2020 (3) TMI 53 - HC - Income Tax

Tribunal's Decision Upheld in Revenue's Appeal, Emphasizing AO's Discretion

The Court upheld the Tribunal's decision, dismissing the Revenue's appeal. It found that the Assessing Officer's acceptance of the assessee's revised ... Revision u/s 263 - Capital gain on sale of land - reason for adopting the revised value - HELD THAT:- Even though there is no transfer of property by excluding the sale deed, but at the same time, the property has been revalued in accordance with law and capital gains tax also paid on the revised value. It is not the case of the department that for the purpose of evading the income tax, the assessee company has wrongly calculated the value of the lands which is less than the market value. Therefore, as pointed out by the Income tax Appellate Tribunal and the reliance placed in the case of CIT Vs. Max Inda Ltd. [2007 (11) TMI 12 - SUPREME COURT] referred to by the learned counsel, it is very clear that time and again, as held by the Honourable Supreme Court as well as this court, when two views are possible, if the Assessing Officer had taken one of the plausible views, the CIT has no authority to set aside the order of the Assessing Officer and adopt its one of the other views. Therefore Principal Commissioner of Income Tax could not substitute a lawful view taken by the Assessing Officer. Admittedly in this case, the assessing officer has accepted the returns filed by the respondent/assessee company and the respondent/assessee company has also given reason for adopting the revised value and also pointed out that except the said property, the company has no other property for income and also the entire shares has been transferred and also the value of the land were revised and revalued and capital gains tax also paid. Therefore, under these circumstances, this court do not find any valid reason to interfere with the order passed by Income Tax Appellate Tribunal. The substantial question of law raised by the appellant/revenue is answered accordingly. Thus, we find no good reason to admit the Tax Case (Appeal) filed by the Revenue. Issues Involved:1. Legitimacy of the Assessing Officer's acceptance of the assessee's revised return.2. Validity of the Principal Commissioner of Income Tax's invocation of Section 263 of the Income Tax Act.3. Determination of the correct indexed cost of acquisition for capital gains tax purposes.4. Scope and application of revision powers under Section 263 of the Income Tax Act.5. Applicability of judicial precedents regarding the powers of the Principal Commissioner of Income Tax.Issue-wise Detailed Analysis:1. Legitimacy of the Assessing Officer's Acceptance of the Assessee's Revised Return:The assessee filed its original return for the assessment year 2014-15, disclosing an income of Rs. 79,29,320/-. A revised return was subsequently filed, admitting a total income of Rs. 4,34,23,280/-. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) were served. The assessment was completed under Section 143(3), accepting the returns filed. The Principal Commissioner of Income Tax (PCIT) later issued a notice under Section 263, considering the order prejudicial to the interests of the revenue, and directed a re-examination of the assessment.2. Validity of the Principal Commissioner of Income Tax's Invocation of Section 263 of the Income Tax Act:The PCIT issued a notice to the assessee to show cause why the assessment order should not be set aside, citing a lack of application of mind by the Assessing Officer (AO). The assessee responded, and the PCIT passed an order under Section 263, holding that the AO's order was erroneous and prejudicial to the revenue's interest. The PCIT directed the AO to re-examine the indexed cost of acquisition and pass a fresh order after affording the assessee an opportunity.3. Determination of the Correct Indexed Cost of Acquisition for Capital Gains Tax Purposes:The AO accepted the assessee's calculation of the indexed cost of acquisition based on the revalued amount from the year 2010-11. The PCIT contended that the indexed cost should be calculated from the year 2004-05, the year of original acquisition, not from 2010-11 when only shares were transferred. The PCIT argued that the property transfer occurred in 2004-05, not 2010-11, making the AO's calculation erroneous.4. Scope and Application of Revision Powers under Section 263 of the Income Tax Act:The Tribunal allowed the assessee's appeal, stating that when two views are possible, and the AO has taken one such view, the PCIT cannot treat the AO's order as erroneous and prejudicial to the revenue. The Tribunal set aside the PCIT's order under Section 263. The Revenue appealed, arguing that the AO's order was non-speaking and cryptic, lacking examination of how the original cost was computed.5. Applicability of Judicial Precedents Regarding the Powers of the Principal Commissioner of Income Tax:The Revenue cited judicial precedents, including Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax and V.K. Bharathi vs. Commissioner of Income Tax, to support their argument for the PCIT's intervention. The assessee countered that the AO had taken a plausible view after verifying the long-term capital gain and that the PCIT could not substitute the AO's view with another.Judgment Analysis:The Court held that the AO accepted the assessee's returns after considering the revaluation of the property and the capital gains tax paid by the previous shareholders. The Court noted that the PCIT could revise the AO's order under Section 263 if it was erroneous and prejudicial to the revenue. However, when two plausible views exist, and the AO adopts one, the PCIT should not interfere. The Court found that the AO's acceptance of the revised value was reasonable and that the PCIT's intervention was unwarranted. The Court upheld the Tribunal's decision, dismissing the Revenue's appeal and affirming that the PCIT could not substitute the AO's lawful view.Conclusion:The Tax Case (Appeal) filed by the Revenue was dismissed, and the substantial question of law raised by the appellant was answered in favor of the assessee. The Court found no valid reason to interfere with the Tribunal's order, affirming that the AO's acceptance of the assessee's revised return was a plausible view that the PCIT should not have set aside.