AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1194
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.... set out in the notice which has already examined and considered during the original assessment proceedings concerning AY 2014-15. The assessee has challenged the assumption of jurisdiction by the PCIT under Section 263 of the Act on the ground that the Assessment Order under revision is neither erroneous nor prejudicial to the interest of the revenue. 3. Briefly stated, the assessee company, in the Assessment year 2015-16 in question, filed the return showing income at Rs. 2,74,670/-. The return so filed was selected for "limited scrutiny' assessment under CASS and consequently notices under Section 143(2) and 142(1) were issued. In the course of the assessment, the Assessing Officer found that the actual sale consideration of land parcels shown as business assets/stock-in-trade in the books of accounts is lesser than the corresponding value assessable for the purposes as stamp duty. Consequently, the Assessing Officer invoked provisions of Section 43CA of the Act and made an addition of Rs. 19,40,000/- for the purposes of computing profit and gains from transfer of land parcels in question. The income was accordingly assessed at Rs. 22,14,670/-. 4. Subsequent to the assessm....
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.... issues to reply the assessee-Co; in response to the same, the assessee-Co has submitted reply and explanation (PB-..........) on the various issues as asked by the ld. PCIT along with the sale deed of the alleged land; however, except the issue of land sold on which addition of Rs. 19,40,000 has been made by the ld. AO as per the assessment order u/s. 143(3) dt. 25-4-17, all other issues has been accepted/dropped by the ld. PCIT as they were beyond the scope of limited scrutiny assessment; 1.4. and thereafter, the ld. PCIT, Bilaspur has passed order u/s. 263 on 31-3-20 and directed to the AO to treat the alleged land sold on 30-10-14 & 5-11-14 as 'capital asset held for investment' instead of 'business assets as stock in trade' shown in me audited books of account of the assessee-Co and to compute 'capital gain' on such sale of the alleged land; so, against the alleged order u/s. 263 dt. 31-3-20, the assessee-Co is in appeal before your Honors; 1.5. It is submitted that even if the contention of the ld. PCIT is correct that the land sold by the assessee-Co which is treated by the assessee-Co as 'business asset'/'stock in trade' in its re....
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..... Resultant/revised Computation of Total Income for the AY 15-16 would be as under: (as per the contention of the ld. PCIT as per order u/s. 263 dt. 31-3-20) Income from Business Net loss as per the revised Trading and P&L account (-) 81,66,128 Capital Gain Long term capital gain on sale of land 71,59,348 Gross Total Income AS per sec71(2), in the same AY, loss under the head 'IFB' would be set off against income shown under the head 'capital gains' (-) 10,06,780 Total Income (-) 10,06,780 Assessed Income u/s 143(3) dt.25-4-17 by the Id AO: (Total Income shown as per ROI at Rs. 2,74,670 plus Rs. 19,40,000 as addition made by the Id AO u/s43CA on account of the alleged land sold which is treated by the Id AO and the assessee-Co, as business assets, Le., Stock-in-trade of the regular business of real estate developers/ trading as duly disclosed in the audited books of account of the assessee- Co.) 22,14,670 The income assessed by the Id AO u/s 143(3) dt.25-4-17 of Rs. 22,14,670 would be reduced by Rs. 32,21,450 and the resultant income of the assessee-Co would be Rs.(-) 10,06,780. Rs. 3....
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....the entire issue is revenue and tax neutral, the twin conditions stipulated in sec. 263 are not satisfied and hence, the sec. 263 order passed by the ld. PCIT is eligible to be quashed. Whether the profit on the alleged land sold could be assessed under the head 'IFB' or under the head 'capital gain', per se, is clearly a debatable issue. Hence, the law is now well settled that a debatable issue cannot be subject matter of revision proceedings u/s. 263. Once an issue becomes debatable, the view taken by the ld. AO in his scrutiny assessment order could be construed as one of the possible views and hence, the order passed by him cannot be termed as erroneous. In such a scenario, the view canvassed by the ld. PCIT would only result in substitution of his view in the place of one of the possible views already taken by the ld. AO. The law is very well settled on this point that in these circumstances, the revision jurisdiction u/s. 263 cannot be invoked by the ld. PCIT. Reliance in this regard is placed on Gabriel India Ltd. (1993) (Bom). 1.11. It is submitted that in Pooja Marketing (2021) (Mum-Trib) dt. 24-5-21, held as under: "6.2. In the present case before us, ....
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.... sec. 263 order passed by the ld. PCIT is eligible to be quashed thereon." 7.1. We also find that the issue could be looked into from another angle. Whether the prize winnings from unsold lottery tickets derived by the assessee dealer could be assessed under the head 'IFB' or under the head 'IFOS', per se, is clearly a debatable issue. Hence, the law is now well settled that a debatable issue cannot be subject matter of revision proceedings u/s. 263. The existence of the issue becoming debatable is staring on us from the fact that Mysore Sales International Ltd. (1979) (Kar) had decided the issue in favour of the assessee in pre 1972 era, whereas Manjoo & Co (Ker HC) and JN Sharma (All HC) had decided the issue in favour of the Revenue. These decisions are considered by us in detail in the later part of this order. Once an issue becomes debatable, the view taken by the ld. AO in his scrutiny assessment order could be construed as one of the possible views and hence, the order passed by him cannot be termed as erroneous. In such a scenario, the view canvassed by the ld. PCIT would only result in substitution of his view in the place of one of the possible views alr....
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....nd development, colonization, purchase, sale, construction and letting out of houses, flats, farmhouses." The ld. PCIT considered the above said clause only. However, he ignored the ancillary clause No. 19 which reads as under: "19. To sell, improve, alter, manage, develop exchange, lease, mortgage, dispose of, turn to account or otherwise deal with all or any parts of this business, lands, property, assets, rights and the resources and undertakings of the company in whole or in part in such manner and on such terms as the Directors may think fit." From the aforesaid clause it is clear that the assessee-Co was authorised to lease out the property which in the present case has been done in respect of first floor and second floor of SCO No. 126 and 127, Sec-8C, Chandigarh. The said activity of leasing out was undertaken by the assessee-Co from the very beginning when those assets were purchased, so it cannot be said that this activity was only for the year u/c. It is not in dispute that in all the earlier years the income received from those leased out properties was considered as "business income", as the clause No. 19 of the MOA authorised assessee to lease out its property w....
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....nterest of the Revenue' in sec. 263, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of 2 courses permissible in law and it has resulted in loss of revenue, or where 2 views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law." 8.7. In the instant case, the assessee furnished a chart before the authorities below explaining that if the income received by it was to be treated as "IFHP" instead of "business income", there would be an increase in the loss. The said chart had been reproduced in the former part of this order. However, the ld. PCIT by considering the wrong calculations, was of the view that there was a profit instead of loss claimed by the assessee, if the rental income to be considered as "IFHP" and not "as business income" while adopting the said calculation, the PCIT did not allow the depre and the other exp....
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.... The AO while passing the assessment u/s. 143(3) on 27-3-17 has accepted the capital gain as claimed by the assessee from the sale of ancestral property. Subsequently, the ld. PCIT has exercised its revisionary power u/s. 263 and issued SCN dt. 3-1-19 as under: "During the relevant period, you had sold your ancestral property and got your share amounting to Rs. 1,08,28,148 whereon you had computed CG. Thereafter, you had purchased a property i.e., D-15-A Prem Colony Kachhi Basti, Pani Pech, Jaipur for Rs. 23 lakhs on 11-2-15 and claimed deduction u/s. 54F thereon. You had also invested Rs. 50 lakhs in NHAI Bonds on 31-3-15 and claimed deduction u/s. 54EC thereon separately. It is perused from the record that you had sold your ancestral property by plotting to 59 different persons and offered capital gain thereon for taxation, however, in view of Raja J. Rameshwar Rao (1961) (SC)-the nature of such transaction should have been judged as business income instead of CG, after computing capital gain u/s. 45(2) on conversion of capital assets into 'SIT'." Thus, it is clear that the ld. PCIT invoked the sec. 263 only in respect of capital gain declared by the assessee f....
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....ly because the AO has accepted the capital gain declared by the assessee. Hence, in the facts and circumstances of the case, the impugned ex-parte order passed by the ld. PCIT without proper opportunity of hearing to the assessee and without establishing the order of the AO is prejudicial to the interest of the Revenue is not sustainable in law and consequently, the same is quashed and set aside." [as extracted from Late Shri Ramavtar Gupta (2020)203 TTJ 643 (Jai-Trib(] Submitted for judicious consideration Yours faithfully Sd/- CA Sunil Kumar Agrawal Counsel for the assessee-Co" 7. The learned Departmental Representative, on the other hand, relied upon the observations made by the PCIT while coming to the conclusion adverse to the assessee. 8. We have carefully considered the rival submissions. Section 263 of the Income-tax Act, 1961 ("the Act" in short) confers the powers upon the designated authority to call for and examine the records of a proceeding under the Act and revise any order if he considers the same to be erroneous and prejudicial to the interest of the Revenue. The revisional authority (PCIT in the instant case) can take recourse to revision under Sec....