2022 (2) TMI 1238 - AT - Income Tax

Revision u/s 263 - validity of addition in 153A order in respect of capital gains - Whether there were no incriminating seized materials suggesting that the capital gains has been wrongly computed? - HELD THAT - AO himself could not have added any amount invoking section 50C of the Act and the assessing officer could not have disturbed the carry forward of capital loss while framing assessment u/s. 153A of the Act, as no material whatsoever was found in the course of search warranting an enquiry into these aspects in an assessment u/s.143(3) read with sEc.153A of the Act. Hence, the order u/s. 153A in not doing so cannot be said to be erroneous and prejudicial to the interests of the revenue. In the assessment order made u/s. 153A of the Act dated 30.11.2016 for AY 2011- 12, no reference is made to any seized materials and the income assessed in original assessment order dated 28.06.2013 was reiterated. Hence, AO could not have made any addition in 153A order for the assessment year 2011-12 in respect of capital gains as there were no incriminating seized materials suggesting that the capital gains has been wrongly computed. Hence, provisions of section 263 of the Act cannot be invoked to revise of order u/s 153A of the Act. On this short point we allow the appeal of the assessee and quash the impugned order u/s.263 - Assessee appeal allowed.

Summary

Issues:
1. Whether the order passed under section 263 of the Income Tax Act, 1961 was erroneous and prejudicial to the interest of the revenue.
2. Whether the capital gain on the sale of the property should be computed by applying the provisions of Sec.50C of the Act.
3. Whether the property in question was agricultural land and hence not a capital asset.
4. Whether the Assessing Officer could have disturbed the carry forward of capital loss while framing assessment under section 153A of the Act.

Analysis:

Issue 1:
The Appellate Tribunal considered an appeal by the assessee against an order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961. The Principal Commissioner contended that the original assessment order was erroneous as the Assessing Officer did not apply the provisions of Sec.50C to determine capital gain on the sale of a property. The Tribunal noted that the original assessment order did not reference any seized materials, and as such, no addition could be made under section 153A of the Act without incriminating material. The Tribunal concluded that the order under section 153A was not erroneous, and hence, the revision under section 263 was not valid.

Issue 2:
The Principal Commissioner argued that if the property was a capital asset, capital gain on its sale should be computed using Sec.50C of the Act. The Tribunal observed that the Assessing Officer could not have added any amount under Sec.50C without any material found during the search. As no incriminating material was discovered, the Tribunal held that the original assessment order under section 153A was not erroneous regarding the computation of capital gains.

Issue 3:
The question arose whether the property in question was agricultural land and therefore not a capital asset. The Tribunal noted that the Assessing Officer had made inquiries regarding the capital loss and was satisfied with the declaration made by the assessee. The Principal Commissioner held that if the property was a capital asset, capital gain should be computed using Sec.50C. However, the Tribunal found that the original assessment order was not erroneous on this ground.

Issue 4:
The Tribunal addressed whether the Assessing Officer could disturb the carry forward of capital loss while framing the assessment under section 153A of the Act. It was established that no material was found during the search to warrant an inquiry into these aspects during the assessment under section 153A. Therefore, the Tribunal concluded that the order under section 153A was not erroneous, and the revision under section 263 was not justified.

In conclusion, the Tribunal allowed the appeal of the assessee, quashing the impugned order under section 263 of the Act, based on the reasoning that the original assessment order under section 153A was not erroneous and did not warrant revision.