2018 (1) TMI 1230 - AT - Income Tax

Tribunal overturns jurisdiction assumption, restores original assessment.

The tribunal found that the assessment order dated 26.02.2015 was not erroneous or prejudicial to the interest of the revenue. The Principal CIT's ... Revision u/s 263 - capital gains tax liability on sale of land - Held that:- A perusal of the show cause notice clearly shows that the Principal CIT has not appreciated the facts of the case in true perspective. As mentioned elsewhere, the agreement to sell was entered on 27.03.2007 and the possession was given on 04.05.2007. Therefore, it is incorrect to say that the capital gains tax liability arose in A.Y. 2012-13 when the same was in A.Y. 2008-09 as per the relevant provisions of the IT Act. Therefore, it cannot be said that the assessment order framed u/s. 143(3) is erroneous and prejudicial to the interest of the revenue. It is incorrect to say that the assessee has received a consideration of ₹ 5.63 crores. The conveyance deed dated 25.07.2011 perused by the Principal CIT was tri-partite deed comprising of seller [assessee], confirming party [R.Y. Infrastructure Pvt. Ltd.] and Shantigram Estate Private Ltd. [assignee of R.Y. Infrastructure Pvt. Ltd. and ultimate buyer]. An understanding was reached between R.Y. Infrastructure Pvt. Ltd. and Shantigram Estate Private Ltd. to transfer such beneficial ownership rights in favour of latter which were acquired by R.Y. Infrastructure Pvt. Ltd. from the assessee by agreement to sell. The assessee had already received the sale consideration of ₹ 28.41 lacs when she entered into agreement to sell with R.Y. Infrastructure Pvt. Ltd. and handed over the quite possession in its favour. All these facts were considered by the A.O. and being satisfied with the transaction qua the relevant provisions of the Act, the assessment order was framed u/s. 143(3) - Assessment order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the Principal CIT u/s. 263 and restore that of the A.O. passed u/s. 143(3) of the Act. - Decided in favour of assessee. Issues Involved:1. Assumption of jurisdiction by Principal CIT under Section 263 of the Income Tax Act.2. Whether the assessment order dated 26.02.2015 under Section 143(3) was erroneous and prejudicial to the interest of the revenue.3. Validity of the capital gains tax liability assessment for the financial year 2007-08 relevant to assessment year 2008-09.Detailed Analysis:1. Assumption of Jurisdiction by Principal CIT under Section 263 of the Act:The assessee challenged the jurisdiction assumed by the Principal CIT-5, Ahmedabad under Section 263 of the Income Tax Act. The contention was that the Principal CIT wrongly assumed jurisdiction when the assessment order framed under Section 143(3) dated 26.02.2015 was neither erroneous nor prejudicial to the interest of the revenue. It is a settled position of law that powers under Section 263 can be exercised only if the assessment order is both erroneous and prejudicial to the interest of the revenue, as supported by the Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83.2. Erroneous and Prejudicial to the Interest of the Revenue:The tribunal examined whether the assessment order dated 26.02.2015 was erroneous and prejudicial to the interest of the revenue. The settled law requires the Commissioner to establish that the order of the Assessing Officer (AO) is both erroneous and prejudicial to the revenue. If the AO has taken one of the possible views after inquiry, the revisional power cannot be exercised. The tribunal referred to the Bombay High Court decision in CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay), which supports that revisional power cannot be exercised for directing a fuller inquiry when a view has already been taken after inquiry.3. Capital Gains Tax Liability Assessment:The tribunal analyzed the facts related to the capital gains tax liability. The assessee had entered into an agreement to sell lands on 27.03.2007 and gave possession on 04.05.2007, receiving the entire consideration by that date. According to Section 2(47)(v) of the Income Tax Act, which incorporates Section 53A of the Transfer of Property Act, the transfer occurred in the financial year 2007-08 relevant to the assessment year 2008-09. The assessee had offered the capital gains for tax in the assessment year 2008-09. The tribunal found no wrong assumption of law or facts by the AO in this regard.The tribunal also noted that during the scrutiny assessment for the assessment year 2012-13, the AO had made specific inquiries about the sale of immovable property, and the assessee had provided detailed responses, which the AO duly considered. The Principal CIT, however, issued a show cause notice under Section 263, alleging that the assessee did not declare the capital gain in the return of income for the assessment year 2012-13. The tribunal found that the Principal CIT did not appreciate the facts correctly, as the capital gains tax liability arose in the assessment year 2008-09, not 2012-13.The tribunal referred to the Gujarat High Court decision in CIT vs. Nirma Chemical Works Ltd. 309 ITR 67, which held that an assessment order need not incorporate reasons for upholding a claim if the AO is satisfied with the evidence provided. The tribunal also cited the Bombay High Court decision in Gabriel India Ltd. 203 ITR 108, which held that the decision of the ITO cannot be held erroneous simply because the order did not make an elaborate discussion.Conclusion:The tribunal concluded that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. Therefore, the order passed by the Principal CIT under Section 263 was set aside, and the original assessment order under Section 143(3) was restored. The appeal filed by the assessee was allowed.Order Pronounced:The order was pronounced in Open Court on 23-01-2018.