2022 (6) TMI 1199 - AT - Income Tax

Tribunal quashes CIT's revisionary jurisdiction, deems AO's decision on Registered Valuer's report valid.

ALOKE RAY Versus ACIT (Intt. Taxation), Circle – 1 (1), Kolkata

The Tribunal found that the CIT had not properly exercised revisionary jurisdiction under the Act. The Tribunal quashed the revisionary proceedings ... Revision u/s 263 - LTCG - Difference in valuation of property - AO has acted upon assessee’s calculation indexed cost on the basis of valuation filed by the assessee but as per DVO, the valuation of whole property as on 01.04.1981 determined at Rs. 27,35,720/-, the assessee calculated indexed cost on the basis of valuation at Rs. 42,00,000/- - DR submitted that in the facts of this case, the AO ought to have referred report of DVO and he shall take decision as per law to determine the actual cost of acquisition of the property sold and to determine the correct amount of long term capital gain earned by the assessee on sale of property - HELD THAT:- As relying on the decision of coordinate bench in the case of Monoj Kumar Biswas (2021 (9) TMI 603 - ITAT KOLKATA] we are of the view that the revisionary jurisdiction has not been exercised by the CIT (International Taxation) in accordance with the provisions of the Act. Accordingly we quash the revisionary proceedings initiated u/s 263 of the Act and consequential order passed u/s 263 of the Act. The appeal of the assessee is allowed. Issues Involved:1. Erroneous initiation of proceedings under Section 263.2. Validity of the assumption of jurisdiction by the CIT.3. Discretionary power of the AO under Section 55A.4. Reliance on the Valuation Officer's report.5. Applicability of Explanation 2 to Section 263.6. Finality of proceedings.Detailed Analysis:1. Erroneous initiation of proceedings under Section 263:The assessee contested the initiation of proceedings under Section 263, arguing that the CIT erred in concluding that the Long Term Capital Gain (LTCG) offered should have been higher by INR 49,94,662/-. The CIT initiated proceedings based on the difference in valuation between the assessee's Registered Valuer and the Departmental Valuation Officer (DVO).2. Validity of the assumption of jurisdiction by the CIT:The assessee argued that the assumption of jurisdiction by the CIT violated the principle that if the AO adopts one of the permissible views in law, the order cannot be treated as erroneous. The AO had accepted the valuation report from the assessee's Registered Valuer and made an addition of Rs. 7,00,000/- in respect of LTCG. The CIT's intervention was contested on the grounds that a mere difference in opinion on valuation does not justify the assumption of jurisdiction under Section 263.3. Discretionary power of the AO under Section 55A:The assessee emphasized that the power given to the AO under Section 55A to refer the valuation to a Valuation Officer is discretionary. The AO had accepted the valuation report from a Registered Valuer, and the CIT's reliance on the DVO's report was contested as it was merely an opinion and not binding.4. Reliance on the Valuation Officer's report:The CIT relied on the DVO's report, which valued the property at Rs. 27,36,720/- as on 01.04.1981, compared to the assessee's valuation of Rs. 42,00,000/-. The assessee argued that the DVO's report is merely an opinion and cannot form the basis for interference in the AO's order. Judicial precedents, such as ACIT v Dhariya Construction Co. and Jitendar Singh Chaddha v Pr. CIT-18, were cited to support this argument.5. Applicability of Explanation 2 to Section 263:The CIT placed reliance on Explanation 2 to Section 263, which the assessee argued was inappropriate. The assessee contended that the CIT ignored the settled principle of finality of proceedings and distinguished the judicial precedents relied upon by the CIT.6. Finality of proceedings:The assessee argued that the AO had applied his mind to the valuation report and made a specific disallowance of brokerage expenses, indicating that the AO had conducted an investigation. The CIT's intervention was seen as unwarranted since the AO had already exercised his discretion and accepted the valuation report.Judgment:The Tribunal, after considering the submissions and material on record, found that the CIT had not exercised the revisionary jurisdiction in accordance with the provisions of the Act. The Tribunal quashed the revisionary proceedings initiated under Section 263 and the consequential order passed under the same section. The appeal of the assessee was allowed, and the Tribunal emphasized that the AO's acceptance of the Registered Valuer's report was a permissible view and not erroneous or prejudicial to the interest of the revenue.Conclusion:The Tribunal concluded that the CIT's assumption of jurisdiction under Section 263 was not justified as the AO had adopted a permissible view in law. The reliance on the DVO's report was deemed merely an opinion and not a valid ground for revision. The appeal of the assessee was allowed, and the revisionary proceedings were quashed.