2021 (9) TMI 766 - AT - Income Tax

Tribunal quashes order under Section 263, finding assessment not erroneous. Assessee appeal allowed.

Naina Saraf Versus Pr. CIT-2, Jaipur.

Naina Saraf Versus Pr. CIT-2, Jaipur. - TMI Issues Involved:1. Invocation of Section 263 of the Income Tax Act, 1961.2. Assumption of jurisdiction under Section 263.3. Application of Section 56(2)(vii)(b)(ii) and its proviso.4. Validity of the assessment order dated 21.12.2017.Detailed Analysis:1. Invocation of Section 263 of the Income Tax Act, 1961:The assessee appealed against the order of the Principal Commissioner of Income Tax (Pr.CIT) invoking Section 263, arguing that the assessment order dated 21.12.2017 was neither erroneous nor prejudicial to the interest of the revenue. The Pr.CIT contended that the Assessing Officer (AO) failed to apply Section 56(2)(vii)(b)(ii), thereby rendering the assessment order erroneous and prejudicial to the revenue.2. Assumption of Jurisdiction under Section 263:The Pr.CIT assumed jurisdiction under Section 263 by asserting that the AO did not consider the implications of Section 56(2)(vii)(b)(ii). The assessee argued that the AO had examined all relevant details during the assessment proceedings and that the Pr.CIT’s action was merely a change of opinion, which is not permissible under Section 263. The Tribunal noted that the AO had issued notices and reviewed documents related to the property purchase, indicating that the AO had applied his mind to the issue.3. Application of Section 56(2)(vii)(b)(ii) and its Proviso:The Pr.CIT held that the difference between the stamp duty value and the purchase consideration should be treated as income from other sources under Section 56(2)(vii)(b)(ii). The assessee contended that the transaction should be governed by the pre-amended law, which did not cover inadequacy in consideration. The Tribunal found that the agreement for the property was entered into in A.Y. 2010-11, and substantial consideration was paid before the amendment. Therefore, the amended provision could not be applied retrospectively.4. Validity of the Assessment Order Dated 21.12.2017:The Tribunal examined whether the AO’s order was erroneous and prejudicial to the revenue’s interest. It concluded that the AO had taken a possible view based on the facts and applicable law at the time. The Tribunal also noted that the Pr.CIT’s action was an impermissible substitution of opinion. The Tribunal cited various judicial precedents, including Malabar Industrial Co. Ltd. v/s CIT and CIT v/s Max India Ltd., to support its conclusion that the AO’s order was not erroneous or prejudicial to the revenue.Conclusion:The Tribunal quashed the order passed under Section 263 by the Pr.CIT, holding that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. Consequently, the other grounds raised by the assessee became infructuous and required no further adjudication. The appeal was allowed in favor of the assessee.