Hari L.Mundra, Mumbai vs Assessee

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BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM

आयकर अपील सं./I.T.A. No. 1122/Mum/2014 ( िनधा रण वष / Assessment Year : 2009-10 Mr. Hari L. Mundra, The Commissioner of A-61, Twin Towers, Income-Tax , Circle-5, Off Veer Savarkar Marg, Aayakar Bhavan, Prabhadevi, Mumbai-400 020 Mumbai

ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. :AAHPM 7832R (अपीलाथ, /Appellant) .. (ू.यथ, / Respondent)

अपीलाथ, ओर से/ Appellant by: ` Shri Vijay Mehta ू.यथ, क0 ओर से/Respondent by : Shri Surinderjeet Singh

सुनवाई क0 तार2ख / Date of Hearing :26.02.2015 घोषणा क0 तार2ख /Date of Pronouncement :26.02.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This is an appeal by the assessee preferred against the order of the CIT-5, Mumbai made u/s. 263 of the Act dt. 31.12.2013.

2. The only grievance of the assessee is that the Ld. CIT erred on the facts holding that the AO has not applied his mind while passing the assessment order and therefore the order is erroneous and prejudicial to the interest of Revenue.

2 ITA No.1122/M/2014 3. In this case, assessment order was made u/s. 143(3) of the Act vide order dt. 25.11.2011. The return was selected for scrutiny under CASS. The assessee has returned income from pension, interest, income from house property and capital gains. After examining the details, the returned income was accepted.

3.1. The Commissioner assuming the jurisdiction u/s. 263 of the Act issued show cause notice for revision of order. The reasons for the proposed revision read as under:

" On verification of assessment records, the following facts are noticed:

(i) That the assessee has entered into 'agreement for sale' with M/s Macrotech Constructions P Ltd to acquire a premises situated at 1001, 10th floor, Lodha Bellissimo, in the month of January 2007 for a total consideration of Rs.3,95,95,500/-. The said agreement was registered on 07/03/2007.

(ii) That the assessee had sold two residential flats alongwith parking space in October 2008 resulting in Long Term Capital Gain of Rs.2,08,02.540/- (with indexation benefit). He claimed the said Long Term Capital Gain as exempt u/s 54 of the I.T Act. During the course of assessment proceedings, the claim of the assessee was allowed by the then Assessing Officer.

(iii) That the assessee had taken possession of the said fiat n 13/05/2011 though the agreement was registered on 07/03/2007.

(iv) That as per the agreement for sale, the assessee had to pay Rs.39,59,550/- at the time of booking on or before the execution of the agreement for sale.

3. From the above facts it is evident that the Long Term Capital Gain has arisen on 06/10/2008 i.e. on the date of 3 ITA No.1122/M/2014

sale/transfer of two residential flats and the assessee had entered into an agreement for purchase of flat in January 2007 and registered on 07/03/2007. However, the assessee has taken the possession of the said flat on 13/05/2011. For claim of exemption u/s 54, the assessee has to purchase new asset within one year before or two years after the date of long term capital gain or in the case of construction within a period of three years after the date of transfer of old asset.

4. Thus in this case the new asset was purchased in January 2007 which is much earlier from the date of transfer and beyond one year as prescribed in section 54 of the Act. In view of the above facts, it is observed that the assessee is not eligible for deduction u'/s 54 of the Act in respect of capital gain of Rs.2,08,02,540/-."

4. During the course of the revision prodceedings, it was explained that the conditions for purchase of new asset i.e. one year before or 2 years after the transfer of the property does not apply in the case of the assessee, since the property was constructed and therefore period within which the capital gain needed to be invested should be considered as 3 years from the date of transfer. It was explained that the assessee took final possession on 13.5.2011 which was well within 3 years period as provided u/s. 54 of the Act. Therefore the exemption was rightly claimed u/s. 54 of the Act and there is no requirement to set aside/cancel the exemption allowed by the AO.

5. After considering the facts and the submissions, the Ld. CIT observed that the AO has not examined the claim of the assessee u/s. 54 of the Act properly which has resulted the order as erroneous and prejudicial to the interest of the Revenue. The Ld. CIT proceeded by setting aside the assessment order and directing the AO to decide the issue by fresh assessment.

4 ITA No.1122/M/2014 6. Aggrieved by this, the assessee is before us.

7. The Ld. Counsel for the assessee drew our attention to the replies filed during the assessment proceedings. It is the say of the Ld. Counsel that during the course of the assessment proceedings itself, the AO has called for the necessary information relating to the claim of exemption u/s. 54 of the Act and after thoroughly examining the details, the exemption was allowed, therefore the action of the Ld. CIT u/s. 263 of the Act is unlawful.

8. Per contra, the Ld. Departmental Representative strongly relied upon the order of the Ld. CIT.

9. We have carefully considered the rival submissions and perused the assessment order and the order of the learned Commissioner. The first thing which has to be considered is whether the Learned Commissioner has rightly assumed the power under section 263 of the Act. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. 243 ITR 83 has laid down the following ratio:-

"A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect 5 ITA No.1122/M/2014

assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous"

10. Now, let us see in the light of the above ratio whether the assessment has been made on an incorrect assumption of facts or an incorrect application of law.

11. A perusal of the assessment order clearly shows that the assessee has claimed deduction u/s. 54 of the Act. Further, the assessment order clearly show that the AO has examined this fact so there is no error on the fact.

12. Now coming to the claim of deduction u/s. 54 of the Act, there is no adverse finding which means that the AO has allowed the deduction u/s. 54 of the Act as per the provisions of the law. Thus, the allowability of the claim is as per the provisions of the law. Therefore, there is no incorrect application of law.

13. The AO has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the AO is a loss to the Revenue but the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. (supra) has held that " every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue," for e.g. when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income Tax Officer has taken one view with which the Ld. Commissioner does not agree, it cannot be treated as an order which is erroneous or prejudicial to the interest of Revenue unless the view taken by the Income Tax Officer is unsustainable in law.

6 ITA No.1122/M/2014 14. The Bombay High Court in CIT Vs Gabrial India Ltd., (1993) 203 ITR 108 has held that "the decision of the Income Tax Officer could not be held to be erroneous simply because in his order, he did not make an elaborate discussion in that regard".

15. Considering the facts in totality in the light of the judicial decisions discussed hereinabove, in our understanding of law, the assessment order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the Ld. Commissioner u/s. 263 and restore that of the Assessing Officer passed u/s. 143(3) of the Act.

16. In the result, the appeal filed by the assessee is allowed.

.

आदे श क0 धोषणा खुले यायालय म6 7दनांकः 26.2.2015 को क0 गई ।

Order pronounced in the Open Court at the time of hearing on 26th February, 2015.

Sd/- Sd/- (H.L. KARWA ) (N.K. BILLAIYA) अ य / PRESIDENT लेखा सदःय / ACCOUNTANT MEMBER

मुंबई Mumbai; 7दनांक Dated 26th February, 2015 व.िन.स./ RJ , Sr. PS 7 ITA No.1122/M/2014

आदे श क0 ूितिल!प अमे!षत/Copy षत of the Order forwarded to : 1. अपीलाथ, / The Appellant 2. ू.यथ, / The Respondent. 3. आयकर आयु;(अपील) / The CIT(A)- 4. आयकर आयु; / CIT

5. !वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स.या!पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai