2022 (7) TMI 1155 - AT - Income Tax

Revision u/s 263 - As during the assessment not only examined the issue of capital gain - HELD THAT - The view adopted by the assessing officer was in accordance of the decision in CIT Vs Siddharth J. Desai ( 1981 (9) TMI 48 - GUJARAT HIGH COURT and Madhabhai Patel ( 1993 (7) TMI 28 - GUJARAT HIGH COURT so such assessment order cannot be branded as erroneous. Thus, the twin conditions as enunciated in section 263 cannot be said to be fulfilled in the present case. Again retreating the principal as laid down in Malabar Industrial Company Ltd ( 2000 (2) TMI 10 - SUPREME COURT that when an assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. Thus, in view of the aforesaid factual and legal discussion, we are of the considered opinion that the revision order passed by ld. PCIT under section is not legally sustainable as the same is based on mere change of opinion, which we set aside. In the result, the substantial ground of appeal raised by the assessee is allowed. No contrary facts or law is brought to our notice to take other view. - Decided in favour of assessee.

Issues Involved:
1. Initiation of proceedings under Section 263 of the Income Tax Act, 1961.
2. Assumption of jurisdiction under Section 263.
3. Violation of principles of natural justice.
4. Lack of a speaking order by the Commissioner.
5. Allegation of the order being a mere "change in opinion".
6. Verification of chargeability of 'capital gain'.
7. Validity of the proceedings and assessment order.
8. Setting aside the assessment order without pointing out specific errors.

Detailed Analysis:

1. Initiation of Proceedings under Section 263:
The assessee contended that the initiation of proceedings under Section 263 by the Principal Commissioner of Income Tax (PCIT) was erroneous. The Tribunal noted that the PCIT initiated proceedings based on the observation that the Assessing Officer (AO) did not verify the chargeability of capital gains during the assessment proceedings, which led to the issuance of the show-cause notice.

2. Assumption of Jurisdiction under Section 263:
The Tribunal examined whether the PCIT correctly assumed jurisdiction under Section 263. The PCIT believed that the AO's order was erroneous and prejudicial to the interest of revenue as the AO did not verify the chargeability of capital gains on the sale of land. The Tribunal referred to the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. CIT, emphasizing that both conditions (erroneous and prejudicial to revenue) must be satisfied for the PCIT to assume jurisdiction under Section 263.

3. Violation of Principles of Natural Justice:
The assessee argued that the PCIT violated the principles of natural justice by not mentioning the grounds for initiating action under Section 263 in the show-cause notice. The Tribunal observed that the show-cause notice did record the reasons for the proposed revision, thus complying with the principles of natural justice.

4. Lack of a Speaking Order by the Commissioner:
The assessee claimed that the PCIT did not pass a speaking order addressing the submissions made by the assessee. The Tribunal found that the PCIT did consider the assessee's reply but did not accept it due to specific reasons, including the absence of reference to an agreement to sale in the registered sale deed, and the conversion of land from agricultural to non-agricultural before the sale.

5. Allegation of the Order being a Mere "Change in Opinion":
The Tribunal noted that the AO had examined the issue of capital gains and the nature of the land during the assessment proceedings. The AO had taken a plausible and legally sustainable view, which cannot be termed as erroneous merely because the PCIT held a different opinion.

6. Verification of Chargeability of 'Capital Gain':
The PCIT argued that the AO did not verify the chargeability of capital gains on the sale of land, which was converted to non-agricultural land before the sale. The Tribunal found that the AO had indeed examined the nature of the land, the conversion process, and the applicability of Section 50C, concluding that the land was agricultural at the time of sale and thus not a capital asset.

7. Validity of the Proceedings and Assessment Order:
The Tribunal held that the AO had conducted proper inquiries and verification during the assessment proceedings. The AO's order was based on a reasonable and plausible view, supported by relevant facts and legal precedents. Therefore, the assessment order was not erroneous or prejudicial to the interest of revenue.

8. Setting Aside the Assessment Order without Pointing Out Specific Errors:
The Tribunal observed that the PCIT set aside the assessment order without clearly pointing out specific errors or how the order was prejudicial to the interest of revenue. The Tribunal emphasized that the PCIT must provide specific reasons for revising an assessment order under Section 263.

Conclusion:
The Tribunal concluded that the revision order passed by the PCIT under Section 263 was not legally sustainable as it was based on a mere change of opinion. The Tribunal set aside the PCIT's order and allowed the appeal of the assessee. The Tribunal reiterated that when an AO adopts one of the permissible views in law, it cannot be treated as erroneous merely because the PCIT disagrees with it. The Tribunal's decision was pronounced in the open court, and the appeal was allowed.

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