CIT Vs. SMT A E SAROJINI

JUDGEMENT

(1.) The following are the questions of law raised in this case

(2.) The appeal relates to the assessment year 1992-93.

(3.) The assessee herein is an individual. The assessment was originally completed under Section 143(1)(a). While making a prima facie adjustment in computing the claim on capital gains, the income-tax authority rejected the claim on exemption under Section 54F of the Income Tax Act on the ground that the assessee had a residential house at the time of sale of the vacant site and that the sale proceeds were utilised for the extension of the existing building. The assessee preferred an application under Section 154 of the Income Tax Act, 1961, contending that the benefit of Section 54F should have been considered and the question which is an arguable issue, ought not to have been a matter for consideration under Section 143(1)(a). The assessing authority, however, rejected the petition under Section 154. An appeal was preferred against this order before the Commissioner (Appeals). The assessee contended that the disallowance of the claim under Section 54F could not be made under the prima facie adjustment under Section 143(1) (a), since the question was a debatable one. Taking the view that a disputed or a debatable issue could not be the basis for prima facie adjustment under Section 143(1) (a), the appellate authority accepted the plea of the assessee and allowed the appeal. The appellate authority went into the question on the merits of the claim to hold that the denial of deduction under Section 54F as a prima facie adjustment and the computation of capital gains on the sale of capital asset were contrary to the provisions of the statute.