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TMI Blog2022 (11) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the LTCG, reported by the assessee which was lesser by an amount when compared with the original return and completed the assessment. We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issue raised through the show cause notice by the Ld. PCIT, supporting its contentions by various decisions. It is well settled law that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon'ble Courts. Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries [ 2000 (2) TMI 10 - SUPREME COURT] held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee filed its original return of income on 28.11.2016 reporting a total income of Rs.11,24,08,210/-. Thereafter, assessee filed a revised return of income on 06.02.2017 reporting total income of Rs.11,07,94,330/-. Ld. AO considered the revised return for completing the assessment u/s. 143(3) of the Act. The assessment was completed by the Ld. AO u/s. 143(3) of the Act vide order dated 05.12.2018 after making certain additions/disallowance at an assessed income of Rs.11,51,49,753/-. 4. Subsequent to the assessment, assessments records were called for and examined by the Ld. Pr. CIT from which it was observed that assessee has shown the income under the head long term capital gain from sale of investment. Vide letter dated 19.11.2018, assessee claimed before the Ld. AO that by mistake the amount of long term capital gain was reported as Rs.11,28,60,459/- which should be Rs.11,13,51,302/- and thus, claimed for reduced amount of long term capital gain by Rs.15,09,157/-. Ld. Pr. CIT observed that Ld. AO has considered the request of the assessee based on the letter submitted by it which ought to have been done only through filing of a revised return and not by way of a let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountant was obtained for the valuation of the impugned shares. Based on this valuation, assessee exercised its option u/s. 55(2)(b) of the Act to arrive at the FMV as on 01.04.1981 of the shares sold which were acquired in FY 1975-76. It was thus, submitted by the Ld. Counsel that when the option u/s. 55(2)(b) of the Act was exercised, it resulted into higher quantum of indexed cost of acquisition as on 01.04.1981, leading to reduction of the amount of long term capital gain already reported in the income tax return. The amount of long term capital gain which was reduced due to exercise of option u/s. 55(2)(b) of the Act is of Rs.15,09,157/-. 6.1. Ld. Counsel submitted that there was no claim of any new deduction except for this correction in the indexed cost for acquisition of shares by exercising the option u/s. 55(2)(b) of the Act which was initially based on the historical cost of acquisition of FY 1975-76. Ld. Counsel stated that from the audited financial statement of KLMCL, valuation report dated 26.11.2018 was obtained from a Chartered Accountant and a detailed calculation of the reduced amount of long term capital gain were, all furnished in the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an option to the assessee for the purpose of adopting the cost of acquisition as the FMV of the asset as at 01.04.1981 which the assessee has exercised by getting a valuation report from a Chartered Accountant in terms of requirement of Rule 11UA of the Income-tax Rules, 1962, when the audited financial statement of KLMCL became available to the assessee. It is stated by the Ld. Counsel for the assessee that assessee could not exercise the option available u/s. 55(2)(b) of the Act at the time of filing of return since the audited financial statement of KLMCL as at 31.03.1981 were not available with it. In absence of such Balance Sheet of KLMCL, assessee resorted to compute the LTCG by taking historical cost of acquisition of FY 1975-76. 8.1. In the course of assessment proceedings, when the correction in the computation of LTCG on sale of shares was brought to the knowledge of the Ld. AO by exercising the option available u/s. 55(2)(b) of the Act, he took cognizance of this corrective facts, for which all the relevant corroborative documentary evidences were placed on record. Thus, by considering the details and documents, Ld. AO accepted the correction made by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of an adjudicator] then in aforesaid any of the events, the order passed by the AO can be termed as erroneous order. 10.1. Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 11. We find that the issue in the present case is purely on facts which is verifiable from the records of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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