2018 (2) TMI 1984 - AT - Income Tax

Revision u/s 263 - Capital gain computation - HELD THAT - While passing the assessment order AO recalculated the capital, against the capital gain computed by assessee in its working furnished before the AO, arisen from the development right sold by assessee - assessee filed appeal before the CIT(A). Thus, certainly the recalculation of LTCG was made by AO after raising sufficient queries during the assessment proceeding. AO made the addition of more than ₹ 90 Lakhs in the assessment order. The assessee filed appeal before the ld. CIT(A). When the order was revised the appeal on the same issue was pending before ld CIT(A). CIT issued show-cause notice for revision of assessment order passed under section 143(3) during the pendency of the appeal. The show cause notice was issued in respect of the same issue pending before the ld. CIT(A). Clause-(c) of Explanation 1 attached with section 263 prescribe that where any order passed by AO is subject matter of appeal, PCIT or CIT is precluded to consider those issues , though he may consider the other issues which may not been considered or appealed in such appeal When the subject matter of disallowance was pending adjudication before the ld. CIT(A). The ld. CIT ought not to have revised the order for passing assessment order afresh. Our view is also supported by the provision contained under section 251 of the Act, wherein the appellate Commissioner has a power to confirm, reduce, enhance or annul the assessment order. Even on other alternative argument, we may note that the Hon ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME COURT held that where two view was possible and the AO has taken one view. The order of ld. CIT revising order in such circumstances cannot be treated as order erroneous or prejudicial to the interest of Revenue. - Decided in favour of assessee.

Summary

Issues:
1. Breach of principles of natural justice in framing the revision order under section 263 of the Income Tax Act.
2. Legality of revising the assessment order under section 263 of the Act.
3. Determination of fair market value for computing capital gain tax liability.

Issue 1: Breach of Principles of Natural Justice:
The appeal by the assessee challenged the revision order under section 263 of the Income Tax Act, asserting a breach of natural justice principles. The appellant argued that proper, sufficient, and effective opportunity of being heard was not provided before framing the order. The contention was that the order was bad and illegal due to this breach.

Issue 2: Legality of Revision Order:
The Assessing Officer (AO) had initially computed the Long Term Capital Gain (LTCG) in the assessment order. However, the order was revised by the ld. CIT-19, directing further inquiry on the Fair Market Value of assets received or to be received. The appellant argued that the AO's order was not erroneous or prejudicial to the revenue's interest. Legal precedents were cited to support the argument that revision should not be invoked for every type of mistake.

Issue 3: Determination of Fair Market Value:
The dispute also involved the determination of fair market value for computing capital gain tax liability. The ld. CIT held that the fair market value of flats received should be considered as 'consideration,' not the cost of construction. The appellant contended that no such substitution was warranted based on the facts and circumstances of the case and in law.

The appellant disclosed all information during the assessment proceedings, and the AO had conducted a full-fledged inquiry before passing the assessment order. The AO's decision was based on one of the possible views during the assessment, and it was argued that adopting an alternative method that could yield more revenue does not render the order erroneous. The appellant cited various legal decisions to support this argument.

Moreover, the ld. CIT was precluded from revising the assessment order while the issue was pending before the ld. CIT(A). The Tribunal found that the ld. CIT should not have revised the order when the subject matter was under adjudication. The Tribunal also referenced legal provisions to support this conclusion.

Additionally, the Tribunal noted that where two views were possible, and the AO had taken one view, the revision order by the ld. CIT could not be considered erroneous or prejudicial to the revenue's interest. Consequently, the appeal of the assessee was accepted, and the impugned order passed by ld. CIT under section 263 was set aside.

In another aspect, the Tribunal addressed the delay in filing the appeal and condoned it after considering the explanations provided by the appellant. The Tribunal emphasized the importance of substantial justice and decided to allow the appeal on merit after restoring it to the file of ld. CIT(A) for a fresh decision. The ld. CIT(A) was directed to grant a reasonable opportunity before passing the order on merit.

In conclusion, the Tribunal allowed the appeal of the assessee for both the issues discussed, emphasizing procedural fairness, legal principles, and the need for a thorough inquiry in tax assessment matters.