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2020 (9) TMI 764 - AT - Income TaxRevision u/s 263 - proceedings for reopening the assessment were initiated and assessment was completed u/s 148/143(3) - assessee has wrongly shown this income under the head of capital gain which was actually business income - As per CIT assessee has sold the land of same area which was purchased and in the original return filed the transaction for the land sale was shown under the head capital gain whereas in the return filed in reopening proceedings it was shown as business income and the same was accepted by the AO and he had not examined this issue - HELD THAT - The finding of the Pr. CIT are not correct because the assessee has purchased agriculture land measuring 36/68 part of 0.86 hectare whereas she sold the 3600 square meter industrial plot. So the land sold and land purchased was not same and the finding in the order u/s 263 is not correct. The important fact which has been ignored by the PCIT is that in computation of income filed with the original return the assessee has made a mistake that he has shown the land transactions under the head capital gain income whereas the transaction was purely a business transaction. The object behind the purchase of land is to convert it into the industrial land and after development sale it on good price for earning profit. Transaction of purchase and sale and conversion is purely a business transaction and the assessee has wrongly shown it as capital gain which has been corrected vide filing the revised return copy of which is placed on paper book. By filing return in response to notice u/s 148 the assessee has corrected her mistake and shown this transaction in business income. AO has examined all the issues regarding sale of lands. All the details were submitted before the learned AO. The assessment order passed by AO was neither erroneous, nor prejudicial to the interest of the revenue. Revision under section 263 by PCIT was not justified as all the four issues questioned by PCIT were thoroughly examined by AO during the assessment proceedings, and after considering relevant facts and explanations furnished by assessee had chosen to accept the claim of the assessee and hence, the same could not be termed as non consideration of issues or AO had failed to carry out required enquiries, which ought to have been carried out in accordance with law. Thus the order passed by the learned PCIT deserves to be quashed. Brokerage and commission payment - During the reassessment proceedings the assessee has submitted details of brokerage payment the vouchers and other details are placed on paper book page and TDS was also deducted on brokerage payment treating the transaction as business transaction. Therefore the expenditure incurred on brokerage and commission was fully verifiable and the detail was submitted during the reassessment proceedings.Therefore this objection was also not sustainable. Interest received are shown more as against the interest received - The reason for the difference was duly explained and the learned AO has verified the same. Therefore again this objection was not acceptable for invoking the provisions of section 263. Difference in Proprietor s capital against the capital shown in earlier return - As clarified that the assessee was maintaining books of account for his business of M/s Gupta Engineering Works separately and individual books are kept separately. The individual capital of the assessee was ₹ 1,23,40,013/- out of which the assessee has invested capital of ₹ 26,21,641/- in M/s Gupta Engineering Works. So the capital in individual capacity was ₹ 1,23,40,000/- and capital of M/s Gupta Engineering was ₹ 26,21,641/-. Copy of balance sheet, Profit Loss A/c and other relevant documents are placed on paper book page no. 71 to 82. Therefore the difference in the figures of other income and interest income was duly explained and the objection in this regard is also not sustainable. It is not a fit case for passing the order u/s 263 of the Act by the ld. Pr.CIT . The order passed u/s 143(3) r.w.s. 148 of the Act by the AO was neither erroneous nor prejudicial to the interest of the revenue. Thus the order passed by the AO is confirmed and the main grounds of appeal of the assessee are allowed.
Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act, 1961. 2. Whether the grounds for passing the order under section 263 were prejudicial to the interest of Revenue or erroneous. 3. Whether the issues addressed by the Principal Commissioner of Income Tax (Pr.CIT) had already been decided by the Assessing Officer (AO). 4. Specific issues regarding: - Sale of land as business income. - Expenditure on brokerage and commission for sale of land. - Interest income. - Proprietor’s capital. Detailed Analysis: 1. Validity of the Order Passed Under Section 263: The assessee challenged the validity of the order passed under section 263, arguing that the proceedings initiated under section 147 were invalid. The Tribunal admitted the revised grounds of appeal, considering them legal in nature and not requiring separate evidence for adjudication. 2. Grounds for Passing the Order Under Section 263: The assessee contended that the Pr.CIT erred in passing the order under section 263 on grounds that were not prejudicial to the interest of Revenue or erroneous. The Tribunal noted that the Pr.CIT initiated proceedings under section 263, considering the AO’s order dated 07-12-2017 as erroneous and prejudicial to the interest of Revenue. The Pr.CIT held that the AO passed the order without necessary inquiries and verifications. 3. Issues Addressed by the Pr.CIT Already Decided by the AO: The Tribunal observed that the original grounds of appeal raised by the assessee were interrelated and pertained to challenging the order of the Pr.CIT under section 263. The Tribunal found that the AO had made proper inquiries during the reassessment proceedings, and the order passed by the AO was not erroneous or prejudicial to the interest of Revenue. 4. Specific Issues: (i) Sale of Land as Business Income: The Tribunal noted that the assessee purchased agricultural land, converted it to industrial land, and sold it, showing the transaction as business income. The AO accepted this classification after proper inquiries. The Tribunal held that the AO’s view was a possible one and could not be considered erroneous just because the Pr.CIT had a different view. (ii) Expenditure on Brokerage and Commission for Sale of Land: The Tribunal found that the AO had verified the details of brokerage and commission payments and that the expenditure was fully verifiable. Thus, this objection by the Pr.CIT was not sustainable. (iii) Interest Income: The Tribunal observed that the assessee had explained the differences in interest income and other incomes during the assessment proceedings, and the AO had verified these details. Therefore, this objection was also not acceptable for invoking section 263. (iv) Proprietor’s Capital: The Tribunal noted that the assessee had explained the difference in the proprietor’s capital, showing separate books for individual capacity and business. The AO had verified these details, and the objection by the Pr.CIT was not sustainable. Conclusion: The Tribunal concluded that the conditions for invoking section 263 were not satisfied, as the AO had made necessary inquiries and verifications. The order passed by the AO was neither erroneous nor prejudicial to the interest of Revenue. Consequently, the Tribunal quashed the order passed by the Pr.CIT under section 263 and allowed the main grounds of appeal of the assessee. The revised grounds raised by the assessee were dismissed as infructuous. The appeal filed by the assessee was partly allowed.
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