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Facts
The assessee preferred an appeal against the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961. The PCIT had noted discrepancies in the assessment order regarding long-term capital gains and unexplained money, consequently directing a re-computation by the Assessing Officer (AO). The assessee challenged the PCIT's direction to use the acquisition date of 08/12/2007 for indexation instead of the 'articles of agreement' date of 2005-06.
Held
The Tribunal clarified that the AO is at liberty to verify factual aspects and determine the issue afresh, without being influenced by the PCIT's observations. The AO must independently apply their mind and give the assessee an opportunity of being heard. The assessee is not challenging the direction to consider the returned income but only the indexation period for the property.
Key Issues
Whether the PCIT erred in directing the AO to consider the index cost for capital gains based on the property acquisition date rather than the agreement date, and if the AO's reassessment was tainted by PCIT's specific observations.
Sections Cited
263, 143(3), 144B, 69A, 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH : NAGPUR
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI K.M. ROY
This appeal has been preferred by the assessee against the order dated 19/03/2025 impugned herein passed by the Ld. Principal Commissioner of Income Tax, Nagpur–1 [in short, “Ld. Commissioner”] u/sec. 263 of the Income Tax Act, 1961 (for short, “the Act”) for the Assessment Year (for short, “AY”) 2021-22.
2 ITA.No.241/NAG/2025 2. In the instant case, vide assessment order dated 29/12/2022 u/sec. 143(3) r.w.s. 144B of the Act, the Assessing Officer though accepted the claim of the assessee with regard to long term capital gain, however, made the addition of ₹ 20,80,000/– on account of unexplained money u/sec. 69A of the Act. The Ld. PCIT while considering the assessment order, noted certain discrepancies qua non–enquiring certain facts and consequently issued notice dated 28/10/2024 u/sec. 263 of the Act, with regard to long term capital gain as well as shortfall in the tax effect of ₹ 1,34,322/–. The assessee replied to the above said notice, challenging the action of the ld. PCIT in exercising powers u/sec. 263 of the Act. The assessee also claimed before the ld. PCIT that admittedly, the Assessing Officer by issuing various notices u/sec. 143(2) as well as 142(1) of the Act, raised specific queries with regard to the details of sale/purchases of property during the year and also asked the assessee to furnish detailed statements regarding the source of amount given in the purchase transactions as well as details of the property at Mari Gold Premises vide sale deed dated 09/10/2020. The ld. PCIT though considered the claim of the assessee, however, ultimately opined that the property having been acquired on 08/12/2007 and given indexed to the CII of FY 2007–08 and not in the FY 2005–06 i.e. year of “articles of agreement” of purchase. The ld. PCIT further observed that the Assessing Officer has not taken into consideration the returned income, while calculating the tax and therefore, the same is required to be recomputed by the A.O.
Consequently, on the aforesaid aspects, the ld. PCIT set aside the assessment order for the limited issue mentioned above with a direction to the Jurisdictional Assessing Officer to pass necessary
3 ITA.No.241/NAG/2025 order by conducting enquiries and verification of the claim in the light of the above discussion, after giving an opportunity of being heard. The assessee being aggrieved has preferred the instant appeal challenging the order of the ld. PCIT passed u/sec. 263 of the Act.
Having heard the parties and perused the material available on record. The assessee is not challenging the direction of the ld. PCIT in directing the Jurisdictional Assessing Officer for taking into consideration the returned income of ₹ 10,55,520/– while calculating the tax, however, the assessee challenging the direction of the ld. PCIT in directing the Jurisdictional Assessing Officer to consider the index cost on the basis of property acquired on 08/12/2007 for the F.Y. 2007–08, but not of the FY 2005–06 i.e. year “articles of agreement” of purchase. The assessee has raised the issue that the ld. PCIT has given specific observation and, therefore there is likelihood that Jurisdictional Assessing Officer would follow his direction strictly and will make addition without giving proper opportunity and applying his mind independently.
On the contrary, ld. DR submitted that ld. PCIT by set aside the assessment order has directed the Assessing Officer to conduct necessary enquiries and verification of the claim of the assessee, but not in particular pattern.
We have given thoughtful consideration to the peculiar facts and circumstances of the case and rival claims of the parties. In the interest of substantial justice and proper adjudication of the 4 ITA.No.241/NAG/2025 case, we clarify that the Assessing Officer would be at liberty to verify the factual aspects only and determine the issue afresh accordingly, without being influenced by the observations made by the ld. PCIT in order impugned and by following the dictum laid down in PCIT–3, Mumbai vs. Vembu Vaidyanathan [2019] 101 taxmann.com 436 (Bombay) in its true spirit. Thus, the appeal of the Assessee stands disposed of with the above clarification.
In the result, appeal of the Assessee is allowed for the limited purpose of clarification.
Order pronounced in the open Court on 23.06.2025.