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Issues: (i) Whether the revisionary jurisdiction under section 263 could be invoked where the assessment order disclosed no enquiry on the taxability of capital gains arising from a development agreement and handing over of possession; (ii) Whether the revisional authority was justified in directly directing the Assessing Officer to compute capital gains, or the matter required fresh examination on the facts and evidence.
Issue (i): Whether the revisionary jurisdiction under section 263 could be invoked where the assessment order disclosed no enquiry on the taxability of capital gains arising from a development agreement and handing over of possession.
Analysis: The assessment record showed that the Assessing Officer had not examined the effect of the development agreement, had not discussed the issue of transfer, and had not formed any view on whether handing over possession attracted section 2(47)(v). The existence of materials in the record did not by itself establish application of mind. Where the order is passed without enquiry on a material issue and the omission results in possible escapement of capital gains, the order is both erroneous and prejudicial to the interests of revenue. The doctrine of possible view could not assist the assessee because no view had in fact been formed by the Assessing Officer.
Conclusion: The invocation of section 263 was valid.
Issue (ii): Whether the revisional authority was justified in directly directing the Assessing Officer to compute capital gains, or the matter required fresh examination on the facts and evidence.
Analysis: The taxability of capital gains on the development arrangement depended on several factual matters, including the effect of the earlier sale-cum-GPA, the alleged cancellation of the development arrangement, the date and nature of possession, the conduct of the developer, and the year in which transfer, if any, could be said to have occurred. Those questions required independent enquiry by the Assessing Officer. A straight direction to compute capital gains without such examination was not justified.
Conclusion: The matter had to be restored for fresh examination by the Assessing Officer.
Final Conclusion: The revisional jurisdiction was upheld, but the assessment issue was remitted for independent consideration in accordance with law, so the assessee obtained only a limited procedural relief.
Ratio Decidendi: An assessment order passed without enquiry or application of mind on a material issue is amenable to revision under section 263, and where the taxability turns on unresolved factual questions, the revisional authority must remit the matter for independent examination rather than predetermine the taxable result.
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