2014 (7) TMI 373 - AT - Income Tax

Tribunal Upholds Tax Jurisdiction on Capital Gains Classification

Shri. Hemanth Kumar Bothra Versus The Income Tax Officer

The Tribunal upheld the Commissioner of Income Tax's jurisdiction under section 263, dismissing the appeal challenging the treatment of capital gains as ... Jurisdiction u/s 263 of the Act – Sale of property – STCG or LTCG – Held that:- The assessee’s explanations could not convince the CIT – CIT was of the opinion that there is difference in the rate of tax between the two capital gains i.e. 30% and 20% respectively - assessment framed was erroneous and prejudicial to the interest of the Revenue - the assessee had declared ‘long term’ capital gains and their reinvestment as per Section 54F – there was no discussion at all about this factual position – not the assessee has placed proof of any enquiry conducted by the AO - lack of enquiry in a ‘regular’ assessment itself is erroneous and prejudicial to interest of the Revenue - neither there was any enquiry nor a view much less a possible one taken by the AO. The assessee has failed to place on record copies of the transactions and agreements to prove that Sh. ‘CP’ had acquired ownership and possession in the year 1991 or in any case before 11.08.2006 u/s 2(47)(v) of the Act – there was no fault with observations of the CIT that holding period of the capital asset is only from 11.08.2006 to 01.08.2008 i.e; less than 36 months which gives rise to ‘short term’ capital gains - assessee has not placed on record any evidence to prove his father’s ownership and possession before 11.08.2006 - ‘CP’ had acquired title and possession of the asset only on 11.08.2006 - the consequential capital gains are ‘short term’ only - on all counts i.e; treatment of capital gains as well as non-conducting of enquiry and no view formed by the AO in framing ‘regular’ assessment, the CIT has rightly assumed /exercised his jurisdiction u/s 263 of the Act – Decided against Assessee. Issues:1. Jurisdiction of CIT under section 263 of the Income Tax Act regarding treatment of capital gains as short term or long term.2. Holding period of the asset and its impact on the nature of capital gains.3. Lack of enquiry and view formation by the Assessing Officer in the regular assessment.Issue 1: Jurisdiction of CIT under section 263:The appeal involved a challenge to the Commissioner of Income Tax's order under section 263 of the Income Tax Act regarding the treatment of capital gains as short term instead of long term. The appellant argued that the holding period of the property sold was more than three years, making it eligible for long-term capital gains treatment. The appellant cited relevant case law to support this argument. The Revenue supported the CIT's order and opposed the appeal.Issue 2: Holding period of the asset:The CIT's order was based on the holding period of the asset in question. The CIT found that the property had been acquired in 2006 and sold within 36 months, qualifying it as short-term capital gains. The CIT also noted discrepancies in ownership and possession dates, leading to the conclusion that the capital gains were indeed short term. The CIT distinguished the case law cited by the appellant based on the specific circumstances of the case.Issue 3: Lack of enquiry in regular assessment:The Tribunal observed that the regular assessment lacked discussion on the factual position of the capital gains and reinvestment as per Sec.54F. The Tribunal found the absence of any enquiry by the Assessing Officer to be erroneous and prejudicial to the Revenue's interest. The Tribunal held that the Assessing Officer failed to take any view or conduct necessary enquiries. Additionally, the appellant failed to provide evidence to establish ownership and possession dates before 2006, further supporting the CIT's decision.In conclusion, the Tribunal upheld the CIT's jurisdiction under section 263, rejecting the appellant's contentions and dismissing the appeal. The detailed analysis of the holding period, lack of enquiry in the regular assessment, and the specific circumstances of ownership and possession dates led to the decision in favor of treating the capital gains as short term.