2019 (3) TMI 1730 - AT - Income Tax

Revision u/s 263 - Capital gain on sale of land - HELD THAT - Non application of mind could have been considered as a valid ground for revision, if the assessee had returned any income other than the capital gains arising on the sale of land. Assessee having only one head of income, we cannot say that ld. Assessing Officer was oblivious of the computation of such income in a scrutiny assessment. It is specifically stated by the ld. Assessing Officer that he had examined the details filed by the assessee while completing the assessment accepting returned income. Thus though assessment order is cryptic, we cannot say that the AO had not applied his mind while accepting the income returned by the assessee. Assessee had also pointed out before ld. PCIT that the Audit Objection by itself could not be a reason to come to a concussion that order of the ld. Assessing Officer was erroneous and prejudicial to the interest of the Revenue. It is also not disputed that erstwhile share holders of M/s. ECCI Koya Ltd as it was known earlier had paid capital gains on the consideration received by them from sale of shares, after reckoning the revised value of the land in the hands of the assessee company. In such a situation, we cannot say that acceptance of the returned income by AO was based on an erroneous view of law. By virtue of the judgment of Hon ble Apex Court in the case of Max India Ltd, 2007 (11) TMI 12 - SUPREME COURT where two views are possible and the ld. Assessing Officer had taken one of such views, to which CIT did not agree, would not be a reason for treating the order of the Assessing Officer as one erroneous and prejudicial to the interest of the Revenue. We cannot say that the view taken by the ld. Assessing Officer in the case before us was unsustainable in law. The order of the ld. PCIT is set aside. - Decided in favour of assessee

Summary

Issues:
1. Revision of indexed cost of acquisition for computation of long term capital gains.
2. Application of mind by the Assessing Officer during original assessment proceedings.

Issue 1: Revision of indexed cost of acquisition for computation of long term capital gains:
The appellant, a builder, challenged an order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961, regarding the computation of long term capital gains. The Principal Commissioner contended that the indexed cost of acquisition should have been based on the original cost of the land, not the revalued amount. The appellant argued that the Assessing Officer had examined the issue during scrutiny assessment and that the power of revision cannot substitute the Assessing Officer's view. The appellant also highlighted that the issue had been raised by the Audit Department previously, and the matter had been thoroughly examined. The appellant emphasized that the revaluation of the land was not notional but based on actual outflow of money for development. The appellant further argued against imposing additional burden on capital gains that had already been taxed in the hands of the sellers of shares. The Tribunal found that the Assessing Officer had applied his mind to the issue, and the view taken was sustainable in law. The order of the Principal Commissioner was set aside, and the appeal of the assessee was allowed.

Issue 2: Application of mind by the Assessing Officer during original assessment proceedings:
The Tribunal analyzed whether the Assessing Officer had properly applied his mind during the original assessment proceedings. It was noted that the Assessing Officer had accepted the returned income of the assessee, which solely consisted of capital gains from the sale of land. The Tribunal observed that since the only income source was capital gains, the Assessing Officer had considered the computation of such income during scrutiny assessment. Despite the cryptic nature of the assessment order, it was concluded that the Assessing Officer had indeed applied his mind to the issue at hand. The Tribunal also highlighted that the Audit Objection alone could not render the Assessing Officer's order as erroneous. Moreover, it was acknowledged that the previous shareholders had paid capital gains tax based on the revised land value. Considering these factors, the Tribunal found that the Assessing Officer's view was not unsustainable in law, and the order of the Principal Commissioner was set aside.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the Principal Commissioner's order under section 263 of the Income Tax Act, 1961. The judgment emphasized the importance of proper application of mind by the Assessing Officer and upheld the sustainability of the view taken in the original assessment proceedings regarding the computation of long term capital gains.