2012 (8) TMI 389 - AT - Income Tax

Validity of revisionary order passed u/s 263 on the issue of LTCG held to be STCG by CIT and excess allowance of deduction u/s 80C - assessee purchased three flats vide agreement dated 14.03.2001 rectified vide deed dated 09-10-2002 as the flats numbers were wrongly mentioned in the original agreement - Revenue submitted that through the rectification, the assessee had actually taken different flats, thus holding period was within the three years period - Held that - It is observed that during the regular assessment proceedings the AO had already made the enquiry, as he thought fit. In these circumstances, it can never be held that there was a lack of enquiry by the authority under the Act. It can also not be held that the enquiry was inadequate because complete details were provided to the AO, therefore, we have to hold that this was a clear case of change of opinion, that too, on a proposal sent by the AO, meaning whereby it was not the case of suo moto action of the CIT, which means, that the CIT himself did not apply his mind. Hence, action to invoke revision proceedings u/s 263 is bad in law and cannot be sustained. Second part of revision proceedings with regard to excess allowance of deduction u/s 80C - rectification proceedings already initiated by AO - Held that - Since, this was an erroneous view taken by the AO, which, in any case is unsustainable in law. We, therefore, uphold the revision proceedings initiated by the CIT on the issue of excess allowance of deduction u/s 80C - Decided partly in favor of assessee.

Summary

Issues involved:
1. Correctness of order passed under section 263 by CIT 11, Mumbai.
2. Determination of capital gains and deduction under section 80C.

Issue 1: Correctness of order passed under section 263 by CIT 11, Mumbai
The appeal was filed by the assessee against the order passed under section 263 by CIT 11, Mumbai, which set aside the order of the AO passed under section 143(3). The CIT held that the sale of flats by the assessee, treated as LTCG by the AO, was actually short term capital gains. The AR argued that the AO had examined all facts, and the CIT could not take a different view on the same facts. The AR relied on various decisions to support the argument that the assessment order was not erroneous. The ITAT found that the AO had already considered all details during the assessment proceedings, leading to a change of opinion. Citing relevant case laws, the ITAT held that the action under section 263 was not sustainable as it was a clear case of change of opinion. Therefore, the ITAT canceled the proceedings under section 263 on the issue of LTCG, upholding the AO's order on capital gains.

Issue 2: Determination of capital gains and deduction under section 80C
Regarding the excess allowance of deduction under section 80C, the AR informed the CIT that the AO had initiated rectification proceedings, and the assessee had no objection to rectify the order. The ITAT disagreed with the AR's argument, stating that the AO's view on the excess deduction under section 80C was erroneous and unsustainable in law. Therefore, the ITAT upheld the revision proceedings initiated by the CIT on the issue of excess allowance of deduction under section 80C. As a result, the appeal filed by the assessee was partly allowed, with ground no. 1 being dismissed as not pressed.

In conclusion, the ITAT found the proceedings under section 263 on LTCG to be unwarranted and canceled them, while upholding the revision proceedings on the excess allowance of deduction under section 80C. The judgment provided a detailed analysis of the facts, legal arguments, and relevant case laws to arrive at its decision on each issue involved.