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2008 (2) TMI 662 - AT - Income TaxRevision u/s 263 - Capital gain computation - date of acquisition of the right over the property by the assessee - benefit of indexation on the cost - registration of the conveyance deed is ab initio void - erroneous and prejudicial to interest of revenue - HELD THAT - As per section 2(14) the rights in flat, acquired by the assessee on execution of purchase agreement, come within the purview of the term capital asset . From the perusal of language used in Explanation ( iii ) to section 48 of the Act, which provides for manner of computation of indexed cost of acquisition, it is apparently clear that it refers only to cost of acquisition and not actual payments made by the assessee, hence, there is no merit in the alternate contention of the revenue that the benefit of indexation should be given on the basis of dates of actual payments made by the assessee. We also find that the issue of indexation, in such circumstances, is directly covered in favour of the assessee by the decision of the Tribunal in the case of Charanbir Singh Jolly 2005 (8) TMI 576 - ITAT MUMBAI , hence, respectfully following the same, we hold that the assessment order is correct in law. Thus, on merits, the issue is covered in favour of assessee, however, regarding jurisdiction for invoking the provisions of section 263, we would like to add that the assessee filed necessary details before the Assessing Officer and the Assessing Officer has passed assessment order after taking into consideration the same, hence, merely for the reason that no specific findings have been given in the assessment order, the same cannot be said have been passed without application of mind. In this view of the matter, we cancel the order under section 263 passed by the ld. CIT. In the result, appeal filed by the assessee stands allowed.
Issues Involved:
1. Validity of the action taken by the CIT under section 263 of the Income-tax Act, 1961. 2. Determination of the indexed cost of acquisition for computing long-term capital gains. Issue-wise Detailed Analysis: 1. Validity of the action taken by the CIT under section 263 of the Income-tax Act, 1961: The primary issue for adjudication was whether the CIT's action under section 263, which set aside the assessment order passed under section 143(3), was valid. The assessee contended that the CIT lacked jurisdiction because the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The CIT had noted discrepancies in the indexed cost of acquisition used by the assessee and issued a show-cause notice. The assessee argued that it had acquired the right to the property in 1993 through an unregistered agreement, thus making the indexed cost of acquisition calculation from that year appropriate. The CIT, however, maintained that the property was only held by the assessee after registration in 1998 and that the assessment order was erroneous. The Tribunal held that the necessary details were provided to the Assessing Officer (AO) during the original assessment, and the AO had considered these details. Therefore, merely because the AO did not provide specific findings in the assessment order, it could not be deemed to have been passed without application of mind. Consequently, the Tribunal canceled the CIT's order under section 263, thereby validating the original assessment order. 2. Determination of the indexed cost of acquisition for computing long-term capital gains: The assessee had declared a long-term capital gain by considering the indexed cost of acquisition from the year 1993, the year of the agreement to purchase the property. The CIT argued that the indexed cost should be calculated from 1998, the year of registration. The Tribunal examined the provisions of section 2(14) and section 48 of the Income-tax Act, which define 'capital asset' and the method of computing the indexed cost of acquisition, respectively. It was determined that the assessee held the asset from 1993, as the rights in the property were acquired through the agreement. The Tribunal noted that the term 'asset' used in Explanation (iii) to section 48 refers to the cost of acquisition and not the actual payments made. The Tribunal found that the issue of indexation was directly covered in favor of the assessee by the decision in the case of Charanbir Singh Jolly v. 8th ITO, which held that the assessee was entitled to indexation from the date of the agreement. Therefore, the Tribunal concluded that the AO's method of indexation was correct in law and that the assessment order was neither erroneous nor prejudicial to the revenue's interests. Conclusion: The Tribunal allowed the appeals filed by the assessee, canceling the orders passed by the CIT under section 263 for all the assessment years in question. The indexed cost of acquisition was to be computed from the year 1993, the year of the agreement to purchase the property. The Tribunal's decision emphasized the correct interpretation of the term 'asset' and upheld the AO's original assessment method.
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