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2022 (3) TMI 1024 - AT - Income TaxRevision u/s 263 - Correct head of income - whether the profit on sale of plots was actually in the nature of capital gain or adventure in the nature of trade? - HELD THAT - We observe that in assessment-order, as clearly stated that the assessee has made written submissions and filed not only the working of capital gain but also the purchase and sale deeds. AO has clearly mentioned in the assessment-order that he has perused those submissions and documents and thereafter accepted the long-term capital gain declared by the assessee. We also observe that during assessment proceedings, hearings were conducted from time to time and attended by the assessee and the assessment-order has not been passed in haste. It would have been better if the Ld. AO had made an elaborate discussion which he did not make, but still the assessment-order clearly transpires that the Ld. AO has perused the working of capital gain as well as the evidences of capital gain in the form of purchase and sale deeds and it is thereafter that he accepted the long-term capital gain. Thus, there is no lack of enquiry on the part of Ld. AO. As out of 42 plots allotted by Bhopal Development Authority, the assessee sold a few plots in the immediately preceding assessment-year 2014-15 and declared the profit arising therefrom as long-term capital gain, which stand accepted by Ld. AO and also not disturbed by Ld. PCIT in revision-proceedings of that year. As the assessee has sold 11 plots during the assessment-year 2015-16 under consideration out of the very same bunch of 42 plots, the nature of income being long-term capital gain as accepted by revenue in the assessment-year 2014-15 must be accepted in the assessment-year 2015-16 under consideration too. We are of the considered view that the Ld. PCIT was not justified in invoking section 263 to the present matter of assessee. - Decided in favour of assessee.
Issues Involved:
1. Legality of the order passed under section 263 by the Principal Commissioner of Income Tax (PCIT). 2. Whether the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the revenue. 3. Validity of the appeal filed by the assessee with a delay of 182 days. 4. Nature of income from the sale of plots: whether it should be treated as business income or long-term capital gain. Issue-wise Detailed Analysis: 1. Legality of the order passed under section 263 by the Principal Commissioner of Income Tax (PCIT): The assessee challenged the legality of the revision-order passed by the Ld. PCIT under section 263 of the Income-tax Act, 1961, claiming it to be illegal and bad in law. The Tribunal quashed the order of the Ld. PCIT, concluding that the revision-order was not justified as the original assessment was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal emphasized that the AO had conducted sufficient inquiries and verifications before accepting the assessee's computation of long-term capital gain. 2. Whether the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the revenue: The Ld. PCIT invoked section 263 on the grounds that the AO did not properly inquire into whether the profit from the sale of plots should be treated as business income instead of long-term capital gain. The Tribunal noted that the AO had indeed perused the documents submitted by the assessee, including purchase and sale deeds, and had accepted the computation of long-term capital gain after due consideration. The Tribunal found that the AO had not acted in undue haste and had applied his mind to the relevant materials, thus the assessment order was neither erroneous nor prejudicial to the interest of the revenue. 3. Validity of the appeal filed by the assessee with a delay of 182 days: The assessee filed an appeal with a delay of 182 days, citing ill-health and the COVID-19 pandemic as reasons for the delay. The Tribunal accepted these reasons as sufficient and convincing, especially considering the suo motu extension of the limitation period for filing appeals granted by the Hon’ble Supreme Court due to the pandemic. Consequently, the delay was condoned, and the appeal was admitted for hearing. 4. Nature of income from the sale of plots: whether it should be treated as business income or long-term capital gain: The Ld. PCIT contended that the income from the sale of plots should be treated as business income, arguing that the assessee's activities constituted an adventure in the nature of trade. However, the Tribunal found that the assessee had held the land as a capital asset for a long period and only sold the plots after they were acquired and developed by the Bhopal Development Authority. The Tribunal also noted that in the preceding assessment year (2014-15), the profit from the sale of similar plots was assessed as long-term capital gain and not disturbed by the Ld. PCIT. The Tribunal concluded that the nature of income as long-term capital gain should be consistently applied for the assessment year 2015-16 as well. Conclusion: The Tribunal quashed the revision-order passed by the Ld. PCIT under section 263, holding that the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal accepted the assessee's computation of long-term capital gain and condoned the delay in filing the appeal. The appeal was allowed in favor of the assessee.
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