INCOME TAX ACT, 1961

Section 263

Revision - Erroneous and prejudicial order - No lack of proper enquiry -

AO completed scrutiny assessment under section 143(3) in case of assessee whereby the AO accepted the returned income. Subsequently, CIT invoked his jurisdiction under section 263 observing that the order passed by the AO was erroneous and prejudicial to the interest of Revenue. CIT was of the view that the AO accepted the capital gains offered by the assessee from sale of ancestral property without considering the fact that the assessee sold the said property by plotting to 59 different persons. Thus, in view of the CIT, the transactions should have been judged as business income instead of capital gains after computing the capital gains under section 45(2). Held: There was no allegation by CIT in the show cause that the assessment order passed by the AO was erroneous on account of lack of enquiry. It was found that assessee sold the property for a consideration of Rs. 1,08,28,148 while the stamp duty valuation of the said property was Rs. 1,08,25,150. Thus, the said amount would be deemed to be full value consideration, which was the actual sale consideration and accordingly, there would be no change in the capital gains computed and declared by the assessee even after applying the provisions of section 45(2). Resultantly, the business income, if any, from the said transfer would be Nil as the cost of acquisition of stock-in-trade and the sale consideration of the said property was the same. Therefore, even after invoking the provisions of section 45(2), there would be no change in the tax liability of the assessee. Hence, the order passed by the AO could not be said to be prejudicial to the interest of the Revenue. Accordingly, the impugned order passed by the CIT under section 263 would not be sustainable.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

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