2021 (8) TMI 852 - AT - Income Tax

Revision u/s 263 by CIT - computation of long term capital gain from sale of property - AO examined sale of movable assets like air-conditioner, furniture and fixtures etc. and accepted claim of the assessee that they are in the nature of personal effects not liable for tax - HELD THAT - AO after accepting explanation furnished by the assessee, has taken a possible view and has completed the assessment, therefore, the Principal CIT cannot assume jurisdiction u/s.263 to treat assessment order passed by the AO as erroneous and prejudicial to the interests of revenue. The question whether movable assets like air-conditioner, used TVs, fridge, dining table etc. are personal effects or capital assets is debatable issue. Since the issue is debatable, the AO has taken one of the possible view and accepted claim of the assessee that they are in the nature of personal effects and not liable for tax. The view taken by the AO may not be correct, but the Principal CIT cannot assume jurisdiction to review the assessment order u/s.263 of the Act, unless the view taken by the AO is unsustainable in law, because the Principal CIT cannot impose his view on the AO . Therefore, we are of the considered view that once an issue was subject matter of assessment proceedings by the Assessing Officer in original assessment proceedings, then there is no scope for the Principal CIT to revise assessment order by holding that assessment order passed by the Assessing Officer is erroneous, insofar as it is prejudicial to the interests of revenue - See VENKATAKRISHNA RICE COMPANY AND VIJENDRA PAL SINGH 1981 (3) TMI 1 - MADRAS HIGH COURT Assessment order passed by the AO is neither erroneous nor prejudicial to the interests of revenue. Hence, we are of the considered view that the Principal CIT has erred in revision of assessment order passed by the Assessing Officer u/s.143(3) of the Act. Hence, we quash revision order passed by the Principal CIT u/s.263 - Decided in favour of assessee.

Summary

Issues Involved:
Assessment of long term capital gain from sale of property and movable assets, Jurisdiction of Principal CIT under section 263 of the Income Tax Act, 1961.

Analysis:

Issue 1: Assessment of Long Term Capital Gain
The assessee derived income from various sources and filed a return for assessment year 2015-16. The assessment was completed under section 143(3) of the Income Tax Act, 1961, where the income declared by the assessee was accepted. Subsequently, the case was taken up for revision under section 263 regarding the computation of long term capital gain from the sale of property. The assessee claimed exemption under section 54 for the purchase of another residential property, and the Assessing Officer accepted the claim after verifying the relevant facts. However, the Principal CIT, upon review, held that the assessee failed to prove the consideration received for the sale of movable assets and directed that it should be brought to tax under section 68 as unexplained cash credits. The Principal CIT emphasized the importance of proper verification and diligent application of mind by the Assessing Officer. The order was modified, and penalty proceedings were initiated under section 271(1)(c).

Issue 2: Jurisdiction of Principal CIT under Section 263
The Principal CIT has the power to revise an assessment order if it is found to be erroneous and prejudicial to the interests of revenue. In this case, the Principal CIT set aside the assessment order passed by the Assessing Officer, citing errors in not considering the sale of movable assets. However, the tribunal noted that the Assessing Officer had thoroughly examined the issue of long term capital gain and the sale of movable assets, accepting the claim of the assessee. The tribunal emphasized that the Principal CIT cannot revise an assessment order unless it is proven to be erroneous and prejudicial to revenue. The tribunal highlighted the need for twin conditions to exist for the Principal CIT to exercise jurisdiction under section 263. The decision was supported by legal precedents, including the case of M/s. Malabar Industries Co. Ltd. vs. CIT. The tribunal concluded that the assessment order was neither erroneous nor prejudicial to revenue, quashing the revision order passed by the Principal CIT.

In conclusion, the tribunal allowed the appeal filed by the assessee, emphasizing the importance of a thorough examination of facts and adherence to legal principles in tax assessments.