2014 (12) TMI 1110 - HC - Income Tax

Invocation of power of CIT for revision u/s 263 - Erroneous or prejudicial to the interest of the Revenue Held that - The Tribunal rightly was of the view that the Commissioner s power u/s 263 could not have been exercised - The exercise of powers was based merely on change of opinion - If the Commissioner held the particular opinion but on the same transaction and same dealing then that was not enough to enable him to exercise this power is the conclusion reached - firstly the Commissioner rendered a particular finding - an agreement for sale confers no title in the immoveable property - The Commissioner possibly is not aware of the nature of the transaction and in immoveable property in the city of Mumbai - This agreement for sale definitely confers rights and which are capable of being enforced - it is not clear as to why the Commissioner held another opinion - apart therefrom only his view and opinion will not enable him to exercise the power u/s 263 that is not found to be permissible in law by the Tribunal - if his view on the same set of facts pertaining to the transaction alone have gone into in the exercise undertaken by him and for invoking the power u/s 263 of the Act then there was no error in reversing his order and not upholding his view thus the AO s order is not erroneous and in so far as it is prejudicial to the interest of the Revenue but the Commissioner proceeded to exercise his power on mere change of opinion thus the order of the Tribunal is upheld Decided against revenue.

Summary

Issues involved: Challenge to order under section 263 of the Income Tax Act, 1961 by the Revenue based on change of opinion.

Analysis:

1. The Tribunal considered the challenge to the order passed by the Commissioner of Income Tax invoking power under section 263. The Tribunal found that the exercise of power was merely based on a change of opinion, which was not sufficient grounds for such exercise. The Tribunal concluded that the Commissioner's opinion that the assessment order was erroneous and prejudicial to the Revenue was not valid in this case.

2. The Counsel for the Revenue argued that the Tribunal's conclusion was flawed due to an error of law apparent on the face of the record. He pointed out discrepancies in dates related to the acquisition of property by the Assessee, emphasizing that the property was not held for the required period to claim long-term capital gains. However, the Tribunal held that these details were not relevant for the computation of capital gains if the necessary transaction details were provided to the Assessing Officer.

3. Upon reviewing the Commissioner's order, the Court found that the Commissioner's opinion on the nature of the transaction and the requirement for registration was incorrect. The Court highlighted that the agreement for sale did confer rights in the property, and the subsequent rectification deed completed the transaction. The Court criticized the Commissioner's exercise of power under section 263 based on his differing opinion without substantial grounds.

4. The Court also dismissed the reliance on a Division Bench judgment, emphasizing that the judgment was fact-specific and did not establish a legal principle. The Court upheld the Tribunal's decision to reverse the Commissioner's order and allow the Assessee's appeal, stating that the Tribunal's decision was justified and not erroneous.

5. Ultimately, the Court dismissed the Revenue's Appeal, emphasizing that the Tribunal's decision was not perverse or vitiated by any legal error. No costs were awarded in the matter.

In conclusion, the Court's detailed analysis focused on the Commissioner's exercise of power under section 263 based on a change of opinion, highlighting the importance of substantial grounds for such exercise and the relevance of transaction details for the computation of capital gains. The judgment emphasized the need for a valid legal basis for invoking powers under the Income Tax Act and upheld the Tribunal's decision in favor of the Assessee.