2016 (10) TMI 244 - AT - Income Tax

Revision u/s 263 - exemption u/s 54 - Held that - We find that the assessee purchased flat vide agreement dated 20.4.2004 after making payment of ₹ 16 lakhs being purchase consideration by means of two cheque drawn on HSBC Bank M G Road, Mumbai the details whereof have already been mentioned above and also taken over the physical possession of the flat simultaneously. We further noted that the first agreement which was executed on the plain paper was reduced on non judicial stamp paper on 13.5.2004. The letter filed by the AR at page 16 which was acknowledged by the office of AO on 25.10.2010 and the AO after considering this agreement came to the conclusion that the assessee has held the flat for more than 36 months and accordingly resultant capital gain on sale of the said flat being LTCG as claimed by the assessee and allowed the exemption u/s 54 of the Act . Thereafter we noted that the ld. CIT(A) by exercising the revisionary powers u/s 263 issued show notice dated 13.3.2013 to the assessee on the ground that the sale of flat had resulted into to STCG as it was held for a period of less than 36 months by taking the date of purchase of the fat as 13.5.2004 which is second agreement which was executed on Non-Judicial Stamp Paper and observed that deduction 54 of the Act was wrongly allowed to the assessee and held that this has resulted into under assessment of ₹ 21 lakhs thereby passing an assessment order being erroneous and prejudicial to the interest of revenue and set aside the order of AO for limited purposes to pass appropriate order after examining all the facts of the case. In this case, we find that the by considering the date of purchase of the first agreement on which the flat was sold and the possession was taken ,the AO has taken the possible view that the flat was purchased on 20.4.2004 as is apparent from the facts as discussed above. The assessee has made LTCG of ₹ 21 lakhs on the sale of flat which was claimed exempt u/s 54 of the Act and was allowed by the AO after considering various documents placed before him during the course of assessment proceedings. In our opinion, no prejudice is called to the revenue and the order passed by the AO is neither erroneous nor prejudicial to the interest of the revneue as the AO has taken a correct view on the basis of documents furnished by the aseseee. Accordingly, we set aside the order of Commissioner passed u/s 263 of the Act by allowing the appeal of the assessee.

Summary

Issues:
Challenge to exercise of powers under section 263 of the Income Tax Act by the Commissioner of Income Tax and setting aside the order of the Assessing Officer regarding the classification of capital gains as Short Term Capital Gains (STCG) instead of Long Term Capital Gains (LTCG).

Analysis:
The appellant filed an appeal against the Commissioner of Income Tax's order dated 25.3.2013 for the assessment year 2008-09. The issue revolved around the exercise of powers under section 263 of the Income Tax Act by the Commissioner, challenging the classification of capital gains. The appellant sold a flat resulting in a capital gain of ?21 lakhs, claimed as LTCG with a deduction under section 54 of the Act. The Commissioner contended that the flat was transferred within three years of purchase, deeming the gain as STCG and disallowing the exemption under section 54. The Commissioner issued a notice under section 263, setting aside the assessment partially. The appellant argued that the purchase date was 20.04.2004, supported by agreements and payment evidence, while the Commissioner considered the second agreement date of 30.05.2004. The appellant relied on the AO's assessment, Gujarat High Court's precedent, and the correct view taken by the AO based on the evidence.

The Tribunal examined the facts, agreements, and payment details presented by the appellant. It noted the AO's acceptance of LTCG and exemption under section 54 after considering the documents. The Commissioner invoked section 263, alleging under-assessment due to STCG classification. The Tribunal referenced the Gujarat High Court's ruling that the date of booking is the purchase date for capital gains calculation, emphasizing the first agreement date and payment as crucial. It concluded that the AO's decision was correct, following the Gujarat High Court's principle, and not prejudicial to revenue. Therefore, the Tribunal set aside the Commissioner's order under section 263, allowing the appellant's appeal.

In conclusion, the Tribunal upheld the appellant's appeal, emphasizing the correct view taken by the AO based on the evidence provided, in line with legal precedents.