INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - No lack of enquiry on AO's part -

Pr. CIT treated order passed by AO as erroneous and prejudicial to the interest of revenue on the ground that assessee had not complied with sections 54 and 54EC while claiming exemption under these sections and AO had not examined when actually the property after completion was handed over to assessee so as to comply with section 54 as for exemption under section 54 the construction should have been completed within a period of 3 years. Held: Assessee made investment in new residential property on 20-4-2017 after sale of the existing residential house property on 16-3-2017, i.e., within stipulated time for exemption under section 54. New Flat was purchased from M/s V Constructions on 20-4-2017 for Rs. 79 lakhs paid vide 2 cheques which were cleared from bank also on 24-4-2017 as per copy of allotment letter, money receipt and bank statement. Assessee also invested a sum of Rs. 50 Lac in Capital Bonds allotted on 31-3-2017 exempted under section 54EC copy of the Bond. Further, Net Capital Gain after these two investments/exemptions was offered for tax by assessee and the same was accepted by AO. Enquiry on the limited scrutiny issue was initiated by the AO and duly responded by the assessee, AO also mentioned in the order that 'the documents as submitted by assessee were examined and placed on record', however, no remark on the issue was made by AO in the assessment order, therefore this would be considered that AO was satisfied with the enquiries made. If Pr. CIT was of the view that any enquiry was necessary in the matter, then he should either himself made such enquiry or may get such enquiry conducted. For the purpose of exercising jurisdiction under section 263, the conclusion that order of AO was erroneous and prejudicial to the interest of revenue was to be preceded by some minimal enquiry by Pr. CIT. If the Pr. CIT was of the view that AO did not undertake any enquiry, it was incumbent on the Pr. CIT to conduct such enquiry. As Pr. CIT did not conduct such basic exercise then he was not justified in setting aside the assessment order under section 263. Therefore, order under section 263 was quashed.

Relied:CIT v. Hindustan Marketing and Advertising Company Ltd. (2011) 341 ITR 180 (Del-HC) : 2011 TaxPub(DT) 482 (Del-HC) and DIT v. Jyoti Foundation (2013) 38 Taxmann.com 180 (Del) : 2013 TaxPub(DT) 2463 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2017-18

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