2020 (1) TMI 548 - AT - Income Tax

Tribunal upholds Pr. CIT's jurisdiction under Section 263, emphasizes importance of correct assessments

The Tribunal dismissed the appeal, upholding the Pr. CIT's jurisdiction under Section 263. The AO's failure to properly examine the investment details and ... Revision u/s 263 - lack of enquiry on claim made u/s. 54F as Investment in two residential units seen and showing purchase price of said property at 1346% above market price - HELD THAT:- We find that the assessee made investments in two residential units along with two IT unit for a total consideration of ₹ 70,00,000/- which is evident from internal page 8 of Agreement to Assign at main page thereby, we find the AO assumed incorrect facts to satisfy the requirement u/s. 54F of the Act which supports the finding in showcasing of the Pr. CIT in its impugned order at page No. 1 that the assessee have shown investment in two residential units and the said residential units were purchased on 16-03-2010 which was beyond the allowed period of one year before sale of capital asset. Therefore, we find force in the arguments of ld. DR that it is a lack of enquiry by the AO in terms of claim made u/s. 54F of the Act. To the second query about substantial increase of sale price shown by the assessee vis-à-vis the value of price ascertained by Stamp Valuation Authority, it is observed from the impugned order i.e. page No. 8, the AO said to have been referred to the Assistant Valuation Officer for valuation of land and for the cost of acquisition as on 01-04-1981, it appears by the time of framing of assessment, the said reply from the Assistant Valuation Officer has not been received by the AO and without considering the same he completed assessment and allowed the claim of assessee u/s. 54F of the Act without referring and recording the same in the assessment order. In our opinion, in the present case having no report from the Valuation Officer, the AO allowed the claim of assessee establishes that the AO failed to examine the claim of assessee in terms of law contemplated therein. AO failed to apply his mind to the case in all perspective in terms of conditions contemplated in provisions u/s. 54F of the Act. He accepted the claim of assessee in the absence of any inquiry, in our opinion, the Pr. CIT rightly held its jurisdiction u/s. 263 - Decided against assessee. Issues Involved:1. Initiation of proceedings under Section 263 of the Income Tax Act.2. Investment in two residential units and the purchase price discrepancy.3. Allowability of claim under Section 54F of the Income Tax Act.4. Lack of enquiry by the Assessing Officer (AO).Issue-wise Detailed Analysis:1. Initiation of Proceedings under Section 263 of the Income Tax Act:The assessee challenged the initiation of proceedings under Section 263, which was initiated by the Pr. Commissioner of Income Tax (Pr. CIT) on the grounds that the assessment order passed by the AO under Section 143(3) was erroneous and prejudicial to the interest of the revenue. The Pr. CIT found discrepancies in the investment in two residential units and the purchase price of the property.2. Investment in Two Residential Units and Purchase Price Discrepancy:The Pr. CIT identified two main issues:- The assessee showed investment in two residential units.- The purchase price of Rs. 70,00,000/- was significantly above the market price of Rs. 4,84,000/-.The assessee explained that the purchase date should be considered as the date of the Deed of Assignment (31-07-2014) and argued that the stamp valuation authority's value is different from the market value. However, the Pr. CIT found these explanations unacceptable and held that the AO failed to examine these issues properly.3. Allowability of Claim under Section 54F of the Income Tax Act:The assessee claimed exemption under Section 54F for the investment in residential units. The Pr. CIT held that the AO allowed the claim without proper examination, as the investment in two residential units violated the conditions of Section 54F. The AO did not reference the Agreement to Assign or the specifics of the investment in the assessment order, indicating a lack of enquiry.4. Lack of Enquiry by the Assessing Officer (AO):The Tribunal noted that the AO did not conduct a proper enquiry into the claim under Section 54F. The AO accepted the return without verifying the details of the investment and the conditions stipulated under Section 54F. The Tribunal supported the Pr. CIT's finding that the AO's order was erroneous due to the lack of enquiry.Judgment:The Tribunal dismissed the appeal of the assessee, holding that the Pr. CIT rightly exercised jurisdiction under Section 263. The AO's failure to apply his mind and conduct a proper enquiry rendered the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal found that the Pr. CIT's action was justified and upheld the order.Conclusion:The appeal by the assessee was dismissed, and the Pr. CIT's order under Section 263 was upheld due to the AO's lack of enquiry and incorrect application of the law regarding the claim under Section 54F. The Tribunal emphasized the necessity for the AO to conduct thorough enquiries and apply the law correctly to avoid erroneous assessments.