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TMI Blog2021 (3) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed by the AO accepting the income as returned by the assessee. The assessment order dated 31.12.2015 was passed to this effect. Thereafter, the Pr.CIT in exercise of its revisionary powers, issued show cause notice dated 16.02.2018 under s. 263 of the Act requiring the assessee to show cause as to why the assessment so framed under s.143(3) of the Act should not be modified/set aside on the ground that such order is erroneous and prejudicial to the interest of the Revenue. The show cause notice issued in this regard is extracted hereunder for ready reference: " You had filed your return of income on 23.9.2013 declaring income of Rs. 15,71,830/ - It is observed that during the year under consideration, you had shown an income of Rs. 16,81,827/ - from ' Income from Other Sources' and share in profit from firm 'Suyog Infrastructure' amounting to Rs. 2,52,57,038 / - (which has been claimed exempt u/ s 10 (2 A) of the IT Act). Income was assessed u/ s 143 (3) of the IT Act on 31.12.2015 accepting the income as per the return of income. On verification of the records, it is seen that:- (I) The firm ' Suyog Infrastructure' in which you were a partner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been passed without application of mind and without making proper inquiries which should have been made by the AO. In this view of the matter and also in view of Explanation 2 (a) of Section 263, the order passed by the AO is erroneous and prejudicial to the interest of revenue and thereby I intend to revise the same u/ s 263 of IT Act " 4. The Pr.CIT, in essence, alleged that the order of the AO suffers from non-application of mind and rendered without proper enquiries and verification of crucial facts required in discharge of its statutory function. On a broader reckoning, it was alleged that (i) the assessee as a partner of the partnership asset was liable for taxation on his share of income on transfer of interest in land in the partnership firm and not entitled to excessive exemption wrongly claimed in view of Explanation attached to Section 10(2A) of the Act; (ii) the AO has failed to apply his mind to the fact that the said transaction of transfer of interest of existing partners in the land held by the partnership firm to a new set of partner, from the angle of a colourable device adopted to transfer the capital asset from one set of partners to another set of partners w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee firm to the retiring partner on change of constitution of firm does not constitute capital gains in the hands of the partnership firm under s.45(4) of the Act. It was further contended that amount distributed by the partnership firm on account of revaluation of the land at fair market value to the outgoing partners for the purposes of assigning share of interest to the incoming partners is nevertheless a capital receipt out of ambit of taxation. It was submitted that sum received from partnership firm towards share of profit is eligible for exemption under s.10(2A) of the Act. 6.3 The learned counsel next submitted that AO has taken plausible view in accordance with law in so far as taxation of partner assessee is concerned and thus the assessment order passed cannot be made susceptible to revisional proceedings under s.263 of the Act by capricious exercise of jurisdiction. It was thus urged that the revisional order passed on wrongful assumption of jurisdiction under s.263 of the Act requires to be quashed. 7. The learned D.R. for Revenue, on the other hand, relied on the revisional order and submitted that when all the allegations made in the revisional order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has claimed exemption of Rs. 2,52,57,038/- under s.10(2A) of the Act towards share of income from partnership firm, namely, Suyog Infrastructure. On review of assessment records, the Pr.CIT found that the income declared by the partnership firm for the F.Y. 2012- 13 relevant to A.Y. 2013-14 in question stands at Rs. 24,63,089/- only. When tested on the touchstone of Explanation to Section 10(2A) of the Act, the Revisional Commissioner observed that for the purposes of exemption under s.10(2A) of the Act, the share of a partner in the total income of the firm shall be in proportion to his interest in the partnership firm. No document had been placed before us on behalf of the assessee to show that the AO, at any point of time, applied his mind to the apparent mis-match in the amount of exemption income claimed under s.10(2A) of the Act qua the corresponding income declared by the partnership firm. The issue apparently did not weigh in the mind of the AO, which has resulted in serious prejudice to the Revenue. The plea of all pervasive scrutiny conducted by AO thus does not resonate with apparent gaffes shown. 8.3 It is also the case of the Revisional Commissioner that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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