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TMI Blog2012 (8) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... "INVSTMENT" the Income from which was assessed under the head "Income from House Property". 5. The learned C.I.T-I, Hyderabad, failed to note that the Assessment of Surplus Income arising from transfer of Immovable Property was vexed issue highly debatable conceivably on which two views are possible and therefore, was not amenable to jurisdiction u/s. 263 of the Income Tax Act 1961 and therefore the Order passéd must be quashed. 6. …" Thus, the point in dispute in this appeal relates to the legality and validity of the order passed by the Chief Commissioner of Income-tax Act under S.263 of the Act, directing the assessing officer to tax the amount received by the assessee on cancellation of the development agreement entered into by it with M/s. Vansh Builders as income from business, as against the assessee's claim for assessing it under the head 'capital gains' which has been accepted by the Assessing Officer. 3. Facts of the case in brief are that the assessee is engaged in the business of manufacture and sale of copper products, jelly filled telephone cables and real estate. For the assessment year 2008-09, assessee filed return of income on 29.9.2008 declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial complex and thereafter sell the shops/space. This is nothing but trade/adventure in the nature of trade. Therefore, the amount received on cancellation of development agreement is assessable as business income. However, the same was offered as capital gains. To that extent order of the AO is erroneous and as well as prejudicial to the interests of revenue." After extracting the above portion of the show-cause notice, the Chief Commissioner, in para 3 of the impugned order observed that Shri K.C.Dev Das, FCA attended and filed written submissions stating that clause 19 of the said agreement was only an entitlement and not mandatory one. That clause, he noted, enabled the assessee to sell some of the shops in case there was any necessity, and as such, the assessee treated the entire deal as an investment only, as it was holding immovable properties as investment in the Balance Sheet. It was also pointed out to the Chief Commissioner that investment was made out of its own funds and had the project not failed, the property would have been exploited to earn the rental income. 5. The Chief Commissioner, thereafter concluded the matter, setting aside the assessment for being redon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee in its account has also shown it as investment 8. The learned Authorised Representative for the assessee questioning the assumption of jurisdiction under S.263 of the Act, submitted that the Assessing Officer having completed the assessment after making necessary enquiry on the issue, the order of assessment could not have been held to be either erroneous or prejudicial to the interests of Revenue. The learned Authorised Representative for the assessee submitted that during the assessment proceedings, the Assessing Officer has, in a questionnaire issued, has specifically called for information with regard to relinquishment of property right, and in reply to the question on that issue, the assessee in its letter dated 25.10.2010, submitted all the details with regard to the relinquishment of the property right under the Development Agreement and also submitted the Development Agreement cum Irrevocable General Power of Attorney alongwith the memorandum of compromise with M/s. Vansh Builders. In this context, the assessee referred to the questionnaire issued by the Assessing Officer, at page 114 of the paper-book and the assessee's reply at page 82 of the paper-book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003, and all along, the assessee has treated it as an investment and never shown as stock in trade, and therefore, the compensation received is assessable as income from capital gains. 10. The learned Departmental Representative submitted before us that the assessment order does not reveal that the Assessing Officer has applied his mind to this issue, since there is no mention on this particular issue, in the assessment order. The learned Departmental Representative referring to clause 11, 11D and 11E of the Memorandum and Articles of Association of the assessee, submitted that the assessee is a new entrant in the real estate business and has taken up the project of building commercial complex under the development agreement as a venture in the nature of trade. The learned Departmental Representative referring to the Development Agreement, which is at page 88 of the paper-book submitted that the terms of development agreement suggest it to be a business activity. He submitted that since the Assessing Officer has not made proper enquiries, the assessment order is erroneous and prejudicial to the interests of the Revenue and the power under S.263 have been rightly exercised. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord that the assessee in the return filed has offered the amount received as compensation on cancellation of the development agreement under the head 'income from capital gains. The Assessing Officer in the course of assessment proceedings, as revealed from the material on record, though not mentioned in assessment order, has examined this issue and conducted necessary enquiry by calling for information from the assessee. Only after receiving necessary details from the assessee, the Assessing Officer has proceeded to complete the assessment, apparently accepting the claim of the assessee. If at all there was no discussion on this issue in the body of the asst order, it may be because no addition/disallowance was to be made in relation to such issue, as the Assessing Officer was satisfied with the claim of the assessee as a result of the enquiries conducted. For that matter, even in the context of impugned proceedings under S.263 also, in the showcause notice issued, the Commissioner of Income-tax has raised a couple of other issues as well. However, as the Commissioner of Income-tax appears to have been satisfied with the replies of the assessee in relation to those issues, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied his mind to the issue, before accepting the claim of the assessee. Once it is seen that the Assessing Officer has conducted the enquiries and considered the issue, since he has taken one of the two possible views, the matter goes out of the scope of the revisionary powers under S.263 of the Act, since it cannot be said that the order of assessment was either erroneous or prejudicial to the interests of the Revenue. 14. It is a well settled principle of law that the jurisdiction of the commissioner under S.263 is a supervisory jurisdiction. It is intended for interference in special cases to counteract orders which are erroneous as well as prejudicial to the interests of Revenue. The expression 'prejudicial to the interests of revenue' is of wider import and must be regarded as involving a conception of acts or orders which are subversive of the administration of the Revenue. The scope of interference under S.263 is not to set aside merely unfavourable orders and bring into coffers of the Revenue, some more money. The revisionary power under S.263 is also not meant to set right escapement of revenue for which there are other provisions, like S.147, under the Act to take care of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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