2023 (6) TMI 918 - AT - Income Tax

Tribunal overturns tax order, deems land sale as capital gain.

Anu Singhi Versus The ITO, Ward, Sirhind

The Tribunal quashed the order passed by the Principal Commissioner of Income Tax under section 263, holding that the Assessing Officer's decision to ... Revision u/s 263 - LTCG on sale of properties - property had been sold in piecemeal in 14 transactions - as per CIT properties held by the assessee were stock-in-trade and not capital asset and, therefore, benefit of indexation was not to be made available to the assessee - HELD THAT:- Just because the assessee had sold the land in piecemeal after entering into numerous transactions, it cannot be concluded that such transactions were in the nature of business and selling of immovable property. It is not in dispute that the assessee had duly filed the copies of the sale deed before the AO and, therefore, it is a logical assumption that the AO had duly examined these sale deeds before accepting the returned income of the assessee. Whether to accept the transactions as being taxable under the Long Term Capital Gain or to reject them and tax them under the head income from business would have been duly considered by the AO at the time of assessment proceedings and the conclusion arrived at by the AO was definitely one of the plausible views and, therefore, it cannot be said that the order passed by the AO was erroneous inasmuch as being prejudicial to the interest of the Revenue. We are unable to concur with the view taken by the ld. PCIT and we quash the impugned order which has been passed u/s. 263 - Decided in favour of assessee. Issues Involved:1. Whether the order of the Assessing Officer was erroneous and prejudicial to the interest of the Revenue.2. Whether the income from the sale of land should be treated as Long Term Capital Gain or business income.Summary:Issue 1: Order of the Assessing Officer being Erroneous and Prejudicial to the Interest of the RevenueThe assessee challenged the order passed u/s. 263 of the Income Tax Act, 1961, by the Pr. Commissioner of Income Tax (PCIT). The PCIT issued a notice u/s. 263 on the grounds that the assessee's sale of properties in piecemeal transactions indicated a business activity rather than a capital asset sale. The PCIT held that the assessment was erroneous and prejudicial to the interest of the Revenue, directing a fresh assessment.The assessee argued that the Assessing Officer had duly verified the transactions during the assessment proceedings, and the revisionary proceedings were not warranted. The Tribunal noted that the Assessing Officer had indeed examined the sale deeds and the nature of the land, which was recorded as agricultural land. The Tribunal concluded that the PCIT was not justified in invoking revisionary powers as the Assessing Officer had adopted one of the plausible views.Issue 2: Treatment of Income from Sale of LandThe PCIT contended that the repetitive transactions of selling land indicated business activity, thus treating the income as business income. The Tribunal, however, observed that the land was held for over six years and sold in small portions, with no evidence of the assessee's intention to enter into the business of buying and selling property. The Tribunal referred to judicial precedents, including the Punjab and Haryana High Court's judgment in Kaur Singh vs. CIT and CIT vs. Harjit Singh Sangha, which supported the view that selling agricultural land in piecemeal does not constitute business activity.The Tribunal held that the income from the sale of land was rightly treated as Long Term Capital Gain by the Assessing Officer. The PCIT's order to treat it as business income was quashed, and the appeal of the assessee was allowed.Conclusion:The Tribunal quashed the impugned order passed u/s. 263 of the Act, holding that the Assessing Officer's view was plausible and not erroneous or prejudicial to the interest of the Revenue. The income from the sale of land was to be treated as Long Term Capital Gain.