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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI JASON P. BOAZ (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against order dated 13/03/2015 passed by the Pr. Commissioner of Income Tax-28, Mumbai, under section 263 of the Income Tax Act, 1961 (for short ‘the Act.’), pertaining to the assessment year 2010-11, whereby the Ld. Commissioner has set aside the assessment order passed by the AO, exercising the jurisdiction under section 263 of the Act and ordered for passing assessment order afresh.
Brief facts of the case are that the assessee, engaged in the business of trading in paper scrap, filed its return of income for relevant A.Y. declaring the total income at Rs. 4,41,637/-. The case was selected for scrutiny and accordingly notice u/s 143 (2) was issued and after considering the details and 2 Assessment Year: 2010-11 submissions made by the assessee, the assessment order u/s 143 (3) of the Act was passed determining the total income of the assessee at Rs. 40,82,550/- after making addition of Rs. 36,27,974/- under the head Capital Gain and Rs. 12,937/- i.e. 20% of Rs. 64,684/-, claimed by the assessee as Motor Car depreciation.
The Ld. Pr. of Commissioner finding the assessment order erroneous and prejudicial to the interest of the revenue issued show cause notice to the assessee for the following reasons:
During the year under consideration, the consideration on sale of flat no. 504, Woodland Heights, Chandiwali was declared at Rs. 19,50,000/- as against stamp duty value of Rs. 31,85,000/- which should have been considered as sale consideration as per the provisions of section 50C of the Income Tax Act, 1961. ii The Capital gain on sale of flat no. 505 & 506, Woodland Heights Chandiwali should have been declared as STCG as it was head for less than 36 months.
In response thereof the authorized representative filed written submissions and contended that the provisions of Section 50C are not applicable as what is sold is the right in a property and that the right in the property has been acquired prior to 36 months and hence it will be only a long term capital gain. The Ld. CIT (A) rejected the contention of the assessee and set aside the assessment order holding that the assessment order is erroneous and prejudicial to the interest of the revenue.
Aggrieved by the impugned order passed by the Ld. Pr. Commissioner, the assessee has filed the present appeal on the following effective grounds:-
3 Assessment Year: 2010-11
1. “On the facts and in the circumstances of case and in law, the Pr. Commissioner of Income Tax has erred in invoking section 263 of the Income Tax Act, 1961 (‘the Act’).
2. Without prejudice to ground no. 1, on the facts and in the circumstances of case and in law, the Pr. Commissioner of Income Tax has erred in treating long term capital gains of Rs. 36,27,974/- as short term capital gains in respect of capital gains on sale of rights in flat 505 and 506. 3. Without prejudice to ground no. 1, on the facts and in the circumstances of case and law, the Pr. Commissioner of Income Tax has erred in invoking section 50C of the Act and thereby adopting sale consideration at Rs. 31,85,000/- being the stamp duty value in respect of flat 504 which was under construction” 6. Before us, the Ld. Counsel for the assessee submitted that the Ld. Pr. Commissioner has erred in invoking section 263 of the Act as the AO has already considered all the facts and documents before passing the assessment order in question. As per the settled law section 263 of the Act cannot be invoked merely because there is some other plausible view, the Ld. Counsel relied on the law laid down by the Hon’ble jurisdictional High Court, Bombay in Commissioner of Income Tax Vs. Gabriel India Ltd., 203 ITR 108 (Bom), the order rendered by the ITAT, Mumbai in Sh. Suresh K Jajoo Vs. ACIT (2010, TIOL, 114 (Mum, ITAT) and Ramesh P Modi Vs. CIT 2009, (122) TTJ 0566, (Mum, ITAT) .
On merits, without prejudice to ground no. 1, the Ld. Counsel submitted that the Ld. Pr. Commissioner has erred in treating long term capital gain of Rs. 36,27,974/- as short term capital gain in respect of capital gain on sale of rights in flat no. 505 & 506. The rights in property in respect flat no. 505 & 506 were acquired by the appellant on 05.01.2006 and 09.10.2006 respectively i.e. for more than 36 months the gain cannot be treated as short term capital gain.
4 Assessment Year: 2010-11
The Ld. Counsel submitted that so far as application of section 50C of the Act on sale of rights in flat no. 504 is concerned, this section applies to capital asset being land or building or both. However, in the present case the rights in the residential flats under construction were sold, which do not fall in the category of land or building. The sale consideration will not be based on the actual sale consideration for the stamp duty values whichever is higher.
On the other hand, the Ld. Departmental Representative relying on the order passed by the Ld. Pr. Commissioner submitted that the Ld. Commissioner has rightly exercised the powers u/s 263 of the Act as the assessment order is erroneous as well as prejudicial to the interest of the revenue.
We have heard the rival submissions and perused the material placed on record in the light of the respective contentions of the parties. We have also gone through the orders passed by the authorities below and the case law relied upon by the parties. We notice that the Ld. Pr. Commissioner has passed the impugned order on the two grounds. Firstly that the consideration for sale of flat no. 504 was declared at Rs. 19,50,000/- as against the stamp duty value of Rs. 31,85,000/- which should have been considered as sale consideration as per the provisions of section 50 C of the Act. Secondly, the capital gain on sale of flat no. 505 & 506 should have been taken as short term capital gain. The Ld. Pr. Commissioner as mentioned in the impugned order that the assessee claimed to have rights in flat no. 404, 405 & 406 on 2.06.2009 and 24.11.2009 respectively and declared short term capital gain of 2,39,590/- for flat no. 504 in return of income and the Assessing Officer added back Rs. 18,13,947/- and Rs. 18,13,987/- for flat no. 505 and 506 as long term capital gain in the assessment. The Ld. Pr. Commissioner has further pointed out that the Assessing Officer has not conducted any enquiry and has not carried out any 5 Assessment Year: 2010-11 investigation regarding the taxability of the gain as long term or short term or on the deemed value of the property as per the provisions of Section 50C of the Act.
We notice that during the course of assessment proceedings, the assessee submitted the details of investment made in the properties as well as source of investment. The authorized representative further pointed out that building in which the flats were booked were under construction till the date of sale and the assessee had not received the possession of the properties. In view of the aforesaid facts the assessee contended that provisions of section 50C are not applicable. The assessee also submitted the details of capital gain arising out of the sale of rights in the properties in question. We further notice that the AO after taking into consideration the each and every details submitted by the assessee declined to grant exemption u/s 54F of the Act holding that the assessee has failed to produce any evidence to prove that purchase agreement were executed and the possession was taken within three years from the date of sale of flat in F.Y. 2009-10. We further notice that during the assessment proceedings, the assessee’s representative was asked to explain as to why long term capital gain arising from sale of flat no. 505 and 506 should not be taxed and in response thereof the assessee’s representative filed revised computation of income making addition of long term capital gain of Rs. 36,27,974/- .
The Hon’ble jurisdictional High Court, Bombay has held in CIT Vs. Gabriel India (supra) that where the claim was allowed by the Income Tax Officer on being satisfied with explanation of the assessee, such decision of the Income Tax Officer cannot be held to be erroneous simply because in his order he did not make and elaborate discussion in this regard. In Sh. Suresh Kumar Jajoo Vs. ACIT (supra) the coordinate Bench of the Tribunal has held that were the AO raised detailed queries and asked the assessee to furnish various relevant details and material, the CIT cannot invoke section 263 so as to 6 Assessment Year: 2010-11 substitute his views in place of AOs view. Hence in our considered opinion that the AO has treated the gain in question as long term capital gain after examining the details furnished by the AO and applying his mind.
So far as the applicability of section 50C of the Act is concerned, the coordinate Bench of the Tribunal in Vinay Pratap Thaker Vs. CIT vide order dated 27.02.2013 has decided the similar issue in favour of the assessee holding that as under:
We also have to accept the arguments of the AR with respect of applicability of section 50C on lease hold properties, because, this is an undisputed fact that the impugned property was a leased property, even though, it is a long lease, but the title of the same shall always remain with the actual owner, in the present case, BMA. Though the issue is squarely covered by the cited decisions, but going by the submissions of the DR that it is a case of deemed ownership, itself creates a doubt that whether there has to be an application of section 50C or not. This doubt, in our considered opinion is fatal to invocation of provisions of section 263, because provision of section 263 cannot be invoked where the issue become debatable, because if the issue is debatable it goes out of the scope of administration provisions but would fall in the realm of judicial provisions, which is not the purpose and context of section 263, which, in our opinion is to deal only on two realms simultaneously, i.e. whether the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue.
Taking into consideration the entire facts of the case and the circumstances under which the Ld. Pr. Commissioner has invoked the jurisdiction u/s 263 of the Act, judicial decisions relied upon by the parties and the material placed on record, we are of the considered opinion that the CIT could not have invoked the jurisdiction u/s 263 of the Act by merely disagreeing on the view taken by the AO. We therefore allow the first ground of 7 Assessment Year: 2010-11 appeal of the assessee and set aside the impugned order passed by the Ld. Pr. Commissioner.
Since we have allowed the legal ground raised
by the assessee, he did not consider it necessary to adjudicate ground no. 2 and 3 which have been taken without prejudice to the ground no.
1. In the result, appeal filed by the assessee for assessment year 2010- 2011 is allowed.