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2011 (5) TMI 221 - AT - Income TaxRevision u/s 263 - Time limitation - Income escaping assessment - STCG or LTCG - In any case if the appeal before the CIT(A) reopening is held to be without jurisdiction the impugned order under section 263 revising such order itself becomes infructuous and non est - it is crystal clear that the assessee has claimed excess cost of construction which has eventually resulted into under assessment of income of Rs. 2,73,551 - Mere filing of bills of the contractor did not amount to such disclosure by virtue of the aforesaid Explanation 1 to section 147 - The gist of the reasons for issuing this show cause notice was that sale consideration attributable to upper ground floor would give rise to only short-term capital gains which has been assessed by the Assessing Officer in his order under section 147 read with section 143(3) dated 14-2-2005 as long term capital gains - If the subject matter of revision under section 263 was not considered in the reassessment order or was not the subject matter of reassessment then limitation available to the ld. CIT for taking action under section 263 cannot be counted from that order of re-assessment but it will go back to original assessment where the subject matter was not at all considered whether assessment as short-term capital gains or long term capital gains - it is clear that construction of the building was made during financial year 1996-97 and sale was also made during that financial year - These facts are steering at the face of the Assessing Officer and if they escape his notice or he ignores them then certainly the order of Assessing Officer becomes erroneous and prejudicial to the interest of revenue - it is settled law if a duty cast on the Assessing Officer either to enquire or to assess a particular item of income, and if he fails to carry out his duty then his order would be erroneous and prejudicial to the interest of revenue - Decided against the assessee
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Conditions for invoking Section 263. 3. Revision of reassessment order under Section 147. 4. Apportionment of sales consideration between land and building. 5. Levy of interest under Section 234A/B. 6. Consideration of facts and submissions by the CIT. 7. Limitation for passing order under Section 263. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The assessee contended that the CIT erred in assuming jurisdiction under Section 263, arguing that the assessment order was neither erroneous nor prejudicial to the interests of the revenue. The Tribunal upheld the CIT's jurisdiction, noting that the order of the Assessing Officer (AO) was indeed erroneous and prejudicial to the revenue because the AO failed to properly assess the nature of capital gains. 2. Conditions for invoking Section 263: The assessee argued that both conditions for invoking Section 263-error in the assessment order and prejudice to the revenue-were not met. The Tribunal found that the AO's assessment was erroneous as it incorrectly treated the entire capital gain as long-term without proper scrutiny, thus fulfilling both conditions for Section 263. 3. Revision of reassessment order under Section 147: The assessee claimed that the reassessment order under Section 147 was already under appeal, making the CIT's revision erroneous. The Tribunal held that the CIT's revision was valid as the AO's reassessment failed to correctly categorize the capital gains, which was prejudicial to the revenue. 4. Apportionment of sales consideration between land and building: The CIT bifurcated the sales consideration between land and building, treating a portion as short-term capital gain. The Tribunal supported this bifurcation, stating that the CIT correctly identified that the sale of the newly constructed building should be treated as short-term capital gain, while the sale of land should be treated as long-term capital gain. 5. Levy of interest under Section 234A/B: The assessee contended that the levy of interest under Section 234A/B was unlawful. The Tribunal did not find merit in this argument, upholding the CIT's decision to levy interest as per the provisions of the Income Tax Act. 6. Consideration of facts and submissions by the CIT: The assessee argued that the CIT did not properly consider the facts and submissions. The Tribunal found that the CIT had adequately considered all relevant facts and submissions before passing the order under Section 263. 7. Limitation for passing order under Section 263: The assessee raised an additional ground that the CIT's order under Section 263 was barred by limitation, as it revised the original order passed under Section 143(3) and not the reopened order under Section 147. The Tribunal rejected this argument, stating that the reassessment order under Section 147 was the relevant order for the purpose of limitation, and the CIT's revision was within the permissible time frame. Conclusion: The Tribunal upheld the CIT's order under Section 263, dismissing the appeal filed by the assessee. The Tribunal found that the AO's assessment was erroneous and prejudicial to the interests of the revenue, justifying the CIT's revision. The Tribunal also confirmed the bifurcation of sales consideration between land and building, the levy of interest under Section 234A/B, and the consideration of facts and submissions by the CIT. The additional ground regarding the limitation was also dismissed.
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