2021 (9) TMI 603 - AT - Income Tax

Tribunal quashes PCIT's revisional jurisdiction, upholds Assessing Officer's valuation method.

The Tribunal held that the Principal Commissioner of Income Tax's invocation of revisional jurisdiction under Section 263 was erroneous as the Assessing ... Revision u/s 263 by CIT - omission on the part of AO not to refer the valuation of asset/flats to DVO - incorrect valuation of the flats - CIT was of the opinion that AO still erred in accepting the Registered Valuer’s valuation report of flats less than stamp valuation authority value and according to Ld. Pr. CIT, the AO ought to have referred the valuation to the Departmental Valuation Officer (‘DVO’) to reach a judicious and proper conclusion - whether the Ld. PCIT’s allegation against the AO’s action/omission can be termed as erroeneous as well as prejudicial to the Revenue? - HELD THAT:- Section 55A of the Act empowers the AO to refer the value of a capital asset to Department Valuation Officer (DVO) provided he is not satisfied with the FMV of the capital asset estimated by the registered valuer of the assessee. So, it can be seen that the AO has acted as per the section 55A of the Act and has exercised his discretion as empowered by the law, so it cannot be termed as erroneous. Further the AO’s action of accepting the fair market value of the flats on the basis of the estimate prepared by the registered valuer of the assessee as per section 55A of the Act cannot be held to be perverse because it was based on material i.e. registered valuer’s report. Therefore, in the aforesaid facts the action of the AO cannot be held to be erroneous. Whether the amendment made by Finance Act, 2013 w.e.f. 01.04.2014 in section 56(2)(vii)(b) of the Act is applicable in this case? - since the date of agreement for sale of flats was on 15 Feb 2013, we find that the amendment brought in by Finance Act, 2013 w.e.f. 1.04.2014 by inserting sub-clause (ii) in section 56(2)(vii)(b) of the Act is not applicable in the case of the assessee. And as per the law as was applicable in the case of the assessee before the pre-amendment even sub- clause (i) in section 56(2)(vii)(b) is not applicable since assessee’s case is not a case wherein no consideration was given for receiving the immovable property. AO as per section 55A of the Act since satisfied with the estimate prepared by the registered valuer of the assessee has adopted at ₹ 67,57,600/- as the fair market value of the capital assets/flat as full value of consideration for the capital asset which action of the AO is his discretion which he has exercised as empowered by the statute. So it cannot be called as a wrong/erroneous order, whereas it is a plausible view. Therefore, the said action of AO to accept the estimated value of the flats at ₹ 67,57,600/- cannot be held to be erroneous. Even if the Ld. PCIT has a different view which may be a possible view that cannot be a ground to invoke the revisional jurisdiction u/s 263 of the Act unless the Ld. PCIT is able to show that the AO’s view was unsustainable in law, which is not the case of the Ld PCIT. CIT erroneously has usurped the jurisdiction u/s. 263 of the Act, so we are inclined to quash the same - Decided in favour of assessee. Issues Involved:1. Legality of the initiation and passing of the order under Section 263 of the Income Tax Act, 1961.2. Applicability of Section 56(2)(vii)(b)(ii) of the Income Tax Act to the assessee's case.3. Validity of the valuation method used by the Assessing Officer (AO) and whether the AO should have referred the valuation to the Departmental Valuation Officer (DVO).Detailed Analysis:1. Legality of the initiation and passing of the order under Section 263 of the Income Tax Act, 1961:The assessee contested the Principal Commissioner of Income Tax (PCIT)'s invocation of revisional jurisdiction under Section 263 of the Act. The PCIT alleged that the AO's order was erroneous and prejudicial to the interests of the revenue because the AO relied on a private valuer's report instead of referring the valuation to the DVO. The Tribunal noted that the AO had relied on the valuation report of a registered valuer, approved by the Chief Commissioner of Income Tax, and found no fault in the AO's actions. The Tribunal emphasized that for the PCIT to invoke Section 263, the AO's order must be both erroneous and prejudicial to the revenue. Since the AO had acted within the law by accepting the registered valuer's report, the Tribunal held that the PCIT's order was without jurisdiction and quashed it.2. Applicability of Section 56(2)(vii)(b)(ii) of the Income Tax Act to the assessee's case:The Tribunal examined whether the amended Section 56(2)(vii)(b)(ii), effective from April 1, 2014, applied to the assessee's case. The assessee had entered into an agreement to purchase the property on February 6, 2013 (Assessment Year 2013-14), and the amendment was not applicable retrospectively. The Tribunal referred to the Supreme Court's judgment in Sanjeev Lal v. CIT, which held that the date of the agreement for sale is crucial in determining the transfer of property. Since the agreement was executed before the amendment, the Tribunal concluded that the amended provision did not apply to the assessee's case.3. Validity of the valuation method used by the AO and whether the AO should have referred the valuation to the DVO:The Tribunal reviewed the AO's decision to rely on the registered valuer's report, which estimated the property's fair market value at Rs. 67,57,600, against the stamp duty valuation of Rs. 80,82,150. The Tribunal noted that Section 55A of the Act empowers the AO to refer the valuation to the DVO only if the AO is not satisfied with the registered valuer's report. Since the AO was satisfied with the registered valuer's estimate, the Tribunal held that the AO's decision was within the legal framework and could not be termed erroneous. The Tribunal also pointed out that the PCIT's disagreement with the AO's view did not justify invoking Section 263 unless the AO's view was unsustainable in law, which was not the case here.Conclusion:The Tribunal concluded that the PCIT had erroneously invoked revisional jurisdiction under Section 263, as the AO's order was neither erroneous nor prejudicial to the interests of the revenue. The Tribunal quashed the PCIT's order and allowed the assessee's appeal.