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Question ID : 38162

Validity of Notice issued u/s 263 of IT Act.

Dear Friends, please clarify on the following:- An assessee filed his return of income claiming exemption U/s 54F of IT Act on sale of his vacant land by investing in a residential property. The assessment was processed U/s 143(1) of the IT Act. Subsequently he was issued notice U/s 147 based on AIR information. The assessment was completed U/s 143(3) accepting the Return filed and also the exemption U/s 54F. Now, based on Audit Objection PCIT has issued notice U/s 263, setting aside the Assessment and directed the AO for re-assessment to deny exemption U/s 54F stating that the assessee has owned more than on residential house The AO has started the reassessment proceedings Please advise whether the reassessment proceeding is valid in view of reopening notice issued U/s 147 and assessment completed accepting the return. Whether any case laws are available in this regard. Whether we can object the assessment itself or appeal before CIT (A).

Posted by RAMAN on May 24, 2019


Answer ID : 76624

In case of Purushottam P. Patel vs. ITAT Ahmedabad, it was held that where no material evidence or reason has been pointed before beginning the reassessment, which prove that the same has escaped assessment, reassessment proceedings u/s. 147 are not justified. Also, reassessment on new view on same facts is not permissible.

Posted by CA. chunauti dholakia on May 24, 2019
Answer ID : 76626

basic condition for availing the exemption u/s54F is that the assessee should not own more than one residential house other than the one to be acquired for claiming exemption u/s 54F. Including the new property, he can have 2 residential properties. assuming, this condition is not fulfilled, if this was not considered u/s 143(3)/148 assessment, the CIT can definitely assume jurisdiction u/s 263 and direct the AO to pass fresh orders.

Posted by CA. VENKITARAMAN K V on May 25, 2019
Answer ID : 76668

CIT appears to be justified in what he has done subject to limitation of time u/s 263.

Posted by SIVADAS CHETTOOR on May 29, 2019
Answer ID : 76725

I wish to bring to your notice a case law ie CIT v Sohana woollen mills 296 ITR 238 wherin the HC held that revision based merely on the basis of audit objection cannot be the ground for revision u/s 263. You may try to apply the principles of that decision in your case.

Posted by SIVADAS CHETTOOR on Jun 03, 2019