2023 (9) TMI 948 - AT - Income Tax

Revision u/s 263 - Applicability of provisions of 56(2)(vii)(b) - PCIT applying Explanation 2 to section 263 held the impugned assessment as erroneous and prejudicial to the interest of Revenue; set it aside and directed the Ld. AO to refer the matter to District Valuation Officer ( DVO ) to examine the FMV of the property as on the date of purchase/registration and examine the issue of purchase of property for a consideration lower than the stamp duty value in the light of the provisions of section 56(2)(vii)(b) - HELD THAT - We agree with the contention of the AR that the provision of section 56(2)(vii)(b) is not applicable to case of a company and that section 56(2)(x) which may apply to case of a company has been inserted by the Finance Act 2017 w.e.f. 01.04.2017 and is accordingly applicable to AY 2018-19 and onwards whereas the case of the assessee company pertains to AY 2015-16. In this view of the matter the direction of the PCIT is not sustainable being not in accordance with law. Documentary evidence available in the records which the AO admits to have verified the veracity thereof amply demonstrate that the AO made the requisite enquiry. If that be so a mere non-discussion or non-mention thereof in the assessment order could not lead to assumption that the AO did not apply his mind or that he had not made inquiry on the issue. Assumption of jurisdiction u/s 263 of the Act by the Ld. PCIT was not justified. Accordingly we vacate his order. Appeal of the assessee is allowed.

Summary

Issues Involved:
The issues involved in this case are the validity of the order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961 for Assessment Year 2015-16, specifically concerning the assessment of investment in property, increase in sundry creditors, and Fair Market Value of property purchased.

Assessment of Investment in Property:
The assessee company filed its return for AY 2015-16, which was processed under section 143(1) of the Act. Subsequently, it underwent limited scrutiny under CASS. The Ld. Assessing Officer accepted the income returned by the assessee after due verification and completed the assessment under section 143(3) of the Act. However, the Ld. Principal Commissioner of Income Tax found discrepancies in the assessment related to investment in property, increase in sundry creditors, and Fair Market Value of property purchased. The Ld. PCIT issued a notice to the assessee to show cause why the assessment should not be considered erroneous and prejudicial to the interest of Revenue.

Validity of Assessment Order:
The Ld. PCIT set aside the assessment order, directing the Ld. AO to refer the matter to the District Valuation Officer to examine the Fair Market Value of the property and the issue of purchase of property for a consideration lower than the stamp duty value. The assessee challenged this decision before the Tribunal, arguing that the provisions of section 56(2)(vii)(b) do not apply to a company like itself, making the PCIT's order void-ab-initio and invalid. The AR contended that the Ld. AO had conducted a detailed enquiry before passing the assessment order, and the PCIT's intervention was unwarranted.

Legal Interpretation and Conclusion:
The Tribunal agreed with the AR's argument, stating that section 56(2)(vii)(b) does not apply to companies, and section 56(2)(x) introduced later was not applicable to the assessee company's AY 2015-16. The Tribunal found that the Ld. AO had conducted the necessary enquiries, even though they were not explicitly mentioned in the assessment order. The Tribunal concluded that the Ld. PCIT's assumption of jurisdiction under section 263 was unjustified, and therefore vacated the order. Consequently, the appeal of the assessee was allowed.

Separate Judgement by Judges:
The judgment was pronounced in the open court on 19th September 2023 by Dr. BRR Kumar, Accountant Member, and Ms. Astha Chandra, Judicial Member.