2024 (1) TMI 498 - HC - Income Tax

Validity of Revision u/s 263 - as per CIT wrong computation of the income by AO under the head Capital Gain by treating the net capital gain to be LTCG, ignoring the provisions of Section 50 - Tribunal setting aside the order u/s. 263 - HELD THAT - AO might have committed an error while computing the assessment order but in fact, the Tribunal has considered this aspect in detail and has held that there is no finding of any error by the PCIT in the order of the Assessing Officer with respect to the issue involved as the assessee claimed the set off of long-term capital loss while offering short-term capital gain in accordance with law which has remained un-controverted even by the departmental representative as well as the appellant. Tribunal has therefore, rightly come to the conclusion that the PCIT would not have any jurisdiction to invoke the powers under section 263 since the findings of error is essential for invoking such power and AO taking a plausible view in the matter, the assessment order cannot be said to be erroneous so as to cause prejudice to the Revenue. Considering the reasons assigned by the Tribunal for allowing the appeal filed by the assessee challenging the order u/s 263 we do not find any infirmity in the same and accordingly, no question of law much less any substantial question of law can be said have arisen.

Summary

Issues involved:
The issues involved in this case are:
1. Whether the Appellate Tribunal erred in setting aside the order u/s. 263 of the Income Tax Act, 1961 despite non-verification of the claim in respect of the Capital Gain?
2. Whether the decision of the Appellate Tribunal is perverse on facts and in law in not upholding the Order u/s. 263 of the Income Tax Act, 1961, which is based on wrong computation of the income by the Assessing Officer under the head Capital Gain by treating the net capital gain as Long Term Capital Gain, ignoring the provisions of Section 50 of the Income Tax Act, 1961?

Comprehensive details of the judgment for each issue involved:

1. The Principal Commissioner of Income Tax issued a notice under section 263 of the Income Tax Act, 1961 after finalizing the assessment order for A.Y. 2017-2018. The notice highlighted that the short-term capital gain on the sale of depreciable assets had been treated as long-term capital gain by the Assessing Officer, leading to an error in the assessment order.

2. The assessee responded to the notice, clarifying that the short-term capital gain was correctly treated as such, and there was no loss to the Revenue. The PCIT, however, passed the order under section 263, which was challenged by the assessee before the Tribunal.

3. The Tribunal, after considering the facts and legal interpretations presented by the assessee, found that the claim of set off of brought forward long-term capital loss against short-term capital gain was in accordance with the law. The Tribunal noted that there was no error in the assessment order and that the PCIT had not found any fault in the Assessing Officer's decision.

4. The Tribunal emphasized that the PCIT's revisionary powers under section 263 should only be exercised in case of errors in the Assessing Officer's order, not for mere verification purposes. It cited legal precedents to support this view, including a decision of the Hon'ble Allahabad High Court.

5. Despite arguments from the appellant's advocate, the Court upheld the Tribunal's decision, stating that while there may have been errors in the assessment order, the PCIT did not find any fault in the Assessing Officer's decision regarding the treatment of capital gains. The Court concluded that no substantial question of law arose from the impugned order, and thus dismissed the appeal.

This summary provides a detailed overview of the judgment, focusing on the issues raised and the legal reasoning behind the decision.