LAXMI SURYA KUMARI ATLURI,HYDERABAD vs. ACIT., CIRCLE-3(1), HYDERABAD

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ITA 959/HYD/2025Status: DisposedITAT Hyderabad15 July 2026AY 2021-2214 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO failed to conduct proper inquiry regarding the nature of capital gains and the date of acquisition, making the assessment order erroneous and prejudicial to revenue. Therefore, the PCIT's revisionary order was justified.

What were the facts?

The assessee offered capital gains from property sales, which the AO accepted. The PCIT invoked Section 263, holding the AO's assessment order erroneous due to lack of inquiry into the nature of capital gains and the date of acquisition.

What were the issues?

Whether the PCIT was justified in revising the assessment order under Section 263 due to the AO's failure to verify the nature of capital gains and the date of acquisition of properties.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 2(42A),Section 54F

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘SM‘ Bench, Hyderabad

Before: Shri Ravish SoodShri Madhusudan Sawdia

Hearing: 29/06/2026

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘SM‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 959/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2021-22) Smt.Laxmi Surya Kumari Vs. ACIT Atluri, HYDERABAD CIRCLE 3(1) PAN: ABQPA3908A HYDERABAD (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: CA Pawan Kumar Chakrapani राज� व �ारा/Revenue by: Dr. Seema Meena CIT(DR) सुनवाई की तारीख/Date of hearing: 29/06/2026 घोषणा की तारीख/Pronouncement: 15/07/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by Smt. Laxmi Surya Kumari Atluri (“the assessee”), feeling aggrieved by the order passed by the Learned Principal Commissioner of Income Tax -1, Hyderabad (“Ld. PCIT”) dated 13.03.2025 for the A.Y. 2021- 22. 2. The assessee has raised the following grounds of appeal:

3.

The brief facts of the case are that the assessee is an individual who filed her return of income for Assessment Year 2021-22 on 30.03.2022 declaring total income of the assessee at ₹1,96,05,930/- comprising income from house property and capital gains. The case of the assessee was selected for scrutiny and accordingly notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) dated 28.06.2022 was issued by the Learned Assessing Officer (“Ld. AO”). After considering the submissions filed by the assessee, the assessment was completed by the Ld. AO under section 143(3) read with section 144B of the Act vide order dated 22.12.2022 accepting the returned income of the assessee. 4. Subsequently, the Ld. PCIT invoked the provisions of section 263 of the Act on the ground that the assessment order passed by the Ld. AO was erroneous in so far as it was prejudicial to the interests of the Revenue. After considering the submissions of the assessee, the Ld. PCIT set aside the assessment order holding that the Ld. AO had failed to examine the nature of capital gains arising from sale of Property vide sale deed no. 2860/2020 (“Property No.1”) and Property vide sale deed No.2861/2020 (“Property No.2”) with reference to the provisions of section 2(42A) of the Act and directed the Ld. AO to recompute the capital gains in accordance with law. 5. Aggrieved with the order of the Ld. PCIT, the assessee is in appeal before the Tribunal. The Learned Authorized Representative (“Ld. AR”) submitted that the assumption of jurisdiction under section 263 of the Act by the Ld. PCIT is bad in law. It was submitted that the objection of the assessee is manifold. At the outset, it was contended that

the issue relating to capital gains had already been examined by the Ld. AO during the course of assessment proceedings and after due verification the Ld. AO had accepted the computation furnished by the assessee. Therefore, it was argued that once the Ld. AO had taken one of the possible views, the assessment order could not be treated as erroneous and prejudicial to the interests of the Revenue. In this regard, the Ld. AR invited our attention to the notices issued by the Ld. AO and the acknowledgements of the replies filed by the assessee placed at page nos. 210 to 236 of the paper book and submitted that during the year under consideration the assessee had sold four immovable properties, offered capital gains thereon and claimed exemption under section 54F of the Act. After examining all the relevant documents, the Ld. AO accepted the returned income. Therefore, the order passed by the Ld. AO was not erroneous, so as to prejudicial to the interest of the Revenue. Accordingly, it was prayed before the Bench to set aside the order of the Ld. PCIT. 6. In their other objections, it was further submitted that though the Ld. PCIT alleged lack of enquiry on the part of the Ld. AO, he had not invoked Explanation 2 to section 263(1) of the Act and therefore the order passed under section 263 of the Act was legally unsustainable. 7. While arguing the other objection of the assessee, the Ld. AR referring to para nos. 9.2 to 14 of the order of the Ld. PCIT, submitted that the Ld. PCIT erred in considering the date of registration as the date of acquisition of the properties. Inviting our attention to the purchased documents of property no.1 placed at page nos. 137 to 170 of the paper book,

particularly page no.147, it was submitted that out of the total consideration of ₹2,03,84,000/-, a sum of ₹1.60 crore had already been paid during Financial Year 2008-09 and therefore the assessee had acquired valuable rights in the property during Financial Year 2008-09 itself. Similar submissions were made in respect of the property no.2, referring to purchased documents placed at page no.99 to 136 of the paper book, particularly, page no.109, it was contended that out of the total consideration of ₹1,75,10,360/-, a sum of ₹30 lakh had been paid by the assessee during Financial Year 2008-09 and rights in the property had accrued from that date. Accordingly, it was submitted that the Ld. PCIT wrongly proceeded on the basis that the properties were acquired only on the date of registration and consequently erred in holding that the gains were liable to be treated as short-term capital gains. 8. The Ld. AR further pointed out that there were factual inconsistencies in the order of the Ld. PCIT. It was submitted that in para no. 9.3 the Ld. PCIT observed that the Ld. AO had adopted the cost of acquisition of property no.1 at ₹2,03,84,000/- instead of ₹1,75,10,360/-, whereas in para no. 10.3 the Ld. PCIT stated that the Ld. AO had adopted the cost of property no.2 at ₹1,75,10,360/- instead of ₹2,03,84,000/-. It was submitted that the cost of the property no.1 was ₹2,03,84,000/- and the second property’s cost was ₹1,75,10,360/- and therefore the observations of the Ld. PCIT were factually incorrect. Accordingly, it was prayed that the order passed under section 263 be quashed. 9. Per contra, the Learned Departmental Representative (“Ld. DR”) strongly relied upon the order of the

Ld. PCIT and submitted that the Ld. AO had failed to verify the most crucial aspect relating to the nature of the capital gains arising from sale of the properties. It was submitted that both the properties were registered on 13.05.2019 and despite such material being available on record, the Ld. AO accepted the claim of long-term capital gains without conducting any enquiry regarding the actual date of acquisition and the applicability of section 2(42A) of the Act. It was further submitted that the order of the Ld. AO was passed without proper verification and therefore the Ld. PCIT was justified in exercising revisionary jurisdiction under section 263 of the Act. 10. We have heard the rival submissions and perused the material available on record. We have carefully gone through para nos. 9 to 14 of the order passed by the Ld. PCIT, which is to the following effect:

11.

On perusal the above, we find that the Ld. PCIT has specifically mentioned that the Ld. AO had not at all verified the computation of capital gains with reference to the nature of the capital asset sold by the assessee. The Ld. PCIT has specifically recorded a finding that both the properties were registered on 13.05.2019 and that if such date is considered as the date of acquisition, the gains arising on sale thereof would result in short-term capital gains. The grievance of the Ld. PCIT is that despite the availability of these facts on record, the Ld. AO accepted the claim of long-term capital gains without conducting any enquiry whatsoever regarding the holding period of the properties. We have also perused the registered purchased deeds of both the properties placed at page nos. 99 to 170 of the paper book. From the documents available on record, it is evident that both the properties were registered in favour of the assessee on 13.05.2019. Prima facie, therefore, it can be concluded that the properties stood purchased on 13.05.2019 and if such date is adopted as the date of acquisition, the gains arising on sale thereof would partake the character of short-term capital gains. We have further examined the notices issued by the Ld. AO and the acknowledgement of the replies filed by the assessee placed at page nos. 210 to 236 of the paper book. On perusal of the same, we find that despite the significance of the issue and despite the registration deeds being available on record, the Ld. AO failed to verify the basis on which the assessee treated the properties as long-term capital assets. No enquiry appears to have been conducted regarding the date from which the assessee claimed to have acquired rights in the properties, nor is there any discussion in the assessment order regarding the

applicability of section 2(42A) of the Act. In this regard, we have gone through the Explanation 2 to section 263(1) of the Act, which is to the following effect:

“Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.”

Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 12. On perusal of the above, it is evident that if the assessment order is passed without making inquiry or verification, which should have been made, then in that case, the order passed by the Ld. AO is deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue. In the present case, the Ld. AO had failed to examine a crucial aspect of nature of capital gains having substantial bearing on the tax liability of the assessee. Therefore, in our considered view, the Ld. PCIT was justified in holding that the Ld. AO had failed to examine a crucial aspect having substantial bearing on the tax liability of the assessee.

13.

As regards the contention of the assessee that the Ld. PCIT had not specifically invoked Explanation 2 to section 263(1) of the Act, we find no merit therein. A reading of the revision order clearly demonstrates that the Ld. PCIT has recorded a categorical finding that the Ld. AO failed to make enquiry on a material issue having direct bearing on the

computation of capital gains. Merely because a particular Explanation has not been specifically referred to in the order, the same would not invalidate the exercise of jurisdiction when the foundational facts justifying invocation of section 263 of the Act are clearly recorded. 14. The contention of the assessee that substantial payments had been made during Financial Year 2008-09 and that rights in the properties had accrued from that period also does not advance the case of the assessee at this stage. Admittedly, this aspect was never examined by the Ld. AO during the assessment proceedings. Whether the payments made prior to registration conferred any enforceable rights upon the assessee so as to constitute acquisition of the capital asset from an earlier date is a matter requiring proper verification on the basis of supporting documentary evidence. Since no such exercise was undertaken by the Ld. AO, the Ld. PCIT was justified in directing fresh examination of the issue. 15. Similarly, the factual discrepancies pointed out by the assessee in para nos. 9.3 and 10.3 of the order of the Ld. PCIT regarding the cost of acquisition do not materially affect the validity of the revisionary order. The core finding of the Ld. PCIT is that the Ld. AO failed to verify the nature of the capital gains despite both the properties having been registered on 13.05.2019. Such failure goes to the root of the assessment and has a direct impact not only on the computation of capital gains but also on the eligibility of exemption claimed by the assessee under section 54F of the Act. Further, as far as the purchase cost of the property no.1 is concerned, we have gone through page no.5 of the registered purchase deed of property

No.1 placed at page no.147 of the paper book, which is to the following effect:

16.

On perusal of the above, it is evident that the total purchase consideration of the property no.1 is Rs.2,03,84,000/-. However, in the Table of payment, the total payment has been mentioned as Rs.2,03,84,000/-, but the payment details of only Rs.1,73,84,000/- has been provided. We have also gone through computation of Long-Term Capital Gain of the property no.1 furnished by the assessee, which has been reproduced at page no. 5 of the order of the Ld. PCIT, the same is reproduced as under:

17.

On perusal of the above, we found that the assessee has claimed the total cost of Rs.1,73,84,000/- for calculation of Long-Term Capital Gains. Therefore, there is factual mismatch with regard to purchase cost of property no.1. As per registered purchased deed, although total purchase cost has been mentioned as Rs.2,03,84,000/-. However, in the same registered purchased deed, there is inconsistency in the table of the payment schedule, which contained the details of the payment of only Rs.1,73,84,000/-. No payment details of Rs.30 lakhs have been provided in the registered purchase deed.

Further, the assessee for the purposes of calculation of capital gains, has taken the cost of purchase of the property no.1 at Rs. 1,73,84,000/-. Hence, the contention of the assessee, that there is no factual errors in the calculation of capital gain of the property with regard to purchase cost, is not acceptable. The same has also missed the sight of the Ld. AO.

18.

In view of the foregoing discussion, we are of the considered opinion that the assessment order was passed without proper enquiry on a vital issue and therefore the Ld. PCIT was justified in invoking the provisions of section 263 of the Act. We, therefore, do not find any infirmity in the order passed by the Ld. PCIT. Accordingly, the appeal of the assessee is dismissed.

19.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the Open Court on 15th July, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 15th July, 2026. Vinodan/sps Copy to: S.No Addresses 1 Smt. Laxmi Surya Kumari Atluri Plot No.893M, Road No.44/A Jubilee Hills, Hyderabad 500033 2 Assistant Commissioner of Income Tax Circle 3(1) Signature Towers, Kondapur, Hyderabad 500084 3 Pr. CIT –, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order Digitally signed by TUMMALACHARLA TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.07.15 12:14:05 +05'30'

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