2025 (6) TMI 1703 - AT - Income Tax

Revision u/s 263 - Jurisdiction of the Pr. CIT u/s 263 to revise the AO s order for AY 2021-22 - HELD THAT - After going through the facts on record we are of the considered view that the ld. Pr. CIT has assumed jurisdiction on wrong appreciation of facts. The impugned property was purchased by the assessee on 03/08/2021 falling in FY 2021-22 relevant to AY 2022-23 whereas the impugned assessment year is AY 2021-22. All the apprehensions raised by the ld. Pr. CIT in justifying that the assessment order dated 26/12/2022 is erroneous and prejudicial to the interest of the revenue may be relevant for AY 2022-23 and not for the year under consideration. Since the assumption of jurisdiction is based upon wrong appreciation of facts we have no hesitation in setting aside the impugned order of the CIT and restore that of the AO.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking jurisdiction under Section 263 of the Income Tax Act, 1961 to revise the assessment order framed under Section 143(3) read with Section 144B of the Act for the Assessment Year (AY) 2021-22.
• Whether the order passed by the Assessing Officer (AO) dated 26/12/2022 was erroneous and prejudicial to the interests of the revenue, thereby warranting revision under Section 263.
• Whether the Pr. CIT was correct in directing the AO to examine the applicability of Sections 56(2)(x)(b)(B) and 50C of the Income Tax Act to the transaction involving purchase of a residential flat (Flat No.3602 at Planet Godrej, Mahalaxmi (E), Mumbai) dated 03/08/2021, in the assessment proceedings for AY 2021-22.
• Whether the transaction of purchase of the flat falls within the relevant previous year for AY 2021-22 or AY 2022-23, and the consequent impact on the validity of the Pr. CIT's order under Section 263.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction of the Pr. CIT under Section 263 to revise the AO's order for AY 2021-22

Relevant Legal Framework and Precedents: Section 263 of the Income Tax Act empowers the Pr. CIT to revise an assessment order if it is found to be erroneous and prejudicial to the interests of the revenue. The jurisdiction under Section 263 is to be exercised with caution and only when the order passed by the AO is demonstrably erroneous on facts or law, and such error causes prejudice to revenue.

Court's Interpretation and Reasoning: The Tribunal noted that the Pr. CIT's jurisdiction under Section 263 was invoked on the basis that the AO's order was erroneous and prejudicial. However, the Tribunal found that the Pr. CIT's assumption of jurisdiction was based on a misappreciation of facts, specifically the timing of the transaction under scrutiny.

Key Evidence and Findings: The transaction in question, the purchase of the residential flat, was executed on 03/08/2021, which falls in the financial year 2021-22, relevant to AY 2022-23, not AY 2021-22. The AO's order under challenge pertained to AY 2021-22.

Application of Law to Facts: Since the transaction did not pertain to the AY 2021-22, the AO's order for that year could not be held erroneous on this ground. Thus, the Pr. CIT's jurisdiction to revise the AY 2021-22 assessment order under Section 263 was not validly invoked.

Treatment of Competing Arguments: The Revenue contended that the AO's order was erroneous for not examining the applicability of Sections 56(2)(x)(b)(B) and 50C to the transaction. The assessee argued that the transaction was not in the relevant previous year for AY 2021-22, hence no error in the AO's order for that year.

Conclusion: The Tribunal concluded that the Pr. CIT's jurisdiction was assumed on a wrong appreciation of facts, and therefore the revision order under Section 263 was invalid.

Issue 2: Applicability of Sections 56(2)(x)(b)(B) and 50C to the purchase transaction in AY 2021-22

Relevant Legal Framework and Precedents: Section 56(2)(x)(b)(B) deals with taxation of income from immovable property transactions where consideration is less than the stamp duty value, and Section 50C provides for deemed sale consideration at stamp duty value for capital gains computation in certain property transactions.

Court's Interpretation and Reasoning: The Tribunal observed that the AO was directed by the Pr. CIT to examine the applicability of these provisions in the assessment for AY 2021-22. However, since the purchase transaction occurred in the financial year 2021-22 (relevant to AY 2022-23), these provisions could not be applicable to AY 2021-22.

Key Evidence and Findings: The date of agreement for purchase was 03/08/2021, falling in FY 2021-22. The assessment under challenge related to AY 2021-22, which corresponds to FY 2020-21.

Application of Law to Facts: The Tribunal held that the AO was not required to examine these provisions for AY 2021-22 as the transaction did not fall in that year. Any examination of these provisions would be relevant only in AY 2022-23 assessment proceedings.

Treatment of Competing Arguments: The Revenue's reliance on these provisions for AY 2021-22 was rejected as misplaced. The assessee's argument that the transaction was not relevant to AY 2021-22 was accepted.

Conclusion: The direction to examine Sections 56(2)(x)(b)(B) and 50C in AY 2021-22 was unwarranted and based on incorrect facts.

Issue 3: Validity of setting aside the AO's order for AY 2021-22 and directing re-examination

Relevant Legal Framework and Precedents: Under Section 263, the Pr. CIT can set aside an assessment order only if it is erroneous and prejudicial to revenue. The order must be based on correct facts and legal principles.

Court's Interpretation and Reasoning: The Tribunal found that the Pr. CIT's order dated 27/03/2025