S. Baljit Singh Ryait, Ludhiana V. ITO, Ludhiana

ITA 667/CHANDI/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7016 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Assessment record; Capital receipt
• Section: 143(3); 54F; 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.667/CHD/2010 (ASSESSMENT YEAR : 2005-06) AND ITA NO.954/CHD/2016 (ASSESSMENT YEAR : 2005-06) S.BALJIT SINGH RYAIT, VS. THE INCOME TAX OFFICER, PROP. RYAIT ENTERPRISES, WARD-VI(1), 197-198F SAHEED BHAGAT LUDHIANA. SINGH NAGAR, PAKHOWAL ROAD, LUDHIANA. PAN: AAZPR4972K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR, CA RESPONDENT BY : SHRI RAVI SARANGAL, CIT DR DATE OF HEARING : 05.07.2017 DATE OF PRONOUNCEMENT : 01.08.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : BOTH THE APPEALS HAVE BEEN FILED BY THE SAME ASSESSEE. WHILE THE APPEAL IN ITA NO.667/CHD/2010 IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX-III , LUDHIANA DATED 23.3.2010, PASSED U/S 263 OF THE INC OME TAX ACT, 1961 (IN SHORT THE ACT) RELATING TO ASSE SSMENT YEAR 2005-06, THE APPEAL IN ITA NO.954/CHD/2016 IS AGAINST THE ORDER PASSED BY THE COMMISSIONER OF IN COME TAX LEVYING PENALTY UNDER SECTION 271(1)(C) ON ACCO UNT OF ADDITION MADE IN THE ORDER PASSED UNDER SECTION 263 OF THE ACT. 2 2. SINCE BOTH THE APPEALS ARE INTERCONNECTED, THEY WERE HEARD TOGETHER AND ARE BEING DECIDED BY THIS C OMMON ORDER. WE SHALL BE FIRST TAKING UP THE APPEAL FIL ED BY THE ASSESSEE AGAINST THE ORDER PASSED BY CIT UNDER SECT ION 263 OF THE ACT IN ITA NO.667/CHD/2010. ITA NO.667/CHD/2010: 3. AT THE OUTSET, IT MAY BE POINTED OUT THAT THE PRESENT APPEAL WAS DISMISSED IN LIMINE FOR WANT OF PROSECUTION VIDE ORDER DATED 10.6.2013 BUT WAS THER EAFTER RECALLED IN CONSEQUENCE TO A MISCELLANEOUS APPLICAT ION FILED BY THE ASSESSEE, VIDE ORDER OF THE I.T.A.T. DATED 2 1.10.2016 IN MA/11/2016. IN PURSUANCE TO THE SAID ORDER, THE CASE WAS FIXED FOR HEARING BEFORE US. 4. THE FACTS OF THE PRESENT CASE ARE THAT INITIALL Y ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS PASS ED IN THE CASE OF THE ASSESSEE FOR THE IMPUGNED ASSESSMEN T YEAR I.E. ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 25.6. 2007. THEREAFTER ON PERUSAL OF THE ASSESSMENT RECORD, THE LD.CIT(APPEALS) FOUND THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS CAUSING PREJUDICE T O THE INTEREST OF THE REVENUE, SINCE THE ASSESSEE HAD BEE N INCORRECTLY ALLOWED CLAIM OF EXEMPTION OF LONG TERM CAPITAL GAINS UNDER SECTION 54F OF THE ACT TO THE EXTENT OF RS.15,06,457/-. THE LD.CIT(APPEALS) FOUND FROM THE RECORDS THAT THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAINS AMOUNTING TO RS.35,13,572/- DURING THE IMPUGNED YEA R AND HAS REDUCED THEREFROM A SUM OF RS.15,06,457/- WHICH WAS 3 CLAIMED AS DEDUCTION U/S54F OF THE ACT. THE LD.CIT(APPEALS) FOUND FROM THE RECORDS THAT IN THE PRECEDING ASSESSMENT YEAR ALSO I.E. ASSESSMENT YEAR 2004- 05 THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS AND HAD CLAIMED DEDUCTION U/S 54 AND 54F OF THE ACT. T HE ASSESSEE, HE FOUND, HAD STARTED THE CONSTRUCTION OF THE HOUSE PROPERTY IN ASSESSMENT YEAR 2004-05 AND HAD CLAIMED DEDUCTION UNDER SECTION 54F ON THE CAPITAL GAINS COMPUTED FOR THE SAID ASSESSMENT YEAR I.E. ASSESSME NT YEAR 2004-05. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD CONTINUED TO TAKE EXEMPTION OF THE SAME CONSTRUCTIO N IN ASSESSMENT YEAR 2005-06 ALSO TO THE EXTENT OF RS.15,06,457/-, WHICH CLAIM HAD NOT EXHAUSTED IN TH E PRECEDING YEAR. THE LD. CIT FOUND THE AFORE SAID CLAIM TO BE INELIGIBLE AS PER THE PROVISIONS OF LAW AND, THEREFORE, ISSUED NOTICE UNDER SECTION 263 OF THE A CT FOR REVIEWING THE ORDER PASSED BY THE ASSESSING OFFICER . THE CONTENTS OF THE NOTICE ISSUED TO THE ASSESSEE ARE A S UNDER: II). AFTER THE PERUSAL OF THE ASSESSMENT RECORD FOR THE A. Y.2005- 06, THE ORDER IS FOUND TO BE ERRONEOUS SO FAR PREJUDIC IAL TO THE INTEREST OF REVENUE ON THE FOLLOWING POINT:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S SOLD VARIOUS NEW LONG TERM CAPITAL GAINS ASSETS ON WHICH DEDUCTIO N UNDER SECTION 54F OF RS.15,06,457/- HAS BEEN CLAIMED WHICH PERTAI NS TO TRANSACTION OF ORIGINAL ASSETS MADE IN A.Y. 2004-05. THE DEDUCTION OF RS.15,06,457/- PERTAINING TO LAST YEAR'S TRANSACTION APPEARS O HAVE BEEN WRONGLY CLAIMED AGAINST THE LONG TERM CAPITAL GAINS OF THIS YEAR. THE DETAILS OF THE TRANSACTIONS SHOWN IN A. Y. 2004-0 5, AS PER THE COPY OF COMPUTATION OF TAXABLE INCOME FILED BY THE ASSESSEE FOR A. Y. 2004-05 IS AS UNDER:- LESS : LOSS B/FD A.Y 98-99 2.83,102 5,08,274 ADD : SHARE IN SALES CONSIDERATION OF PLOT. 19,07,700 24,15,974 4 LESS: UNDER SECTION 54 & 54F 39,81,050 EXCESS INVESTMENT 15,65,076 IN A.Y. 2005-06 IN A.Y, 2005-06 AGAINST THE LONG TERM CAPITAL GAINS ARIS ING OUT OF SALE OF NEW ASSETS HAS MADE THE FOLLOWING DEDUCTIONS : LONG TERM CAPITAL GAINS AFTER INDEXED COST 35,13,572 LESS: EXEMPTION UNDER SECTION 54F INVESTMENT AS PER LAST RETURN IN RESIDENTIAL 15,65,07 6 ADD: CONSTRUCTION DURING THE YEAR 04-05 1,42,108 ADD: CONSTRUCTION DURING THE YEAR 05-06 3,02,590 20,09,774 LESS : 5,03,317 15,06,457 20,07,115 THE DEDUCTION OF RS. 15,06,457/- CLAIMED UNDER SECT ION 54F IN THIS YEAR PERTAINS TO LONG TERM CAPITAL GAINS TRANSACTION C ONDUCTED IN A. Y. 2004-05. THE ORIGINAL ASSETS WERE TRANSFERRED IN A.Y. 2004-05. THE COST OF INVESTMENTS IN NEW ASSETS IN A .Y. 04-05 WAS ALREADY MORE THAN THE CAPITAL GAIN ARISING ON A/C OF ORIGINAL ASSETS OF A.Y.04-05. THE EXCESS INVESTMENTS MADE IN THE NEW ASSET IN A.Y. 04-05 COULD NOT BE CARRIED FORWARD (LIKE THE UNABSORB ED BUSINESS LOSS/DEPRECIATION) TO THE NEXT YEAR. THE SUM OF RS.15 ,06,457- IS IN REGARD TO NEW ASSET OF A.Y. 04-05 WHERE THE INVESTMEN TS WERE ALREADY MORE THAN THE CAPITAL GAIN ARISING OUT OF O RIGINAL ASSETS IN A.Y, 04-05. THE DEDUCTION OF RS.75,06,457/- MAD E IN A.Y. 05-06 IS AGAINST OTHER ASSETS (NOT THE ORIGINAL ASS ETS OF A. Y. 04- 05) WHICH WERE SOLD IN THIS YEAR AND THAT TOO IS NOT AGAINST 'NET CONSIDERATION' BUT AGAINST CAPITAL GAINS ARRIVED AT AF TER ADJUSTMENTS OF INDEXED COSTS. THE DEDUCTION OF RS.15,06,457/- AGA INST THE LONG TERM CAPITAL GAINS OF THIS YEAR IS NOT AS PER SECT. 5 4F OF THE ACT. THE ASSESSING OFFICER HAS ERRED IN ALLOWING DEDUCTI ON OF RS.15,06,457/- WHILE COMPUTING THE LTCG FOR THIS ASSESSMENT YEAR. IT IS ALSO NOT APPARENT WHETHER IN REGAR D TO EXPENDITURE OF RS.3.02,590/- INCURRED FOR 05-06, THE PROVISIONS OF 54F(4) WERE SATISFIED/ APPLICABLE AND WHETHER THE N EW ASSET WAS CONSTRUCTED WITHIN THREE YEARS. THERE AP PEARS TO BE UNDER ASSESSMENT OF LTCG/INCOME. ILL). THE ORDER HAS BEEN PASSED BY THE ASSES SING OFFICER IN A PERFUNCTORY MANNER THEREFORE, IN VIEW OF THE AB OVE, THE ORDER OF THE ASSESSING OFFICER PASSED U/S 143(3) OF THE IT ACT IS ERRONEOUS AS WE// AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. YOU ARE GIVEN OPPORTUNITY OF BEING HEARD AND SHOW CAUSE WHY THE IMPUGNED ORDER BE NOT ENHANCED/MODIFIED/CANCELLED OR SET ASI DE FOR FRESH ASSESSMENT U/S 263 OF THE ACT IN THIS OFFICE ON 23-2 -2010 AT 3.30 PM. 5. THE ASSESSEE RESPONDED BY FILING REPLY TO THE AFORESAID NOTICE STATING THAT IT HAD NOT VIOLATED A NY OF THE CONDITIONS/REQUIREMENTS PROVIDED UNDER SECTION 54F BY 5 VIRTUE OF CLAIMING DEDUCTION UNDER THE SAID SECTION AMOUNTING TO RS.15,06,457/- AND, THEREFORE, CHALLEN GED THE POWER EXERCISED BY THE CIT UNDER SECTION 263 OF THE ACT. THE LD.CIT DID NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE. THE LD.CIT THEREAFTER HELD THAT DEDUCTIO N CLAIMED UNDER SECTION 54F OF RS.15,06,457/- WAS NOT AS PER LAW AND DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE INCOME BY DENYING THE SAID DEDUCTION. 6. AGGRIEVED BY THE SAID ORDER THE ASSESSEE HAS CO ME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARI NG THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET STATED T HAT THE ASSESSMENT ORDER HAD BEEN SUBJECT TO REVIEW BY THE CIT ON THE SAME ISSUE EARLIER ALSO AND AFTER CONSIDERING T HE REPLY FILED BY THE ASSESSEE THE PROCEEDING INITIATED UNDE R SECTION 263 OF THE ACT HAD BEEN DROPPED BY THE CIT. THE LD . COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING DOCUMENTS TO SUBSTANTIATE ITS ABOVE CONTENTION: I) COPY OF NOTICE DATED 14.12.2007 ISSUED BY THE CIT-III, LUDHIANA PLACED AT PAPER BOOK PAGE NO.1. THE CONTENTS OF THE AFORESAID NOTICE ARE AS UNDER: ON GONG THROUGH YOUR ASSESSMENT RECORDS FOR THE A.Y. 2005-06, IT IS SEEN THAT YOU HAVE CLAIMED EXEMPTION OF RS.15,06,457/- UNDER SECTION 54F OUT OF LONG TERM CAPITAL GAIN OF RS.35,13,572/-. THE SUM OF RS.15,06,457/- IS PERTAINING TO TRANSACTION OF LONG TERM CAPITAL GAIN OF THE PREVIOUS YEAR RELATING TO THE ASSESSMENT YEAR 2004-05. THUS SUM OF RS.15,06,457/- IS IN REGARD TO THE ORIGINAL 6 ASSETS WHICH WERE SOLD DURING THE ASSESSMENT YEAR 2004-05 AND IN THAT ASSESSMENT YEAR THE INVESTMENTS ALREADY EXCEEDED THE CAPITAL GAIN ARISING OUT OF SALE OF ORIGINAL ASSETS. THE DEDUCTION OF RS.15,06,457/- CLAIMED FOR THE ASSESSMENT YEAR 2005-06 IS AGAINST THE OTHER ORIGINAL ASSETS WHICH WERE SOLD IN THE ASSESSMENT YEAR 2005-06. THE DEDUCTION OF RS.15,06,457/- CLAIMED UNDER SECTION 54F IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005- 06 IS NOT CORRECT ON FACTS AND LAW. FROM THE ABOVE FACTS IT IS APPARENT THAT THE ASSESSMENT ORDER ALLOWING EXEMPTION OF RS.15,06,457/- UNDER SECTION 54F FRAMED BY THE ITO, VI(1) LUDHIANA VIDE ORDER UNDER SECTION 143(3) DATED 25.6.2007 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HOWEVER, BEFORE INVOKING THE PROVISIONS OF SECTION 263(1) OF THE IT ACT, YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH YOUR AUTHORIZED REPRESENTATIVE ON 3.1.2008 AT 12.30 P.M.S II) COPY OF REPLY DATED 3.1.2008 FILED IN RESPONSE TO THE NOTICE OF THE COMMISSIONER OF INCOME TAX-III PLACED AT PAPER BOOK PAGE NOS.2 AND 3, THE CONTENTS OF WHICH ARE AS UNDER: TO THE COMMISSIONER OF INCOME TAX-ILL, AAYAKAR BHAWAN,RISHI NAGAR, LUDHIANA REF NO.CIT-III/LDH/JB/07-08/ SUBJECT: REPLY TO YOUR NOTICE U/S 263 (1) OF THE IN COME TAX ACT, 1961 IN CASE OF SR. BALJIT SINGH PRCP. M/S RYAIT ENTERPRISE S, R/O 197-198-F, SHAHEED BHAGAT SINGH NAGAR, PAKHOWAL ROAD, LUDHIANA PAN : AAZPR4972K- ASSESSMENT YEAR 2005-06. 7 SIR IN RESPONSE TO YOUR NOTICE IN THE ABOVESAID CASE IT IS HUMBLY REQUESTED THAT: AS SHOWN IN THE LAST INCOME TAX RETURN OUT OF THE E XCEEDED AMOUNT RS.970000/- WAS THE BALANCE STANDING IN CAPI TAL GAIN ACCOUNT WHICH WAS SPENT ON CONSTRUCTION AFTER THE SALE OF O RIGINAL ASSET DURING THE ASSESSEMENT YEAR 2005-06, RS.105000/-WAS THE CO NSTRUCTION EXPENSES INCURRED DURING THE MONTH OF MAY, 2004 AND THE BALANCE WAS THE EXCESS INVESTMENT IN RESIDENTIAL PURCHASE AS TH ESE INVESTMENTS WERE MADE PRIOR TO FILING OF INCOME TAX RETURN THES E WERE CLEARLY SHOWN WHILE THE INCOME TAX RETURN OF THE EARLIER YE AR HAD BEEN FILED. ON GOING, THROUGH THE PROVISIONS OF SECTION 54F IT IS CLEAR THAT THE BASIC REQUIREMENTS FOR CLAIMING DEDUCTION ARE: I) TRANSFER OF ANY LONG, TERM CAPITAL ASSET. A) WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO Y EARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASE, OR WITH IN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTION OF A RESIDENTIAL HOUSE. III) OWNING OF ONE RESIDENTIAL HOUSE ON THE DA TE OF TRANSFER. THUS THE ASSESSEE HAS MET WITH ALL THE REQUIREMENTS PROVIDED U/S 54F AND CLAIMED DEDUCTION U/S 54F. THERE IS NO THING IN THE SECTION WHICH BARS THE ASSESSES TO CLAIM THE DEDUCT ION REGARDING EXCEEDED INVESTMENT OF EARLIER YEAR. BARS PROVIDED U/S 54F REGARDING CLAIMING OF EXEMPTION ARE NOT APPLICABLE TO ASSESSEE. ON PLAIN READING OF SECTION 54F IT SEEMS THAT THE A SSESSEE IS ENTITLED TO CLAIM EXEMPTION ON FULL INVESTMENTS AGAIN AS THE ASSESSEE HAS MET WITH ALL THE REQUIREMENTS PROVIDED U/S I4F BUT TILLS CAN NEVER BE THE INTENTION OF THE LEGISLATION SO THE ASSESSEE CL AIMED DEDUCTION ONLY ON THE EXCEEDED INVESTMENTS. THUS THE DEDUCTION CLAIMED IN THE RETURN IS CORRECT ON FACTS AND LAW AND ASSESSMENT ORDER ALLOWING DEDUCTION IS CORRECT. THERE ARE SOME JUDGMENTS ALSO ON THE BASIS OF WHICH IT IS VERY MUCH CLEAR THAT THE POWERS U/S 263 SHOULD NOT BE USED IN THE CASE PRESENT: THE ASSESSING, OFFICER HAD TAKEN ALL THE DETAILS OF ASSESSMENT YEAR 2004-2005 WHICH HAS BEEN PLACED ON FILE SO THE ASSE SSING OFFICER RIGHTLY INTERPRETED THE PROVISIONS OF SECTION 54F A ND ALLOWED THE EXEMPTION. SO THE JUDGMENT OF LTAT MUMBAI BENCH (70 07) 162 TAXMANN 39 MAG. IS APPLICABLE TO THIS CASE. JUDGMENT OF PUNJAB AND HARYANA HIGH COURT IN COMMIS SIONER OF INCOME TAX, PATIALA VS.VINOD KUMAR GUPTA, (2007) 16 5 TAXMAN 225, DECIDED ON FEB. 28,2007, IS ALSO RELEVANT IN W HICH THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT TREATED A RECEIPT, TO BE A CAPITAL RECEIPT. THE HONBLE HIGH COURT HELD-MERELY BECAUSE THERE WAS A SECOND OPINION POSSIBLE ON SAME FACTS. COMMISSION ER COULD NOT, IN THOSE CIRCUMSTANCES, EXERCISE POWERS UNDER SECTION 263. THUS THE PROVISIONS OF SECTION 263(1) SHOULD NOT BE INVOKED. THANKING YOU PLACE : LUDHIANA YOURS SINCERELY, DATE : 03/01/08 (SANJEEV GARG ADVOCATE) 8 III) THE ORDER PASSED BY THE LEARNED CIT DROPPING THE PROCEEDING INITIATED UNDER SECTION 263 DATED 26.3.2008 PLACED AT PAPER BOOK PAGE NO.5 7. THE LD. COUNSEL FOR THE ASSESSEE THEREAFTER DRE W OUR ATTENTION TO THE NOTICE ISSUED IN THE SECOND RO UND WHICH IS REPRODUCED IN THE EARLIER PART OF OUR ORDE R. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT FROM THE A BOVE DOCUMENTS THAT THE ORDER OF THE ASSESSING OFFICER H AD BEEN SUBJECT TO REVIEW EARLIER ALSO ON THE IDENTICAL IS SUE AND AFTER BEING CONVINCED AND SATISFIED WITH THE REPLY OF THE ASSESSEE THE PROCEEDING HAD BEEN DROPPED. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, STATED THAT THE REVIEW PROCEEDINGS AGAIN COULD NOT BE INITIATED ON THE SAM E ISSUE. IN SUPPORT OF ITS CONTENTION THE LD. COUNSEL FOR TH E ASSESSEE RELIED ON THE ORDER OF THE I.T.A.T., DELHI BENCH IN THE CASE OF SHRI SATYA PRAKASH GUPTA VS. ITO IN ITA NO.2730/DEL/2013 WHEREIN, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT, THAT IT WAS CATEGORICALLY HEL D IN IDENTICAL SET OF CIRCUMSTANCES THAT THE SECOND ROUN D OF REVISIONARY PROCEEDINGS WERE ILLEGAL AND THE ORDER PASSED UNDER SECTION 263 OF THE ACT WAS NOT SUSTAINABLE. 8. THE LEARNED D.R. AT THIS JUNCTURE STATED THAT THERE MUST BE NO BAR IN REVIEWING AN ASSESSMENT ORD ER TWICE ON THE IDENTICAL ISSUE EVEN WHEN THE EARLIER PROCEEDINGS HAVE BEEN DROPPED. THE ARGUMENT OF THE LEARNED D.R. WAS THAT BY PLACING SUCH A BAR THERE M AY BE POSSIBILITY OF AN ERROR BEING PERPETUATED, WHICH MA Y HAVE 9 OCCURRED BY VIRTUE OF THE DROPPING OF THE EARLIER PROCEEDING,. THE LEARNED D.R. PLACED RELIANCE ON T HE ORDER OF THE HON'BLE APEX COURT IN THE CASE OF DISTRIBUTO RS (BARODA) P.LTD. VS. UNION OF INDIA & ORS (1985) 155 ITR 120(SC) 9. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. T HE ISSUE AND THE ERROR AS PER THE LD.CIT WHICH HAD OCCURRED IN THE ORDER OF THE ASSESSING OFFICER WHICH REQUIRED INITI ATION OF REVIEW PROCEEDINGS IN THE PRESENT CASE WAS THAT THE ASSESSEE HAD WRONGLY CLAIMED AND BEEN ALLOWED DEDUC TION UNDER SECTION 54F OF THE ACT FROM THE LONG TERM CAP ITAL GAIN EARNED BY IT ON ACCOUNT OF CONSTRUCTION OF HOU SE UNDERTAKEN BY IT TO THE EXTENT OF RS.15,06,457/-. THE REASONING BEING THAT THE DEDUCTION ON ACCOUNT OF PU RCHASE OF LAND AND CONSTRUCTION UNDERTAKEN ON THE SAID LAN D, U/S 54 AND 54F, HAD BEEN CLAIMED AND BEEN ALLOWED TO TH E ASSESSEE IN THE PRECEDING ASSESSMENT YEAR I.E. ASSE SSMENT YEAR 2004-05. THE CONTENTION OF THE REVENUE IS THA T ONCE DEDUCTION U/S 54 AND 54F OF THE ACT HAS BEEN CLAIME D ON ACCOUNT OF HOUSE CONSTRUCTED AGAINST CAPITAL GAIN E ARNED DURING THE YEAR, ANY SURPLUS REMAINING THEREFROM CA NNOT BE CARRIED OVER TO THE NEXT YEAR AND CLAIMED AS DEDUCT ION FROM CAPITAL GAIN EARNED IN THE SUCCEEDING YEAR. 10. CLEARLY AND UNDISPUTEDLY THIS ISSUE WAS EXAMIN ED BY THE CIT IN PROCEEDING INITIATED UNDER SECTION 26 3 OF THE ACT VIDE HIS NOTICE DATED 14.12.2007 AND DUE REPLY FILED BY 10 THE ASSESSEE, AFTER CONSIDERING WHICH AND AFTER BEI NG SATISFIED BY WHICH THE PROCEEDINGS WERE DROPPED. TH E PRESENT PROCEEDING HAVING BEEN INITIATED ON THE IDE NTICAL ISSUE ARE CLEARLY UNSUSTAINABLE IN LAW SINCE IT SIM PLY TANTAMOUNTS TO REVIEW OF THE ORDER OF THE CIT AND N OT OF THE ASSESSING OFFICER. THE COORDINATE BENCH OF THE I.T .A.T. IN THE CASE OF SHRI SATYA PRAKASH GUPTA (SUPRA) HAS IN IDENTICAL CIRCUMSTANCES HELD THAT THE SUCCESSOR CIT BECOMES FUNCTUS OFFICIO IN THIS REGARD AFTER THE EX ERCISE CONDUCTED BY THE PREDECESSOR CIT. THEREFORE, WE HA VE NO HESITATION IN HOLDING THAT THE ORDER PASSED UNDER S ECTION 263 IS NOT SUSTAINABLE ON THIS GROUND ALONE. 11. AS FAR AS THE ARGUMENT OF THE LEARNED D.R. THA T SUCH A FINDING WOULD LEAD TO PERPETUATION OF AN ERR OR, THE LD.DR WAS ASKED AT BAR TO DEMONSTRATE IN THE PRESEN T CASE AS TO WHAT ERROR WOULD BE PERPETUATED. TO THIS, TH E LEARNED D.R. RESPONDED BY SAYING THAT THE CLAIM OF DEDUCTIO N UNDER SECTION 54F BY THE ASSESSEE WAS IN CONTRAVENTION OF PROVISIONS OF LAW AND BY SETTING ASIDE THE ORDER OF THE CIT FOR THE REASON THAT THE ISSUE HAD ALREADY BEEN EXAM INED BY THE EARLIER CIT, THE ERROR OF ALLOWING DEDUCTION TO THE ASSESSEE UNDER SECTION 54F OF THE ACT WOULD CONTINU E TO BE PERPETUATED. 12. WE FIND NO MERIT IN THIS CONTENTION OF THE LEA RNED D.R. THE EXPLANATION GIVEN BY THE ASSESSEE IN THIS REGARD VIDE ITS REPLY SUBMITTED TO THE CIT IN THE EARLIER PROCEEDING AND EVEN IN THE PRESENT PROCEEDING, WE FIND IS PLAU SIBLE AND 11 REASONABLE. A BARE READING OF SECTIONS 54 AND 54F OF THE ACT NOWHERE STATES THAT THE SURPLUS REMAINING AFTER CLAIMING DEDUCTION U/S 54/54F ON ACCOUNT OF CONSTRU CTION OF HOUSE PROPERTY UNDERTAKEN IN A YEAR, WOULD NOT B E ALLOWED SET OFF AGAINST LONG TERM CAPITAL GAIN EARN ED IN THE SUCCEEDING YEAR. THERE IS NO SUCH SPECIFIC BAR PROVIDED IN SECTION. THE LEARNED D.R. ALSO AGREED TO THIS. THEREFORE, AS LONG AS THE CONDITIONS SPECIFIED UNDER SECTION 54F ARE FULFILLED, THE INTERPRETATION AND UNDERSTANDING OF SECTION AS TAKEN BY THE ASSESSEE AND ALSO BY THE EARLIER CIT C ANNOT BE SAID TO BE PERVERSE AND GROSSLY AGAINST LAW. THEREF ORE, THE ARGUMENT OF THE LEARNED D.R. THAT AN ERROR WOULD BE ALLOWED TO BE PERPETUATED BY SETTING ASIDE THE PRESENT ORDE R OF THE LD.CIT ON TECHNICAL GROUNDS, WE FIND HAS NO MERIT. 13. IN VIEW OF THE ABOVE WE ALLOW THE APPEAL OF TH E ASSESSEE AND SET ASIDE THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT. THE ADDITION MADE OF RS.15,06,457/- IS, THEREFORE, DIRECTED TO BE DELETE D. 14. THE APPEAL OF THE ASSESSEE IN ITA NO.667/CHD/2010 IS ALLOWED. ITA NO.954/CHD/2016 : 15. THE PRESENT APPEAL RELATES TO LEVY OF PENALTY ON THE ADDITION MADE OF RS.15,06,457/- BY DENYING DEDU CTION U/S 54F OF THE ACT AGAINST LONG TERM CAPITAL GAINS EARNED BY THE ASSESSEE. SINCE THE IMPUGNED ADDITION HAS B EEN DELETED BY US IN OUR ORDER PASSED IN ITA NO.667/CHD /2010, 12 THERE REMAINS NO BASIS FOR LEVY OF PENALTY U/S 271( 1)(C) OF THE ACT AND PENALTY LEVIED, THEREFORE, AMOUNTING TO RS.3,38,050/- IS ALSO DELETED. 16. THE APPEAL OF THE ASSESSEE IN ITA NO.954/CHD/2016 IS ALLOWED. 17. IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 ST AUGUST, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH