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2025 (4) TMI 863 - AT - Income TaxRevision u/s 263 - AO had not inquired into two issues on applicability of section 43CA regarding the sale of land below market value and the capitalization of interest costs - HELD THAT - It is an admitted fact that the assessee had sold the land at Survey No.24 for a consideration less than the market value adopted for stamp duty purposes for which the provisions of section 43CA of the Act are squarely applicable. Although there is a difference as per the provisions of section 43CA of the Act of Rs. 38, 32, 312/- the assessee had offered only an amount of Rs. 3, 05, 475/- and the Assessing Officer has not bothered to inquire about the same. Similarly the issue relating to the addition of interest of Rs. 1, 52, 87, 640/- to the cost of land despite debiting such interest as finance cost in the Profit and Loss Account remained to be examined by the AO. A perusal of the assessment order shows that it is a very brief order without touching the two vital issues pointed out by the Ld. PCIT. As in the case of Vedanta Ltd 2020 (12) TMI 89 - BOMBAY HIGH COURT has held that where the assessment was completed without proper inquiries the Commissioner was competent to invoke revisional jurisdiction and direct the Assessing Officer for fresh assessment. We find in the case of Rampyari Devi Saraogi 1967 (5) TMI 10 - SUPREME COURT has held that where the Assessing Officer had concluded the assessment in undue hurry by passing a short stereotyped assessment order without making any inquiries the CIT is justified in revising the order u/s 263 of the Act. Decided against assessee. Revision u/s 263 - Addition u/s 69C r.w.s. 115BBE - When the AO had raised specific queries on an issue and the assessee had given the reply to the same and the AO after considering the reply of the assessee has passed the order then the order cannot be set aside by the Ld. PCIT by invoking jurisdiction u/s 263 of the Act since it is not a case of lack of enquiry or no enquiry but at best may be inadequate enquiry. Since the AO in the instant case has raised specific queries regarding the issues pointed out by the Ld. PCIT and the assessee had replied to the same and the AO after considering the reply of the assessee has accepted the submissions made by the assessee therefore it is not a case of lack of enquiry and therefore is not a fit case for invoking the jurisdiction u/s 263 of the Act. We therefore set aside the order passed by the Ld. PCIT and allow the grounds raised by the assessee.
ISSUES PRESENTED and CONSIDERED
The primary issues considered in the judgment were:
ISSUE-WISE DETAILED ANALYSIS 1. Validity of PCIT's Assumption of Jurisdiction under Section 263 The legal framework under section 263 allows the PCIT to revise an order if it is deemed erroneous and prejudicial to the interests of the Revenue. The PCIT noted that the AO had not adequately inquired into certain issues, such as the applicability of section 43CA regarding the sale of land below market value and the capitalization of interest costs, which were not verified during the assessment proceedings for A.Y. 2018-19. Similarly, for A.Y. 2019-20, the increase in project cost and discrepancies in declared net profit were not adequately examined. The Tribunal considered the legal precedents cited by the PCIT, which supported the view that lack of inquiry or inadequate inquiry could justify the invocation of section 263. The Tribunal upheld the PCIT's assumption of jurisdiction for A.Y. 2018-19, as the AO failed to verify crucial issues, thus making the order erroneous and prejudicial to the Revenue. 2. Erroneous and Prejudicial Orders due to Lack of Inquiry For A.Y. 2018-19, the PCIT identified that the AO did not inquire into the difference in the sale value of land as per section 43CA and the improper capitalization of interest costs. The Tribunal agreed that these issues were not addressed in the assessment order, which was brief and lacked necessary inquiries. For A.Y. 2019-20, the PCIT noted the unexplained increase in project costs and discrepancies in declared net profit. The Tribunal found that the AO had raised queries and received responses from the assessee, indicating that some inquiries were made. However, the Tribunal concluded that the inquiries were inadequate, and the PCIT was justified in invoking section 263 to ensure a thorough examination. 3. Justification for Setting Aside Assessment Orders The Tribunal upheld the PCIT's decision to set aside the assessment order for A.Y. 2018-19, directing the AO to re-examine the issues related to section 43CA and interest capitalization. The Tribunal emphasized the need for the AO to conduct a detailed inquiry and verification of these issues. For A.Y. 2019-20, the Tribunal noted that while the AO had made some inquiries, they were not sufficient. The Tribunal directed the AO to conduct a fresh assessment with a detailed examination of the project's cost increase and profit discrepancies, after providing the assessee an opportunity to be heard. 4. Additional Ground on Section 153D Approval The assessee raised an additional ground challenging the PCIT's order for lack of prior approval under section 153D. However, this ground was not pressed by the assessee during the proceedings, and the Tribunal dismissed it without further consideration. SIGNIFICANT HOLDINGS The Tribunal upheld the PCIT's invocation of section 263 for both assessment years, emphasizing the necessity for proper inquiry and verification by the AO. The Tribunal concluded that the assessment orders were erroneous and prejudicial to the Revenue due to inadequate inquiry. The Tribunal directed the AO to conduct fresh assessments with detailed inquiries into the specific issues identified by the PCIT. The Tribunal's decision reinforces the principle that the AO must conduct thorough inquiries and verifications during assessment proceedings, and failure to do so can justify revisional jurisdiction under section 263. In conclusion, the appeal for A.Y. 2018-19 was dismissed, and the appeal for A.Y. 2019-20 was partly allowed, with directions for fresh assessments on specific issues.
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