TaxTMI 
TaxTMI 
2025 (8) TMI 1246
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....) erred in making direction u/s 263 of the income tax Act, 1961 to AO to re-compute income of the assessee considering the co-ownership of capital assets sold during the year being a) The case was taken in limited security to examine the claim of large refund. b) The assessment was neither erroneous nor prejudice to the interest of revenue. Therefore, the direction without justification and to be quashed. 2. Assessee deserves right to amend, alter, delete and add any ground of appeal on or before the hearing of appeal." 3. Succinctly, the fact as culled out from the records is that the assessee filed return of income for Assessment Year 2018-19 on 13.07.2018 declaring total income of Rs. 1,13,290/- and claimed loss of Rs. 1,15,19,069/-, The return of income was processed u/s 143(1) of the Income Tax Act. 1961 (hereinafter referred to as "the Act") and the case was selected for scrutiny through CASS. The notice u/s 143(2) of the Act was issued by the National e-Assessment Centre on dated 28/09/2019. The case was selected for scrutiny for the verification of refund claim by the assessee. Notice u/s 142(1) of the Act along with questionnaire was issued on issued on 06/02/2....
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....PINNACLE situated at Hulimavu Village, Arakere Subdivision, Bommanahali Zone, Bangalore. This property was acquired by the assessee in F. Y. 2010-11 through an Agreement for Sale executed on dated 23.12.2010. The long term capital gains declared by the assessee was computed as under: Flat No. 1802 at MANTRI DSK PINNACLE situated at Hulimavu Village, Arakere Sub-division, Bommanahali Zone, Bangalore Sale consideration Rs. 2,77,22,864/- Cost of acquisition As per Agreement for sale = 27722864 Indexed cost of acquisition Rs. 3,92,41,933/- Long Term Capital Gain (LTCG) Rs. (-)1,15,19,069/- The aforesaid property was acquired by the assessee through payments made in installments. The assessee claimed indexed cost of acquisition for the various financial years in which installments were paid by him. Considering the submission filed by the assessee so far as well as on examination of documents and other material evidence produced by the assessee, queries were raised by ld. AO. After considering all the submissions as well as information/documents filed by the assessee and on perusal of the record and after going through the submissions as ....
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....t some payments were made in F.Y 2012-13. However, in the computation of total income, for the purpose of indexation, cost inflation index has been taken for F.Y 2011-12 instead of F.Y 2012-13. Thus, excess cost of indexation amounting of Rs. 5,81,368/- has been claimed by the assessee. Therefore, the assessee was show caused vide notice u/s 142(1) of the Act on dated 10.04.2021 as to why the excess cost of indexation claimed by you should not be added to the total income. In response the assessee submitted its reply on dated 13.04.2021. In the reply, the assessee submitted that he computed long term capital gain by indexing cost for two payments wrongly due to oversight and omission. In view of the above factual position, it is evident that the assessee has wrongly computed excess indexed cost of acquisition to the tune of Rs. 5,81,368/- in the computation of Long-Term Capital Gain which was added to the Long Term Capital Gain income of the assessee. Accordingly ld. AO completed the assessment u/s 143(3) read with section 144C(3) of the Act on 21.06.2021. 4. On culmination of the assessment proceeding the ld. PCIT called for the assessment records ....
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.... the copy of bank accounts statement from where the funds of Rs. 70,15,655/- and Rs. 2,15,07,106/- were transferred. 4.3 After considering the reply of the assessee as well as the facts and circumstances of the case as stated, the assessment order passed by the Assessing officer under the provisions of section 143(3) of the Act dated 21.06.2021 was found erroneous in so far as it was prejudicial to the interest of revenue. Therefore, PCIT directed AO to verify that entire payment for purchase of impugned flat was made by the assessee Shri Ajay Agarwal from his own source of funds from the documentary evidences and no payment was made by his spouse as stated by the assessee and that after proper verification the AO should pass the assessment order accordingly. 5. Assessee, feeling dissatisfied with the order of the PCIT passed u/s. 263 of the Act, filed the present appeal before this tribunal on the grounds as raised here in above. Apropos to the grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submissions which are reproduced here in below; "Assessee is an individual, who filed his return of income u/s 139(1) claiming refund o....
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....rom which the booking amount and instalments were paid and the sale consideration was credited. (Copies of bank statements are annexed at page no 28-37 and 40-41 of paper book). 1.7 LD AO examined the sources of booking payment and instalments of booking rights paid by assessee to ascertain whether the assessee has claimed actual cost or the cost is artificially inflated. Since the scrutiny assessment was to be made specially to examine the refund claim made by assessee, the cost taken in deriving gain to assessee was meticulously examined. 1.8 After, due verification of sale consideration, cost, sources of cost, indexation, Form 26AS and bank statements of assessee, the AO assessed the loss from long term capital gain with minor modification due to clerical mistake in ITR in calculating indexation and granted refund to assessee. 1.9 The subject matter of scrutiny assessment is to examine the claim of refund, the AO restricted his inquires to such extent. However, he was satisfied from the evidences and documents produced to him that the booking was made by assessee from his own funds and the amount was paid from his own bank account, the instalments were....
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...., had completed the assessment and passed the order u/s 143(3) of the Act. We also note that that an assessment or re-assessment could only be revised u/s 263 of the Act in case it satisfies the twin conditions, viz: order is erroneous as well as prejudicial to the interest of revenue. In the case of assessee, order passed u/s 143(3) of the Act is neither erroneous nor prejudicial to the revenue, as it was passed after detailed examination and proper verification of all documents of subject matter of limited scrutiny. Therefore, respectfully following the judgment of the Co-ordinate Bench of ITAT Surat in the case of Green Park (supra), we quash the order of ld PCIT. This case is also covered on identical facts in case of Shri Arun Kumar Palawat Vs. The PCIT, Jaipur-1, Jaipur. Case no ITA No. 144/JP/2022 (page no 53-78 of paper book ) in which it was held that (Page No 25 from last para )"As we have discussed above, in case of limited scrutiny, the AO is duty bound to restrict himself to examine the matters for which matter was selected for limited scrutiny and where the AO takes a view and forms a reasonable belief that some other matters are required to be examined, the ....
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....r the Ld. PCIT to say that not adverting to the other aspects of the competition would render the assessment order erroneous and prejudicial to the interest of the Revenue." 2.1 Further, your honour as per law held by The Supreme Court in celebrated/ leading case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. In view of aforesaid factual and legal discussions, in our considered view, the twin condition as required to revise the assessment ord....
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....2.7 On the above facts and in the circumstances, the order of assessing officer is not erroneous at all. 2.8 Your honour, the order is also not prejudicial to the interest of revenue. From the above discussion, it is well established that the funds of the assessee were involved in the purchase of the flat (Booking). In the case if the wife is treated as a joint owner, still the Long-Term Capital Gain or loss as the case may be, is liable to be clubbed in the hand of the husband. 2.9 The case of assessee is well covered under section 64 sub-section 1 clause (iv) Which reads as under: - "In computing the total income of any individual, there shall be included all such income as arises directly or indirectly - (iv) subject to the provision of clause (i) of section 27 to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for the adequate consideration or in connection with an agreement to live apart." In either case - 1 If we treat it the case of transfer of ½ ownership to wife without consideration, or 2 Treat it the gift In both circumstances....
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.... assessee wherein the payment was considered as cost of acquisition made in various years were considered and was accordingly allowed. Therefore, the order is neither erroneous or prejudicial to the interest of the revenue. Ld. AR of the assessee further submitted that the provisions of section 263 of the Act empowers the ld. PCIT only if the criteria as prescribed under explanation 2 to section 263 of the Act is met with, and while passing the order ld. PCIT failed to demonstrate that criteria mentioned and the provisions even while passing the order. She also argued that ld. PCIT while passing the order did not invoke explanation 2 to section 263 of the Act to hold the order of the ld. AO was erroneous and prejudicial to the interest of the revenue. 8. Per contra, ld. DR representing the revenue heavily relied upon the findings recorded in the order of ld. PCIT. 9. We have heard the rival contentions and perused the material placed on record. The assessee in this appeal has raised solitary ground challenging the directions to the ld. AO in the revision proceeding to re-compute income of the assessee considering the co-ownership of capital assets sold during the year. The....
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....cost of acquisition including the details of the source thereof. Now what was proposed by way of direction under section 263 of the Act whereby ld. PCIT aims to expand the scope of scrutiny and same is not permitted. Not only that while passing the order the ld. PCIT has not exposed any of the clause of explanation 2 of section 263 as applicable based on the facts of the case. The assessee in the written submission serviced a land mark judgment delivered by the apex court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), where the highest court of the country the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to se....