2014 (4) TMI 391 - AT - Income Tax

Validity of order u/s 263 of the Act - Direction of the CIT in determination of assessee s share in property and capital gain Held that - The case on which the reliance was placed has been dismissed thus, the basis on which the CIT has held the assessment order to be erroneous and prejudicial to the interests of Revenue has become redundant - it is a fact on record that the issue with regard to sharing of the property between the co-owners is still pending before the Civil Court - the CIT cannot determine the share of the assessee in the disputed property when the matter is still pending for decision in Civil Court which alone is competent to decide the right, title and interest of the parties in respect of the property in question thus, the CIT cannot direct the AO to determine assessee s share in property as well as in capital gain as 1/3rd thus, the order of the CIT is modified Decided partly in favour of Assessee. Adoption of cost of acquisition Held that - The assessee during the revision proceeding before the CIT had produced certified copies of the sale deeds in case of two comparable instances of sale of land in the same survey number at Rs.6/- per sq. yard - the CIT has refused to take cognizance of them on a flimsy ground that the assessee has failed to produce the original sale deeds the reasoning of the CIT is not at all acceptable - When the assessee is producing certified copies of the sale deeds, the CIT is bound to accept them and cannot insist upon the assessee to produce the original sale deeds which is an impossible act to do - the CIT cannot determine the cost of acquisition solely relying upon the SRO rate Decided in favour of Assessee. Payment of brokerage Held that - CIT was not justified in holding the assessment order to be erroneous and prejudicial to the interests of Revenue the AO has not only applied his mind but has also made necessary enquiry while bringing the capital gains to tax - The CIT(A) has dealt in detail with the various issues relating to capital gain in course of disposal of the appeal preferred by the assessee and has ultimately passed an exhaustive order wherein he has considered all the aspects relating not only to the computation of capital gain but also with regard to the various expenses claimed by the assessee including brokerage - the assessment order on the issue of capital gain having merged with the order passed by the CIT(A) and ITAT, will not be amenable to revisionary proceeding under section 263 of the Act in view of the specific bar contained under section 263(1) Explanation (c) thus, the order passed by the CIT under section 263 of the Act is set aside Decided in favour of Assessee.

Summary

Issues Involved:
1. Determination of the assessee's share in the property and consequential capital gains.
2. Adoption of the cost of acquisition as on 01.04.1981.
3. Allowance of brokerage claimed without supporting evidence.

Detailed Analysis:

1. Determination of the Assessee's Share in the Property and Consequential Capital Gains:
The CIT held that the assessment order was erroneous and prejudicial to the interests of Revenue because the Assessing Officer (AO) had determined the assessee's share in the property at 1/6th based on a preliminary decree by the 1st Additional District Judge, Ranga Reddy District, which was stayed by the High Court of Andhra Pradesh. The CIT directed the AO to compute the capital gains based on a 1/3rd share. However, the Tribunal found that the preliminary decree had been confirmed by the High Court, making the CIT's basis for revision redundant. The Tribunal noted that the issue of property sharing was still pending before the Civil Court, and the CIT could not determine the share of the assessee when the matter was sub judice. Therefore, the Tribunal concluded that the CIT's direction to compute the capital gains based on a 1/3rd share could not be sustained. However, any changes resulting from the final decree by the Civil Court should be taken into account by the AO.

2. Adoption of the Cost of Acquisition as on 01.04.1981:
The CIT found that the AO had erroneously adopted the cost of acquisition at Rs.2/- per sq. yard instead of Rs.2/- per acre. The assessee had produced certified copies of sale deeds indicating a higher value of Rs.6/- per sq. yard for comparable land, but the CIT rejected them for lack of original documents. The Tribunal held that the CIT's insistence on original documents was unreasonable and that certified copies should be accepted. Moreover, the Tribunal emphasized that SRO rates do not necessarily reflect fair market value, and the AO's adoption of Rs.2/- per sq. yard was not erroneous.

3. Allowance of Brokerage Claimed Without Supporting Evidence:
The CIT held that the AO had wrongly allowed the brokerage claim without supporting evidence. The assessee had provided confirmation letters and sworn statements supporting the brokerage payment. The Tribunal found that the AO had made necessary inquiries and applied his mind to the evidence before allowing the brokerage claim. The Tribunal noted that the CIT(A) and the ITAT had already dealt with the brokerage issue in detail, and the assessment order had merged with the appellate orders. Therefore, the CIT could not revise the assessment order under section 263 for this issue.

Conclusion:
The Tribunal concluded that the CIT's exercise of jurisdiction under section 263 was not justified, except for the issue of the assessee's share in the property, which depended on the final decree by the Civil Court. The Tribunal set aside the CIT's order under section 263 for all other issues, thereby allowing the assessee's appeals. The Tribunal also noted that the assessment order had merged with the appellate orders of the CIT(A) and ITAT, barring the CIT from revising the assessment under section 263.