2022 (6) TMI 1193 - AT - Income Tax

Revision u/s 263 by CIT - Capital gain computation - HELD THAT - Computation where capital gain is calculated separately for sale of land and sale of building, the result would be short term capital loss. If the capital gain is calculated in the manner as directed by Pr. CIT, then the assessment so framed shall be prejudicial to the interests of the Revenue. Therefore, under the given facts and circumstances of the case where the purchase of land building and sale of land building are covered under a single deed of purchase sale, the calculation made by the ld. AO showing short term capital gain which has been valued in detail by the ld. AO, in our considered view, the order of the ld. AO is not prejudicial to the interests of the Revenue. Therefore, since the assessment order dated 26.12.2019 is neither erroneous nor prejudicial to the interests of the Revenue and a detailed enquiry of the issue raised in the show cause notice u/s 263 of the Act has been conducted by the ld. AO, adopting one of the permissible view in law, ld. Pr. CIT erred in assuming jurisdiction u/s 263 - We, therefore, quash the impugned order of the ld. Pr. CIT u/s 263 of the Act and restore the order so framed u/s 143(3) - Hence, grounds of the appeal raised by the assessee are allowed.

Summary

Issues Involved:
1. Assumption of jurisdiction under Section 263 of the Income Tax Act.
2. Determination of whether the assessment order is erroneous and prejudicial to the interests of the Revenue.
3. Examination of the Assessing Officer's (AO) enquiry and findings regarding the computation of capital gains.

Detailed Analysis:

1. Assumption of Jurisdiction under Section 263 of the Income Tax Act:

The assessee contested the Principal Commissioner of Income Tax’s (Pr. CIT) assumption of jurisdiction under Section 263 of the Act. The Pr. CIT had issued a notice under Section 263, considering the assessment order passed under Section 143(3) as erroneous and prejudicial to the interests of the Revenue. The notice highlighted that the assessee had not correctly computed the capital gains on the sale of land and building, and the AO had not examined this issue during the assessment proceedings.

2. Determination of Whether the Assessment Order is Erroneous and Prejudicial to the Interests of the Revenue:

The Tribunal examined whether the assessment order was erroneous and prejudicial to the interests of the Revenue. The assessee had purchased land and building together and sold them along with furniture. The Pr. CIT argued that the assessee should have computed capital gains separately for land and building. However, the Tribunal noted that the AO had thoroughly examined the transaction during the assessment proceedings. The AO had called for details and documents related to the sale and purchase of the assets and had accepted the assessee's computation of short-term capital gains.

3. Examination of the Assessing Officer's Enquiry and Findings Regarding the Computation of Capital Gains:

The Tribunal found that the AO had conducted a detailed enquiry into the computation of capital gains. The assessee had provided all necessary documents, including the purchase deed, sale deed, and computation of capital gains. The AO had considered these documents and accepted the assessee's computation, which showed a short-term capital gain of Rs. 27,31,810. The Tribunal concluded that the AO had applied his mind to the issue and had taken a permissible view in law.

The Tribunal also examined the Pr. CIT’s computation method and found that it would result in a short-term capital loss, which would be prejudicial to the interests of the Revenue. Therefore, the Tribunal held that the assessment order was neither erroneous nor prejudicial to the interests of the Revenue.

Conclusion:

The Tribunal quashed the Pr. CIT’s order under Section 263, restoring the original assessment order passed under Section 143(3). The appeal filed by the assessee was allowed, as the assessment order was found to be neither erroneous nor prejudicial to the interests of the Revenue, and the AO had conducted a proper enquiry into the issue.