TMI Blog2017 (5) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld Principal CIT has assumed jurisdiction u/s 263 of the Act on this issue without properly complying with the mandate of the section, i.e., he has failed to show that the assessment order was erroneous on this issue causing prejudice to the revenue. Accordingly we set aside the order passed by Ld Principal CIT on this issue. - Decided in favour of assessee Weighted deduction u/s 35(1)(ii) - Held that:- The assessing officer has failed to examine the same at all. Further the Ld Principal CIT has also observed that the weighted deduction is allowed upon compliance of certain conditions, which require examination. Ld Principal CIT was justified in invoking revision provisions on this issue.- Decided against assessee - S.A. No. 287/Mum/2017, And I.T.A. No. 2830/Mum/2016 - - - Dated:- 24-5-2017 - Shri B.R. Baskaran (AM), And Sandeep Gosain (JM) For The Assessee : Shri S.C. Tiwari Ms. Rutuja Pawar For The Department : Shri R.P. Meena ORDER Per B.R. Baskaran (AM) :- The appeal filed by the assessee is directed against the order dated 22.3.2016 passed by the Principal CIT-12, Mumbai u/s. 263 of the Act revising the assessment order passed by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring into development agreement in respect of stock in trade. The AO completed the assessment accepting the explanations of the assessee. 5. However, Learned Principal CIT took the view that the assessee is liable to pay capital gain tax on conversion of capital asset into stock in trade, since the transfer has been completed upon entering into development agreement. According to Ld Principal CIT, the assessing officer has not properly examined this issue in accordance with the law. The Ld Principal CIT further noticed that the assessee has donated a sum of ₹ 70.00 lakhs to M/s ASPEE Agricultural Research and Development Foundation and claimed weighted deduction u/s 35(1)(ii) of the Act at ₹ 1,22,50,000/-. The Ld Principal CIT noticed that the assessing officer has allowed the said claim without examining the compliance of conditions prescribed u/s 35(1)(ii) of the Act. In view of the foregoing, the Ld Principal CIT took the view that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, he issued show cause notice u/s 263 of the Act proposing to revise the assessment order. 6. Before learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in would be chargeable. However, learned Principal CIT observed as under with regard to various submissions of the assessee:- While it is true that the Assessing Officer appears to have sought an explanation with reference to the chargeability of capital gain on conversion of capital asset into stock in trade, the reply given by the assessee at that point of time is almost similar to the reply given during the present proceedings and seems to skirt around the issue and perhaps deliberately fails to address it. The Assessing Officer has accepted the response of the assessee, which is devoid of not only merit but also logic mechanically without any application of mind and in complete disregard the relevant statutory provisions and the applicable judicial decisions. The conduct of the Assessing Officer in accepting patently absurd explanations, which are irrefutably irrelevant to the issue under consideration certainly qualified as an error as the acceptance of such explanation is inconsistent with the facts and the law. Mere making a query on an issue does not absolve the Assessing Officer from his duty of appreciating the response of the tax payer. Even the courts have held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cruing as a result of the transfer of the capital asset. The Ld A.R submitted that the assessee has given license only to the developer through the development agreement and hence there is no transfer of any asset. He further submitted that the Ld Principal CIT has taken the view that the provisions of sec. 2(47)(v) of the Act would be applicable to the impugned transaction of development of a land held as stock in trade. The Ld A.R invited our attention to sec. 2(47) of the Act, which commences as under:- 2(47) transfer in relation to a capital asset, includes,-- . The Ld A.R submitted that the definition of the term transfer given in that section would apply only in relation to a capital asset and not to Stock in trade. Accordingly he submitted that the reliance placed upon by Ld Principal CIT on sec. 2(47)(v) to come to the conclusion that the transfer of the asset is complete is legally not correct, since the assessee has entered into a development agreement with regard to Stock in trade and further the developer has given only a license under the agreement. 9. The Ld A.R submitted that the Ld Principal CIT has placed reliance on the decision rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts as on 1.4.1981 and 1.4.2010 would show that the assessee was very well aware of the fact that the transfer of the asset has been completed during the year under consideration. He submitted that the deeming provisions of sec. 2(47)(v) would be applicable to the impugned transaction and the Ld Principal CIT has rightly applied the same by following the decision rendered by Hon ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra). He further submitted that the AO did not discuss anything about these transactions in the assessment order. 12. With regard to the weighted deduction claimed by the assessee, the Ld CIT DR submitted that the assessing officer did not examine the said claim at all during the course of assessment proceedings. He submitted that the statute provides for compliance of certain conditions for availing weighted deduction and the same has not been examined by the AO at all. 13. We have heard the rival contentions and perused the record. Before going into the merits of the issue, we would like to discuss about the legal position with regard to the power of Learned CIT to invoke revision proceedings under section 263 of the Act. The scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Income-tax Officer is unsustainable in law. The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282. 14. It is settled proposition of law that the Ld Pr. CIT can revised the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue. The question as to when an order can be termed as erroneous was explained by Hon ble Bombay High Court in the case of Gabriel India Ltd (203 ITR 108) as under:- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld arise only in the year in which the stock in trade is sold. In the instant case, there is no dispute that the assessee has converted its capital asset into stock in trade as on 1.4.2010. The question is whether or not the transfer of stock in trade is completed upon entering into the development agreement ? The Ld Principal CIT has taken the view that the provisions of sec. 2(47)(v) shall apply to the impugned transaction and hence as per the said provision, the transfer shall be deemed to have been completed. However, the contention of the assessee with regard to the view so taken by Ld Principal CIT is twofold, viz., (a) the developer has been given only licencee rights and the possession has not been legally handed over and hence the provisions of sec. 2(47)(v) would not apply. (b) the deeming provisions of sec. 2(47)(v) would apply only to Capital assets and not to Stock in trade . Accordingly it was contended that the Ld Principal CIT erred in law in concluding that the transfer of asset, being stock in trade has been completed. 17. We find merit in the contentions of the assessee. As observed by Hon ble jurisdictional Bombay High Court, there must be some prima fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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