2022 (4) TMI 232 - ITAT DELHI

Revision u/s 263 - capital gain on sale of leasehold rights - HELD THAT:- From the various details furnished by the assessee, we find the assessee applied for purchase of plot on 30th March, 1996 and an amount was paid on 30th March, 1996. Further payment was made on 26th May, 1998 and the land was allotted to the assessee on 2nd January, 2004 but physical possession of land was given on 22.11.2015. The assessee acquired the leasehold rights by the lease deed on 4th February, 2016 and the sale of leasehold rights or agreement to sell was entered on 16th February, 2016. Therefore, these events, in our opinion, clearly show that the assessee has fully acquired the leasehold rights in the plot in the F.Y. 2003-04 and the assessee has also made complete payments for acquiring the plot rights in FY 2004-05.

The assessee, after taking a conservative view computed the indexed cost of acquisition for F.Y. 2004-05, i.e., the year in which complete payments for acquiring the leasehold rights was made and the assessee having sold such rights after holding for more than 36 months, computed the long-term capital gains in terms of the provisions of section 2(29A) of the Act. We find, in the case of CIT vs. Frick India Limited [2014 (9) TMI 394 - DELHI HIGH COURT] has held that the expression 'held by the Assessee' means the date from which the assessee acquired right to hold the asset

In the present case, the assessee was allotted a plot of land under a reallocation scheme by the President of India on 02.01.2004 and the leasehold rights have been sold on 16.02.2016. The assessee has made complete payment for acquiring these rights before the end of F.Y. 2004-05. Therefore, the said decision, in our opinion is distinguishable and not applicable to the facts of the present case. In view of the above discussion, we are of the considered opinion that the order passed by the AO may be prejudicial to the interest of the Revenue, but cannot be held to be erroneous.

It is the settled proposition of law that for invoking the provisions of section 263 of the IT Act, the twin conditions, namely, (a) the order must be erroneous and (b) it must be prejudicial to the interest of the Revenue must be satisfied as held by the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT[2000 (2) TMI 10 - SUPREME COURT]

Since we have already held in the preceding paragraph that the AO has conducted proper enquiry and has taken a plausible view, therefore, the order cannot be held to be erroneous, therefore, in absence of fulfillment of twin conditions, ld. PCIT is not justified in invoking the jurisdiction u/s 263 of the IT Act, 1961. We, therefore, quash the section 263 proceedings initiated by ld. PCIT and the grounds raised by the assessee are allowed.