AO correctly determined capital gains transfer date as possession date not registration date following SC precedent in Sanjeev Lal case making CIT revision under section 263 invalid

ITAT Nagpur held that CIT's revision u/s 263 was invalid where AO determined date of transfer for capital gains computation as date of possession/allotment deed rather than registration date. Following SC precedent in Sanjeev Lal case, transfer occurs when agreement creates enforceable rights, not upon registration. Since assessee obtained possession on 16-12-2005 after full payment versus registration on 01-09-2009, AO correctly applied established legal principle. Where two views are possible and AO adopts sustainable view per Max India Ltd precedent, CIT cannot invoke s.263 jurisdiction. Order quashed in assessee's favor.

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Issues Involved:
1. Legality of notice and order passed under Section 263.
2. Validity of proceedings considering the original assessment order under Section 143(3).
3. Determination of whether the transaction is a Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG).
4. Correctness of the Commissioner’s decision regarding the nature of the capital gain.

Detailed Analysis:

1. Legality of Notice and Order Passed Under Section 263:
The appellant argued that the notice issued and the order passed under Section 263 were illegal as they did not conform to the basic requirements of the section. The Tribunal noted that the Commissioner of Income Tax (CIT) had issued a show cause notice under Section 263, stating that the assessment framed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of revenue.

2. Validity of Proceedings Considering the Original Assessment Order Under Section 143(3):
The appellant contended that the notice and proceedings were invalid because the original assessment order under Section 143(3) was neither erroneous nor prejudicial to the interest of revenue. The Tribunal observed that the AO had examined the details of capital gains during the original assessment proceedings and accepted the same after detailed discussion. The Tribunal emphasized that the AO had applied his mind in the assessment order, and thus, the assumption of jurisdiction under Section 263 by the CIT was invalid.

3. Determination of Whether the Transaction is LTCG or STCG:
The main issue was whether the transaction should be considered as Long Term Capital Gain or Short Term Capital Gain. The CIT held that the gain on the sale of property was Short Term Capital Gain, as the property was in the possession of the assessee from 01/09/2009 to 22/04/2010, which is less than 36 months. The appellant argued that the property was allotted on 16/12/2005, making it a Long Term Capital Asset. The Tribunal referred to the Hon'ble Apex Court decision in the case of Shri Sanjeev Lal Etc. vs. CIT, which held that the date of transfer for computation of capital gains should be the date of the agreement/deed of allotment granting possession, not the date of registration of the sale deed.

4. Correctness of the Commissioner’s Decision Regarding the Nature of the Capital Gain:
The CIT's decision was based on the observation that the Deed of Allotment dated 16/12/2005 was not a registered document, and the property was transferred to the assessee by a registered sale deed on 01/09/2009. The Tribunal found that the AO had already considered the facts and had taken a plausible view supported by the Hon'ble Apex Court decision. The Tribunal concluded that the AO's view was sustainable in law, and the CIT's treatment of the assessment order as erroneous and prejudicial to the revenue was not justified.

Conclusion:
The Tribunal quashed the order passed by the CIT under Section 263, holding that the AO had applied a view supported by the Hon'ble Apex Court, and thus, the assessment order was neither erroneous nor prejudicial to the interest of revenue. The appeal by the assessee was allowed.

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