2020 (12) TMI 1201 - HC - Income Tax

Revision u/s 263 - Characterization of income - As per CIT AO has not satisfied itself that the assessee was engaged in the business of purchase and sale of plots and has not brought any material on record to show that investment in the property was made for the purposes of trading - income assessed as income from business in respect of sale of properties as income from capital gains to disallow interest on loan of purchase of property as deduction from sale consideration, to direct the Assessing Officer to adopt guidance value of sub registrar in respect of one property as deemed sale value and to bring to tax the difference and to allow deduction under Section 80C - HELD THAT - Commissioner of Income Tax as well as the tribunal has failed to appreciate that the Assessing Officer had put 36 questions to the assessee to ascertain the nature of business of the assessee and from perusal of questions Nos.16 and 18, it is evident that the aforesaid questions specifically pertain to issue of classification of income. It is pertinent to note that several notices were issued to the assessee and detailed hearings were conducted and the Assessing Officer in its order has mentioned the details of all the properties with dates of purchase and sale and from perusal of the same, it is evident that the properties were brought and sold within a maximum period of 20 months, from which it is evident that the assessee was engaged in real estate business. Assessing Officer has conducted sufficient enquiry as required under Explanation 2(a) to Section 263 and there was material available on record to arrive at a conclusion, which was recorded by the Assessing Officer. It is trite law that merely because a different view can be taken, the powers under Section 263 of the Act cannot be invoked - Decided in favour of assessee.

Summary

Issues:
Whether Commissioner committed error under Section 263 of the Income Tax Act, 1961 in the case.

Analysis:
1. Background: The appellant, an individual running two proprietorship concerns, filed a return of income for the Assessment Year 2009-10. The Assessing Officer concluded the assessment by treating income from the sale of properties as business income instead of capital gains.

2. Section 263 Invocation: The Commissioner issued a notice under Section 263, directing re-assessment based on various grounds, including disallowance of interest on loans, adoption of guideline value, and deduction under Section 80C. The appellant challenged this in the High Court.

3. Appellant's Arguments: The appellant contended that the Assessing Officer conducted a thorough enquiry, put forward 36 questions, and considered all relevant details before assessing the income. The appellant argued that the powers under Section 263 cannot be invoked merely due to a different view that could be taken.

4. Revenue's Arguments: The revenue argued that the Assessing Officer's conclusion was erroneous as the appellant did not disclose real estate business in financial statements, and the properties were not necessarily held as stock in trade.

5. Legal Position: The High Court analyzed Section 263 and relevant case laws, emphasizing that for revisional jurisdiction, the order must be both erroneous and prejudicial to revenue. The court cited precedents stating that where two views are possible, the Commissioner cannot intervene merely due to a disagreement with the Assessing Officer's view.

6. Court's Decision: The Court found that the Assessing Officer conducted a sufficient enquiry and had material to support the assessment. It ruled in favor of the appellant, quashing the orders of the Commissioner and the tribunal. The appeal was allowed in favor of the appellant.

This detailed analysis of the judgment highlights the key issues involved, arguments presented by both parties, the legal framework applied, and the final decision rendered by the High Court.