2022 (5) TMI 1029 - AT - Income Tax

Revision u/s 263 by CIT - PCIT raised a point in the show cause notice to treat the profit on sale of land as income from business in the place of Capital Gains and the only difference in place of giving directions to the AO to make assessment in a particular manner held that proper enquiries were not made and the issue was decided without application of mind by the AO - HELD THAT - We are not agreeable to the arguments advanced by the Ld. CIT-DR, for the reason, that the A.O in the present case did not deviate from law and admittedly made certain assessment in accordance with law. PCIT under revision held the same as erroneous, as in his opinion, the A.O. did not apply his mind elaborately. We note that the A.O examined the claim of assessee with supporting evidences along with necessary submissions and determined the assessment and chargeable to tax under LTCG. If at all, if the PCIT not satisfied with the said determination of assessment is lower side, would have applied higher rate by the A.O. of another head of income in our opinion, is untenable, again, for another reasons as it constitutes substitution of opinion which cannot be held as erroneous. Thus, when the assessment made by the A.O. is in accordance with law, it cannot be termed as erroneous and when it is not erroneous it cannot be prejudicial to the interest of revenue. Therefore, the decision of Hon ble Supreme Court in the case of Amitabh Bachan supra, is not applicable to the facts on hand. We find in the present case, the PCIT issued a show cause notice for non examination of LTCG, without determining the same, directing the A.O. to conduct de novo assessment i.e. re-examination, is not sustainable under law, therefore, in light of the discussion made by us herein above with the support of decisions relied on and in the facts and circumstances of the case, we hold, the PCIT in treating the assessment erroneous and prejudicial to the interest of revenue is not justified under revision proceedings u/s. 263 of the Act and it is set aside. Decided in favour of assessee.

Summary

Issues involved:
Delay in filing appeal, Additional grounds raised by the assessee, Validity of the order passed by the Principal Commissioner of Income Tax under section 263 of the Act, Compliance with show cause notice requirements, Revisionary powers under section 263, Opportunity of being heard, Proper application of law in assessment, Sustainability of revisionary powers exercised by the Principal Commissioner.

Delay in filing appeal:
The appeal was filed with a delay of 86 days, and the assessee provided reasons for the delay, which were considered genuine, leading to the condonation of the delay.

Additional grounds raised by the assessee:
The assessee raised two sets of additional grounds, with the second ground questioning the legality of the revision order under section 263 of the Act. The Tribunal decided to take up the second additional ground as a preliminary issue, as it was a legal matter not requiring new facts.

Validity of the order under section 263:
The Principal Commissioner of Income Tax (PCIT) issued a show cause notice stating that the assessment order was erroneous and prejudicial to the revenue's interest. The PCIT directed the Assessing Officer (AO) to re-examine the issue of Long Term Capital Gain (LTCG) without providing a clear finding on the error in the original assessment order. The Tribunal found that the PCIT's actions went beyond the scope of the show cause notice, leading to the order being set aside.

Compliance with show cause notice requirements:
The PCIT's order under section 263 was challenged for not providing a clear finding on the alleged errors in the assessment order. The Tribunal emphasized the importance of giving the assessee a reasonable opportunity to respond to the specific grounds mentioned in the show cause notice.

Revisionary powers under section 263:
The Tribunal examined case laws cited by the parties, highlighting instances where revisionary powers were exercised based on specific grounds mentioned in the show cause notice. The Tribunal found that the PCIT's shift in focus from LTCG to business income without clear findings was not sustainable under section 263.

Opportunity of being heard:
The PCIT's order was scrutinized for not providing a proper opportunity for the assessee to address the issues raised in the show cause notice. The Tribunal emphasized the need for the PCIT to base their decisions on specific grounds communicated to the assessee.

Proper application of law in assessment:
The Tribunal analyzed the PCIT's directive to the AO to re-examine the LTCG issue, noting that the original assessment was made in accordance with the law. The Tribunal held that the PCIT's opinion on the adequacy of the AO's examination did not justify de novo assessment.

Sustainability of revisionary powers exercised by the Principal Commissioner:
After thorough examination of the facts and legal precedents, the Tribunal concluded that the PCIT's treatment of the assessment as erroneous and prejudicial to revenue was not justified under section 263. The order was set aside, and the appeal of the assessee was allowed.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's reasoning in reaching its decision to set aside the PCIT's order under section 263 of the Act.