Gurbakshish Singh Batra Vs PCIT (ITAT Delhi)
Facts- Assessee is an individual and filed his ROI on 6th October, 2016 declaring the total income at Rs.44,86,160/-. The return was processed u/s 143(1) of the IT Act. Subsequently, the case of the assessee was selected for ‘limited scrutiny’.
AO, thereafter, issued notice u/s 143(2) of the Act on 03.07.2017. Subsequently, notices u/s 142(1) on 11th April, 2018 and 15th May, 2018 were also issued and served on the assessee. After considering the various submissions made by the assessee, the AO passed the order u/s 143(3) on 28.11.2018 determining the total income of the assessee at Rs.45,50,550/- by making an addition of Rs.64,386/- on account of Interest u/s 244A of the Act.
Subsequently, the ld. PCIT perused the assessment record and found that the assessee has claimed capital loss of Rs.5,76,814/- on one of the properties sold in the computation of income. Further, the market value of such property was Rs. 68,50,000 whereas the property was sold at Rs. 24,00,000/-which attracts provisions of Section 50C of the Act. The AO has not made any disallowance u/s 50C of the Act. She further noted that the assessee got possession of land on 26.11.2015, the lease deed was registered on 21.01.2016 and sold the same on 16.02.2016. The period of holding was less than 36 months and, therefore, the Capital Gain shall be treated as STCG. However, in computation, the assessee has taken it as long term capital Asset. The above facts according to her clearly show that the AO has not made proper inquiry and verification. Therefore, she initiated proceedings u/s 263 of the Income Tax Act and issued a notice u/s 263 of the IT Act asking the assessee to explain as to why the assessment should not be reframed u/s 263 of the IT Act. Rejecting the various explanations given by the assessee, the ld. PCIT passed her revisional order u/s 263 of the Act. Being aggrieved by the order of PCIT, assessee preferred appeal before Tribunal.
Conclusion- It is the settled proposition of law that for invoking the provisions of section 263 of the IT Act, the twin conditions, namely, (a) the order must be erroneous and (b) it must be prejudicial to the interest of the Revenue must be satisfied as held by the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, reported in 243 ITR 83. Since we have already held that the AO has conducted proper enquiry and has taken a plausible view, therefore, the order cannot be held to be erroneous, therefore, in absence of fulfillment of twin conditions, PCIT is not justified in invoking the jurisdiction u/s 263 of the IT Act, 1961. We, therefore, quash the section 263 proceedings initiated by ld. PCIT and the grounds raised by the assessee are allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order dated 22nd March, 2021 of the PCIT, Delhi-12, passed u/s 263 of the IT Act for the assessment year 2016-17.
2. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 6th October, 2016 declaring the total income at Rs.44,86,160/-.
The return was processed u/s 143(1) of the IT Act. Subsequently, the case of the assessee was selected for ‘limited scrutiny’ based on the following reasons:-
(i) Whether Sales turnover/receipts has been correctly offered to tax.
(ii) Whether capital gains/loss on sale of property has been correctly shown in the return of income.
3. The AO, thereafter, issued notice u/s 143(2) of the Act on 03.07.2017. Subsequently, notices u/s 142(1) on 11th April, 2918 and 15th May, 2018 were also issued and served on the assessee. In response to the statutory notices issued by the AO, the ld. AR of the assessee appeared from time to time. After considering the various submissions made by the assessee, the AO passed the order u/s 143(3) on 28.11.2018 determining the total income of the assessee at Rs.45,50,550/- by making an addition of Rs.64,386/- on account of Interest u/s 244A of the Act.
4. Subsequently, the ld. PCIT perused the assessment record and found that the assessee has claimed capital loss of Rs.5,76,814/- on one of the properties sold in the computation of income. Further, The market value of such property was Rs. 68,50,000 – whereas the property was sold at Rs. 24,00,000/-which attracts provisions of Section 50C of the Act. The Assessing Officer has not made any disallowance u/s 50C of the Act. She further noted that the assessee got possession of land on 26.11.2015, the lease deed was registered on 21.01.2016 and sold the same on 16.02.2016. The period of holding was less than 36 months and, therefore, the Capital Gain shall be treated as Short Term Capital Gain. However, in computation, the assessee has taken it as long term capital Asset. The above facts according to her clearly show that the AO has not made proper inquiry and verification. She, therefore, was of the opinion that the assessment order passed by the Assessing Officer in respect of A.Y. 2016-17 is erroneous in so far as it is prejudicial to the interests of revenue as the AO has passed the assessment order without making inquires or verification which should have been made during the assessment proceedings. Therefore, she initiated proceedings u/s 263 of the Income Tax Act and issued a notice u/s 263 of the IT Act asking the assessee to explain as to why the assessment should not be reframed u/s 263 of the IT Act. Rejecting the various explanations given by the assessee, the ld. PCIT passed her revisional order u/s 263 of the Act by making the following observation:-
“From the discussion made above, it is clear that the AO has not done any enquiry and verification which he should have done as per the details given above. I therefore, hold that the assessment order passed u/s 143(3) of the Income Tax Act, 1961 dated 28/11/2018 for A.Y. 2016-17 is erroneous in as much as it is prejudicial to the interest of revenue. The Assessment is cancelled with the direction that the assessment be made afresh de novo after conducting appropriate enquiries keeping in view of the facts mentioned above on the issues on which the case was selected for limited scrutiny. The A.O will give reasonable opportunity to the Assessee of being heard before completion of assessment.”
5. Aggrieved with such order of the PCIT, the assessee is in appeal before the Tribunal by raising the following grounds:-
“ 1.1 That on the facts and circumstances of the case, the Pr. Commissioner of Income Tax, New Delhi was not justified in invoking provisions of section 263 of the Income Tax Act, 1961 even though the assessment order passed u/s. 143(3) is neither erroneous nor prejudicial to the interest of the revenue.
1.2 That the Assessing Officer having passed the Assessment order u/s 143(3) after due verification and enquiry of facts of the case, the same cannot be considered as erroneous or prejudicial to the interest of the revenue.
1.3 That in any case, the Pr. CIT, New Delhi having failed to conduct any independent enquiry or expressing any conclusive error as regarding order being erroneous and prejudicial in the interest of revenue, there is no justification for setting aside the assessment order passed u/s 143(3) of the Act.
1.4 That assumption of jurisdiction u/s 263 is merely based on reappraisal of same facts and on surmises and conjectures.
2.1 That on the facts and circumstances of the case, the Pr. CIT, New Delhi was not justified in treating the long term capital asset as short term capital asset in total disregard to the facts of the case and settled legal principles.
2.2 That there being no dispute regarding the date of allotment of leasehold rights in the year Financial Year 2004-05, the Pr. CIT, New Delhi was not justified in treating the long term capital asset as short term capital asset and thereby making consequential disallowance of the benefit of indexation.
2.3 That the leasehold right in the land having been acquired by the Appellant upon the date of allotment in terms of section 2(47), the period of holding of such right should be considered from the date of allotment.
2.4 That the Appellant had paid the entire cost in Financial Year 2004-05 and the rights having been successfully allotted in Appellant’s name, there was creation of a capital asset in form of leasehold right in terms of section 2(14) of the Act.
2.5 That the decision of Hon’ble Delhi High Court in the case of Gulshan Malik vs. CIT (2014) 223 Taxmann 243 is not relevant and has been applied on illegal and arbitrary basis.
3.1 That the provisions of section 50C of the Act is applicable only in case of sale or transfer of immovable property being land or building and the same is not applicable on transfer of leasehold rights.
3.2 In any case, this being a case of bonafide sale made in accordance with prevailing market rate, the Pr. CIT, New Delhi was not justified in disputing the sale consideration u/s 50C without appreciating the factual position or making any reference to the Valuation Officer in terms of provisions of section 55A of the Income Tax Act, 1961.
3.3 That observation with regard to applicability of section 50C is merely on the basis of surmises & conjectures and not sustainable under law.
4 That order u/s 263 is not sustainable on facts and under the law as the same is not erroneous or prejudicial to the interest of revenue.”
6. The ld. Counsel for the assessee strongly challenged the order of the PCIT in invoking her revisional power u/s 263 of the IT Act. He submitted that the only issue in dispute as per the order of ld. PCIT is whether it is a case of long term or short term capital gain and value of sale consideration in terms of 50C of the Income Tax Act, 1961. In the light of above position, he made a reference to the following details as mentioned in his synopsis:
