An assessment order passed by a non-jurisdictional officer is void. Furthermore, under Section 54F of the Income Tax Act, capital gains exemption is available for a residential house constructed in the name of a family member, provided the investment originated from the sale proceeds of the original capital asset.

Headnote:(A) Income Tax Act, 1961 - Section 54F - Capital gains exemption - Construction of residential house in name of son - Whether exemption permissible - Assessee claimed exemption for investment in residential property constructed in name of son using sale proceeds of capital asset - Revenue denied exemption relying on procedural grounds - Tribunal held that investment in name of son, where entire consideration flows from assessee, qualifies for exemption - Purposive construction of statute required. (Paras 4.1, 4.2)

(B) Assessment proceedings - Jurisdiction - Re-assessment initiated by officer of one ward and completed by another - Non-jurisdictional assessment orders are illegal - Appellate court duty-bound to rectify lack of jurisdiction. (Paras 3.1, 3.2)

Facts of the case:
The assessee, a pensioner, sold immovable property and claimed exemption under Section 54F for investment in property construction in his own and his son's name. Reassessment proceedings were initiated under Sections 147/148. The assessment order was passed by an officer different from the one who initiated the proceedings. The CIT(A) upheld the assessment but limited the exemption.

Findings of Court:
The reassessment order is void as it was passed by a non-jurisdictional officer. On merits, the assessee is entitled to exemption under Section 54F even if property is in the name of a family member, provided the source of funds is the sale proceeds of the capital asset.

Issues: Whether the assessment order passed by a non-jurisdictional officer is valid and whether the assessee is entitled to Section 54F exemption for property in his son's name.

Ratio Decidendi: An assessment order passed by an officer lacking jurisdiction is illegal. Under Section 54F, the requirement for a residential house does not restrict ownership to the assessee personally, so long as the funds are derived from the sale of the original asset.

Result: Appeal allowed.

O R D E R

PER VIMAL KUMAR, JUDICIAL MEMBER:

The appeal filed by assessee is against order dated 29.03.2016 of Learned Commissioner of Income-Tax (Appeals)-, Muzaffarnagar (hereinafter referred as “the Ld. CIT(A)”) under Section 250(6) of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of assessment order dated 17.03.2015 of the Learned Assessing Officer/The Income Tax Officer, Ward-2, Saharanpur (hereinafter referred as “Ld. AO") under Sections 147/143(3) of the Act for assessment year 2009-10.

Brief facts of case are that assessee is a Pensioner of the Government Department. The assessee filed his return of income at Rs.1,21,546/- on 30.07.2009. Later on, it was noticed that assessee sold immoveable property for a sale consideration of Rs.41,57,100 (Circle Rate Rs.51,73,925/-) as per section 50C of the Act. As the land sold was capital asset and no income from capital gain was shown in the return from transaction of immoveable property, notice under Section 148 of the Act dated 06.01.2014 was issued for escapement of income. The assessee filed reply dated 26.02.2014 stating that return filed by him on 30.07.2009 may be treated as filed under Section 148 of the Act. Notices under Section 143(2) and 142(1) of the Act along with questionnaire were issued. Shri Deepak Gupta, CA/AR attended proceedings, filed replies and relevant material. On completion of assessment proceeding, Ld. AO passed order dated 17.03.2015 by making addition of Rs.14,05,500/-, Rs.37,090/- and Rs.50,31,150/-.

Against order dated 17.03.2015 of Ld. AO, the appellant/assessee preferred appeal before the Ld. CIT(A) which was dismissed vide order dated 29.03.2016.

Being aggrieved, appellant/assessee preferred present appeal with following grounds:

“1. That the Learned CIT(A) is wrong and unjustified in not allowing exemption u/s 54F in respect of all the three houses-one in the name of appellant and two in the name of son, constructed out of the sale proceeds of land.

2. That Learned CIT(A) is wrong and unjustified in restricting the exemption u/s 54-F in respect of only house belonging to the appellant up to the date of filing of return, on the ground that no compliance of the provisions of section u/s 54F(4)) has been made ignoring the fact that the entire amount remained in Bank account and payment to the contractor was made after withdrawing the amount from the bank account. In alternative the exemption should has been allowed up to the time for filing the return u/s 139(4).

3. That Learned CIT(A) is wrong and unjustified in not allowing the exemption u/s 54-F in respect of houses constructed in the name of son and various decisions replied upon by the appellant has not been distinguished”.

Appellant/assessee through application dated 05.01.2023 requested following additional grounds of appeal:

“1. That the notice issued u/s 148 and reassessment order passed u/s 147 r.w.s. 143(3) are illegal, bad in law and without jurisdiction.

2. That, the assessment order passed by the non-jurisdictional officer, therefore, the assessment order passed is illegal, bad in law and without jurisdiction.

3. That, no application of mind by the assessing officer while recording the alleged satisfaction and failed to establish the live nexus between tangible material and income escaped assessment, which is vague, incorrect and baseless, hence, the proceedings initiated is illegal, bad in law and without jurisdiction. The CIT (A) has erred in upholding the validity of the proceedings initiated U/s 147 read with section 148.

4. That no proper statutory approval has been taken by the Assessing officer U/s 151 of the I.T. Act, 1961, as required. If any approval is taken then the approval is in very mechanical manner without application of mind by the statutory authority hence the proceedings initiated U/s 147/148 is illegal, bad in law and without jurisdiction.”

Learned Authorized Representative for the appel

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2025 Supreme(Online)(ITAT) 21789

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)M Balaganesh, Accountant Member, Vimal Kumar, Judicial MemberAssessee – AppellantVersusIncome Tax Officer – RespondentITA No. 3300/Del/2016

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
M Balaganesh, Accountant Member, Vimal Kumar, Judicial Member
Assessee – Appellant
Versus
Income Tax Officer – Respondent
ITA No. 3300/Del/2016