2022 (10) TMI 648 - AT - Income Tax

Tribunal Reverses Revision Order, Emphasizes Diligence in Assessment

Shri Velayutham Pillai Giri Versus The Income Tax Officer, Non-Corporate Ward 22 (1) Chennai

The Tribunal overturned the Revision Order under section 263 of the Income-Tax Act, directing the reassessment to consider Long Term Capital Gain instead ... Revision u/s 263 by CIT - Direction to AO to consider the capital gain for an amount as Short Term Capital Gain - HELD THAT:- Before us, assessee first of all argued that the AO has examined the entire issue and he took us through the assessment order wherein the AO has considered the claim of capital gains exemption u/s. 54 of the Act and the entire discussion in the assessment order is as regards to this capital gain only. Assessee stated that the AO has raised queries and assessee vide letter dated 23.06.2017 submitted complete details. Relevant details filed by the assessee before AO during original assessment proceedings that the AO has examined the complete details before passing a speaking order on the very issue. From the assessment order, it can be gathered that the AO has formed an opinion and a view is taken which is one of the possible view. Admittedly, the assessee purchased one property at Medavakkam Main Road in 1998 for a sum which includes the building cost. Before construction of residential house on this property, the assessee has to demolish this building and accordingly, the building was demolished in 2012 but assessee has purchased this land along with residential building. Hence, it cannot be a case of Short Term Capital Gain as directed by PCIT. Therefore, we find no infirmity in the order of AO accepting the Long Term Capital Gain declared by assessee. Hence, we reverse the revision order and allow the appeal of assessee. Issues Involved:Appeal against Revision Order u/s. 263 of the Income-Tax Act, 1961 - Delay in filing appeal - Direction to redo assessment considering part of sale consideration as Short Term Capital Gain - Validity of revision order - Examination of capital gain exemption u/s. 54 - Source of purchase of land and construction costs - Proper verification by AO - Applicability of deduction u/s. 54F - Assessment order erroneous or prejudicial to revenue - Admissibility of Long Term Capital Gain - Inferring Short Term Capital Gain - AO's diligence in assessment - Appeal outcome.Detailed Analysis:1. Delay in Filing Appeal:The appeal was delayed by 22 days due to the receipt of the Revision order post the deadline. The delay was attributed to the Covid-19 pandemic, with the Supreme Court's directions for condonation of delays during the specified period. The Tribunal, in line with the Supreme Court's directives, condoned the delay and admitted the appeal for adjudication.2. Revision Order and Capital Gain Exemption:The PCIT issued a revision order directing the AO to reconsider the assessment, specifically focusing on treating part of the sale consideration as Short Term Capital Gain. The PCIT highlighted discrepancies in the source of purchase of land and construction costs, questioning the applicability of deductions u/s. 54F. The PCIT found the assessment erroneous and prejudicial to revenue, leading to the direction for reassessment.3. Assessment Proceedings and AO's Examination:The AO had thoroughly examined the details during the original assessment, considering the capital gain exemption u/s. 54. The AO had raised queries, and the assessee had provided comprehensive explanations and documents regarding the sale and purchase transactions. The Tribunal observed that the AO had taken a reasoned view and accepted the Long Term Capital Gain declared by the assessee, finding no grounds for Short Term Capital Gain as directed by the PCIT.4. Validity of Revision Order and Appeal Outcome:After analyzing the facts and contentions, the Tribunal reversed the revision order, concluding that the AO's decision on Long Term Capital Gain was valid. The Tribunal found no infirmity in the AO's assessment, ultimately allowing the appeal filed by the assessee. The appeal outcome favored the assessee, overturning the revision order and upholding the assessment of Long Term Capital Gain over Short Term Capital Gain.In conclusion, the Tribunal's detailed analysis and examination of the issues presented in the appeal resulted in the reversal of the revision order, emphasizing the importance of proper verification and diligence in assessment proceedings to ensure accurate tax implications and adherence to relevant provisions of the Income-Tax Act, 1961.