Case Number: ITA 806/DEL/2021
Appellant: H B Exports, New Delhi
Respondent: Pr.CIT, Delhi
Assessment Year: 2013-14
Case Filed On: June 29, 2021
Order Type: Final Tribunal Order
Date of Order: November 25, 2022
Pronounced On: November 25, 2022
Result: The tribunal ruled in favor of the appellant, setting aside the PCIT’s order and restoring the Assessing Officer’s order.
This article discusses the case between H B Exports and the Principal Commissioner of Income Tax (Pr.CIT), Delhi, where the central issue was the jurisdiction assumed by the Pr.CIT under Section 263 of the Income Tax Act, 1961. The tribunal’s decision, pronounced on November 25, 2022, provided significant clarification on the application of Section 263 and the computation of capital gains.
The appellant, H B Exports, filed an appeal against the order of the Pr.CIT, Delhi, which was framed under Section 263 of the Income Tax Act. The appellant contended that the Pr.CIT erred in law by assuming jurisdiction under Section 263 and holding the assessment order passed by the Assessing Officer as erroneous and prejudicial to the interests of the revenue.
Initially, H B Exports had filed its original return of income on September 30, 2013, declaring a total income of Rs. 1,45,04,688, which included capital gains on the sale of land and building. The assessment was completed on March 10, 2016, under Section 143(3) of the Act, with minor additions, resulting in an assessed income of Rs. 1,46,90,610.
Subsequently, the assessment was reopened on March 30, 2018, under Section 148 of the Act. The reassessment, completed on November 18, 2018, led to a recomputation of capital gains and an addition of Rs. 2,11,76,360, raising the total assessed income to Rs. 3,58,66,970.
The reassessed income was challenged by the appellant before the CIT(A), arguing that the Assessing Officer had wrongly invoked Section 147/148 for reopening the assessment and had erroneously made additions under Section 50C of the Income Tax Act.
While the appeal was pending before the CIT(A), the Pr.CIT assumed jurisdiction under Section 263 and issued a notice stating that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the revenue due to improper inquiry and verification. The Pr.CIT contended that the cost of the land and building was wrongly taken on the basis of the collector rate at the time of purchase, rather than the actual cost, resulting in the lowering of capital gains.
The representatives of both sides were heard at length, and the case records were carefully perused. The appellant argued that the issues on which jurisdiction was assumed under Section 263 were already pending before the CIT(A) and that invoking Section 263 in such circumstances amounted to usurping the power of the CIT(A) and a misuse of the provisions of Section 263.
The appellant further emphasized that the cost of the property and other related issues were being examined by the CIT(A) with the involvement of a Valuation Officer to determine the fair market value of the property. Therefore, invoking Section 263 was unwarranted.
The tribunal, comprising Shri N.K. Billaiya (Accountant Member) and Shri Kul Bharat (Judicial Member), carefully considered the factual matrix and the submissions made. The tribunal referred to the provisions of Section 263(1) Explanation 1(c), which bars the exercise of jurisdiction under Section 263 when an appeal is pending before the CIT(A) on the same issues.
The tribunal noted that the reasons for reopening the assessment under Section 147/148 related to the provisions of Section 50C, and these were under challenge before the CIT(A). The tribunal found that the Pr.CIT’s observation that the appeal before the CIT(A) was on different issues was incorrect, as the provisions of Section 50C were central to both the reassessment and the proceedings under Section 263.
The tribunal cited the decisions of the Hon’ble High Court of Madras in the case of Smt Renuka Philip (409 ITR 567) and the Hon’ble Allahabad High Court in the case of Vam Resorts & Hotels Pvt Ltd (418 ITR 723), which held that when an appeal is pending before the CIT(A), the exercise of jurisdiction under Section 263 is barred.
In conclusion, the tribunal ruled in favor of the appellant, H B Exports. The tribunal set aside the order of the Pr.CIT dated March 30, 2021, and restored the order of the Assessing Officer dated December 18, 2018, framed under Section 143(3) read with Section 147 of the Income Tax Act. The tribunal’s decision reinforces the principle that jurisdiction under Section 263 cannot be assumed when the same issues are already pending before the CIT(A).
This decision provides significant relief to taxpayers and clarifies the application of Section 263, ensuring that the provisions are not misused and that taxpayers’ rights are protected when matters are already under appeal.
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