2017 (10) TMI 1153 - AT - Income Tax

Revision u/s 263 - CIT(A) revising the assessment framed by the AO under section 143(3) for claiming higher cost of acquisition and excess indexation cost - Held that - The evidences clearly leads us to the fact that the cost of acquisition of these two row houses i.e. No. 10 and 11 is ₹ 53,69,696/- and this was acquired as on 12-11-1994 vide agreement cum allotment letter from where the assessee started making payment as it is clearly evident from the above Paras. In view of the above facts and circumstances, we are of the view that the assessment framed by AO under section 143(3) of the Act is neither erroneous nor prejudicial to the interest of the Revenue. Accordingly, we quashed the revision order passed by CIT(A) under section 263 of the Act and allow the appeal of the assessee.

Issues Involved:
1. Legitimacy of the Commissioner's order to revise the assessment under section 263.
2. Determination of the correct cost of acquisition of the row houses.
3. Correct period for applying indexation benefits.

Issue-wise Detailed Analysis:

1. Legitimacy of the Commissioner's Order to Revise the Assessment under Section 263:
The primary issue in this appeal concerns the validity of the Commissioner's order to revise the assessment framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] set aside the AO's order and directed a fresh assessment, asserting that the AO's determination of the cost of acquisition and indexation was erroneous and prejudicial to the interests of the Revenue. The assessee contested this revision, arguing that the AO had correctly verified the evidence and calculated the long-term capital loss.

2. Determination of the Correct Cost of Acquisition of the Row Houses:
The CIT(A) observed that the assessee had shown the purchase cost of row houses No. 10 and 11 at ?53,69,696/- and claimed indexation from FY 1994-95, calculating the indexed cost of acquisition at ?1,10,28,659/-. However, according to an agreement dated 18-04-2000, the actual cost of acquisition was ?23,16,100/-. The CIT(A) concluded that the AO had erroneously adopted a higher cost of acquisition and allowed excess indexation. The assessee provided balance sheets from multiple financial years demonstrating the total purchase price of ?53,69,696/-, including payments made in 1994 and subsequent years. The CIT(A) had allowed the entire cost of acquisition at ?53,69,696/- in its appellate order, recognizing payments made for additional amenities and other expenses.

3. Correct Period for Applying Indexation Benefits:
The CIT(A) directed the AO to calculate the indexed cost from FY 2000-01 instead of FY 1994-95. However, the assessee argued that the rights in the property originated from an agreement-cum-allotment letter dated 12-11-1994, and thus, indexation should commence from that date. The CIT(A) acknowledged that the vested interest in the property began with the agreement dated 12-11-1994, and the subsequent agreement in 2000 was merely a conveyance deed recognizing the ownership rights established earlier.

Conclusion:
After examining the evidence and arguments, the Tribunal concluded that the cost of acquisition of the row houses was indeed ?53,69,696/-, and the indexing should commence from 12-11-1994, as per the original agreement. The Tribunal found that the AO's assessment was neither erroneous nor prejudicial to the interests of the Revenue. Consequently, the Tribunal quashed the revision order passed by the CIT(A) under section 263 and allowed the appeal of the assessee. The order was pronounced in the open court on 25-10-2017.

← Previous Next →