INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Claim of capital gain on transfer of land - Proper enquiry concluded by AO

AO completed assessment under section 143(3) which was revised by PCIT under section 263 of the Act holding that in the return of income, assessee showed LTCG in respect of sale of agricultural land which was claimed as exempted. According to PCIT, AO did not raise any query nor make any inquiry regarding circumstances in which the seller of land, within 2 months, sold the land for a price 1335% higher than the purchase price. AO simply accepted the transaction as genuine on the basis of papers filed in the course of assessment and therefore, failure on the part of AO to examine the unusual transaction from the point of view of genuineness, rendered the order erroneous and prejudicial to the interest of Revenue. Held: ITAT had come to a factual finding that AO raised queries with regard to the claim of capital gain on transfer of land, assessee furnished the details in respect of distance of agricultural land from municipal limits, record of population as per last census and AO after considering the reply of assessee accepted the claim. ITAT has given a finding that the claim of capital gain was accepted by AO after necessary inquiry and the order under section 143(3) was passed. It is true that AO had not passed any written detailed order while accepting the explanation of capital gains of assessee but the fact was that AO had raised queries and assessee gave detailed reply thereto. Thus, AO passed this order after making necessary inquiries. PCIT cannot decide how elaborate an order of AO should be. Where AO, during the scrutiny assessment proceedings, has raised a query which was answered by the assessee to the satisfaction of AO but the same was not reflected in assessment order by him, PCIT cannot conclude that no proper inquiry with respect to the issue was made by AO so as to enable him to assume jurisdiction under section 263.

Followed:CIT, West Bengal II v. Durga Prasad More (1971) 82 ITD 540 (SC) : 1971 TaxPub(DT) 0375 (SC) and CIT v. Gabriel India Limited (1993) 203 ITR 108 (Bom) : 1993 TaxPub(DT) 1357 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2011-12

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