| The Tax Publishers2019 TaxPub(DT) 8458 (Jp-Trib) INCOME TAX ACT, 1961
Section 263
When the ancestral property was sold by the assessee by plotting to 59 different persons, then the provisions of section 45(2) were applied. But, if there would be no revenue loss even if the provisions of section 45(2) were applied, then in such a situation the PCIT was not allowed to exercise its power under section 263 merely because the AO had accepted the capital gains declared by the assessee.
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Revision under section 263 - Validity - AO accepted the capital gains declared by assessee from sale of ancestral property - No revenue loss
AO had accepted the capital gains offered by assessee from sale of ancestral property without considering the fact that the assessee had sold the said property by plotting to 59 different persons. Thus, in view of the PCIT, the transactions should have been judged as business income, instead of capital gains after computing the capital gains under section 45(2). Therefore, PCIT held that order passed by the AO was erroneous and prejudicial to the interest of Revenue and accordingly, he invoked section 263.Assessee contended that even if the provisions of section 45(2) were applied, there would be no change so far as the capital gains arising from the said transaction and there would be no business income as the cost of stock-in-trade would be same as sale consideration being the fair market price. Held: When the ancestral property was sold by the assessee by plotting to 59 different persons, then the provisions of section 45(2) were applied. But, as in the instant case, the business income arising from the transfer of ancestral property under the provisions of section 45(2) would be Nil as the cost of acquisition of stock-in-trade and the sale consideration of the said property was the same, there would be no change in the capital gains computed and declared by the assessee even after applying the provisions of section 45(2). Thus, the order passed by the AO could not be said to be prejudicial to the interest of the Revenue. Accordingly, the PCIT had not rightly exercised its revisionary power under section 263.
REFERRED : Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83(SC) : 2000 TaxPub(DT) 1227 (SC),CIT v. Vegetable Products Limited (1973) 88 ITR 192 (SC) : 1973 TaxPub(DT) 0421 (SC),Raja J. Rameshwar Rao v. CIT (1961) 42 ITR 179(SC) : 1961 TaxPub(DT) 0226 (SC),Indian Hume Pipe Co. Limited v. CIT (1992) 107 CTR 95 (Bom.) : 1992 TaxPub(DT) 0483 (Bom-HC), and CIT v. A. Mohammed Mohideen (1989) 74 CTR 129 (Mad) : 1989 TaxPub(DT) 0592 (Mad-HC)
FAVOUR : In assessee's favour
A.Y. : 2015-16
IN THE ITAT, JAIPUR BENCH
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