Difference in ITAT and non jurisdictional High Court amounts to two opposite views

Difference in Tribunal and non jurisdictional High Court amounts to two opposite views despite that decision of High Court rendered after ITAT

ABCAUS Case Law Citation:
ABCAUS 2884 (2019) (04) ITAT

Important Case Laws Cited/relied upon by the parties
Gouli Mahadevappa vs. ITO  356 ITR 90 (Karn)
Prakash Karnawat vs. ITO 49 SOT 160
CIT vs. Max India Limited’ [2007] 295 ITR 282 (SC)

The assessee was in appeal against the order assed by the CIT  u/s 263 of the Income Tax Act,  1961 (the Act) on holding the order passed by the Assessing Officer (AO) erroneous and prejudicial to the interest of the revenue.

In the instant case, the AO had allowed a deduction u/s 54EC of the Act on the capital gain computed, based on the actual sale consideration recorded in the sale deed instead of on the capital gain required to be computed under section 48 of the Act by adopting the stamp duty value as per provisions of Section 50C of the Act.

Accordingly, the Pr. CIT issued show cause notice under sub-section (1) of Section 263 of the Act and after rejecting the assessee’s reply, passed the impugned order.

The Tribunal observed that before the CIT the assessee had contended that decision of the Tribunal, instead of the High Court as relied by the CIT was applicable to the case.

The Tribunal found that the grievance of the assessee was justified. The existence of two views in the matter, i.e. the decision of the Tribunal and that of the High Court itself showed that there were two divergent judicial views prevailing. Just because the earlier decision is that rendered by the Tribunal and the later one is that handed down by the Hon’ble High Court, which, incidentally, was also not jurisdictional qua the assessee, did not change the situation.

The Tribunal opined that had the decision of the Hon’ble High Court been of the jurisdictional High Court, could it would have been possible to say that there were no two opposite views existing. This, however, was not the case.

The Tribunal pointed out that the Hon’ble Supreme Court had held that where two views are possible and the Income-tax Officer has taken one 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 Tribunal also opined that the assessee was also justified in his other grievance inasmuch as the impugned order did not state the assessment order to be both the erroneous as well as prejudicial to the interests of the Revenue.

The Tribunal opined that though, it was the primary requirement of invokeability of the provisions of section 263 of the Act. It is trite that in order to term an assessment order to be revisable under the provisions of section 263 of the Act, such assessment order must be shown by the C.I.T. to be both the erroneous as well as prejudicial to the interest of the Revenue.

However, in the impugned order, the Pr. CIT had specifically stated that ‘the AO has committed an error in accepting the claim of the assessee………’. The Tribunal opined that the terminology employed was ‘erroneous insofar as it is prejudicial to the interest of the revenue’. However, as to how the assessment order is prejudicial to the interest of the Revenue, was not made out.

As a result, the order was found to be unsustainable and was set aside and cancelled.

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