2021 (4) TMI 1016 - AT - Income Tax

Tax Tribunal affirms PCIT's jurisdiction under Section 263 for assessment revision.

The Tribunal upheld the Principal Commissioner of Income Tax's (PCIT) decision to exercise jurisdiction under Section 263 of the Income Tax Act. The ... Jurisdiction under section 263 - erroneous and prejudicial to the interest of Revenue - failure to make enquiries which ought to have been made - application of section 50C valuation in capital gains - claim of deduction under section 54F-requirement of proper verificationApplication of section 50C valuation in capital gains - failure to make enquiries which ought to have been made - erroneous and prejudicial to the interest of Revenue - Assessment order was erroneous and prejudicial to the interest of Revenue for not considering the stamp duty valuation under section 50C in relation to the sale of immovable property. - HELD THAT: - The Tribunal found that the Assessing Officer's order contains no examination of the discrepancy between the value declared by the assessee (jantri value for his 30% share) and the stamp valuation recorded by the Sub-Registrar (total valuation leading to a large differential). The Court applied the settled principle that an assessing officer must investigate facts which reasonably call for inquiry and that omission to do so renders an order 'erroneous' under section 263. Given the undisputed existence of a substantial stamp duty valuation which attracted section 50C, the AO's failure to consider that valuation could not be treated as merely an alternative possible view but amounted to gross negligence and omission to make requisite enquiries, thereby prejudicing revenue. On these grounds the exercise of revisional jurisdiction by the Principal Commissioner was held to be justified. [Paras 11, 12, 14]The revisional exercise under section 263 in relation to non-application of section 50C was upheld and the assessment was held erroneous and prejudicial to revenue.Claim of deduction under section 54F-requirement of proper verification - failure to make enquiries which ought to have been made - erroneous and prejudicial to the interest of Revenue - Assessment order was erroneous and prejudicial to the interest of Revenue for allowing deduction under section 54F without proper verification of facts. - HELD THAT: - The Tribunal noted that the AO's assessment order is silent on verification of the facts material to the claim of exemption under section 54F - specifically the sale of the original property, purchase of a new property, and absence of reflection of these transactions in the assessee's balance sheet/capital gain account. The Assessing Officer failed to examine or record necessary inquiries despite departmental notices and queries, and therefore did not discharge the investigative duty incumbent upon him. In the circumstances, allowing the deduction without necessary verification was held to render the assessment order erroneous and prejudicial to revenue, validating the PCIT's revisional action. [Paras 11, 14]The revisional exercise under section 263 in relation to the unverified allowance of deduction under section 54F was upheld and the assessment was held erroneous and prejudicial to revenue.Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the Principal Commissioner's order under section 263, finding the assessment order to be erroneous and prejudicial to the revenue for (a) failure to apply section 50C valuation to the capital gains transaction and (b) allowing deduction under section 54F without proper verification. Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Non-consideration of Section 50C by the Assessing Officer.3. Allowing deduction under Section 54F without proper verification.Issue-wise Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The assessee challenged the correctness of the order dated 24.01.2020 passed by the Principal Commissioner of Income Tax (PCIT), Surat-2, under Section 263 of the Income Tax Act, 1961. The main contention was that the PCIT assumed jurisdiction without satisfying the necessary conditions. The assessee argued that the PCIT should not have invoked Section 263 on points already inquired and decided by the Assessing Officer (AO). The PCIT's decision to take a different view on the same matter was also contested.2. Non-consideration of Section 50C by the Assessing Officer:The PCIT noticed that the assessee sold an immovable property for Rs. 1,00,00,000, but the Sub-Registrar Office (SRO) valued it at Rs. 6,22,19,600. The assessee's share was 30%, and thus, the Jantri value should have been Rs. 1,86,65,880. This differential amount of Rs. 5,22,19,600 was required to be considered under Section 50C. The AO, however, did not consider this differential amount while finalizing the assessment, rendering the order erroneous and prejudicial to the Revenue's interest. The Tribunal upheld the PCIT's view, stating that the AO failed to make necessary inquiries regarding the differential amount.3. Allowing Deduction under Section 54F without Proper Verification:The PCIT also found that the AO allowed the assessee's claim for deduction under Section 54F without proper verification. The balance sheet did not reflect the purchase of a new property, yet the AO allowed the deduction. The Tribunal noted that the AO did not examine the factual aspects of the property transactions and the capital gain account. The Tribunal supported the PCIT's decision, stating that the AO's failure to verify these facts made the assessment order erroneous and prejudicial to the Revenue's interest.Conclusion:The Tribunal concluded that the AO did not properly investigate or verify the facts related to the differential amount under Section 50C and the claim for deduction under Section 54F. Therefore, the PCIT rightly exercised jurisdiction under Section 263 to revise the assessment order. The appeal by the assessee was dismissed, and the PCIT's order was upheld.