CIT & Anr. v. D.G. Gopala Gowda

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The Tax Publishers2013 TaxPub(DT) 1618 (Karn-HC) : (2013) 053 (I) ITCL 0124 : (2013) 354 ITR 0501 : (2013) 088 DTR 0273 Income Tax Act, 1961 --Revision under section 263--Condition precedent Order of assessment not prejudicial to interest of revenue --assessing officer computed the income from the long-term capital gains for the sale of the property, however, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property. Commissioner of Income-tax issued a notice under section 263 stating that the assessing officer was not justified in treating the sale as long-term capital gains and, according to him, it should have been treated as short-term capital gains. Commissioner proceeded to pass the order setting aside the order of assessment on the ground that it was prejudicial to the interests of the Revenue. Tribunal set aside the order of the revisional authority and granted relief to the assessee. *Held :* Rightly so as there was no iota of evidence to show how it was prejudicial to the interests of the Revenue. Even if the assessment was to be made separately for the land on long-term basis and to the building on short-term basis, the assessee was not liable to pay any tax for the building. The assessee had demonstrated that in no event the order passed by the assessing officer was prejudicial to the interests of the Revenue. That aspect had not been considered and there was no reference to that aspect in the entire order passed by the revisional authority and by a cryptic order, the matter was remanded to the assessing authority. Therefore, the order passed by the revisional authority was illegal and rightly it had been set aside. Income Tax Act, 1961, Section 263 In the Karnataka High Court N. Kumar & B. Manohar J.J. CIT & Anr. v. D. G. Gopala Gowda I.T.A. No. 1422 of 2006 5 March, 2013 Appellants by : M. Thirumalesh, Advocate Respondent by : A. Shankar, Advocate JUDGMENT *N. Kumar, J*. The Revenue has preferred this appeal against the order passed by the Income-tax Appellate Tribunal (for short 'the Tribunal') which has set aside the order passed by the Commissioner under section 263 of the Income Tax Act, 1961 (for short, hereinafter referred to as 'the Act') and remanded the matter back to the assessing authority for fresh consideration. 2. The assessee had purchased a site at Rupena Agrahara in the financial year 1995-96 for a consideration of Rs. 3,46,520. He started construction of the building in April, 1999. He agreed to sell the said property under the agreement dated 9-9-2000, in unfinished condition. Under the terms of agreement, the assessee should complete the construction of the building before execution of sale deed with the help of the funds provided by the purchaser. On 22-11-2000, the assessee executed a sale deed in favour of the purchaser for a consideration of Rs. 1,38,00,000. The assessee received a sum of Rs. 40,00,000 at the time of agreement. The total cost of construction was Rs. 1,04,30,425. Thereafter, the assessee purchased another property at Koramangala. The assessing officer computed the income from the long-term capital gains at Rs. 22,17,940 for the sale of the property. However, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property at Koramangala. The Commissioner of Income-tax issued a notice under section 263 of the Act stating that the assessing officer was not justified in treating the sale as long-term capital gains and, according to him, it should have been treated as short-term capital gains. The assessee filed his reply to the show-cause notice. Thereafter, the Commissioner proceeded to pass the order setting aside the order of assessment on the ground that it is prejudicial to the interests of the Revenue. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal went into the factual aspects and took note of the legal position as settled in various judgments of the courts and in fact, calculated both the short-term and long-term capital gains and then found that the assessee is not liable to pay any tax. Therefore, it recorded the finding that even if the order of the assessing authority is erroneous, it is not prejudicial to the interests of the Revenue. Therefore, set aside the order of the revisional authority and granted relief to the assessee. Aggrieved by the said order, the Revenue has preferred this appeal. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1618 (Karn-HC) : (2013) 053 (I) ITCL 0124 : (2013) 354 ITR 0501 : (2013) 088 DTR 0273

Income Tax Act, 1961

--Revision under section 263--Condition precedent Order of assessment not prejudicial to interest of revenue --assessing officer computed the income from the long-term capital gains for the sale of the property, however, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property. Commissioner of Income-tax issued a notice under section 263 stating that the assessing officer was not justified in treating the sale as long-term capital gains and, according to him, it should have been treated as short-term capital gains. Commissioner proceeded to pass the order setting aside the order of assessment on the ground that it was prejudicial to the interests of the Revenue. Tribunal set aside the order of the revisional authority and granted relief to the assessee. Held : Rightly so as there was no iota of evidence to show how it was prejudicial to the interests of the Revenue. Even if the assessment was to be made separately for the land on long-term basis and to the building on short-term basis, the assessee was not liable to pay any tax for the building. The assessee had demonstrated that in no event the order passed by the assessing officer was prejudicial to the interests of the Revenue. That aspect had not been considered and there was no reference to that aspect in the entire order passed by the revisional authority and by a cryptic order, the matter was remanded to the assessing authority. Therefore, the order passed by the revisional authority was illegal and rightly it had been set aside.

Income Tax Act, 1961, Section 263

In the Karnataka High Court

N. Kumar & B. Manohar J.J.

CIT & Anr. v. D. G. Gopala Gowda

I.T.A. No. 1422 of 2006

5 March, 2013

Appellants by : M. Thirumalesh, Advocate

Respondent by : A. Shankar, Advocate

JUDGMENT

N. Kumar, J.

The Revenue has preferred this appeal against the order passed by the Income-tax Appellate Tribunal (for short 'the Tribunal') which has set aside the order passed by the Commissioner under section 263 of the Income Tax Act, 1961 (for short, hereinafter referred to as 'the Act') and remanded the matter back to the assessing authority for fresh consideration.

2. The assessee had purchased a site at Rupena Agrahara in the financial year 1995-96 for a consideration of Rs. 3,46,520. He started construction of the building in April, 1999. He agreed to sell the said property under the agreement dated 9-9-2000, in unfinished condition. Under the terms of agreement, the assessee should complete the construction of the building before execution of sale deed with the help of the funds provided by the purchaser. On 22-11-2000, the assessee executed a sale deed in favour of the purchaser for a consideration of Rs. 1,38,00,000. The assessee received a sum of Rs. 40,00,000 at the time of agreement. The total cost of construction was Rs. 1,04,30,425. Thereafter, the assessee purchased another property at Koramangala. The assessing officer computed the income from the long-term capital gains at Rs. 22,17,940 for the sale of the property. However, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property at Koramangala. The Commissioner of Income-tax issued a notice under section 263 of the Act stating that the assessing officer was not justified in treating the sale as long-term capital gains and, according to him, it should have been treated as short-term capital gains. The assessee filed his reply to the show-cause notice. Thereafter, the Commissioner proceeded to pass the order setting aside the order of assessment on the ground that it is prejudicial to the interests of the Revenue. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal went into the factual aspects and took note of the legal position as settled in various judgments of the courts and in fact, calculated both the short-term and long-term capital gains and then found that the assessee is not liable to pay any tax. Therefore, it recorded the finding that even if the order of the assessing authority is erroneous, it is not prejudicial to the interests of the Revenue. Therefore, set aside the order of the revisional authority and granted relief to the assessee. Aggrieved by the said order, the Revenue has preferred this appeal.