TaxTMI 
TaxTMI 
2021 (10) TMI 1194
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.... de novo after making enquiries on the points 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....
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.... the ld. PCIT has issued SCN on 26-2-20 (PB-..........) and raised various 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 t....
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....r) 7,35,880 Net consideration 1,12,64,120 Less: Cost of acquisition (Rs. 25,94,091 plus Rs. 2,56,000 as stamp duty paid on alleged land at the time of purchase on 16-8- 10 & 23-8-10) 28,50,091 Indexed cost of acquisition: Rs. 28,50,091 x 1,024/711 (FY14-15/FY10-11) 41,04,772 LTCG on sale of land 71,59,348 1.8. 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 ....
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....he impugned order passed u/s. 263 dt. 31-3-20 is invalid, void-ab-initio and thus, liable to be quashed. Malabar Industrial Co Ltd. (2000) (SC) had categorically held that for the ld. PCIT to invoke revision jurisdiction u/s. 263, the twin conditions should be cumulatively satisfied i.e., the order passed by the ld. AO should be erroneous and it should be prejudicial to the interest of the Revenue. In the instant case, since 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....
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.... that Malabar Industrial Co Ltd. (2000) (SC) had categorically held that for the ld. PCIT to invoke revision jurisdiction u/s. 263, the twin conditions should be cumulatively satisfied i.e., the order passed by the ld. AO should be erroneous and it should be prejudicial to the interest of the Revenue. In the instant case, since 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 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 f....
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....t correct as the letting out of the shop from which the rent was received was not the main object of the assessee. 8.2 To resolve this controversy we have to consider the objects and ancillary objects as mentioned in the MOA and AOA of the assessee-Co, copy of which is placed at page No. 22 to 41 of the assessee's compilation. The cl. 3 of the said MOA reads as under: "3. To carry on the business of real estate dealers and developers including purchase and sale of land, land 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 presen....
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....sessed under the head 'IFHP'; composite rental receipts are assessable as business income in the relevant AY also in view of rule of consistency." 8.6. In that view of the matter, it cannot be said that the view taken by the AO was wrong and if the view taken by the AO was one of the possible views the assessment order dt. 16-9-16 passed by him cannot be considered to be erroneous. For the aforesaid view, we are fortified by the ratio laid down by Max India Ltd. (2007) (SC), wherein it has been held that as under: "The phrase 'prejudicial to the interest 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 in....
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.... that view of the matter, the impugned order passed by the ld. PCIT u/s. 263 is quashed." [as extracted from Noor Resorts (P) Ltd. (2021) 1.13. It is submitted that in Late Shri Ramavtar Gupta (2020) (Jai-Trib) dt. 13-12-19, held as under: "2.4. The assessee has sold the ancestral property during the year u/c for a consideration of Rs. 1,08,28,148. The SDV of the said property was amounting to Rs. 1,08,25,150. Therefore, the deemed 'FVC' u/s. 50C cannot be applied in the case of the assessee where the sale consideration shown in the sale deed and declared by the assessee is equivalent to the SDV. 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 ....
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....tax liability of the assessee and hence, the order passed by the AO cannot be said prejudicial to the interest of the Revenue. It is undisputed proposition of law that for exercising the power u/s. 263, the CIT has to satisfy itself that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. Without satisfaction of the twin conditions that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue, the sec. 263 can't be invoked. Therefore, in the case in hand, when there will be no revenue loss even if sec. 45(2) are applied then in such a situation the CIT is not allowed to exercise its power u/s. 263 merely 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(] ....