RAJESH KRUSHNARAO CHIKTE,NAGPUR vs. PCIT-1,NAGPUR, NAGPUR

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ITA 335/NAG/2025Status: DisposedITAT Nagpur20 May 2026AY 2015-1615 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer's lack of inquiry into the applicability of Section 56(2)(vii)(b) on the difference between purchase consideration and stamp duty valuation made the assessment order erroneous and prejudicial to revenue. Therefore, the PCIT was justified in invoking Section 263.

What were the facts?

The assessee did not file a return for AY 2015-16, but high-value property transactions were noted. The Assessing Officer initiated reassessment and made additions based on sale consideration vs. stamp duty value, later rectified. The PCIT initiated revision under Section 263, citing failure to examine Section 56(2)(vii)(b) regarding property purchase difference.

What were the issues?

Whether the PCIT was justified in revising the assessment order under Section 263 due to the Assessing Officer's failure to examine the applicability of Section 56(2)(vii)(b) on a property purchase.

Which sections of the Income-tax Act were involved?

Section 263,Section 147,Section 144B,Section 154,Section 56(2)(vii)(b),Section 56(2)(x),Section 43CA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, NAGPUR BENCH :: NAGPUR

For Appellant: Shri K.M. Gupta, CA (virtual)
For Respondent: Shri Pankaj Kumar, CIT-DR
Hearing: 26.02.2026Pronounced: 20.05.2026

PER KHETTRA MOHAN ROY, AM:

This appeal filed by the assessee is directed against the order of Ld. Principal Commissioner of Income Tax, Nagpur-1, (for short, “PCIT”), dated 24/03/2025 passed under section 263 of the Income Tax Act, 1961 (for short, “Act”) for Assessment Year 2015-16.

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) 2. The assessee has raised the following grounds of appeal:

1.

That on the facts and circumstance of the case and in law, order dated 24 March 2025, passed under section 263 of the Income tax Act, 1961 ("the Act") by Hon'ble Principal Commissioner of Income Tax, Nagpur-1 is bad in law and liable to be quashed. 2. That, on the facts and circumstances of the case and in law, Hon'ble PCIT, Nagpur-1 has erred in initiating revisionary proceedings on the ground that subject issues have not been examined properly by Assessing Officer during course of assessment proceedings. 3. That, on the facts and in circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in passing the order u/s. 263 by invoking Explanation 1 and 2 of Section 263 of the Act, although the assessment order passed u/s. 147 r.w.s 143(3) of the I. T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 4. That on the facts and circumstances of case and in law, PCIT, Nagpur -1 has not assumed proper jurisdiction to revise order passed by the A.O. u/s 147 where assessee being an eligible assessee to avail benefit of VSV scheme 2024, filed an application in Form 1 on 23/01/2025 and awaited Form 2 from PCIT. Thus, the notice issued u/s 263 after filing of Form 1 under VSV scheme is bad in law. 5. That on the facts and circumstances of case and in law, PCIT, Nagpur -1 has erred in invoking Section 263 to revise the reassessment order for not applying section 56(2) (vii) (b) of the Income Tax Act on purchase of property, ignoring the fact that said property is a business purchase of assessee and section 56(2)(vii)(b) is not applicable to trading purchases. 6. That on the facts and circumstance of the case and in law, order dated 24 March 2025, passed under section 263 of the Income tax Act, 1961 ("the Act") by Hon'ble Principal Commissioner of Income Tax, Nagpur-1 setting aside the reassessment order and directing the JAO to pass fresh order. 7. The above grounds are independent and without prejudice to each other. The appellant craves leave to add, amend, vary,

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.

3.

Facts of the case, in brief, are that assessee is an individual who had not filed his return of income for the Assessment Year 2015-16. Based on the information available with the Department through Annual Information Return (AIR)/other sources, it was noticed that assessee had entered into high-value financial transactions aggregating to Rs.2,14,58,000/-. The said transactions comprised sale of immovable property amounting to Rs.22,50,000/- and purchase of immovable property amounting to Rs.1,92,08,000/-. Accordingly, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment and initiated reassessment proceedings by issuing notice under section 148 of the Act, which was duly served upon the assessee. In response to the said notice, assessee filed his return of income on 09.07.2022 declaring total income of Rs.4,08,090/-. During the course of reassessment proceedings, the assessee furnished various details and

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) documentary evidences including copy of bank account statements, Form No.26AS, computation of income, details of immovable properties sold and purchased along with copies of registered sale deeds and purchase deeds. On verification of the sale deeds relating to the immovable properties sold by the assessee, Ld.Assessing Officer observed that there existed substantial variation between the apparent sale consideration disclosed by the assessee and the stamp duty valuation/ market value adopted for the purpose of registration. Since the assessee disputed the valuation adopted for stamp duty purposes, the matter, at the request of the assessee, was referred to the Departmental Valuation Officer (DVO)/ Technical Unit for determination of fair market value of the properties in question. However, as the valuation report from the DVO was not received within the statutory time limit available for completion of reassessment proceedings and the matter was getting time-barred, the Assessing Officer proceeded to complete the assessment under section 147 read with section 144B of the Act by making an addition of Rs.87,61,500/- on account of the difference between the sale 4

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) consideration disclosed by the assessee and the market/stamp duty value of the properties sold. Subsequently, upon receipt of the valuation report from the DVO, the Assessing Officer passed a rectification order under section 154 read with section 147 of the Act, wherein the earlier addition was recomputed and restricted to Rs.9,97,444/- under section 43CA of the Act based on the valuation determined by the DVO.

4.

On examination of the assessment records, Ld. PCIT observed that Faceless Assessing Officer (FAO) had failed to examine and invoke the provisions of section 56(2)(vii)(b) of the Act in respect of purchase of immovable property by the assessee. The Ld.PCIT noticed that assessee had purchased immovable property for a consideration of Rs.1,40,00,000/-, whereas the stamp duty valuation of the said property was Rs.1,92,08,000/-, resulting in a difference of Rs.52,08,000/-. According to the Ld. PCIT, the said differential amount ought to have been brought to tax under the head “Income from Other Sources” in terms of section 56(2)(vii)(b) of the Act. The

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) Ld.PCIT further observed that neither the FAO nor the Jurisdictional Assessing Officer (JAO) had carried out any proper verification regarding applicability of section 56(2)(vii)(b) of the Act to the aforesaid transaction. It was noted that Assessing Officer had merely accepted the submissions of the assessee referring to section 56(2)(x) of the Act, which according to the Ld.PCIT was not relevant to the assessment year under consideration. Accordingly, Ld.PCIT issued a show-cause notice under section 263 of the Act requiring the assessee to explain as to why the reassessment order passed under section 147 r.w.s. 144B dated 29.03.2023 and the rectification order passed under section 154 r.w.s. 147 dated 26.04.2024 should not be revised on the ground that the same were erroneous insofar as prejudicial to the interests of the Revenue. However, no reply was filed by the assessee in response to the said show-cause notice. After considering the material available on record, Ld.PCIT held that the assessment order as well as the rectification order were erroneous and prejudicial to the interests of the Revenue for failure on the part of the Assessing Officer to apply the provisions of section 6

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) 56(2)(vii)(b) of the Act with regard to the difference between the purchase consideration of Rs.1,40,00,000/- and the stamp duty valuation of Rs.1,92,08,000/-. According to the Ld. PCIT, in absence of any evidence to justify such variation, the differential amount of Rs.52,08,000/- ought to have been assessed as “Income from Other Sources”. Accordingly, Ld.PCIT set aside the reassessment order as well as the rectification order for the limited purpose of conducting proper inquiry and verification regarding applicability of section 56(2)(vii)(b) of the Act and directed the Assessing Officer to reframe the assessment afresh in accordance with law.

5.

Learned counsel for the assessee submitted that Ld.PCIT erred in invoking revisionary jurisdiction under section 263 of the Act without satisfying the twin conditions that the assessment order should be both “erroneous” and “prejudicial to the interests of the Revenue”. The reassessment order passed by the Assessing Officer under section 147 r.w.s. 144B dated 29.03.2023 and rectification order passed under section 154 r.w.s.147 dated 26.04.2024 were passed after examining

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) the details and documentary evidences furnished by the assessee during the reassessment proceedings. During the reassessment proceedings, the Assessing Officer specifically called for details relating to purchase and sale of immovable properties. In response thereto, assessee furnished copies of registered sale deeds, purchase deeds, bank statements, Form No.26AS and other supporting evidences. Thus, it cannot be said that the Assessing Officer passed the reassessment order without inquiry or verification. Ld.PCIT merely alleged inadequate inquiry on the part of the Assessing Officer. However, revision under section 263 cannot be invoked merely because the PCIT holds a different opinion or believes that further inquiry ought to have been conducted. Once the Assessing Officer had examined the issue during reassessment proceedings and adopted one of the possible views, the order cannot be treated as erroneous merely because the Ld. PCIT does not agree with such view. The assessee submitted before the Assessing Officer that provisions of section 56(2)(x) were not applicable to the year under consideration and therefore no addition was called for. The Assessing Officer, after 8

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) considering the submissions and material available on record, consciously accepted the returned income. Thus, the impugned order represents a plausible view taken by the Assessing Officer. It was further submitted that the Ld.PCIT failed to bring any material on record demonstrating that the difference between purchase consideration and stamp duty valuation represented taxable income in the hands of the assessee. Mere difference between stamp duty value and purchase consideration cannot automatically justify revision under section 263 without establishing failure of inquiry causing prejudice to Revenue. The assessee further submitted that reassessment proceedings were initiated for verification of high-value transactions reflected in AIR information and the Assessing Officer had duly examined such transactions during the course of reassessment proceedings. Therefore, the impugned order cannot be said to be passed without application of mind. The learned PCIT also erred in setting aside the assessment order merely for making roving and fishing inquiries. Revision under section 263 cannot be invoked for directing the Assessing Officer to conduct fresh 9

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) verification when necessary details were already available on record and examined during assessment proceedings. Therefore the order passed by the Ld.PCIT under section 263 deserves to be quashed as being contrary to law and facts of the case. 6. Per contra, Ld. Departmental Representative strongly supported the order passed by the Ld. PCIT under section 263 of the Act. It was submitted that the reassessment proceedings were initiated on the basis of AIR information reflecting high- value transactions entered into by the assessee including purchase of immovable property valued at Rs.1,92,08,000/-. However, despite such information being available on record, the Assessing Officer failed to examine applicability of section 56(2)(vii)(b) of the Act. Ld.DR submitted that assessee had purchased immovable property for consideration of Rs.1,40,00,000/- whereas the stamp duty value adopted by registration authorities was Rs.1,92,08,000/-, resulting in difference of Rs.52,08,000/-. As per provisions of section 56(2)(vii)(b), such difference was liable to be assessed under the head “Income from Other Sources”. It was contended that 10

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) reassessment order as well as rectification order were completely silent regarding applicability of section 56(2)(vii)(b) of the Act. No inquiry whatsoever was conducted by the Assessing Officer on this issue and no finding was recorded in the assessment order. Ld.DR further submitted that Assessing Officer merely accepted the submissions of the assessee referring to provisions of section 56(2)(x), which admittedly were not applicable for the assessment year under consideration. Thus, the Assessing Officer failed to apply correct statutory provisions while completing reassessment. According to the Ld. DR, failure to conduct proper inquiry on an issue arising from assessment records itself renders the assessment order erroneous and prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. The Ld. DR further submitted that Ld.PCIT had not made any addition directly but merely restored the matter to the file of the Assessing Officer for conducting proper verification and framing fresh assessment in accordance with law after providing opportunity to the assessee. Therefore, no prejudice is caused to the assessee by the impugned revision order. 11

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) Accordingly, Ld.DR prayed for upholding the order passed by the Ld. PCIT under section 263 of the Act.

7.

We have heard rival submissions and perused material available on record. The short issue involved in the present appeal is whether the Ld.PCIT was justified in invoking revisionary jurisdiction under section 263 of the Act on the ground that the reassessment order passed under section 147 r.w.s.144B and rectification order passed under section 154 r.w.s.147 were erroneous and prejudicial to the interests of the Revenue. It is an undisputed fact that reassessment proceedings were initiated based on AIR information relating to high-value immovable property transactions entered into by the assessee. During reassessment proceedings, assessee furnished copies of sale deeds, purchase deeds, bank statements, Form No.26AS and other supporting evidences before the Assessing Officer. From perusal of reassessment order and material available on record, it is noticed that the Assessing Officer examined issue relating to sale of immovable

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) properties and referred valuation dispute to DVO for determination of fair market value. Subsequently, rectification order under section 154 r.w.s.147 was also passed upon receipt of DVO report. However, no inquiry whatsoever appears to have been conducted by the Assessing Officer regarding applicability of provisions of section 56(2)(vii)(b) of the Act in respect of purchase of immovable property by the assessee. The records reveal that assessee had purchased immovable property for consideration of Rs.1,40,00,000/- whereas stamp duty valuation of such property was Rs.1,92,08,000/-, resulting in difference of Rs.52,08,000/-. Despite such material being available on record, the reassessment order is completely silent regarding applicability of section 56(2)(vii)(b) of the Act. We find merit in the observations of the Ld.PCIT that the Assessing Officer merely accepted submissions of the assessee referring to section 56(2)(x) of the Act, which admittedly was not applicable to the assessment year under consideration. The Assessing Officer failed to examine applicability of relevant statutory provision governing the impugned transaction. It is well settled proposition of law that 13

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) lack of inquiry or non-application of mind by the Assessing Officer on a material issue renders assessment order erroneous and prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. In the present case, there is complete absence of inquiry by the Assessing Officer regarding taxability of differential amount between purchase consideration and stamp duty valuation under section 56(2)(vii)(b) of the Act. It is evident from the order that Ld.PCIT has not made any conclusive addition but has merely restored the issue to the file of the Assessing Officer for conducting proper verification and reframing assessment in accordance with law after affording reasonable opportunity of being heard to the assessee keeping all issues wide open. Therefore, no infirmity can be found in the impugned revision order. In view of the above facts and circumstances, we hold that the reassessment order passed by the Assessing Officer suffers from lack of inquiry on a contentious issue with potential loss of revenue and therefore the Ld.PCIT was justified in invoking jurisdiction under section 263 of the Act.

ITA No. 335/NAG/2025 (Rajesh Krushnarao Chikte) Consequently, the order passed under section 263 is upheld and grounds raised by the assessee are dismissed.

8.

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

Order pronounced on 20.05.2026 under Rule 34 of Income Tax (Appellate Tribunal) rules 1963

Sd/- sd/- PAWAN SINGH KHETTRA MOHAN ROY JUDICIAL MEMBER ACCOUNTANT MEMBER

Nagpur: Dated: 20/05/2026

vr/-

Copy to:

1.

The Assessee 2. The Revenue 3. The Pr.CIT concerned. 4. The DR, ITAT, Nagpur 5. Guard file. By order Vukkem Digitally signed by Vukkem Rambabu Rambabu Date: 2026.05.20 12:34:28 +05'30' Senior Private Secretary ITAT, Nagpur

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