SPML Infra Limited, New Delhi V. PCIT-1 , Kolkata

ITA 510/KOL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3570 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 21-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Opportunity of being heard; Principle of natural justice; Period of limitation; Valuation report; Set aside
• Section: 263; 143(3); 142(1); 80IA; 64; 44AB; 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA [Virtual Court] (Before Sri Sanjay Garg, Judicial Member & Sri Manish Borad, Accountant Member) I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited.................................................................Appellant [PAN: AADCS 2469 K] Vs. Pr. Commissioner of Income Tax-1, Kolkata.........................Respondent Appearances by: Sh. S.K. Tulsiyan, Adv. and Ms. Mita Rizvi, appeared on behalf of the Assessee. Md. Ghayas Uddin, CIT(D/R), appeared on behalf of the Revenue. Date of concluding the hearing : February 15 th , 2022 Date of pronouncing the order : April 27 th , 2022 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2017-18 is directed against the order of ld. Pr. Commissioner of Income-tax-1, Kolkata [in short ld. “Pr. CIT”] dated 06.10.2021 vide Document No. (DIN) ITBA/REV/F/REV5/2021-22/1036187833(1) which is arising out of the assessment order framed u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 26.12.2019 by ACIT, Circle-8(2), Kolkata. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. That, on the facts and in the circumstances of the case, the Ld. Pr. C.I.T., Kolkata erred in law in assuming jurisdiction u/s.263 of the Act in order to impose his own views on the Ld. A.O. when the Ld. A.O. after examining the relevant sale deed and computation of capital gain as arrived at by the assessee along with detailed submission filed in course of the assessment proceeding, had taken a plausible and judicious view, which did not suffer from lack of independent and adequate enquiry. I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 2 of 17 2. That, the Ld. Pr. C.I.T erred in holding the assessment order u/s. 143(3) of the Act erroneous and prejudicial to the interests of the revenue for alleged non- compliance of clause (a) of Explanation 2 to sec. 263(1) of the Act in spite of the fact that the impugned assessment was not a case of no enquiry and after thorough examination of the related documents, the Ld. A.O. took a judicious view in the matter and allowed the computation of capital gain as adopted by the assessee. 3. That, the Ld. Pr. C.I.T. has acted against the Explanation 2 to sec.263 of the Act, inasmuch as the assessment order was passed after making proper enquiries/verification which the A.O. was required to make with respect to the computation of capital gain on sale of building (12344 sq. ft, built in a land of 7380 sq. ft. previously), as adopted by the assessee and hence the order passed u/s.263 of the Act is liable to be quashed. 4. That, on the facts and in the circumstances of the case, the Ld. Pr. C.I.T. erred in law in assuming jurisdiction u/s.263 of the Act and setting aside the assessment order u/s. 143(3) of the Act for fresh assessment, totally ignoring the fact that even if separate computation of long term capital gain for the sale of land and short term capital gain for the sale of building is made, the assessee is not liable to pay any tax and hence, in no event the order passed by the Ld. AO can be alleged to be prejudicial to the interests of the revenue. 5. That, the Ld. Pr. C.I.T. further erred in treating the assessment order erroneous and prejudicial to the interests of the revenue in spite of the fact that it is a revenue neutral case and it is after examining the aspect that even if separate computation of capital gain of land and building is made, the revenue is getting more tax in the computation of capital gain as adopted by the assessee, that the Ld. AO had accepted the assessee’s computation and as such, the impugned order has not caused any prejudice to the revenue. 6. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.” 3. Brief facts of the case as called out from the records are that the assessee is a limited company. Income of Rupees NIL declared in the return of income on 07.11.2017 u/s 80IA of the Act. Case was selected for scrutiny and assessment u/s 143(3) of the Act was framed on 26.12.2019 assessing income at Rs.16,21,98,753/- computed by the Assessing Officer (in short ld. “AO”) after disallowing deduction u/s 80IA of the Act. The assessee challenged the addition and the issues were carried on in the appellate proceedings. 3.1. In the meantime ld. Pr. CIT exercised the revisionary powers and issued the following notice u/s 263 of the Act dated 04.08.2021: “Whereas the undersigned had called for and examined the record of your case and it is considered that the impugned assessment order passed u/s 143(3) of the I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 3 of 17 I T Act, 1961 by the DCIT, Circle - 8(1), Kolkata on 20.12.2019 for A.Y. 2017-18at assessed income of Rs.16,21,98,753/- is, prima facie, erroneous in so far as it is prejudicial to the interests of the revenue for the following reasons: The assessee company filed its return of income on 07.11.2017 at declared income of Rs. NIL after claiming deduction u/s 80IA of the Income-tax Act, 1961 of Rs. 15,81,94,482/-. The return was assessed u/s 143(3) of the Income-tax Act, 1961 on 26.12.2019 at assessed income of Rs.16,21,98,753/- disallowing the deduction u/s 80IA of Rs.15,81,94,482/-. The assessment records has been gone through and found that the assessee company had purchased a building (12344 sq.ft.) built in a land of 7380 sq. ft. previously and sold the same for Rs.1216.12 lakh in F. Yr. 2016-17 but wrongly claimed the gain of Rs.27.32 lakh under short term capital gain and the same was wrongly set off against loss of earlier assessment year 2015-16. The assessee derived the gain at Rs.27.32 (Rs.1216.12 - Rs.1188.80) lakh by taking into account the building cost (WDV) for Rs.1188.80 lakh. However, the actual cost of building shown under disposal as per Gross Block value of the building account was Rs.322.45 lakh. Net block/WDV of the building block as on 1.04.2016 and April 2017 were Rs.1447.49 lakh and Rs. 1193.70 lakh respectively as per Companies Act whereas the same were as per Income-tax act at Rs. 1188.00 lakh and Rs. NIL respectively. It is further noticed that the land on which the building was erected has been purchased on 26.04.1995 and has been sold on 08.03.2017 along with certain furniture and fixtures including but not limited to 1 lift with lift room, 1 generator with transformers and cabling till the electrical room and all electrical panel boards and cabling place. In the said deed of conveyance, value of land and building along with others fixed assets has not been bifurcated, It is also noticed from the Note-10 to the financial statement (balance sheet) as on 31.03.2017 that the assessee company has shown disposal of land at Rs. NIL, building at Rs.322.49 lakhs, Plant & machinery for Rs.454.31 and site office/equipment at Rs.64.41 lakh totalling to Rs.1816.33 lakhs. Moreover, it is also seen from Clause 18 of Form 3CD (Independent Auditor Report) related to claiming of depreciation for the previous year 2016-17 that the assessee has shown deduction of building for Rs.11,88,80,047/-, furniture & fittings for Rs.28,53,143/-, Plant & Machinery, for Rs.10,000/- and Plant & Machinery for Rs.1,05,38,914/-totalling to Rs.13,22,82,104/-. In view of the aforesaid, it is clear that the assessee has not accounted for the sale consideration of land on which the building was constructed and was sold out by the assessee, Instead It seems that the sole value of land has been accounted on other accounts. Although the sale consideration consists of value of land, building and others as are mentioned above. The assessee should have deducted, the proportionate value of land and others from WDV of the land and others respectively which has not been done so. The assessing officer has also, not examined the issue during the course of the assessment completed u/s 143(3) of the act. 2. The AO has passed the 'Impugned 'assessment order without any application of mind nor conducting any enquiries or verifications which should have been made in this case. 3. Having regard to the facts and circumstances of the case and in law and in accordance with the provisions of Sec, 263(1) of I T Act, 1961 you are hereby given an opportunity of being heard to show cause as to why the Impugned assessment order passed u/s 143(3) by DCIT, Circle - 8(1), Kolkata on 26.12.2019 for A.Y. I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 4 of 17 2017-18 should not be held as erroneous in so far as it is prejudicial to the interests of the revenue. You may accordingly furnish your written submissions u/s 263(1) of I.T. Act, 1961 by 13.08.2021 in this regard, elaborating and/or evidencing, your contentions/submissions. Considering the pandemic situations arising due to COVID-19, physical attendance is not considered necessary and you are requested to make written submissions with necessary details through E- mail ID: [e-mail] and it will be treated as compliance to this notice u/s.263(1).” 4. In response to this notice the assessee filed detailed submissions stating that the issue of computation of short term capital gain on sale of land and building and furniture has been examined thoroughly by the AO during the course of assessment proceedings and the computation of the short term capital gain was accepted by the AO. It was also submitted that if the capital gain is computed in the manner as referred in the show cause notice u/s 263 of the Act it would not be beneficial for the Revenue as the income which would be computed in the manner stated in the show cause notice the same will be much lower or rather it will be a loss. Therefore, the assessment order is neither erroneous nor prejudicial to the interests of the Revenue. Ld. Counsel for the assessee also referred to the detailed written submissions dated 10.02.2022 containing 13 pages. The assessee also filed various documents to support its contention in the form of paper book containing 181 pages dated 07.02.2022 and the documents submitted therein are as follows: 1. Show cause notice u/s.263 of the Act dated 04/08/2021. 2. Sale Deed dated 08/03/2017. 3. Notice u/s. 142(1) of the Act dated 10/09/2019. 4. Written submissions filed in response to notice u/s. 142(1) of the Act dated 18/11/2019. 5. Show cause notice dated 30/10/2019. 6. Reply to show cause dated 25/11/2019. 7. Purchase deed dated 26/04/1995. 8. Valuation Report giving the F.M.V of land as on 01/04/2001. I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 5 of 17 9. Relevant extract of Return of Income for the AY 2017-18. 10. Assessment Order u/s. 143(3) of the Act dated 26/12/2019. 11. Computation of Capital Gain on sale of land and sale of the building. 12. Audited accounts for the A.Y 2017-18. 13. Tax Audit Report for the A.Y 2017-18. 14. Reply to show cause notice u/s.263 dated 04/08/2021. 4.1. Further reliance was placed on the following judgments: 1. Decision in the case of Peerless General Finance & Investment Company Ltd. v. Deputy Commissioner of Income-tax, Circle-3(1), Kolkata, 132 taxmann.com 80 (Kolkata - Trib.). 2. Decision in the case of Satish Kumar Lakhmani v. Principal Commissioner of Income Tax-10, Kolkata, [2021] 128 taxmann.com 264 (Kolkata - Trib.). 3. Decision in the case of Commissioner of Income-tax v. Sunbeam Auto Ltd [2011] 332 ITR 0167-Del. 4. Decision of Karnataka High Court in the case of M/s. Subhash Kabini Power, [2016] 69 taxmann.com 394 (Karnataka). 5. Decision of Karnataka High Court in the case of COMMISSIONER OF INCOME-TAX AND ANOTHER v. D. G. GOPALA GOWDA [2013] 354 ITR 501 (Kar). 5. Per contra, ld. D/R vehemently argued supporting the order of the ld. Pr. CIT. 6. We have heard rival contentions and perused the records placed before us. Through this appeal, the assessee has raised various grounds challenging the assumption of jurisdiction u/s 263 of the Act by ld. Pr. CIT I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 6 of 17 and also challenging the finding of the ld. Pr. CIT that ld. AO has not made any enquiry on the issue mentioned in the show cause notice. 7. We find that on 26.04.1995 the assessee purchased a land measuring 7380 sq.ft. with building constructed therein measuring 12344 sq.ft. for a consideration of Rs.1,55,00,000/-. As per the purchase deed placed at page 55 to 64 of the paper book, the purchase price of the land is Rs.1,20,00,000/- and building is Rs.35,00,000/-. In the subsequent years the assessee invested in the building by doing construction work. The opening Written-Down Value (in short the “WDV”) of land and building as on 01.04.2016 is Rs.11,88,80,047/-. In this building, opening WDV of furniture is Rs.23,88,143/-. During the year the assessee sold the said land and building along with the furniture for a consideration of 12.40 crore and after deducting the opening WDV of land, building and furniture computed short term capital gain of Rs.27,31,810/-. Ld. Pr. CIT on perusal of the assessment records observed that in Note-10 of the balance sheet as on 31.03.2017, the assessee company has shown disposal of land at Rupees NIL, building at Rs.3.22 crore whereas in the Tax Audit Report in Form No.- 3CD, the assessee has shown deduction for building at Rs.11.88 crore and furniture at Rs.28,53,143/-. In view of these details, ld. Pr. CIT observed that the assessee has not accounted for the sale consideration of land on which the building was constructed and was sold out by the assessee, instead it seems that the sale value of the land has been accounted on other accounts. He, thus, came to a finding that the assessee has not computed the capital gain on this transaction correctly. Ld. Pr. CIT is of the view that the calculation of capital gain should be made separately for land, building and furniture and the assessee should have deducted the proportionate value of land and others from WDV of the land. In view of the ld. Pr. CIT, computing the capital gain taking land and building together is not correct and since the ld. AO has not examined this aspect, the assessment order is erroneous and prejudicial to the interests of the Revenue. I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 7 of 17 8. We find that the provision of Section 263 of the Act has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- "263(1) The 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- 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 1 st 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 Chief Commissioner or Director General or Commissioner authorized 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 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 1 st day of June, 1988, the powers of the 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. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 8 of 17 8.1. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4 th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. 8.2. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 9 of 17 order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)”.[Emphasis Supplied] 8.3. Hon’ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: “ 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interests of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the ITO is unsustainable in law.” 8.4. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interests of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 10 of 17 8.5. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: "63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: “We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar 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 enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interests of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interests of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interests of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee.” 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 11 of 17 invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed." 8.6. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: “(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interestss of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 12 of 17 assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.” 9. Now, in light of the above settled judicial position, we have to examine firstly, whether the order of the ld. AO is erroneous, secondly, whether it is prejudicial to the interests of the Revenue and thirdly, whether ld. Pr. CIT has conducted necessary enquiry on merit before giving direction to the AO for framing the assessment in light of the finding in the order u/s 263 of the Act. As far as, for the assessment order not to be erroneous in nature it needs to be examined that whether the ld. AO has conducted enquiry with regard to the issue raised in the show cause notice u/s 263 of the Act. In the instant case the issue is computation of capital gain on sale of land, building and furniture. On the basis of purchase deed dated 26.04.1995, it is crystal and clear that consideration of Rs.1.55 crore was paid for purchase of land at Rs.1.20 crore and building at Rs.0.35 crore. There was a single purchase deed and not a separate deed for land and building. Similarly, as per the sale deed dated 08.03.2017 the assessee company sold the land and building together to M/s. Tech Precision Solutions along with furniture for a total consideration of Rs.12.40 crore. In the notice issued u/s 142(1) of the Act dated 10.09.2019 the ld. AO specifically asked for the details of capital gain along with the copy of details/evidences in respect of sale and purchase of relevant asset. This question was asked in point no.-12 of the notice issued u/s 142(1) of the Act. In reply dated 18.11.2019 the assessee filed details of capital gain arising out of sale of fixed assets along with copy of relevant sale deed and calculation which is placed at page 31 to 34 of the paper book. Again on 25.11.2019 the assessee filed a reply to the show cause notice dated 30.10.2019 on various issues which also included the issue of capital gain on sale of building. In this reply dated 25.11.2019 at point no.-7 placed at page 43 to 54 of the paper book following submissions with necessary details were made: “7. State of building shown in return of Rs.12,16,11,857/- instead of Rs.12,40,00,000/-. Why the full value of consideration shall not be considered for computation of capital gain. The assessee during the year had sold building along with furniture to M/s. Tech Precision Solutions for Rs.12,40,00,000/-. Copy of sale agreement and cheque is enclosed here with. As per schedule A and schedule B at page 10 of the I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 13 of 17 agreement, it was mentioned that the sales includes transfer of building along with certain furniture and fixtures. Hence, the assessee had not only transferred building but the furniture also. The book value of building as per book of accounts of the assessee was Rs.12,16,11,857/- and therefore the assessee had shown the sale consideration of building amounting to Rs.12,16,11,857/- in ITR under block “Building” and the balance of Rs/23,88,143/- (Rs.12,40,00,000/- - Rs.12,16,11,857/- was shown under block furniture and fittings. The same is shown in tabular form as under: Sale Proceeds of Building with Furniture Amount (Rs.) Amount (Rs.) Amount (Rs.) Sale Proceeds Less Op Block STCG WDV Value building 12,16,11,857 11,88,80,047 27,31,810 WDV Value Furniture 23,88,143 23,88,143 - Sale Proceeds 12,40,00,000 STCG 27,31,810 Less:- B/F STCL for AY 2015-16 27,31,810 Balance O/S - Hence, the sale consideration of Rs.12,40,00,000/- has been fully considered while computing the income.” 9.1. All these details filed by the assessee which has been called for by the ld. AO on various occasions along with other details including Audited Balance Sheet and Tax Audit Report ensure the fact that the ld. AO has thoroughly examined the said transaction of sale of land, building and furniture by going through the purchase deed, sale deed, calculation of capital gain, written down value appearing in the balance sheet, notes attached to the balance sheet and the details of sales of land, building and furniture appearing in the Form No.-3CD attached to the Tax Audit Report u/s 44AB of the Act. Thus, we are satisfied that on the issue in hand the order of the ld. AO is not erroneous in nature. 9.2. Now, whether the order of the ld. AO is prejudicial to the interests of the Revenue with regard to the said transaction, on going through the records placed before us by the ld. Counsel for the assessee, we find that short term capital gain of Rs.27,31,810/- has been arrived at by the assessee in the following manner: Short Term Capital Gain as arrived at by the assessee Sale Proceeds [A] Op W.D.V. [B] STCG [A-B] Building 12,16,11,857 11,88,80,047 27,31,810 I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 14 of 17 Furniture 23,88,143 23,88,143 - Total Sale Proceeds of Building with Furniture 12,40,00,000 STCG 27,31,810 9.3. Now, if we calculate the capital gain in the manner as observed by ld. Pr. CIT in the impugned order, the computation of the capital gain will be made in the following manner: Cost of the land as on 26/04/1995 [As per purchase deed enclosed at pages 55-64 of the Paperbook] Amount (Rs.) % Land 1,20,00,000 77.42 Building 35,00,000 22.58 Total consideration paid by the assessee at the time of purchase 1,55,00,000 F.M.V of land as on 01/04/2001 [as per Valuation Report enclosed at pages 65-70 of the Paperbook] 1,90,06,153 Total sale consideration as on 08/03/2017 12,40,00,000 % of land 9,60,00,080 % of building 2,79,99,920 Computation of Long term Capital Gain on sale of land Proportionate sale consideration 9,60,00,080 Less: Indexed cost [19006153 x 264/100] 5,01,76,244 Long term capital gain 4,58,23,836 Loss of earlier A.Ys [as shown in Return of Income for AY 2017-18 enclosed at pages 71-72 of the Paperbook] B/f Long term capital loss of earlier years 4,70,10,675 Less: Adjustment with Long term capital gain of Current year 4,58,23,836 Total loss c/f to future years 11,86,839 Computation of Short term Capital Gain on sale of Building 2,79,99,920 Proportionate sale consideration Less: WDV of building as on 01/04/2016 11,88,80,047 Short term capital loss -9,08,80,127 Loss of earlier A.Ys [as shown in Return of Income for AY 2017-18 enclosed at pages 71-72 of the Paperbook] 32,56,852 B/f Short term capital loss of earlier years Add: Current year losses 9,08,80,127 Total loss c/f to future years 9,41,36,979 I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 15 of 17 9.4. On going through the above computation where capital gain is calculated separately for sale of land and sale of building, the result would be short term capital loss. If the capital gain is calculated in the manner as directed by ld. Pr. CIT, then the assessment so framed shall be prejudicial to the interests of the Revenue. Therefore, under the given facts and circumstances of the case where the purchase of land & building and sale of land & building are covered under a single deed of purchase & sale, the calculation made by the ld. AO showing short term capital gain of Rs.27,31,810/- which has been valued in detail by the ld. AO, in our considered view, the order of the ld. AO is not prejudicial to the interests of the Revenue. 10. Therefore, since the assessment order dated 26.12.2019 is neither erroneous nor prejudicial to the interests of the Revenue and a detailed enquiry of the issue raised in the show cause notice u/s 263 of the Act has been conducted by the ld. AO, adopting one of the permissible view in law, ld. Pr. CIT erred in assuming jurisdiction u/s 263 of the Act. We, therefore, quash the impugned order of the ld. Pr. CIT u/s 263 of the Act and restore the order dated 26.12.2019 so framed u/s 143(3) of the Act. Hence, grounds of the appeal raised by the assessee are allowed. 11. In the result, appeal filed by the assessee is allowed. Kolkata, the 27 th April, 2022. Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 27.04.2022 Bidhan (P.S.) I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 16 of 17 Copy of the order forwarded to: 1. SPML Infra Limited, 22, Camac Street, Block-A, 3 rd Floor, Kolkata-700 016. 2. Pr. Commissioner of Income Tax-1, Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata I.T.A. No.: 510/Kol/2021 Assessment Year: 2017-18 SPML Infra Limited. Page 17 of 17 Date of Dictation 29.03.2022 Date on which the typed order is placed before the dictating Member and other Member 05.04.2022 Date on which the order came back to Sr. P.S. 27.04.2022 Date on which file(s) go(es) to the Bench Clerk 29.04.2022 Date on which file(s) go(es) to the O.S. Date of despatch of the order