Hansaben Mahendrakumar Mehta vs. The Principal Commissioner of Income Tax-1, Ahmedabad

Parties Involved

Facts Summary

The assessee filed her return of income for the assessment year 2018-19 on 10.07.2018 declaring total income at Rs.2,98,51,920/-. The case was selected for scrutiny through CASS to verify the capital gains deduction claimed during the year under consideration and assessment proceedings u/s.143(3) of the Income Tax Act 1961 was finalized on 10.11.2020 accepting the returned income. The Ld.PCIT observed that the assessee had earned capital gain on sale of unlisted shares and availed exemption of Rs.3,20,00,000/- under section 54F of the Act. The Ld.PCIT observed that since the Act prescribes that the assessee has to purchase/construct a residential house within the prescribed period of 3 years, the investment in construction cost of house owned by her husband and brother-in-law cannot be considered as eligible for availing exemption u/s.54F of the Act. Thus, the Ld.PCIT issued notice u/s.263 of the Act which was subsequently replied by the assessee along with the documents submitted before the Assessing officer. The Ld.PCIT after taking cognizance of the submission of the assessee held that the assessment order passed by the Assessing Officer u/s.143(3) of the Act is erroneous in prejudicial to the interest of the Revenue and set-aside the same. The Ld.PCIT further directed the Assessing Officer to make fresh assessment after making necessary inquiries. Being aggrieved by the order u/s.263 of the Act, the assessee filed appeal before the Income Tax Appellate Tribunal.…

Legal Issues

• 1. Whether the order passed by U/s.263 on 28.03.2023 by Pr. CIT-1 Abad holding the order of assessment passed u/s 143(3) on 10.11.2020 by AO to the extent of allowing the claim of exemption u/s 54F of RS. 3,16,37,333/- was erroneous and prejudicial to the interest of the Revenue for want of adequate inquiry is wholly illegal, unlawful and against the principles of natural justice.
• 2. Whether the order passed by U/s.263 on 28.03.2023 by Pr. CIT-1 Abad holding the order of assessment passed u/s 143(3) on 10.11.2020 as erroneous and prejudicial to the Revenue is illegal and unlawful.

Judgment Outcome

Decided in favour of Assessee.

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