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2018 (7) TMI 1865 - AT - Income TaxRevision u/s 263 - proceedings u/s. 147 for the purpose of bringing into tax the capital gain on the information received from the Sub-Registrar about the sale deed - Held that - It cannot be held that AO did not carry out any enquiry or verification which should have been done. Since the proceedings itself were initiated u/s. 147 for the purpose of bringing into tax the capital gain on the information received from the Sub-Registrar about the sale deed, AO did enquire and accepted the contentions of assessee that the transaction was in-dispute and ultimately was settled in September, 2013 before the Lok Adalat. AO has accepted the explanation and did not consider it fit enough to bring capital gains to tax in AY. 2009-10. Thus, AO has taken a plausible view on the facts and circumstances of the case. Even though Ld.CIT has drawn certain inferences about the legal provisions, yet it can be seen that they are debatable in nature. For this, CIT had not brought any material on record either making further enquiries or by verifications to substantiate his inferences. It is observed that CIT has undertaken the revisional proceedings only to substitute his views of taxability in the impugned year over the view of the AO, who accepted that it is not taxable in the impugned assessment year. Thus, the CIT was not justified in law in holding that the impugned order is erroneous. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act. 2. Applicability of capital gains tax for the assessment year 2009-10. 3. Validity of the assessment order passed by the Assessing Officer (AO) under Section 143(3) read with Section 147 of the Income Tax Act. 4. Interpretation of Explanation 2 to Section 263 introduced by the Finance Act, 2015. Issue-wise Detailed Analysis: 1. Jurisdiction of the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act: The CIT invoked Section 263 to revise the AO's order, claiming it was erroneous and prejudicial to the interests of the Revenue. The CIT argued that the AO failed to bring the short-term capital gain to tax, which should have been assessed in the year under consideration. The CIT issued a show cause notice to the assessee, who contended that the AO had already examined and accepted the contentions regarding the disputed nature of the property transaction. The Tribunal held that the CIT cannot exercise jurisdiction under Section 263 if the AO has made proper enquiries and accepted the assessee's contentions. The Tribunal referred to the case of Spectra Shares & Scrips Pvt Ltd. Vs. CIT [354 ITR 35] (AP), where it was held that if a query was raised and answered to the satisfaction of the AO, it does not warrant interference by the CIT under Section 263. 2. Applicability of capital gains tax for the assessment year 2009-10: The AO had accepted the assessee's contention that no capital gains arose in the assessment year 2009-10 due to the disputed nature of the property transaction, which was settled only in September 2013 before the Lok Adalat. The CIT, however, opined that the capital gains should have been brought to tax in the year 2009-10 based on the provisions of Section 45(1), Section 2(47)(i), and Section 2(47)(v) of the Income Tax Act. The Tribunal held that the AO's decision not to tax the capital gains in the assessment year 2009-10 was a plausible view based on the facts and circumstances of the case. 3. Validity of the assessment order passed by the Assessing Officer (AO) under Section 143(3) read with Section 147 of the Income Tax Act: The AO had initiated proceedings under Section 147 on the basis of information received about the property transaction and conducted enquiries during the assessment proceedings. The AO accepted the assessee's explanation that the transaction was disputed and settled only in 2013, and thus did not bring any capital gains to tax in the year under consideration. The Tribunal held that the AO had made proper enquiries and verification, and the assessment order was not erroneous. The Tribunal referred to the case of Malabar Industrial Company Ltd. Vs. CIT [243 ITR 83] (SC), where it was held that an order cannot be treated as erroneous if the AO adopts one of the permissible views in law. 4. Interpretation of Explanation 2 to Section 263 introduced by the Finance Act, 2015: The CIT relied on Explanation 2 to Section 263, which states that an order is deemed to be erroneous if it is passed without making necessary enquiries or verification. The Tribunal held that the AO had made proper enquiries and verification, and thus the order was not erroneous under Explanation 2. The Tribunal referred to the case of Narayan Tatu Rane Vs. ITO [70 taxmann.com 227] (Mumbai-Trib), where it was held that Explanation 2 does not give unfettered powers to the Commissioner to revise every order without proper material to substantiate the inference. Conclusion: The Tribunal concluded that the AO's order was not erroneous and the CIT's exercise of jurisdiction under Section 263 was not justified. The Tribunal set aside the CIT's order and restored the AO's assessment order. The appeal of the assessee was allowed.
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