PCIT cannot revise finalized regular assessments through search proceedings without new incriminating material under section 153A

ITAT Kolkata allowed assessee appeals challenging PCIT's revision orders u/s 263 regarding escaped long-term capital gain computation. PCIT sought to enhance s.153A assessment scope to include s.50C valuation provisions for stamp duty-based consideration. ITAT held that since assessees disclosed capital asset transfers in regular returns and no incriminating material was found during search, the issue fell outside s.153A ambit. Following SC precedent in Abhisar Buildwell, ITAT ruled that regular assessment matters achieving finality cannot be reopened through search assessments without new discoveries from seized material. PCIT's revision orders were unsustainable.

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Issues Involved:
1. Legality of the Principal Commissioner of Income Tax (Pr. CIT) taking cognizance under section 263 of the Income Tax Act.
2. Validity of setting aside the assessment orders for de novo assessments.
3. Interpretation and application of section 50C of the Income Tax Act.
4. Examination of whether assessments under section 153A can include re-computation of long-term capital gains for unabated assessments.

Detailed Analysis:

1. Legality of the Pr. CIT Taking Cognizance Under Section 263:
The core issue revolves around whether the Pr. CIT was justified in invoking section 263 of the Income Tax Act to set aside the assessment orders dated 14th September 2021, 21st September 2021, and 30th September 2021, for the respective assesses. The Pr. CIT argued that the assessment orders were erroneous and prejudicial to the interest of the revenue because they did not consider the deemed sale consideration as per section 50C of the Income Tax Act.

2. Validity of Setting Aside the Assessment Orders for De Novo Assessments:
The Pr. CIT found that the assesses had sold lands resulting in long-term capital gains and that the sale consideration was less than the value determined by the Stamp Duty Valuation Authority. The Pr. CIT believed that, under section 50C, the full sale value should be deemed equivalent to the stamp duty valuation, thus making the assessment orders erroneous and prejudicial to the interest of the revenue. Consequently, the Pr. CIT set aside the assessment orders and directed de novo assessments.

3. Interpretation and Application of Section 50C:
The Pr. CIT observed that the assesses had sold properties at a consideration lower than the stamp duty valuation, which should be the deemed full sale consideration for computing long-term capital gains under section 50C. The Pr. CIT calculated the alleged escaped long-term capital gains for each assessee based on the difference between the actual sale consideration and the stamp duty valuation.

4. Examination of Whether Assessments Under Section 153A Can Include Re-computation of Long-term Capital Gains for Unabated Assessments:
The Tribunal examined whether the scope of assessment under section 153A could be expanded to include re-computation of long-term capital gains for assessments that had already attained finality. The Tribunal noted that the assessments were completed without any incriminating material found during the search, and the returns had been accepted under section 143(1).

The Tribunal referred to the Supreme Court's judgment in the case of Pr. CIT, Central -3 vs. Abhisar Buildwell (P) Ltd. and other relevant judgments, which held that no addition could be made under section 153A in the absence of incriminating material. The Tribunal concluded that the Pr. CIT's assumption that the assessment orders were erroneous was not tenable because the assessments had already attained finality and no incriminating material was found during the search.

The Tribunal also emphasized that section 50C's deeming provision regarding the full sale consideration should have been applied during the regular assessment under section 143(3), which had already attained finality. The Tribunal found that the Pr. CIT had misinterpreted the law by attempting to include this issue in the scope of section 153A assessments.

Conclusion:
The Tribunal quashed the orders of the Pr. CIT in each case, stating that the Pr. CIT's actions were not sustainable under the law. The Tribunal allowed the appeals of the assesses, concluding that the assessments under section 153A could not include re-computation of long-term capital gains for unabated assessments without any incriminating material found during the search. The Tribunal's decision was pronounced in the open court on 11/07/2024.

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