2012 (4) TMI 768 - AT - Income Tax

Summary

Issues involved: Appeal against order u/s 263 for AY 2006-07.

Ground 1 - Limitation Issue:
The appeal challenged the revision order u/s 263 as being time-barred. The CIT passed the order on 10.02.2011, within the 2-year limit from the end of the financial year 2008-09 when the original assessment order was passed. Thus, the contention of the assessee that the order was beyond the time limit was dismissed.

Ground 2 - Erroneous Assessment:
Assessee contended that the assessment order was not erroneous or prejudicial to revenue. However, as the Assessing Officer did not discuss the lease transaction in the assessment order, and no information was furnished during assessment, the CIT rightly invoked section 263. Hence, this ground was dismissed.

Grounds 3 and 4 - Lease Transaction Treatment:
The dispute arose from CIT directing to treat a lease transaction as a sale and compute capital gains. The lease agreement was initially for 99 years but later amended to 11 years. The CIT held it as a transfer of capital assets attracting capital gains. However, the Tribunal found that the lease was a simple agreement for a limited period with no transfer of rights, hence not constituting a "transfer" under section 2(47) of the Act. Rulings cited by the CIT were distinguished, and the Tribunal set aside the CIT's order.

In conclusion, the Tribunal partly allowed the appeal, holding that the lease transaction did not amount to a sale, and the order passed u/s 263 was set aside.