THE PCIT, RAJKOT-1, RAJKOT, RAJKOT V. ISHWARLAL JADAVBHAI JAGANI, RAJKOT

ITA 95/RJT/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5366 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 07-04-2022
• Court: TRIBUNAL
• Assessee Lawyers: ADJUSTING EXCESS
• Keywords: Capital asset; Salary income; Cost of acquisition; Set aside
• Section: 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./ITA No. 95/Rjt/2022 िनधाᭅरण वषᭅ/Asstt. Years: 2017-2018 Shri Ishwarlal Jadavbhai Jagani, 652, Takshashila Society-2, Opp. Star Plaza,, Near Phulchhab Press, Rajkot. PAN: AAXPJ8634L Vs. The Principal Commissioner of Income Tax, Rajkot-1, Rajkot. (Applicant) (Respondent) Assessee by : Shri Mehul Ranpura, A.R Revenue by : Shri Aarsi Prasad, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 06/07/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 20/07/2022 आदेश/O R D E R PER BENCH: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principal Commissioner of Income, Rajkot-1, dated 10/02/2022 arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18. ITA no.95/Rjt/2022 A.Y. 2017-18 2 2. The only interconnected issue raised by the assessee is that the learned Principal CIT erred in holding the assessment framed under section 143(3) as erroneous insofar prejudicial to the interest of Revenue. 3. The brief facts are that the assessee is an individual and claim to be deriving income from salary, house property, business and profession and capital gain. The PCIT on examination of the case records of the assessee, found that the assessee has sold a property jointly held with his daughter in which he has shown capital loss of Rs. 27,59,425/- which was set off against long term capital gain on sale of unlisted securities. 4. The learned Principal CIT found that the assessee along with daughter purchased the impugned property vide banakhat and conveyance deed dated 24- 05-2012 for Rs. 1,60,63,788/- only. Thus the 50% share of the assessee in cost comes at Rs. 80,31,894/- whereas assessee claimed the cost at Rs. 87,16,471/- which is in excess of the cost of acquisition. 4.1 Likewise, the impugned property was sold by the assessee vide execution of sale deed dated 20-03-2017, but the agreement for sale of property/ sale banakhat was executed and notarized as on 29-06-2015. Thus technically the property was sold on 29-06-2015 i.e. in the F.Y. 2015-16. However the assessee for the purpose of indexation of cost taken CFI at 1125 as applicable for F.Y. 2016-17 taking the date of execution of sale deed instead of CFI at 1081 as applicable for F.Y. 2015- 16. Similarly the assessee taken sales consideration at Rs. 87,50,000/- being stamp value as on the date of execution of sale deed i.e. 20-03-2017 whereas stamp value of the same stand Rs. 97.5 lakh as on execution of agreement to sale i.e 29-06- 2015. Accordingly the learned Principal CIT reworked the long term capital loss at Rs. 13,18,724/- as compared to the loss claimed by the assessee at Rs. 27,59,425/- only. ITA no.95/Rjt/2022 A.Y. 2017-18 3 4.2 The learned PCIT was of the view that the assessee by adjusting excess capital loss against capital gain understated the income by Rs. 13,18,724/- which escaped in the assessment due to lack of proper inquiry by the AO. Thus, the ld. CIT-A proposes to revise the assessment order under section 263 of the Act being erroneous insofar prejudicial to the interest of the Revenue. 4.3 The assessee in response to the notice issued under section 263 of the Act submitted that the during the assessment proceeding the AO had considered the issue of capital loss on transfer of property and after applying his mind finalized the assessment under section 143(3) of the Act. It was submitted that cost of acquisition claimed at Rs. 87,16,471/- includes expenses such as stamp duty charges, registration charges and service tax. The assessee further explained that the agreement for sale of property was entered into on 29-06-2015, however the property was not in his possession. Subsequently, the sale deed was executed on 20-03-2017, once possession of the property was cleared. Therefore, the point of transfer of property is 20-03-2017 and the CFI for indexation and stamp value for consideration taken is correct. 4.4 However, the ld. PCIT found that the AO has verified the issue in the light of the provision of section 2(47) read with section 53A of transfer of property Act. As per the provision of section 2(47)(v) part performance of contract of transfer of property as provided under section 53A of transfer of property Act will amount to transfer for the purpose of capital gain. The AO did not make any inquiry about this crucial legal fact. Similarly, the assessee increased cost of acquisition by adding stamp duty and registration charges and service tax but the AO did not verify the genuineness and quantum and eligibility of the expenses. Thus, the AO finalized the assessment without conducting necessary inquiry and verification which should have been done which amounts to an error in the order causing prejudice to the Revenue. Hence the learned PCIT exercised his power conferred under section ITA no.95/Rjt/2022 A.Y. 2017-18 4 263(3) and set aside the assessment order with the direction to the AO to make de- novo assessment. 5. Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 6. The learned AR before us filed a paper book running from pages 1 to 116 and contended that if the transfer of the property has taken place in the assessment year 2016-17, then the question of charging the tax in the year under consideration does not arise. As such, there is no error causing prejudice to the interest of revenue in the year under consideration and thus the question of revising the same does not arise. 7. On the other hand learned DR vehemently supported the order of the learned CIT passed under section 263 of the Act. 8. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the assessment was framed under the provisions of section 143(3) of the Act, for the year under consideration being A.Y. 2017-18. However, we find that same was revised by the learned Principal CIT under the provisions of section 263 of the Act for the reasons as detailed below: Submission of the assessee has been examined and it is found that the AO ought to have examined the transfer of the property in view of the provisions of section 2(47) of the I T Act whereby as per clause (v) i.e. the part performance in view of section 53A of the Transfer of Property Act 1882 also form the transfer and accordingly the capital gain / loss has to be shown in the year of its transfer. Since the assessee has claimed that the said property has been sold in the year under consideration, therefore the AO shall verify the facts in view of above provisions of law. Further, with regard to the difference in cost of acquisition for the reason of stamp duty, registration charges and service tax etc, the AO shall examine having incurred such expenses before granting the indexed cost of these expenses as the AO has not examined these expenses before allowing the deduction thereof. The above verifications had not been carried out by the AO in the assessment proceedings. 6. The above facts will indicate that AO has not conducted any inquiries/verification in respect of the above issues during the course of assessment proceedings. It may be ITA no.95/Rjt/2022 A.Y. 2017-18 5 mentioned that two essentials condition for invoking the provisions of section 263 of I.T. Act are that the order passed by the AO is erroneous and prejudicial to the interest of revenue 7. In view of the above discussion it is apparent that such cases where the assessment has been completed without conducting any inquiries/ verification or incorrect application of law tantamount to erroneous orders as also order prejudicial to the interest of Revenue. For such proposition of law Reliance is made on following cases: 8.1 If the observation of the learned the CIT is assumed to be true then the income on the transfer of the property is not chargeable to tax in the year under consideration. As such, the income on transfer of the property is chargeable to tax in the AY 2016-17 which is not before us. It was expected from the learned Principal CIT to point out error causing prejudice to the interest of revenue for the year under consideration. The scope under section 263 of the Act is limited to the particular assessment year. If there is error in any of the assessment year then the same can be made subject to the revision under the proceedings of section 263 of the Act. As such there is no error pointed out by the learned Principal CIT in the assessment framed under section 143(3) of the Act for the year under consideration. Likewise, the learned DR at the time of hearing has also not brought anything contrary to the arguments advanced by the learned AR for the assessee. Accordingly, we hold that the order passed by the learned Principal CIT under the provisions of section 263 of the Act is not sustainable. Thus we quash the same without going into the merit of the case. Hence the ground of appeal of the assessee is allowed. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 20/07/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 20/07/2022 Manish