2022 (12) TMI 1207 - AT - Income Tax

Revision u/s 263 - LTCG - Nature of land sold - distance of the land in question from the outer limit of the Indore Municipal Corporation - assessee sold the land jointly with a co-owner - assessee claimed exemption of half share of long term capital gain claiming that the said land was an agricultural one and situated outside the definition of capital asset under Section 2(14) - whether SDM is not a competent authority for the distance certificate rather than PWD department is authorized for the same? - HELD THAT - We find that the original assessment order has been passed under Section 143(3) of the Act by the Ld.AO after due verification of the issue raised in the order impugned passed under Section 263 of the Act and that too upon causing exhaustive enquiry and finalising the same after taking a possible view, the invocation of provision of Section 263 of the Act on the basis of change of opinion is, thus, not found to be sustainable. We have also found substance in the arguments advanced by the Ld. AR that the original order needs not to give detailed reason. Further that when one possible view has been taken by the Ld AO the said cannot be treated as erroneous and prejudicial to the interest of the Revenue. In this regard, we are also inspired by the ratios laid down in the judgment passed in the matter of CIT vs. Nirma Chemicals Works (P.) Ltd 2008 (2) TMI 373 - GUJARAT HIGH COURT and CIT vs. Kamal Galani 2018 (6) TMI 1052 - GUJARAT HIGH COURT Under this circumstance, we find the order passed by the Ld PCIT under Section 263 of the Act is not sustainable and thus quashed. Interest amount as received by the assessee from Gujarati Samaj, Indore - PCIT was of the view that the assessee has unaccounted money and out of books the same has been given to Gujarati Samaj - Since, the buyer could not make payment in due time as agreed upon the interest on delayed payment was made to the assessee. Therefore, such interest has been paid not on any amount of money borrowed from the assessee by the said party rather for non-fulfilment of the commitment of making timely payment in respect of sale of agricultural land. In view of the matter, there was no disclosure of any advance in the financial statement when the source of interest amount was asked by the Ld.AO. The above narrated facts were duly placed by the assessee to him and finally the Ld. AO accepted the said interest income made by the AO.. No contrary document, however, is forthcoming from the Revenue which could justify that the order passed by the Ld. AO in this count is erroneous so far as it is prejudicial to the interest of the Revenue. Hence, the condition prescribed under Section 263 of the Act has not been fulfilled in issuing the order under Section 263 of the Act by Ld. PCIT as impugned before us. Hence, the same is found to be not sustainable and thus quashed. Assessee s appeal is allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the original assessment order regarding the exemption of capital gains from the sale of agricultural land.
3. Validity of the original assessment order regarding the interest income received from Gujarati Samaj, Indore.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 48 days due to the Covid-19 pandemic. The Tribunal condoned the delay, noting that the reason provided by the assessee was not contested by the Department and considering the Supreme Court's judgment on delays during the pandemic.

2. Exemption of Capital Gains from Sale of Agricultural Land:
The original assessment order accepted the assessee's claim that the land sold was agricultural and situated outside the definition of a capital asset under Section 2(14) of the Income Tax Act. The Principal Commissioner of Income Tax (PCIT) found the assessment order erroneous, citing a letter from the SDM stating the land was 6.4 km away from the municipal limits, contrary to the assessee's claim of 8 km.

- The Tribunal reviewed various certificates submitted by the assessee, including those from the Executive Engineer and the Chief Executive Engineer, which indicated the land was more than 8 km away from the municipal limits.
- The Tribunal noted that the SDM is not the competent authority to certify the distance, as per the judgment in CIT vs. Lal Singh, which states that the Tehsildar or PWD department should provide such certification.
- The Tribunal found that the land was within a Gram Panchayat area, not a municipal area, and thus did not qualify as a capital asset under Section 2(14) of the Act, referencing judgments from the Hon'ble Madras High Court and the Co-ordinate Bench.
- The Tribunal concluded that the original assessment order was based on a possible view after exhaustive inquiry and was not erroneous or prejudicial to the interest of the Revenue. Therefore, the invocation of Section 263 by the PCIT was not sustainable.

3. Interest Income from Gujarati Samaj, Indore:
The PCIT questioned the interest income of Rs. 20 Lakhs shown by the assessee, noting that no loans or advances were recorded in the financial statements, and no TDS was deducted by Gujarati Samaj.

- The Tribunal found that the interest was paid due to delayed payment for the sale of agricultural land, not from any loan or advance.
- The original assessment order considered these facts and accepted the interest income as declared by the assessee.
- The Tribunal concluded that the PCIT's order under Section 263 was not justified, as the original assessment was neither erroneous nor prejudicial to the interest of the Revenue.

Conclusion:
The Tribunal allowed the appeal, quashing the PCIT's order under Section 263 of the Income Tax Act. The original assessment order was upheld as it was based on a possible view after due verification and was not erroneous or prejudicial to the interest of the Revenue.