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2021 (11) TMI 711 - HC - Income TaxRevision u/s 263 by CIT - claim of capital gain on transfer of land - HELD THAT - When it is not disputed that the land concerned would not fall under the definition of capital asset, the question of any capital gains arising also will not arise - We also find that the ITAT has come to a factual finding that the AO has raised queries with regard to the claim of capital gain on transfer of land, Respondent vide its reply dated 31/01/2014 furnished the details in respect of distance of agricultural land from municipal limits, record of population as per last census and the AO after considering the reply of Respondent, accepted the claim of Respondent. ITAT has given a finding that the claim of capital gain was accepted by AO after necessary inquiry and the order under Section 143(3) of the Act was passed. It is true that the AO has not passed any written detailed order while accepting the explanation of capital gains of Respondent but the fact is AO had raised queries and Respondent has given detailed reply means the AO has passed this order after making necessary inquiries. We agree with the view of the ITAT that the order of the AO cannot be branded as erroneous merely because the order does not contain the details which Principal Commissioner feels should have been included. Principal Commissioner cannot decide how elaborate an order of the AO should be. Where the AO, during the scrutiny assessment proceedings, has raised a query which was answered by the Assessee to the satisfaction of the AO but the same was not reflected in the AO by him, the Commissioner cannot conclude that no proper inquiry with respect to the issue was made by the AO and enable him to assume jurisdiction under Section 263. ITAT has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that questions as pressed raise any substantial questions of law.
Issues involved:
1. Interpretation of Section 263 of the Income Tax Act, 1961. 2. Validity of the order passed by the Principal Commissioner under Section 263. 3. Assessment of Long Term Capital Gain (LTCG) on sale of agricultural land. 4. Applicability of the definition of 'Capital Asset' under Section 2(14) of the Act. 5. Jurisdiction of the Principal Commissioner under Section 263. 6. Correctness of the order passed by the Assessing Officer under Section 143(3) of the Act. 7. The power of suo motu revision under Section 263. Analysis: 1. The appeal was filed under Section 260A of the Income Tax Act, challenging an order passed by the Income Tax Appellate Tribunal (ITAT). The appellant raised questions regarding the correctness of the order passed by the Principal Commissioner under Section 263 of the Act. The appellant contended that the Assessing Officer's order dated 26/02/2014 should be considered instead. 2. The Respondent had declared total income for AY 2011-12, which was later revised by the Principal Commissioner under Section 263 due to the treatment of Long Term Capital Gain (LTCG) on the sale of agricultural land. The Principal Commissioner found the Assessing Officer's inquiry inadequate and issued notices under Section 263. The Respondent contested the revision proceedings, providing detailed explanations and evidence to support their position. 3. The ITAT, in its order dated 30/11/2016, accepted the contentions of the Respondent and overturned the Principal Commissioner's decision. Both parties agreed that the land in question did not fall under the definition of 'Capital Asset' as per Section 2(14) of the Act applicable during AY 2011-12. 4. The ITAT found that the Assessing Officer had raised queries regarding the capital gain claim, and the Respondent had provided satisfactory explanations. The ITAT held that the Principal Commissioner could not assume jurisdiction under Section 263 based on the lack of elaboration in the Assessing Officer's order. 5. The High Court upheld the ITAT's decision, emphasizing that the order of the Assessing Officer should not be considered erroneous simply due to lack of detail. The Court cited the supervisory nature of the revision power under Section 263 and highlighted the necessity for the order to deviate from the law to be deemed erroneous. 6. The Court concluded that the ITAT did not err in its analysis, and the questions raised by the appellant did not present substantial legal issues. Therefore, the appeal was dismissed, and no costs were awarded. This detailed analysis covers the various legal aspects and arguments presented in the judgment of the High Court.
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