Invoking Section 263 without proper justification is erroneous when the assessing officer addresses capital gain classifications appropriately.

ORDER

PER YOGESH KUMAR U.S., JM:

This appeal is filed by the Assessee against the order of Learned Pr. Commissioner of Income Tax[“Ld. Pr. CIT”, for short], dated 22/03/2019for the Assessment Year 2012-13.

2. Grounds taken in this appeal are as under:

“1. The Learned Pr. CIT erred in invoking section 263, in view of the fact at the time of examination of the records by her, the order passed by the Assessing Officer u/s 143(3) of the I.T.Act, 1961 was not erroneous or prejudicial to the interests of revenue.

2. The Learned Pr. CIT erred in directing the Assessing officer to initiate penalty proceedings u/s 271(1)(c), if the capital gain is treated as a long term capital gain.”

3. Brief facts of the case are that the Assessee filed return of income declaring an income of Rs. 1,72,48,137/-. The case was selected for scrutiny under CASS. An order under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) came to be passed on 18.03.2015 by ACIT, Circle 51(1), New Delhi by assessing the income of the Assessee at Rs. 1,91,61,670/-. During the year under consideration, the Assessee sold a Flat in Essencia Residential Plot No. E-2040, Sector-67, Sushant Lok-IV, Gurgaon and treated it as Long Term Capital Gain and adjusted it against the Long Term Capital Loss of Rs. 10,80,752/-. The Ld. A.O. after passing the Assessment Order, on perusal of the record that the Assessee purchased a said plot on 10.08.2010 and sold it on 13.05.2011 i.e. holding of the said plot less than 36 months and further found that instead of claiming Short Term Capital Gain, the Assessee has treated it as Long Term Capital Gain therefore, Ld. AO passed rectification order under section 154 of the Act on 11.07.2016 wherein added Rs. 9,48,911/- to the income of the Assessee treating the same as Short Term Capital Gain. The Ld. PCIT exercising power conferred under section 263 of the Act, on perusal of the record found that the issue as to whether holding of asset for 36 months or for less than 36 months is not debatable issue and the same is not error apparent on record, thus, invocation of Section 154 of the Act may not take appropriate by the A.O., accordingly a notice under section 263 of the Act has been issued by the PCIT in following manners: -

“Assessment in your case for A.Y. 2012-13 was completed u/s 143(3) of the Income Tax Act, 1961 by the ACIT, Circle-51(1), New Delhi on 18.03.2015 at Rs. 1,91,61,670-. Further an order u/s 154 of the Act was passed on 11.07.2016 at Rs.2,01,10,580/-. The assessment record for the impugned order was called and examined. From perusal of record, it appears that the Assessing Officer has passed the orders without making enquiries or verification which he should have made while investigating your case. Since the proper enquiry has not been done, it is erroneous order prejudicial to the interest of revenue. The order passed by the AO is required to be set aside

The property situated at Essencia Residential bearing Plot No. E-2040, Sector-67, Sushant Lok-IV, Gurgaon was purchased by you on 10.08.2010 and sold on 13.05.2011. The said property was under your possession for less than 36 months and income from the sale/transfer of this property should have been treated as Short term Capital Gain rather than Long Term Capital loss as claimed by you as well as assessed by the AO.

Failure on part of Assessing Officer in making proper enquiry and verification which he was required to do in your case has rendered the assessment order erroneous in so far as it is prejudicial to the interest of revenue."

3.1 In response to the above notice, the Assessee submitted reply as under: -

“Kindly refer to your letter F. No. Pr. CIT-17/263/2018-19/2553 dated 31st January, 2019 issued u/s 263 of the I.T. Act, 1961 (hereinafter referred to as the Act). In terms of the said