2016 (7) TMI 196 - HC - Income Tax

Revision u/s 263 - default in claim of deduction under section 54F - CIT(A) was of opinion that the sale of land would not give rise to a long term capital gain, but a business income - Tribunal upholding the order passed by the CIT under section 263 on merits and still storing the issue of allowability of deduction to the file of Assessing Officer - Held that - Though in the order of assessment, the Assessing Officer has not discussed the claim of the assessee of long term capital gain and deduction under section 54F of the Act out of such capital gain, he had raised multiple queries about said aspects. In the order sheet, the Assessment Officer had called upon the assessee to furnish various details including the details of fixed assets and details of sale of land . Thus, details the assessee had provided under a communication made in October, 2012 in which he had provided details of fixed assets and details of sale of land. Though final order of assessment was silent on this aspect, the Assessing Officer had carried out inquiries about the nature of sale of land and about the validity of the assessee's claim of deduction under section 54F of the Act. Learned counsel for the Revenue however submitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise to a long term capital gain. Looking to the tenor of queries by the Assessing Office and details supplied by the assessee, we are unable to accept such a condition. In that view of the matter, the observation of the Tribunal that the Assessing Officer having made inquiries and when two views are possible, revisional powers could not be exercised, called for no interference. Since with respect to computation and assertions of other aspects of deduction under section 54F of the Act, the Tribunal has remanded the proceedings, nothing stated in this order would affect either side in considerations of such claim. - No substantial question of law

Summary

Issues:
1. Whether the Tribunal is right in upholding the order passed by the CIT under section 263 and storing the issue of deduction under section 54 to the file of Assessing Officer?
2. Whether the Tribunal is right in not accepting the long term capital gain as "business income" based on the past history of the assessee?

Issue 1:
The case involved an appeal arising from a judgment of the Income Tax Appellate Tribunal where the department challenged the decision of the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act, 1961. The primary issue was whether the Tribunal was correct in upholding the CIT's order under section 263 while also storing the issue of the allowability of deduction under section 54 of the Act to the Assessing Officer's file. The CIT revised the assessment order, contending that the sale of land should be considered as business income rather than long term capital gain. The Tribunal allowed the assessee's appeal, stating that two views were possible, and the Commissioner could not have exercised revisional powers. The High Court observed that the Assessing Officer had made inquiries regarding the |nature of the sale of land and the claim of deduction under section 54F, indicating that the revisional powers were not justified. As a result, the Tribunal's decision was upheld, and the Tax Appeals were dismissed.

Issue 2:
The second issue in the case was whether the Tribunal was correct in not accepting the long term capital gain as "business income" based on the past history of the assessee. The Commissioner of Income Tax had revised the assessment order, arguing that the income from the sale of land should be treated as business income due to the assessee's intent to develop and sell the property for profit. The High Court noted that the Tribunal found two possible views on the matter, leading to the conclusion that the revisional powers could not be exercised. The Court further emphasized that the Assessing Officer had raised queries and obtained details regarding the nature of the sale of land and the deduction under section 54F. The Court agreed with the Tribunal's decision, stating that the Assessing Officer's inquiries were relevant to the issue of whether the sale of land resulted in long term capital gain. Consequently, the Tribunal's judgment was upheld, and the Tax Appeals were dismissed.

In conclusion, the High Court upheld the Tribunal's decision in both issues, emphasizing the relevance of the Assessing Officer's inquiries and the possibility of multiple views in determining the nature of income from the sale of land and the allowability of deduction under section 54F of the Income Tax Act.