2015 (2) TMI 1113 - AT - Income Tax

Revision 263 - Held that - On the basis of the explanation offered in respect of each and every issue, it was contended on behalf of the assessee before the Ld. CIT that it was not the case of assessments having been completed by the A.O. without making proper and adequate enquiries as required in the facts and circumstances of the case. A perusal of the operative portion of the Ld. CIT s impugned order however shows that he has neither considered this explanation of the assessee nor made any comment/ observation thereon pointing out specifically that it was still a case of failure on the part of the A.O. to make proper and adequate enquiries before completing the assessments as were required in the facts and circumstances of the case. He has not pointed out specifically even a single enquiry which A.O. ought to have made in the facts and circumstances of the case but has failed to do. We, therefore, fully agree with the stand of the assessee that the impugned order has been passed by the Ld. CIT under section 263 without considering the explanation offered by the assessee and without applying his mind. In our opinion, this failure of the Ld. CIT, however, does not constitute any legal infirmity to make the order passed by him under section 263 invalid or void abinitio as sought to be made out by the assessee in the ground raised in these appeals. We are of the view that it would be just and proper in the facts and circumstances of the case, to set aside the impugned order of the Ld. CIT passed under section 263 and remit the matter back to him with a direction to pass fresh order under section 263 after duly taking into consideration the explanation offered by the assessee and after applying his mind. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Validity of the Development Agreement registration and its impact on Section 50C compliance.
2. Correctness of the capital gains computation for A.Y. 2005-06 and A.Y. 2006-07.
3. Appropriateness of the exemption claimed under Section 54F for A.Y. 2006-07.
4. Legitimacy of the revision under Section 263 by the CIT.

Issue-wise Detailed Analysis:

1. Validity of the Development Agreement registration and its impact on Section 50C compliance:
The Ld. CIT raised concerns regarding the registration of the Development Agreement cum GPA dated 01-06-2004, which was crucial for assessing compliance with Section 50C of the IT Act. The assessee contended that the endorsement of registration was indeed present and had been considered by the A.O. during the original assessment. The Ld. CIT, however, found that the A.O. did not examine this aspect properly, leading to an erroneous assessment.

2. Correctness of the capital gains computation for A.Y. 2005-06 and A.Y. 2006-07:
For A.Y. 2005-06, the Ld. CIT noted that the capital gains arising from the Development Agreement were not correctly assessed by the A.O., as the transfer occurred in the relevant financial year. The assessee argued that all facts were considered by the A.O., and valid explanations were provided.

For A.Y. 2006-07, the Ld. CIT pointed out discrepancies in the computation of capital gains, particularly the valuation of the undivided share of land and the compliance with Section 50C. The assessee explained that the cost assigned to the undivided share of land was a balancing figure and not the actual cost. The Ld. CIT found that the A.O. failed to verify these details adequately.

3. Appropriateness of the exemption claimed under Section 54F for A.Y. 2006-07:
The Ld. CIT observed that the assessee claimed exemption under Section 54F for multiple flats, whereas the exemption is generally allowed for one residential house. The assessee cited a Karnataka High Court ruling, stating that all flats acquired in one building under a development agreement should be considered as one residential house for Section 54F purposes. The Ld. CIT concluded that the A.O. did not verify this claim properly.

4. Legitimacy of the revision under Section 263 by the CIT:
The Ld. CIT invoked Section 263, arguing that the A.O.'s failure to make necessary inquiries rendered the assessment orders erroneous and prejudicial to the interests of the Revenue. The assessee challenged this, stating that the Ld. CIT did not consider their explanations and failed to apply his mind. The Tribunal agreed that the Ld. CIT did not duly consider the assessee's explanations but held that this did not invalidate the revision under Section 263. Instead, the Tribunal remitted the matter back to the Ld. CIT for a fresh order, directing him to consider the assessee's explanations and pass a well-reasoned order after providing an opportunity for a hearing.

Conclusion:
The Tribunal set aside the impugned orders of the Ld. CIT under Section 263 and remitted the matter back to him for fresh consideration, emphasizing the need for a well-reasoned order that duly considers the assessee's explanations. The appeals were treated as allowed for statistical purposes.