Tribunal reverses CIT's order, restores AO's decision.

Vinay Pratap Thacker Versus Commissioner of Income tax

Vinay Pratap Thacker Versus Commissioner of Income tax - TMI Issues Involved:
1. Independent application of mind by the CIT.
2. Consistency between the Show Cause Notice (SCN) and the final order.
3. Applicability of Section 50C on leasehold properties.
4. Validity of the revision proceedings under Section 263.

Issue-wise Detailed Analysis:

1. Independent Application of Mind by the CIT:
The assessee argued that the CIT did not independently apply his mind when invoking Section 263, as the SCN was verbatim of the Audit Objection Note. The AR cited the case of ICICI Home Finance Co. Ltd. vs ACIT, where the Supreme Court held that the Assessing Officer (AO) must independently determine whether income has escaped assessment and cannot blindly follow the opinion of the audit authority. The Tribunal found that the CIT did not independently apply his mind, as evidenced by the CIT's admission that a proposal was received from the AO pointing out discrepancies, which led to the invocation of Section 263.

2. Consistency Between the SCN and the Final Order:
The AR argued that the CIT's final order went beyond the reasons stated in the SCN, which is not permissible. The AR referred to the case of Geometric Software Solutions Co. Ltd. vs. ACIT, where it was held that the Commissioner cannot travel beyond the reasons given in the SCN during revision proceedings. The Tribunal agreed with the AR, noting a departure from the reasons stated in the SCN and the final order, thus supporting the argument that the CIT transgressed into judicial territory.

3. Applicability of Section 50C on Leasehold Properties:
The AR contended that Section 50C, which deals with the substitution of the full value of consideration with the value adopted by the stamp valuation authority, does not apply to leasehold properties. The AR cited cases such as ITO vs. Sh. Prem Rattan Gupta and Atul G. Puranik vs ITO, where it was held that lease rights in a plot of land are neither "land or building or both" and thus Section 50C does not apply. The Tribunal found this argument persuasive, noting that the impugned property was a leased property and that the issue was debatable, making the invocation of Section 263 inappropriate.

4. Validity of the Revision Proceedings Under Section 263:
The AR argued that the AO had already considered all the relevant details during the regular assessment proceedings, and thus the CIT's invocation of Section 263 was invalid. The AR cited the case of Max India Ltd., where the Supreme Court held that if the AO took a possible view, the Commissioner could not invoke Section 263 merely because he disagreed with the AO's conclusion. The Tribunal agreed, noting that the CIT's actions were based on an audit objection and not on his own independent application of mind. The Tribunal also referenced the case of Gabrial India Ltd., where it was held that the CIT cannot revise an order merely because he disagrees with the ITO's conclusion.

Conclusion:
The Tribunal set aside the order of the CIT dated 11.02.2011, passed under Section 263, and annulled the initiation of revision proceedings. Consequently, the order passed by the AO under Section 143(3) dated 15.12.2008 was restored. The appeal was allowed, and the order pronounced on 27th February 2013.