Kerala HC Affirms S 263 Order citing Assessing Officer's Failure to Adjudicate on 'Slump Sale' [Read Order]
The court clarified that the observations in the Section 263 order would not preclude the assessee from making submissions during the subsequent re-assessment proceedings
Kerala High Court, Assessing Officer, Slump Sale
Kerala High Court, Assessing Officer, Slump Sale
The Kerala High Court has affirmed a revision order under Section 263 of the Income Tax Act, holding that the Assessing Officer's failure to properly adjudicate whether a transaction constituted a 'slump sale' justified the Commissioner's intervention.
The appellant, Sterling Farm Research and Services Pvt. Ltd., had sold its 'Test House Division' as a 'slump sale' under Section 50B for the assessment year 2016-17. The Assessing Officer (AO) completed the assessment under Section 143(3), noting that documents were verified but not specifically ruling on the applicability of Section 50B versus Section 50 of the Act.
The Commissioner subsequently initiated revision proceedings under Section 263, setting aside the assessment on the ground that the AO had accepted the assessee's position without proper enquiry. The assessee's appeal before the Income Tax Appellate Tribunal was dismissed.
Counsel for the assessee contended that the power under Section 263 was wrongly invoked, arguing that the AO's assessment order, which stated that documents had been verified, indicated that proper adjudication had occurred.
Per contra, the court relied on the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT. It reiterated that Section 263 can be invoked if the assessment order is both erroneous and prejudicial to the interests of the revenue.
A division bench comprising Justice A. Muhamed Mustaque and Justice Harisankar V. Menon observed that the AO had merely accepted the assessee's contention without any enquiry into the specific legal issue of whether the sale should be treated as a 'slump sale' under Section 50B or as a short-term capital gain under Section 50.
The court found that since the assessment order failed to address this core issue, the Commissioner's exercise of power under Section 263 was justified. In view of the AO's failure to conduct a proper enquiry, the court found no reason to interfere with the Tribunal's order and dismissed the appeal.
The court clarified that the observations in the Section 263 order would not preclude the assessee from making submissions during the subsequent re-assessment proceedings.
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