGALOW WAS SOLD ON 31.03.2009 FOR A CONSIDERATION OF RS.92,02,625/-. BUNGALOW WAS PURCHASED FOR CONSIDERATION OF RS.5,39 ,540/-. SINCE IT WAS PURCHASED PRIOR TO 1.4.1981 ITS INDEXED COST FROM 1 .4.1981 WAS WORKED OUT AS ON 31.3.2009 AT RS.31,40,123/-. THE ASSESSEE HAS C OMPUTED LONG TERM CAPITAL GAIN OF RS.60,62,502/-. THE ASSESSEE HAS CLAIMED T HAT A SUM OF RS.50.00 LACS WAS INVESTED IN NATIONAL HIGHWAY AUTHORITY OF INDIA BOND AND DEDUCTION UNDER SECTION 54EC WAS CLAIMED. RS.25 LAKH WAS DEPO SITED IN CAPITAL GAIN ACCOUNT WITH STATE BANK OF INDIA. IN THIS WAY THE ASSESSEE HAS CLAIMED THAT SHE HAS MADE INVESTMENT OF TOTAL CAPITAL GAIN AND N O CAPITAL GAIN HAS FALLEN FOR TAXATION. THIS CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE AO. HE HAS MADE CONCLUSION IN PARA-4 OF THE ASSESSMENT ORDER, AND U LTIMATELY ASSESSED THE INCOME OF THE ASSESSEE AT THE DECLARED INCOME. 4. AFTER PERUSAL OF THE ASSESSMENT RECORD, THE LD.C OMMISSIONER HARBOURED A BELIEF THAT THE AO HAS NOT CARRIED OUT PROPER INQ UIRIES AND HIS ACTION HAS CAUSED PREJUDICE TO THE INTEREST OF REVENUE. HE RE CORDED THE FOLLOWING REASONS AND ISSUED A SHOW CAUSE NOTICE UNDER SECTIO N 263 OF THE INCOME TAX ACT. DURING THE YEAR THE ASSESSEE HAD SHOWN LTCG OF RS. 60,62,502/~ ON SALE OF CAPITAL ASSET, OUT OF THAT RS. 50,00,000/- WAS INVESTED IN NATIONAL HIGHWAY AUTHORITY OF INDIA AND RS. 25,00,0 00/- WAS INVESTED WITH S.B.I CAPITAL GAIN ACCOUNT ON 22.09.2009. EXEM PTION OF RS.50 LAC WAS CLAIMED U/S. 54EC AND OF RS. 10,62,502/-U/S. 54 F OF THE IT.ACT. EXEMPTION U/S. 54F IS AVAILABLE ON LONG TERM CAPITA L GAIN ARISING OUT OF LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL PRO PERTY. ALSO AS PER SECTION 54EC THE MAXIMUM, AMOUNT ALLOWABLE IS RS. 5 0 LACS. THERE IS NO MANDATE IN THE ACT FOR INVESTING THE REMAINING A MOUNT IN BANK OR ITA NO.528/AHD/20143 3 SPECIFIED INSTITUTION. THUS, THE ALLOWANCE OF EXEMP TION U/S. 54F WAS IRREGULAR. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE HAS FILED WRITTEN SUBMISSION WHICH HAS BEEN REPRODUCED BY THE LD.CIT. THE SUBMISSIONS ARE AVAILABLE ON PAGE NOS.5 TO 9 OF THE PAPER BOOK. WE DEEM IT APPROPRIATE TO TAKE NOTE OF THE SUBMISSIONS. IT READS AS UNDER: 1 WITH REFERENCE TO THE ABOVE CAPTIONED SUBJECT IT I S STATED THAT THE ASSESSEE WAS IN RECEIPT OF NOTICE U/S 263 OF THE IN COME TAX ACT,1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 10.10. 2013 GIVING; THE FOLLOWING REASONS ON WHICH ORDER U/S 143(3) OF THE ACT PASSED BY THE DCIT, CIRCLE-3, BARODA HAS BEEN CONSIDERED AS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. '...... DURING THE YEAR YOU HAVE SHOWN LTCG OF RS. 60,62,502/- ON SALE OF CAPITAL ASSET. RS. 50,00,000/- WAS INVES TED IN NATIONAL HIGHWAY AUTHORITY OF INDIA AND RS. 25,00,000/- WAS INVESTED WITH SBI CAPITAL GAIN A/C ON 22.09.2009. EXEMPTION OF RS. 50 LAC WAS CLAIMED U/S 54EC AND RS. 10,62,502/- U/S 54F. E XEMPTION U/S 54F IS AVAILABLE ON LONG TERM CAPITAL GAINS AR ISING OUT OF LONG TERM CAPITAL ASSET NOT BEADING A RESIDENTIAL P ROPERTY. ALSO AS PER SEC 54EC THE MAXIMUM AMOUNT ALLOWABLE IS RS. 50 LAC. THERE IS NO MENTION IN THE SEC, FOR INVESTING THE R EMAINING AMOUNT IN BANK OR SPECIFIED INSTITUTION. THUS THE A LLOWANCE OF EXEMPTION U/S 54F WAS IRREGULAR. ....' 2. OUT OF ABUNDANT CAUTION ONLY, WE BEG TO PO INT OUT THAT THE MENTION OF SECTION 54F IN THE AFORESAID REASON IS C LEARLY INADVERTENT. IN THIS RESPECT IT IS MOST RESPECTFULLY SUBMITTED THAT ACTUALLY THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54 OF THE ACT. DUE TO INA DVERTENT PUNCHING ERROR , WHILE PASSING THE ORDER U/S 143(3) ( ANNEXU RE-1) THE ASSESSING OFFICER (AO) HAS MENTIONED EXEMPTION AS CLAIMED 'U/ S 54F INSTEAD OF EXEMPTION 'U/S 54' OF THE 'ACT AND IT SEEMS THAT SU CH MERE INADVERTENT PUNCHING ERROR HAS RESULTED IN TO THE SOLE REASON O N YOUR GOOD HONOUR END TO CONSIDER THAT THE ORDER PASSED U/S 143(3) DA TED 05.12.2011 BY THE AO WAS ERRONEOUS AS IT WAS PREJUDICIAL TO THE I NTEREST OF THE REVENUE AND CONSEQUENTLY LEADING THE SHOW CAUSE UND ER SECTION 263(3) OF THE ACT. ITA NO.528/AHD/20143 4 3. AS YOUR GOOD HONOUR IS AWARE, JURISDICTION U/S. 263 CAN BE ASSUMED ONLY IF THE ORDER SOUGHT TO BE REVISED IS B OTH ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SINCE THE ASSESSMENT ORDER FOR THE PRESENT ASSESSMENT YEAR IS NOT ERRONEOUS IN RESPECT OF THE COUNT RAISED IN THE NOTICE, FAR LESS, PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE CONDITIONS FOR ASSUMING JURISDICTION U/S. 263 A RE ABSENT AND, THEREFORE, THE QUESTION FOR ASSUMING THAT JURISDICT ION IN OUR PRESENT CASE CAN JUST NOT ARISE. IN ORDER THAT THIS MAY BE APPRECIATED, WE BEG TO RELATE THE RELEVANT FACTS AND MAKE SUBMISSIONS IN T HE PARAS THAT FOLLOW. 4. ASSESSEE HAD FILED RETURN OF INCOME FOR A. Y. 2009-10 ON 25.09.2009 DECLARING INCOME AT RS. 28,30,590/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT WHERE IN ALL THE DETAILS AN D EXPLANATION WERE FURNISHED FROM TIME TO TIME. THERE AFTER ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 IS PASSED BY THE LD. AO DA TED 05.12.2011 ASSESSING THE INCOME AT RS. 28,30,590/- ONLY, AFTER SCRUTINIZING WHOLE COMPUTATION OF INCOME AND CLAIMS MADE UNDER DIFFERE NT HEADS VERY MINUTELY. 5. ASSESSEE OBJECTS THE REASON FOR REVISING T HE CASE U/S 263 OF THE ACT ON THE SOLE CONTENTION AS PER REASON QUOTED IN YOUR SHOW CAUSE NOTICE ABOUT IRREGULAR CLAIM OF EXEMPTION U/S 54F O F THE ACT. ASSESSEE WOULD LIKE TO DRAW ATTENTION OF YOUR GOOD SELVES TO WARDS THE BRIEF FACTS OF THE LONG TERM CAPITAL GAIN AND EXEMPTION CLAIMED FROM THEREOF IN THE RETURN OF INCOME DURING THE YEAR UNDER CONSIDER ATION. 5.1 DURING THE YEAR UNDER CONSIDERATION ASSESS EE HAD EARNED LONG TERM CAPITAL GAIN OF RS. 92,02,625/- ON TRANSFER OF RESIDENTIAL HOUSE, OUT OF WHICH VALID INDEXATION WAS CLAIMED FOR RS. 3 1,40,123/- AND HENCE GROSS LONG TERM GAIN FOR RS. 60,62,502/- AROS E TO ASSESSEE. OUT OF SAID CAPITAL GAIN ASSESSEE HAD INVESTED. A. THE SUM OF RS. 50 LAC IN NATIONAL HIGH WAYS AUTH ORITY OF INDIA [NHAI] BOND ON 29TH JULY 2009 AS TO CLAIM EXE MPTION U/S 54EC AND B. DEPOSITED SUM OF RS. 25,00,000/- IN 'CAPITAL GAI N DEPOSIT SCHEME' ON 22.09.2009 (BEFORE THE DUE DATE OF FILIN G OF RETURN OF INCOME) AS TO CLAIM EXEMPTION U/S 54 OF THE ACT. ITA NO.528/AHD/20143 5 COMPUTATION OF CAPITAL GAIN IS PRODUCED AS BELOW FO R YOUR READY REFERENCE: PARTICULARS AMOUNT AMOUNT SALE/TRANSFER OF RESIDENTIAL PROPERTY 92,02,625 LESS: INDEX COST OF ACQUISITION (31,40,123) GROSS CAPITAL GAIN 60,62,502 LESS: EXEMPTION U/S 54EC INVESTMENT IN NHAI BOND EXEMPTION U/S 54 (2) [INVESTMENT IN SBI CAPITAL GAIN A/C OF RS 25,00,000 (ANNEXURE-1) 1 50,00,000 10,62,502 TOTAL EXEMPTION CLAIMED 60,62,502 NET CAPITAL GAIN NIL 5.2 AFOREMENTIONED FACTS ALREADY BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDING AND AFTER CONSIDERING THE EXP LANATION AND SUBMISSION PROVIDED BY ASSESSEE, ASSESSING OFFICER ALSO ASSESSED THE CAPITAL GAIN INCOME SAME AS DECLARED BY ASSESSEE AN D ALLOWED VALID CLAIM OF EXEMPTION FROM SUCH CAPITAL GAIN. ASSESSEE , HAD NEVER CLAIMED EXEMPTION U/S 54F OF THE ACT, RATHER ASSESSEE HAD C LAIMED EXEMPTION U/S 54 ONLY AS PER AFOREMENTIONED DETAIL. HOWEVER, WHILE DRAFTING ASSESSMENT ORDER AO ERRED IN TYPING THE ORDER WHERE BY EXEMPTION CLAIM 'U/S 54' IS SHOWN AS EXEMPTION 'U/S 54F' AND WHICH HAS NOW, RESULTED AS OBJECTION FOR REVISION OF CASE U/S 263 OF THE ACT. FURTHER, LD. AO HAS ALSO ERRED IN PUNCHING THE AMOUNT OF EXE MPTION FOR RS. 13,17,559/- WHICH IS ACTUALLY 10,62,502/- , AS RIGH TLY QUOTED BY YOUR GOOD HONOUR IN THE NOTICE U/S 263. 5.3 FROM THE REASON AS QUOTED IN YOUR GOOD HONO UR NOTICE IT IS EVIDENT THAT ON PERUSE OF ASSESSMENT RECORDS OF ASS ESSEE' CASE , YOUR HONOUR HAS FOUND A FACT THAT THERE IS A CAPITAL GAI N ARISING OUT OF LONG TERM CAPITAL ASSET WHICH IS RESIDENTIAL HOUSE. YOUR HONOUR HAS UNDISPUTEDLY ACCEPTED THAT THERE IS NEITHER IRREGUL ARITY ABOUT WORKING OF CAPITAL GAIN ON TRANSFER OF RESIDENTIAL PROPERTY NOR ANY IRREGULARITY ITA NO.528/AHD/20143 6 OF INDEXATION CLAIM THERE FROM. FURTHER, WITH RESPE CT TO EXEMPTION CLAIM U/S 54EC FOR RS. 50 LAC FROM THE SAID LONG TE RM CAPITAL GAIN IS ALSO FOUND TO BE ADEQUATE. AS WELL YOUR HONOUR HAS ALSO NOT DISPUTED ABOUT THE LEGALITY OF THE CLAIM OF EXEMPTION UNDER DIFFERENT TWO SECTIONS RANGING FROM SECTION 54 TO SECTION 54H. THE ONLY CO UNT RAISED BY YOUR GOOD HONOUR ON PERUSE OF THE AO'S ORDER PASSED U/S 143(3), IS ABOUT THE ELIGIBILITY CRITERIA FOR CLAIMING EXEMPTION U/S 54F, FOR WHICH YOUR HONOUR HAS CATEGORICALLY MENTIONED THAT EXEMPTION U /S 54F CAN ONLY BE CLAIMED WHEN THERE IS A CAPITAL GAIN ARISING OUT OF TRANSFER OF LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOUSE. AS THE RE IS CAPITAL GAIN FROM TRANSFER OF LONG TERM CAPITAL ASSET BEING RESIDENTI AL PROPERTY IN THE CASE OF ASSESSEE, SECTION 54F CLAIM WAS FOUND TO BE IRRE GULAR AND CONSEQUENTLY AS A MANIFEST COUNT WAS ALSO RAISED TH AT U/S 54EC MAXIMUM EXEMPTION IS PERMISSIBLE FOR RS. 50 LAC ONL Y AND THERE IS NO PROVISION FOR INVESTING THE CAPITAL GAIN IN SPECIFI ED CAPITAL GAIN SCHEME ACCOUNT. 6. FOR YOUR HONUR'S KIND PERUSAL ASSESSEE SUBMITS T HE FOLLOWING EVIDENCES, ON CLOSELY LOOK TO THE SAME IT WILL REMA IN LESS TO JUSTIFY ABOUT THE CLAIM MADE U/S 54 OF THE ACT AND NOT U/S 54F OF THE ACT. A. COPY OF STATEMENT OF CAPITAL GAIN SAVING SCHEME A/C IN THE NAME OF ASSESSEE (ANNEXUE-2) - - ON PERUSE OF THE SAME YOUR HONOUR WILL IDENTIF Y THAT THE INVESTMENT WAS MADE IN CAPITAL GAINS SCHEME ACCOUNT. B. COPY OF DD NO. 114879 DRAWN ON THE NAME OF 'USHA BEN J BRAHMBHATT (ANNEXURE-3) - ON PERUSE OF THE SAME YOUR HONOUR WILL FIND A FAC T THE WITHDRAWAL WAS MADE FROM THE CAPITAL GAIN SCHEME AC COUNT FOR THE PURPOSE OF INVESTMENT IN NEW RESIDENTIAL HOUSE PURC HASED FROM USHABEN J BRAHMBHATT. DETAIL OF THE SAME CAN BE VER IFIED FROM ANNEXUE-3 BELOW. C. COPY OF PURCHASE DEED FOR NEW RESIDENTIAL HOUS E ( ANENXURE-4) - ON PERUSE OF THE SAME YOUR HONOUR WILL FIND A FACT THAT THE PROPERTY WAS BOUGHT IN JOINT OWNERSHIP WHERE IN ONE OF THE P ARTY IS ASSESSEE HERSELF. ITA NO.528/AHD/20143 7 FOR HER 50% SHARE ASSESSEE HAS INVESTED FROM HER OW N SOURCES. OUT OF THE SAID CAPITAL GAIN SCHEME ACCOUNT, 25 LAC WAS WITHDRAWN AS TO GIVE PURCHASE CONSIDERATION FOR NEW RESIDENTIAL HOUSE (WHICH CAN BE PERUSED FROM THE ANNEXURE-1 & 2 FURNISHED HERE IN ABOVE) , DETAIL OF THE SAME IS ALSO AVAILAB LE ON THE REGISTERED DEED OF NEW RESIDENTIAL PROPERTY (FOR SA KE OF IMMEDIATE REFERENCE THE SAME IS MARKED). CONSIDERIN G THIS, THERE WILL REMAIN LESS AS TO JUSTIFY THE CLAIM MADE U/S 5 4 OF THE ACT. 7. AS DISCUSSED IN SUPRA PARAS ON PERUSING THE AFOR ESAID DETAILED EXPLANATION AND SUPPORTING EVIDENCE YOUR H ONOUR WILL CONCUR WITH THE FACT THAT THE ASSESSEE HAD CLAIMED EXEMPTION U/S 54 ONLY AND THERE IS JUST A TYPING ERROR IN QUOTING EXEMPTION CLAIMED AS 'U/S 54F OF THE ACT1 WHILE PASSING THE A SSESSMENT ORDER BY AO. SUCH PUNCHING ERROR REQUIRES RECTIFICA TION U/S 154 ONLY AND SHALL NOT IN ANY CASE SAID TO BE ORDER PAS SED BY ASSESSING OFFICER AS PREJUDICIAL TO REVENUE, WHICH CAN RESULT IN TO REVISION OF CASE U/S 263 OF THE ACT. IT WILL BE MAN IFEST TO SAY THAT AFORESAID EXPLANATION WILL FURTHER BRING CLARITY TH AT RS. 25 LAC WAS NOT DAIMED U/S 54EC OF THE ACT AS CORRECTLY FIG URED OUT BY YOUR HONOUR THAT THERE IS NO PROVISION AS SUCH U/S 54EC TO INVEST THE SAME IN CAPITAL GAIN SCHEME ACCOUNT UNDER THAT SECTION. 8. FROM THE ABOVE DISCUSSION, YOUR HONOUR WOU LD KINDLY SEE THAT THE SUGGESTION CONTAINED IN YOUR NOTICE IS ENT IRELY MISPLACED AND THAT THE ASSESSMENT ORDER FOR THE PRESENT ASSES SMENT YEAR CANNOT BE REGARDED AS BEING ERRONEOUS ON ACCOUNT OF MERE PUNCHING ERROR. BEING SUCH, WE WOULD URGE UPON YOUR HONOUR FOR KINDLY DROPPING THE PROCEEDINGS U/S. 263. FOR T HAT ACT OF KINDNESS, WE SHALL BE VERY GRATEFUL. 6. THE LD.COMMISSIONER HAS CONSIDERED THE ABOVE SUB MISSIONS AND ALSO OBSERVED THAT ASSESSEE HAS MADE INVESTMENT FOR PURC HASE OF BUNGALOW BEARING NO.282/283 HAVING AREA OF 881.30 SQ.YARDS. THIS BUNGALOW HAS CONSTRUCTED PORTION OF 190 SQ.YARDS. ACCORDING TO T HE LD.COMMISSIONER A SUM OF RS.1,27,50,000/- WAS PAID BY THE ASSESSEE ON 29. 9.2009. THE LD.COMMISISONER HAS NOTICED THIS DETAILS IN PARA 2. 2. OF THE IMPUGNED ORDER. ITA NO.528/AHD/20143 8 IT IS PERTINENT TO TAKE NOTE OF THE FINDING OF THE LD.CIT(A) IN THIS CONNECTION AS UNDER: 2.2 THE SUBMISSION OF THE ASSESSES HAS BEEN CONSID ERED. THE CASE RECORD OF THE ASSESSEE HAS ALSO BEEN EXAMINED. THE ASSESSEE HAS FILED A COPY OF DEED OF PURCHASE IN RESPECT OF PROPERTY OF BUNGALOW NO. 282/283 HAVING PLOT AREA SQ. RNTRS, 736.87 I.E. ABO UT 881,30 SQ, YARDS, AND A RESIDENTIAL BUNGALOW THEREON OF 190 SQ. YARDS IN MANEKBAUG CO- OPERATIVE SOCIETY LTD, NEAR SHREYAS FOUNDATION, AMB AWADI, MOJE VASANA, AHMEDABAD WHICH WAS EXECUTED ON 29.09.2009 FOR A CONSIDERATION OF RS. 2,55,00,000/-. THE DETAILS OF PAYMENTS I.E. INVESTMENT MADE ARE AS UNDER: 1 RS.52,50,000 BY PURCHASER NO.1 I.E. RAJESH BHARAT BHAI SHAH BY CHEQUE NO.696392 DT.29.9.2009 DRAWN ON BANK OF BARODA AMBAWADI, AHMEDABAD. 2 RS.1,02,50,000 BY PURCHASER NO.2 I.E. SMT. GEETAB EN BHARATBHAI SHAH BY CHEQUE NO.696393 DT.29.9.2009 DRAWN ON BANK OF BARODA AMBAWADI, AHMEDABAD. 3 RS.25,00,000 BY PURCHASER NO.2 I.E. SMT. GEETABEN BHARATBHAI SHAH BY CHEQUE NO.114879 DT.29.9.2009 DRAWN ON BANK OF BARODA AMBAWADI, AHMEDABAD. PURCHASER NO.2, SMT. GEETABEN BHARABHAI SHAH, THE A SSESSEE HAD MADE PAYMENT OF RS.1,27,50,000/- ON 29.9.2009 AS NO TED ABOVE. 2.3 DURING THE YEAR UNDER ACCOUNT THE ASSESSEE HAD SHOWN LTCG AT RS.NIL. THE DETAILED WORKING GIVEN BY THE ASSESSEE IN RESPECT OF SALE OF BUNGALOW AT AMBAWADI IS AS UNDER: QUANTITY/UNIT PURCHASE DATE SALE DATE SALE OF BUN GLOW AT AMBAWADI (1/2 SHARE) 262 SQ. YRD. 1.4.1981 31.3.2009 SALE VALUE COST INDEXED COST LTCG ITA NO.528/AHD/20143 9 92,02,625 RS. 5,39,540 RS. 31,40,123 60,62,502 2.4 FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE HAD SOLD THE BUNGALOW AS MENTIONED FOR A SALE PRICE OF RS,92,02, 625/- AND SHE HAD PURCHASED A HOUSE IN WHICH HER CONTRIBUTION OF INVE STMENT WAS RS, 1,27,250,000/- WHICH IS MORE THAN THE SALE VALUE OF RS. 92,02,625/-. 2.5. IN THE COMPUTATION OF INCOME THE ASSESSEE HAS WORKED OUT THE CAPITAL GAIN OF THE PROPERTY SOLD AS UNDER: INCOME FROM LONG TERM CAPITAL GAIN: SALE OF ITEMS AS PER LIST ENCLOSED RS, 92,02,625 LESS: (COST OF ACQUISITION ETC.) INDEXED COST OF ACQUISITION (-)RS. 31,40,123 LESS: (EXEMPTIONS U/S. 54B/54D/54G ETC. INVESTMENT IN NABARD BOND INV. WITH SBI FOR CAPITAL GAIN RS.25,00,000/- RS. 50,00,000 RS. 13,17,559 (-)RS. 60,62,502 NIL A PERUSAL OF THE RECORD SHOWS SEVERAL DISCREPANCIES . THE ASSESSES HAS MADE INVESTMENT IN NATIONAL HIGHWAYS AUTHORITY OF I NDIA CAPITAL GAIN 54EC BONDS OF RS. 50,00,000/- ON 12.9.2009 FOR CLAI MING EXEMPTION UNDER THE PROVISIONS OF THE I.T.ACT, WHEREAS IN THE COMPUTATION OF INCOME INVESTMENT IS SHOWN TO BE IN NABARD BOND OF RS.50,00,000/- THIS ASPECT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER, FURTHER IN RESPECT OF INVESTMENT OF RS. 25,00,000/- IN SBI CAP ITAL GAIN EXEMPTION ACCOUNT, THE ASSESSEE HAS NOT QUOTED SPECIFIC SECTI ON UNDER WHICH IT WAS CLAIMED. THEREFORE, THE SUBMISSION OF THE ASSES SEE THAT WHILE DRAFTING THE ASSESSMENT ORDER A.O ERRED IN TYPING T HE ORDER WHEREBY EXEMPTION CLAIM U/S. 54 IS SHOWN AS EXEMPTION U/S. 54F IS UNFOUNDED. IT IS .APPARENT THAT THERE IS ERROR IN THE ORDER OF TH E ASSESSING OFFICER IN PRESUMING AND THEN ALLOWING EXEMPTION U/S 54F. THE ASSESSING OFFICER ALSO FAILED TO ENQUIRE TOTAL INVESTMENT WHICH ACTUA LLY COMES TO RS. 50,00,000 + 1,27,50,000 = 1,77,50,000/- AGAINST SAL E PROCEED OF ITA NO.528/AHD/20143 10 RS.92,02,625/-. THE ORDER OF THE ASSESSING OFFICER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. 3. IN VIEW OF THE ABOVE, THE ORDER OF THE A.O IS S ET-ASIDE WITH A DIRECTION TO RE-COMPUTE THE LONG TERM CAPITAL GAIN, AFTER EXAMINING THE ALLOWABILITY OF CLAIM OF EXEMPTION IN RESPECT OF IN VESTMENT MADE AS PER THE PROVISIONS OF INCOME-TAX ACT. HE IS ALSO DIRECT ED TO MAKE PROPER ENQUIRY REGARDING AVAILABILITY OF FUND FOR INVESTME NT AS ALSO INVESTMENT IN NABARD. 7. BEFORE EMBARKING UPON AN INQUIRY ON THE FACTS OF THE PRESENT CASE, WE DEEM IT APPROPRIATE TO TAKE NOTE OF FUNDAMENTAL TES TS PROPOUNDED IN VARIOUS JUDGMENTS OF TRIBUNAL/SUPERIOR COURTS RELEVANT FOR JUDGING ACTION OF CIT TAKEN UNDER SECTION 263 OF THE INCOME TAX ACT. 8. THE ITAT IN THE CASE OF MRS. KHATIZA S. OOMERBHO Y VS. ITO, MUMBAI, 101 TTJ 1095, ANALYZED IN DETAIL VARIOUS AU THORITATIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 AND HAS PROPOUNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF CIT TAKEN UNDER SE CTION 263. (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVER Y TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. ITA NO.528/AHD/20143 11 (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE AND IF THE AO HAS ADOP TED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO V IEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHI CH THE CIT DOES NOT AGREE. IF CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UNDER LAW (VI) IF WHILE MAKING THE ASSESSMENT, THE AO EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INC OME, THE CIT, WHILE EXERCISING HIS POWER UNDER S 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN P LACE OF THE INCOME ESTIMATED BY THE AO. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVE AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED T O BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEE STRAT IFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S . 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFA CTION. IF THE AO HAS MADE ENQUIRIES DURING THE COURSE OF A SSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOW S THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HI S ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 9. IN THE LIGHT OF THE ABOVE, LET US EXAMINE FACTS OF THE PRESENT CASE. A PERUSAL OF THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS FINDING RECORDED BY THE LD.CIT, IT APPEARS THAT THE LD.COMMISSIONER DID NOT APPRECIATE THE FACTS IN RIGHT PERSPECTIVE. THE FIRST EMPHASIS BY THE AS SESSEE WAS THAT SHE HAS NOT MADE CLAIM UNDER SECTION 54F. IT IS AN ERROR COMMI TTED BY THE AO. THE ITA NO.528/AHD/20143 12 LD.COMMISSIONER OUGHT TO HAVE EXAMINED THIS ASPECT ON MERIT BEFORE SETTING ASIDE THE ISSUE TO THE FILE OF THE AO. IT IS A JUS T AN APPARENT ERROR WHICH CAN BE RECTIFIED EVEN BY THE AO UNDER SECTION 154. IT IS NOT SUCH AN ISSUE WHICH HAS CAUSED ANY PREJUDICE TO THE REVENUE. IF UNDER SECT ION 54 EXEMPTION WAS AVAILABLE TO THE ASSESSEE, THEN MERELY MAKING A WRO NG MENTION OF SECTION 54F BY THE AO EXEMPTION WOULD NOT BE DENIED TO THE ASSE SSEE. THE LD.COMMISSIONER DID NOT ANALYSIS THIS ASPECT WHILE OBSERVING THAT THE AO HAS COMMITTED AN ERROR AND HIS ORDER IS AN ERRONEOUS ON E. APART FROM THE ABOVE, IT IS TO BE SEEN THAT SECTION 54 CONTEMPLATES THAT IN CASE THE ASSESSEE BEING AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY, HAS A CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG TERM CAPITAL ASSETS I.E. BEING B UILDING OR LAND APPURTENANT THEREOF AND BEING A RESIDENTIAL HOUSE, INCOME WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE ASSESSEE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER DATE ON WHICH TRANSF ER TOOK PLACE, PURCHASES OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THE DATE O F CONSTRUCTING A RESIDENTIAL HOUSE, THEN INSTEAD OF CAPITAL GAIN BEING CHARGEABL E TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IN WHICH TRA NSFER TOOK PLACE, IT SHALL BE DEALT IN ACCORDANCE WITH SUB-CLAUSE (1) AND (2) OF SECTION 54(1). THIS CLAUSE CONTEMPLATES QUANTIFICATION OF THE AMOUNTS OF CAPIT AL GAIN VIS--VIS ITS USER BY AN ASSESSEE FOR ACQUIRING NEW RESIDENTIAL HOUSE AND IF THERE REMAINS SOMETHING UNUSED ONLY THAT WILL BE SUBJECT TO CAPIT AL GAIN TAX. THE LD.COMMISSIONER HAS SPECIFICALLY OBSERVED THAT SALE WAS MADE ON 31.3.2009. THE ASSESSEE HAS PURCHASED ONE BUNGALOW ON 29.9.200 9. SHE HAS MADE PAYMENT OF RS.1,27,50,000/-. NOW IF THAT BE SO, EV EN OTHERWISE, THERE CANNOT BE ANY CAPITAL GAIN UPON THE ASSESSEE. IN OTHER WO RDS, EVEN IF ASSESSMENT ORDER WAS SUFFERING FROM ERROR WITH REGARD TO MENTI ONING OF WRONG SECTION, THEN, OTHERWISE ALSO ON MERIT, GAIN WILL NOT BE TAX ABLE, BECAUSE THE ASSESSEE HAS USED GAIN FOR ACQUIRING A NEW HOUSE AND SUCH IN VESTMENT WAS MORE THAN ITA NO.528/AHD/20143 13 THE GAIN ACCRUED TO THE ASSESSEE. THE LD.COUNSEL F OR THE ASSESSEE, AT THE TIME OF HEARING BROUGHT TO OUR NOTICE DECISION OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D.G.GOPALA GOWDA, 34 T AXMANN.CM 154 (KAR.) WHEREIN THE HONBLE COURT HAS OBSERVED THAT TWIN CO NDITIONS SHOULD BE AVAILABLE FOR TAKING ACTION UNDER SECTION 263 I.E. IT SHOULD BE ERRONEOUS AS WELL AS IT SHOULD CAUSE PREJUDICE TO THE REVENUE. IN THE PRESENT CASE, EVEN IF FOR THE SAKE OF ARGUMENTS, IT IS ASSUMED THAT THERE WAS AN ERROR IN THE ORDER OF ASSESSING OFFICER/ITO BY MAKING A MENTION OF SECTIO N 54F THEN ALSO ULTIMATELY, THERE WILL BE NO CAPITAL GAIN TAX UPON THE ASSESSEE, BECAUSE, SHE HAS MADE INVESTMENT IN NHAI BOND. SHE HAS MADE INV ESTMENT IN THE CAPITAL GAIN ACCOUNT WITH STATE BANK OF INDIA. APART FROM THIS, SHE HAS ACQUIRED HOUSE AND MADE INVESTMENT OF RS.1,27,50,000/-. THI S HOUSE HAS BEEN ACQUIRED WITHIN THE TIME LIMIT AVAILABLE IN SECTION 54. UNDER BOTH THE CIRCUMSTANCES, THERE WILL NOT BE ANY LONG TERM CAPI TAL GAIN TAX UPON THE ASSESSEE, AND THUS, THERE WILL NOT BE ANY PREJUDICE TO THE REVENUE. IN SUCH SITUATION, THE LD.COMMISSIONER OUGHT TO HAVE DROPPE D THE PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT. WE ALLOW THE AP PEAL OF THE ASSESSEE AND QUASH THE ORDER OF THE LD.COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 9 TH DECEMBER, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 09/12/2016