2022 (8) TMI 852 - AT - Income Tax

Revision u/s 263 by CIT - Denial of deduction u/s 54F - Gain on sale of property was short term capital gain hence, exemption u/s 54F of the Act was wrongly claimed by the Assessee and allowing exemption u/s 54F by the AO on incorrect assumption of the fact that profit earned on the sale on land in question was long term capital gain was erroneous assessment prejudicial to the interest of revenue - HELD THAT - As with regard to the case in hand the bench is of considered opinion that when the Assessee had claimed deduction which was examined by the ld AO then not only the question of quantum of deduction but also of eligibility has to be presumed to be under examination before the Ld. AO. Considering the grounds before the Ld CIT(A), even the question of applicability of Section 50 F or 50 C itself has come under challenge, as assessee claimed the land does not fall in category of Capital Assets. After the Tribunal's order 2018 (2) TMI 2080 - ITAT DELHI this issue as a whole is pending before the ld CIT(A). Thus, when this issue stands restored to the file of the ld CIT(A) by order the exercise of jurisdiction u/s 263 by Revisional Authority by order was not called for as not only the question of quantum of deduction but even the liability and taxability of the consideration arising out of sale of agricultural land by the Assessee had not attained finality. Now that the matter is with CIT(A) and if the ld CIT(A), decides the issue in favour of the Assessee then issues which the ld Revisional Authority has considered to be erroneous and prejudicial to the interest of revenue, are open to be agitated by the Revenue before the Tribunal, by challenging such, findings of the CIT(A). It appears from the para 6 of the impugned order that Ld Revisional authority was specifically informed of pendency of appeal being pending before the Tribunal but still without giving reasons in the light of section 263(1)(c) of the Act, decided the matter and thus committed an error which needs correction. This bench is of firm view that grounds raised by the Assessee in the present Revisional petition are covered on facts and law, in ground raised and pending before the ld CIT(A), in appeal against the original assessment order. However, the ground no 1 deserves to be sustained.

Issues Involved:
1. Validity of the order under section 263 of the Income Tax Act, 1961.
2. Nature of the land sold (whether agricultural or capital asset).
3. Applicability of section 50C of the Income Tax Act, 1961.
4. Eligibility for exemption under section 54F of the Income Tax Act, 1961.
5. Jurisdiction of the Revisional Authority under section 263 when an appeal is pending before the CIT(A).

Issue-wise Detailed Analysis:

1. Validity of the Order under Section 263 of the Income Tax Act, 1961:
The Assessee appealed against the order dated 26.03.2018 under section 263 of the Income Tax Act, 1961, issued by the Principal Commissioner of Income Tax, Ghaziabad, which set aside the assessment order dated 19.08.2015. The Tribunal examined whether the Revisional Authority had the jurisdiction to pass the order under section 263 when the matter was already under appeal before the CIT(A). The Tribunal found that the Revisional Authority erred in exercising jurisdiction under section 263, as the issue was pending before the CIT(A) and had not attained finality.

2. Nature of the Land Sold (Agricultural or Capital Asset):
The Assessee argued that the land sold was agricultural and not a capital asset, thus not liable for capital gains tax. The Tribunal noted that the Assessee had initially declared the land as a capital asset in the return of income but later contended that it was agricultural land. The Tribunal highlighted that the nature of the land was a matter of contention before the CIT(A) and had not been conclusively determined.

3. Applicability of Section 50C of the Income Tax Act, 1961:
The Assessing Officer applied section 50C, which pertains to the valuation of capital assets based on the circle rate, leading to a higher computation of the sale consideration. The Assessee challenged this application, arguing that the actual sale consideration was higher than the circle rate. The Tribunal observed that the applicability of section 50C was also under challenge before the CIT(A), and thus, the Revisional Authority should not have intervened.

4. Eligibility for Exemption under Section 54F of the Income Tax Act, 1961:
The Revisional Authority concluded that the Assessee wrongly claimed exemption under section 54F, as the gain on the sale of the property was short-term capital gain. The Tribunal noted that the eligibility for exemption under section 54F was a matter of dispute in the appeal before the CIT(A) and had not been resolved. Therefore, the Revisional Authority's intervention was premature.

5. Jurisdiction of the Revisional Authority under Section 263 When an Appeal is Pending Before the CIT(A):
The Tribunal emphasized that section 263(1)(c) of the Income Tax Act restricts the Revisional Authority's jurisdiction when an issue is already the subject matter of an appeal before the CIT(A). The Tribunal cited judgments from the Madras High Court and Allahabad High Court, which supported the Assessee's contention that the Revisional Authority should not exercise jurisdiction under section 263 when an appeal is pending. The Tribunal concluded that the Revisional Authority's order dated 26.03.2018 was invalid as the matter was already under consideration by the CIT(A).

Conclusion:
The Tribunal allowed the Assessee's appeal, setting aside the Revisional Authority's order under section 263 and its consequential effects. The Tribunal directed that the issues raised by the Assessee, including the nature of the land, applicability of section 50C, and eligibility for exemption under section 54F, should be decided afresh by the CIT(A) as per the Tribunal's earlier order dated 28.02.2018. The Tribunal's decision underscores the importance of respecting the jurisdictional boundaries set by section 263(1)(c) of the Income Tax Act.

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