2022 (11) TMI 1448 - HC - Income Tax

Revision u/s 263 set aside by ITAT - computation of capital gain - findings recorded by the PCIT that no enquiry was conducted by AO - Tribunal deciding the appeal against the Revenue by holding that the Assessment Order is neither erroneous nor prejudicial to the interest of the Revenue HELD THAT - After considering the submission made by the assessee to all the notices issued by the AO the computation of capital gain as done by the assessee was accepted by the AO That apart the assessee has also reckoned the findings recorded by the PCIT alleging that the computation of capital gain is prejudicial to the interest of revenue. Assessee has submitted all details in a tabulated form and has demonstrated that if the view taken by the PCIT is to be accepted it would result prejudice to the interest of revenue. Unfortunately, the PCIT though extracted the elaborate submissions made by the assessee to the show-cause notice issued u/s263 of the Act, has not dealt with any of the contentions raised but merely concluded that the assessing officer has not made due enquiry. This aspect of the matter is factually incorrect, as the PCIT has committed a serious error in assuming jurisdiction under Section 263 of the Act. Tribunal has re-appreciated the facts and circumstances and has held that the assessing officer did conduct enquiry, which in our opinion was an elaborate enquiry conducted by the assessing officer. Tribunal had also considered the calculation of capital gain in the manner observed by the PCIT and has recorded a categorical factual finding that if the said method is adopted it will be prejudicial to the interest of revenue. Tribunal rightly granted relief to the assessee - Decided against revenue.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal erred in deciding against the Revenue in holding the Assessment Order as not erroneous or prejudicial to Revenue's interest?
2. Whether the Principal Commissioner of Income Tax was justified in invoking power under Section 263 of the Income Tax Act, 1961?

Analysis:
1. The appeal was filed by the revenue challenging the order of the Income Tax Appellate Tribunal (ITA) for the assessment year 2017-2018. The main issue was whether the ITA erred in deciding against the Revenue by holding that the Assessment Order was not erroneous or prejudicial to the Revenue's interest. The Principal Commissioner of Income Tax, Kolkata I (PCIT) invoked power under Section 263 of the Act, alleging that the Assessing Officer passed the assessment order without proper enquiry and verifications. However, the Tribunal found that the Assessing Officer did conduct an elaborate enquiry, including raising queries and receiving detailed submissions from the assessee regarding the computation of capital gain. The Tribunal concluded that the PCIT's assumption of jurisdiction under Section 263 was factually incorrect, and the assessment order was not erroneous. The Tribunal also determined that adopting the method proposed by the PCIT would be prejudicial to the interest of revenue. Therefore, the Tribunal rightly granted relief to the assessee, and no substantial question of law arose for consideration in the appeal.

2. The second issue revolved around whether the PCIT was justified in invoking power under Section 263 of the Income Tax Act. The PCIT alleged that the Assessing Officer did not conduct a proper enquiry, leading to an erroneous assessment order. However, upon detailed examination, it was found that the Assessing Officer had indeed conducted a thorough enquiry, raising queries and seeking explanations from the assessee regarding the capital gain computation. The Tribunal concluded that the PCIT's assertion of lack of enquiry was factually incorrect, and the assessment order was not erroneous. The Tribunal further determined that accepting the PCIT's method would be prejudicial to the revenue's interest. Consequently, the Tribunal dismissed the appeal, affirming that the PCIT's assumption of jurisdiction under Section 263 was incorrect, and the assessment order was not erroneous or prejudicial to the Revenue's interest.

In conclusion, the High Court upheld the ITA's decision, emphasizing that the PCIT's assumption of jurisdiction under Section 263 was unfounded, as the Assessing Officer had conducted a detailed enquiry. The Court found no substantial question of law in the appeal and dismissed it, affirming the relief granted to the assessee by the ITA.