Income Tax Appellate Tribunal - Ahmedabad
Geetaben Bharatkumar Shah, , Petlad vs Dy.Cit, Circle-3, , Baroda on 9 December, 2016
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ ।
IN THE INCOME TAX APPELLATE TRIBUNAL,
"B" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA.No.528/Ahd/2014
नधा रण वष / Asstt. Year: 2009-2010
Smt.Geetaben Bharatkumar Shah ITO, Ward-4(1)
C/o.Shah Harilal Bhikhabhai & Co. Vs. Ahmedabad.
Nariapada
Petlad 388 450.
PAN : AGLPS 9672 F
(Applicant) (Responent)
Assessee by : Shri P.M. Mehta with
Shri G.M. Thakor, AR
Revenue by : Shri Jagdish, CIT-DR
सन
ु वाई क तार ख/ Dateof Hearing : 04/10/2016
घोषणा क तार ख / Date of Pronouncement: 09/12/2016
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order 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.Commissioner has erred in taking cognizance under section 263 of the Income Tax Act, 1961 and thereby setting aside well reasoned order of ld.AO for passing a fresh assessment order with regard to computation of long term capital gain.
ITA No.528/Ahd/20143 23. Brief facts of the case are that the assessee has 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 computed long term capital gain of Rs.60,62,502/-. The assessee has claimed that 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 deposited 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 no 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 ultimately assessed the income of the assessee at the declared income.
4. After perusal of the assessment record, the ld.Commissioner harboured a belief that the AO has not carried out proper inquiries and his action has caused prejudice to the interest of Revenue. He recorded the following reasons and issued a show cause notice under section 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. 25,00,000/- was invested with S.B.I Capital Gain Account on 22.09.2009. Exemption of Rs.50 lac was claimed u/s. 54EC and of Rs. 10,62,502/-u/s. 54F of the IT.Act. Exemption u/s. 54F is available on long term capital gain arising out of long term capital asset not being a residential property. Also as per section 54EC the maximum, amount allowable is Rs. 50 lacs. There is no mandate in the Act for investing the remaining amount in bank or ITA No.528/Ahd/20143 3 specified institution. Thus, the allowance of exemption u/s. 54F was irregular."
5. In response to the show cause notice, the assessee 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 is stated that the assessee was in receipt of notice u/s 263 of the Income 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 erroneous 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 invested 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. Exemption u/s 54F is available on long term capital gains arising out of long term capital asset not beading a residential property. Also as per Sec 54EC the maximum amount allowable is Rs. 50 Lac. There is no mention in the sec, for investing the remaining amount in bank or Specified institution. Thus the allowance of exemption u/s 54F was irregular. ...."
2. Out of abundant caution only, we beg to point out that the mention of section 54F in the aforesaid reason is clearly inadvertent. In this respect it is most respectfully submitted that actually the assessee has claimed exemption u/s 54 of the Act. Due to inadvertent punching error , while passing the order u/s 143(3) ( annexure-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 such mere inadvertent punching error has resulted in to the sole reason on your good honour end to consider that the order passed u/s 143(3) dated 05.12.2011 by the AO was erroneous as it was prejudicial to the interest of the revenue and consequently leading the show cause under section 263(3) of the Act.
ITA No.528/Ahd/20143 43. As your good honour is aware, jurisdiction u/s. 263 can be assumed only if the order sought to be revised is both 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 are absent and, therefore, the question for assuming that jurisdiction 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 the 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 and 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 dated 05.12.2011 assessing the income at Rs. 28,30,590/- only, after scrutinizing whole computation of income and claims made under different heads very minutely.
5. Assessee Objects the reason for revising the 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 of the Act. Assessee would like to draw attention of your good selves towards the brief facts of the Long term capital gain and exemption claimed from thereof in the return of income during the year under consideration.
5.1 During the year under consideration assessee 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. 31,40,123/- and hence gross long term gain for Rs. 60,62,502/- arose to assessee. Out of said capital gain assessee had invested.
a. the sum of Rs. 50 lac in National High Ways Authority Of India [NHAI] Bond on 29th July 2009 as to claim exemption u/s 54EC and b. Deposited sum of Rs. 25,00,000/- in "capital gain deposit scheme" on 22.09.2009 (before the due date of filing of return of income) as to claim exemption u/s 54 of the Act.
ITA No.528/Ahd/20143 5Computation of capital gain is produced as below for 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 50,00,000
NHAI bond Exemption u/s 54 (2) 10,62,502
[Investment in SBI Capital Gain A/c of Rs
25,00,000 (annexure-1) 1
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 explanation and submission provided by assessee, assessing officer also assessed the capital gain income same as declared by assessee and allowed valid claim of exemption from such capital gain. Assessee, had never claimed exemption u/s 54F of the Act, rather assessee had claimed 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 exemption for Rs. 13,17,559/- which is actually 10,62,502/- , as rightly quoted by your good honour in the notice u/s 263.
5.3 From the reason as quoted in your good honour notice it is evident that on peruse of assessment records of assessee' case , your honour has found a fact that there is a capital gain arising out of long term capital asset which is Residential house. Your honour has undisputedly accepted that there is neither irregularity 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 respect to exemption claim u/s 54EC for Rs. 50 lac from the said long term 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 count 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 there is capital gain from transfer of long term capital asset being residential property in the case of assessee, section 54F claim was found to be irregular And consequently as a manifest count was also raised that u/s 54EC maximum exemption is permissible for Rs. 50 lac only and there is no provision for investing the capital gain in specified capital gain scheme account.
6. For your honur's kind perusal assessee submits the following evidences, on closely look to the same it will remain 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 identify that the investment was made in capital gains scheme account.
b. Copy of DD No. 114879 drawn on the name of 'Ushaben J Brahmbhatt (Annexure-3)
- On peruse of the same your honour will find a fact the withdrawal was made from the capital gain scheme account for the purpose of investment in new residential house purchased from Ushaben J Brahmbhatt. Detail of the same can be verified from annexue-3 below.
c. Copy of purchase deed for new residential house ( 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 party is assessee herself.
ITA No.528/Ahd/20143 7For her 50% share assessee has invested from her own 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 available on the registered deed of new residential property (for sake of immediate reference the same is marked). Considering this, there will remain less as to justify the claim made u/s 54 of the Act.
7. As discussed in supra paras on perusing the aforesaid detailed explanation and supporting evidence your honour 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 assessment order by AO. Such punching error requires rectification u/s 154 only and shall not in any case said to be order passed by assessing officer as prejudicial to revenue, which can result in to revision of case u/s 263 of the Act. It will be manifest to say that aforesaid explanation will further bring clarity that Rs. 25 lac was not daimed u/s 54EC of the act as correctly figured 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 would kindly see that the suggestion contained in your notice is entirely misplaced and that the assessment order for the present assessment 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 that act of kindness, we shall be very grateful.
6. The ld.Commissioner has considered the above submissions and also observed that assessee has made investment for purchase of Bungalow bearing no.282/283 having area of 881.30 sq.yards. This bungalow has constructed portion of 190 sq.yards. According to the 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 8It 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 considered. 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. about 881,30 sq, yards, and a residential bungalow thereon of 190 sq. yards in Manekbaug Co- operative Society Ltd, Near Shreyas Foundation, Ambawadi, 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 Bharatbhai 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. Geetaben 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 assessee had made payment of Rs.1,27,50,000/- on 29.9.2009 as noted 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 262 sq. yrd. 1.4.1981 31.3.2009
at Ambawadi
(1/2 share)
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 investment 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 Rs, 92,02,625 enclosed Less: (Cost of acquisition etc.) (-)Rs. Indexed cost of acquisition 31,40,123 Less: (Exemptions u/s. Rs. 50,00,000 Nil 54B/54D/54G etc. Investment Rs. 13,17,559 in Nabard Bond Inv. With SBI for capital gain (-)Rs. Rs.25,00,000/- 60,62,502
A perusal of the record shows several discrepancies. The assesses has made investment in National Highways Authority of India Capital Gain 54EC Bonds of Rs. 50,00,000/- on 12.9.2009 for claiming 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 Capital gain exemption account, the assessee has not quoted specific section under which it was claimed. Therefore, the submission of the assessee that while drafting the assessment order A.O erred in typing the 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 the Assessing Officer in presuming and then allowing exemption u/s 54F. The Assessing Officer also failed to enquire total investment which actually comes to Rs. 50,00,000 + 1,27,50,000 = 1,77,50,000/- against sale 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 set-aside with a direction to re-compute the long term capital gain, after examining the allowability of claim of exemption in respect of investment made as per the provisions of Income-tax Act. He is also directed to make proper enquiry regarding availability of fund for investment 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 tests 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. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme 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 section 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 every 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 order.ITA No.528/Ahd/20143 11
(v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which 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 income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place 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 to be erroneous simply because the CIT does not fee stratified with the conclusion.
(viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction.
If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows 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 his 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 assessee was that she has not made claim under section 54F. It is an error committed 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 just 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 section 54 exemption was available to the assessee, then merely making a wrong mention of section 54F by the AO exemption would not be denied to the assessee. The ld.Commissioner did not analysis this aspect while observing that the AO has committed an error and his order is an erroneous one. 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 building 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 transfer took place, purchases or has within a period of three years after the date of constructing a residential house, then instead of capital gain being chargeable to income-tax as income of the assessee of that previous year in which transfer 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 capital gain vis-à-vis its user by an assessee for acquiring new residential house and if there remains something unused only that will be subject to capital gain tax. The ld.Commissioner has specifically observed that sale was made on 31.3.2009. The assessee has purchased one bungalow on 29.9.2009. She has made payment of Rs.1,27,50,000/-. Now if that be so, even otherwise, there cannot be any capital gain upon the assessee. In other words, even if assessment order was suffering from error with regard to mentioning of wrong section, then, otherwise also on merit, gain will not be taxable, because the assessee has used gain for acquiring a new house and such investment was more than ITA No.528/Ahd/20143 13 the gain accrued to the assessee. The ld.counsel for the assessee, at the time of hearing brought to our notice decision of the Hon'ble Karnataka High Court in the case of CIT Vs. D.G.Gopala Gowda, 34 taxmann.cm 154 (Kar.) wherein the Hon'ble Court has observed that twin conditions 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 section 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 investment 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/-. This house has been acquired within the time limit available in section 54. Under both the circumstances, there will not be any long term capital 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 dropped the proceedings under section 263 of the Income Tax Act. We allow the appeal 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 allowed.
Order pronounced in the Court on 9th December, 2016 at Ahmedabad.
Sd/- Sd/- (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 09/12/2016