Conditions for revision under Section 263 are not fulfilled hence Income Tax Appellate Tribunal (ITAT), Ahmedabad set asides order as there is no prejudice to interest of revenue.
The assessee, Lalitadevi N. Tibrewala, in the present case is an individual and deriving her income from House property. The assessee in the year under consideration has sold the house property dated 27th May 2011 for a sum of ₹ 50 lakhs which was valued for the purpose of the stamp duty at ₹ 92,29,700/- only. The assessee on the sale of such property has earned capital gain of Rs. 72,74,184/- against which the deduction was claimed under section 54 of the Act on account of construction of another house property. As Such, the assessee has shown NIL taxable capital gain which was accepted by the AO in the assessment framed under section 143(3) of the Act.
However, the Principal Commissioner of Income Tax (PCIT) found that assessee has filed application for BU permission for newly constructed house, thus assumed that the construction of the house was completed by the assessee in the financial year 2010-11. Thus, the construction of new property was completed by the assessee much before the transfer of the property in dispute. According to the PCIT, the exemption/deduction under section 54 of the Act is available if a new house is constructed within a period of 3 years after the date of the transfer of the property. However, in the case on hand, the new house was constructed on a date much before the transfer of the property in dispute.
Accordingly, the PCIT was of the view that the assessee is not eligible for exemption/deduction under section 54 of the Act against the sale of the property. However, the Assessing Officer (AO) without carrying out the necessary verification on this aspect has allowed the claim of the assessee in the assessment framed under section 143(3) of the Act. Thus, the assessment order was held by the PCIT under section 263 of the Act as erroneous insofar prejudicial to the interest of revenue. Aggrieved by the order of PCIT the assessee is before the Tribunal.
Waseem Ahmed, Accountant Member and Madhumita Roy, Judicial Member said “we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revision order passed by the learned PCIT is not sustainable and therefore we quashed the same.”
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