Tribunal upholds decision disallowing capital gain exemption, sets aside assessment for fresh review.

The Tribunal upheld the Principal CIT's decision under section 263, dismissing the appeal. It found that the assessment order allowing the claim for exemption on long-term capital gain was erroneous and prejudicial to the Revenue's interest. The Tribunal noted that the Assessing Officer did not properly consider the income from the sale of shares for taxation under "Long-term Capital Gains." Consequently, the Principal CIT's decision to set aside the assessment order for fresh assessment was justified.

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Issues:
1. Whether the assessment order passed under section 143(3) by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue.
2. Whether the claim of the assessee for exemption on long-term capital gain arising from the sale of shares was rightly allowed by the Assessing Officer.
3. Whether the order passed by the Principal CIT under section 263 setting aside the assessment order was justified.

Analysis:

Issue 1:
The appeal was filed against the order of the Principal Commissioner of Income Tax-2, Kolkata, dated 31.03.2015, under section 263 of the Income Tax Act, 1961. The Principal CIT found that the income earned by the assessee from profit on the sale of investment was not considered by the Assessing Officer for taxation under "Long-term Capital Gains." The Principal CIT issued a show-cause notice under section 263, stating that the assessment order was erroneous and prejudicial to Revenue's interest. The assessee argued that the claim for exemption was pending before BIFR, but the Principal CIT set aside the assessment order for fresh assessment.

Issue 2:
The assessee contended that the Assessing Officer had examined the claim for exemption on long-term capital gain from the sale of shares, and the claim was allowed based on the impression that BIFR would approve it. However, the Revenue argued that there was no positive development in favor of the assessee's claim. The Tribunal found that the Assessing Officer did not enquire into the profit arising from the sale of shares and was not aware of the claim for exemption. The Tribunal upheld the Principal CIT's order under section 263, dismissing the appeal.

Issue 3:
The Tribunal noted that the Assessing Officer did not make any inquiry into the profit from the sale of shares or the taxability of the same, and there was no basis to suggest that the claim for exemption would be allowed by BIFR. The Tribunal distinguished this case from the precedent cited by the assessee and upheld the Principal CIT's decision under section 263. Consequently, the appeal of the assessee was dismissed.

In conclusion, the Tribunal found that the assessment order allowing the claim for exemption was erroneous and prejudicial to the Revenue's interest, justifying the Principal CIT's decision to set it aside under section 263.

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