2022 (8) TMI 436 - AT - Income Tax

Revision u/s 263 - computation of long term capital gain derived transfer of property - Applicability of section 50C - HELD THAT - AO has caused necessary inquiries with regard to computation of long term capital gain derived transfer of property and has computed capital gain by taking into account cost of acquisition claimed by the assessee without disturbing consideration received from transfer of property, even though, there is difference in guideline value of property. From order of the AO, what we could notice is that although, provisions of section 50C could have been applied in the given facts and circumstances of the case, but the AO has failed to apply provisions of section 50C to determine correct consideration received for transfer of property. PCIT, after verifying necessary evidences in light of various facts bought on record by the Assessing Officer has opined that the assessment order passed by the AO is erroneous, insofar as it is prejudicial to the interests of revenue on the issue of computation of long term capital gain from transfer of property, because the AO has failed to apply provisions of section 50C of the Act, while completing assessment. In our considered view, the AO has failed to apply his mind in light of facts of the case to relevant provisions of section 50C of the Act, while completing assessment. Hence, the PCIT has rightly exercised his jurisdiction u/s.263 and set aside the assessment order, because the assessment order passed by the AO is erroneous, insofar as it is prejudicial to the interests of revenue. Therefore, we are of the considered view that there is no error in the reasons given by the ld. PCIT to set aside the assessment order and thus, we are inclined to uphold findings of the learned PCIT and dismiss appeal filed by the assessee.

Summary

Issues:
1. Condoning delay in filing appeal due to Covid-19 lockdown.
2. Jurisdiction of Principal Commissioner to revise assessment order under section 263.
3. Application of section 50C of the Income Tax Act in determining capital gains from property transfer.

Condoning delay in filing appeal due to Covid-19 lockdown:
The appeal was filed by the assessee against an order passed by the Principal Commissioner of Income Tax, which was initially considered time-barred. The assessee cited the Covid-19 lockdown as the reason for the delay in filing the appeal. The Appellate Tribunal noted that the Hon'ble Supreme Court had extended the limitation period for all proceedings due to the pandemic. Considering the circumstances and in the interest of natural justice, the Tribunal condoned the delay in filing the appeal.

Jurisdiction of Principal Commissioner to revise assessment order under section 263:
The Principal Commissioner issued a show-cause notice under section 263 to revise the assessment order passed by the Assessing Officer for the assessment year 2015-16. The issue arose from the difference between the guideline value of a property and the consideration received for its transfer. The assessee argued that the assessment order was not erroneous or prejudicial to revenue as the capital gain had been correctly computed. However, the Principal Commissioner found that the Assessing Officer had failed to apply section 50C of the Income Tax Act in determining the correct consideration for the property transfer. Consequently, the Principal Commissioner set aside the assessment order, leading to the appeal by the assessee.

Application of section 50C of the Income Tax Act in determining capital gains from property transfer:
The Tribunal analyzed the application of section 50C in the assessment of capital gains from a property transfer. It was observed that the Assessing Officer had not applied section 50C to ascertain the correct consideration received for the property transfer, despite a significant difference between the stated consideration and the guideline value of the property. The Tribunal agreed with the Principal Commissioner that the failure to apply section 50C rendered the assessment order erroneous and prejudicial to revenue. Therefore, the Tribunal upheld the decision of the Principal Commissioner to set aside the assessment order and dismissed the appeal filed by the assessee.

In conclusion, the Appellate Tribunal upheld the decision of the Principal Commissioner to revise the assessment order under section 263 due to the failure to apply section 50C in determining capital gains from a property transfer. The Tribunal dismissed the appeal filed by the assessee, emphasizing the importance of correctly applying relevant provisions of the Income Tax Act in such assessments.