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2025 (6) TMI 1694 - AT - Income TaxRevision u/s 263 - As per CIT AO failed to verify the fact that there is difference between the Stamp Duty Value and agreement value of the flats sold - applicability of Section 43CA - HELD THAT - On perusal of the order impugned we find that the PCIT has not invoked the provisions contained in Explanation 2 to Section 263. The order passed under Section 263 of the Act wherein reliance was placed on Explanation 2 to Section 263 of the Act was set aside by the Tribunal vide Order dated 13/10/2022 passed 2022 (10) TMI 1285 - ITAT MUMBAI . Therefore the reliance on the provisions contained in Explanation 2 to Section 263 of the Act is misplaced. We note that the AO had failed to carry out any inquiry in respect of the balance two transactions even though it was apparent that the difference in sale consideration and the stamp-duty value was beyond the tolerance band. To this extent we do not find any infirmity in the order passed by the Learned PCIT in invoking provisions contained in Section 263 of the Act as clearly the applicability of Section 43CA of the Act was required to be examined and the failure on the part of the Assessing Officer has resulted in passing of assessment order which was erroneous as aforesaid. We have already returned a finding that the actual sale agreements were neither requisitioned nor produced during the assessment proceedings. We also reject the contention of the Learned Authorised Representative of the Assessee that the applicability of Section 43CA of the Act is to be examined by aggregating all the transaction. The language of Section 43CA of the Act does not provide for such an approach or interpretation. No addition under Section 43CA of the Act was warranted in respect of 5 out of 7 transactions. Accordingly the order passed by the AO without making addition in respect of the aforesaid 5 transactions cannot be regarded as erroneous. Thus the Order passed by the PCIT directing for fresh examination of the aforesaid five transactions cannot be sustained. As regards balance 2 transactions we uphold the order passed by the Learned PCIT holding that the Assessment Order was erroneous in so far as pre-judicial to the interest of revenue. The Assessee would be at liberty to raise all contentions in relation to the aforesaid 2 sale transaction on merits before the Assessing Officer. Present appeal preferred by the Assessee is partly allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Jurisdiction of PCIT under Section 263 and Allegation of Change of Opinion Relevant Legal Framework and Precedents: Section 263 of the Act empowers the PCIT to revise an assessment order if it is found to be erroneous and prejudicial to the interest of Revenue. However, the power cannot be exercised merely because the PCIT disagrees with the opinion formed by the AO; there must be an identifiable error. Court's Interpretation and Reasoning: The Tribunal noted that the Assessee contended that the PCIT invoked Section 263 merely to take a different view, amounting to an impermissible change of opinion. The Tribunal examined the assessment record and found that the AO had not made any inquiry or verification regarding the difference between the sale consideration and stamp duty value, nor had the Assessee produced the relevant sale agreements during assessment proceedings. Key Evidence and Findings: The Tribunal observed that the AO had only recorded the sale consideration and stamp duty value but failed to verify the difference or apply Section 43CA of the Act. The absence of sale agreements or any inquiry into the discrepancy was a significant omission. Application of Law to Facts: Given the AO's failure to examine the applicability of Section 43CA, the Tribunal held that the PCIT's exercise of jurisdiction under Section 263 was justified and did not amount to mere change of opinion. Treatment of Competing Arguments: The Assessee's argument that the AO had carried out necessary inquiry was rejected on the basis of the assessment record. The Department's contention that the AO failed to requisition sale agreements was accepted. Conclusion: The Tribunal upheld the PCIT's jurisdiction under Section 263 to revise the assessment order. Issue 2: Applicability of Section 43CA of the Act and the Tolerance Band Relevant Legal Framework and Precedents: Section 43CA mandates that where the sale consideration of land or building is less than the stamp duty value, the stamp duty value shall be deemed to be the full value of consideration for computing income under the head "Profits & Gains of Business or Profession." The Proviso to Section 43CA, as amended by Finance Act 2021, provides a tolerance band of 10% difference between sale consideration and stamp duty value below which the provisions of Section 43CA do not apply. Precedents include: Court's Interpretation and Reasoning: The Tribunal examined the difference between sale consideration and stamp duty value for seven transactions. For five transactions, the difference was below 10%, and for two transactions, it exceeded 10%. The Tribunal accepted the Assessee's contention, supported by the above precedents, that the 10% tolerance band applies retrospectively and thus Section 43CA does not apply to the five transactions with differences below 10%. Key Evidence and Findings: The detailed table of differences and percentages furnished by the Assessee was not disputed by the Revenue. The Tribunal relied on this undisputed data. Application of Law to Facts: The Tribunal applied the retrospective tolerance band to exclude five transactions from Section 43CA's applicability and held that no addition was warranted for those. Treatment of Competing Arguments: The Revenue did not dispute the percentage differences. The Assessee's reliance on the precedents was accepted. The Tribunal rejected the Assessee's argument that the differences should be aggregated, holding that the statutory language does not support such aggregation. Conclusion: The Tribunal held that Section 43CA does not apply to five transactions with differences below 10%, and the assessment order in respect of these transactions is not erroneous. Issue 3: Error in Assessment Order Regarding Two Transactions Exceeding the Tolerance Band Relevant Legal Framework: Where the difference between sale consideration and stamp duty value exceeds the tolerance band, Section 43CA applies mandatorily, requiring the stamp duty value to be taken as full consideration. Court's Interpretation and Reasoning: The Tribunal found that for two transactions (Sl. No. 6 and 7), the difference exceeded 10%, and the AO failed to examine or make any addition under Section 43CA. The AO also did not requisition or consider sale agreements. Key Evidence and Findings: The absence of inquiry or verification by the AO and the significant difference in values were critical findings. Application of Law to Facts: The Tribunal held that the AO's failure to apply Section 43CA to these two transactions rendered the assessment order erroneous and prejudicial to Revenue's interest. Treatment of Competing Arguments: The Assessee's contention that the PCIT erred in invoking Section 263 for these transactions was rejected. The Tribunal also dismissed the Assessee's argument for aggregating transactions. Conclusion: The Tribunal upheld the PCIT's order setting aside the assessment order for these two transactions and directing fresh assessment. Issue 4: Invocation of Explanation 2 to Section 263 Relevant Legal Framework: Explanation 2 to Section 263 provides that an order passed without making inquiries or verification that the Assessing Officer ought to have made can be considered erroneous and prejudicial. Court's Interpretation and Reasoning: The Tribunal noted that the PCIT's impugned order dated 09/02/2024 did not invoke Explanation 2, and the earlier order relying on Explanation 2 was set aside by the Tribunal. Hence, reliance on Explanation 2 was misplaced. Conclusion: The Tribunal held that Explanation 2 was not relevant to the present order. 3. SIGNIFICANT HOLDINGS "The Assessing Officer had neither requisitioned the sale agreements pertaining to the sale transactions under consideration, nor had the Assessee placed the same on record... the Assessing Officer failed to inquire into the same and examine the applicability of provisions contained in Section 43CA of the Act." "The tolerance band of 10% contained in Proviso to Section 43CA of the Act... would apply retrospectively." "The Assessment Order cannot be regarded as erroneous in relation to 5 out of the 7 sale transactions under consideration... as there was no violation of the provisions contained in Section 43CA of the Act." "The Assessing Officer had failed to carry out any inquiry in respect of the balance two transactions... the failure on the part of the Assessing Officer has resulted in passing of assessment order which was erroneous... The Assessee would be at liberty to raise all contentions in relation to the aforesaid 2 sale transaction on merits before the Assessing Officer." "The language of Section 43CA of the Act does not provide for... aggregating all the transactions." "Ground No. 1 and 2(a) raised by the Assessee are dismissed while Ground No. 2(b) raised by the Assessee is partly allowed." Core principles established include:
Final determinations:
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