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2014 (2) TMI 646 - AT - Income TaxPower of Revision in u/s 263 of the Act Declaration of LTCG Held that - The long term capital gains declared by the assessee in the computation of income included the sum which the assessee received under the Sale Deed - the AO was apprised of the monies received under the Sale Deed - There is nothing on record to suggest that the sum ought to be treated as income from business - the property was held by the assessee as a capital asset and any income from transfer of the said property would give rise to income under the head capital gains - when the sum received under the joint development agreement was treated as capital gain, there is no reason why the sum received over and above the sum received under the joint development agreement at the time of sale on the very same property should be treated as income from business - sale consideration received on sale of property cannot be bifurcated as partly giving rise to income from business and partly giving rise to income from capital gain - there is nothing on record to indicate the basis on which the CIT comes to the conclusion in the order u/s. 263 of the Act that the sum is to be assessed as income from business - The order of the AO was therefore was not erroneous. Jurisdiction u/s. 263 of the Act cannot be sustained on the basis that there was no enquiry made by the AO on the issue considered in the order u/s. 263 of the Act - in the course of assessment proceedings necessary details had been furnished by the assessee - the CIT is of the view that an enquiry made by the AO is inadequate Relying upon CIT v. Sunbeam Auto Ltd. 2009 (9) TMI 633 - Delhi High Court - jurisdiction u/s. 263 of the Act cannot be invoked for inadequate enquiry - the jurisdiction u/s 263 was not properly invoked thus, the order of the CIT u/s. 263 of the Act is quashed Decided in favour of Assessee.
Issues Involved:
Appeal against CIT's order u/s. 263 of the Income-tax Act, 1961 regarding the treatment of a sum of Rs.One crore received by the assessee under a Sale Deed dated 8.6.2005 as either business income or long term capital gain. Detailed Analysis: 1. Background and Facts: The appeal was filed by the assessee against the CIT's order under section 263 of the Income-tax Act, 1961. The assessee, a company, declared long term capital gain on the sale of a property in Bangalore for the A.Y. 2006-07. The CIT contended that the sum of Rs.One crore received by the assessee under the Sale Deed dated 8.6.2005 should be assessed as business income and not as long term capital gain. 2. Assessee's Arguments: The assessee argued that the sum of Rs.One crore was duly included in the computation of capital gain filed with the return of income. The assessee maintained that the property was a capital asset and any income from its transfer should be treated as long term capital gain. The assessee cited legal precedents to support the argument that the AO had applied his mind to the issue. 3. CIT's Decision and Order: The CIT held that the AO failed to make a finding on whether the sum of Rs.One crore should be assessed as business income or capital gain. Consequently, the CIT set aside the AO's order and directed a fresh assessment. The CIT believed that the AO's order was erroneous and prejudicial to revenue interests. 4. Tribunal's Decision: The Tribunal analyzed the submissions and evidence presented. It noted that the sum of Rs.One crore was disclosed to the AO before the assessment was completed. The Tribunal found no basis for treating the sum as business income, as the property was held as a capital asset. It concluded that the CIT's invocation of section 263 was not justified, as there was no lack of enquiry by the AO. The Tribunal quashed the CIT's order and allowed the appeal by the assessee. 5. Conclusion: The Tribunal's decision emphasized that the sum of Rs.One crore was appropriately considered in the capital gain computation, and there was no valid reason to categorize it as business income. The Tribunal ruled in favor of the assessee, highlighting that the CIT's exercise of jurisdiction under section 263 was unwarranted due to the adequacy of the enquiry conducted by the AO.
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