R.S. THAMILSELVUN,TIRUCHIRAPALLI vs. ACIT, CIRCLE-1, TRICHY

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ITA 312/CHNY/2023Status: DisposedITAT Chennai27 June 2023AY 2018-194 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the PCIT's revision order was not sustainable as the assessment was limited to house property income, and the PCIT did not address the AO's specific findings on that issue. The Tribunal quashed the revision order.

What were the facts?

The assessee's case was selected for limited scrutiny to examine income from house property. The Assessing Officer (AO) completed the assessment without making any additions on this issue. The Principal Commissioner of Income Tax (PCIT) revised the assessment order, citing the AO's failure to consider TDS implications on interest paid to NBFCs.

What were the issues?

Whether the PCIT was justified in exercising revisionary powers under Section 263 when the original assessment was limited to specific issues and the PCIT raised a new issue not covered by the limited scrutiny.

Which sections of the Income-tax Act were involved?

Section 263,Section 40(a)(ia),Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL

Hearing: 27.06.2023Pronounced: 27.06.2023

आदेश /O R D E R

PER MAHAVIR SINGH, VICE PRESIDENT:

1.

This appeal filed by the assessee is directed against the Revision order passed by the Principal Commissioner of Income Tax, Madurai-1 in Revision No.PCIT, Madurai-1/Revision-263/ 100000436537/2022 dated 21.02.2023. The assessment was framed by the Addl./Joint/Deputy/Asst. Commissioner of Income Tax/Income Tax Officer, National e-Assessment Centre, Delhi for the 2 assessment year 2018-19 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 11.01.2021.

2.

The only issue in this appeal of assessee is as regards to the revision order passed by the PCIT u/s.263 of the Act, setting aside the assessment completed u/s.143(3) of the Act in limited scrutiny assessment. For this, assessee has raised various argumentative grounds and also cited many case laws, which we need not to reproduce.

3.

At the time of hearing, none is present from assessee’s side and we have heard ld.CIT-DR and gone through facts and circumstances of the case. Brief facts are that the original assessment was completed u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act vide order dated 11.01.2021. From the assessment order, it is clear that the case was selected for limited scrutiny i.e., for examining income from house property. The relevant noting done in the assessment order reads as under:- “1. The case was selected for Limited Scrutiny assessment under the E- assessment Scheme, 2019 on the following issues:-

S.No. Issues 1. Income from House Property 2. On above issue(s), no addition is made.”

3 The PCIT, on verification of records noted that the assessee has incurred expenditure of interest paid to NBFCs amounting to Rs.41,83,817/- without deduction of TDS. Hence, he revised the assessment framed by AO and directed the AO to verify the applicability of provisions of section 40(a)(ia) of the Act for non- deduction of TDS on interest payment to NBFCs. The PCIT finally directed the AO in para 7 as under:- 7. In view of the above, I am satisfied that the order dated 11/01/2021 passed by the Assessing Officer u/s 143(3) of Act for the A.Y.2018-19 is erroneous in so far it is prejudicial to the interest of the revenue. Therefore, in exercise of powers conferred u/s 263 of the Act, I set aside the aforesaid order for the limited purpose of verification of applicability of section 40(a) (ia) of the Act as discussed in para (5.3) & (5.4) above. The assessing officer shall pass fresh order after making necessary enquiries and verification with regard to the claim of the assessee as discussed above in accordance with law after allowing reasonable opportunity of being heard to the assessee.

4.

We noted that first of all the assessee’ case is clear-cut a limited scrutiny assessment i.e., to examine the income from house property only and this issue is now squarely covered by the decision of Hon’ble Madras High Court in the case of CIT vs. Smt. Padmavathi, [2020] 120 taxmann.com 187 (Madras), wherein it is held as under:- 17. The assessing officer in his limited scrutiny, has verified the source of funds, noted the sale consideration paid, the expenses incurred for stamp duty and other charges. Furthermore, the assessee in their reply dated 11.01.2019 to the show cause notice dated 26.10.2018 issued by the PCIT has specifically stated that the assessment was getting time barred,

4 assessing officer took upon himself the role of a valuation officer under Section 50(C)(2) and found that the guideline value was not actual fair market value of the property and the actual consideration paid was the fair market value and therefore, he did not choose to make any addition under Section 50(C) of the Act.

18.

The PCIT, has not dealt with this specific objection, but, would fault the assessing officer for not invoking Section 56(2)(vii)(b)(ii) merely on the ground that the market value was higher. As point out earlier, the guideline value is only an indicator and that will always not represent the fair market value of the property and therefore, the invocation of the power under Section 263 of the Act by the PCIT is not sustainable in law.

On this short premise, the revision order will go. Accordingly, we quash the revision order passed by PCIT and allow the appeal of assessee.

5.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 27th June, 2023 at Chennai.

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