KAILASHBAI MANUBHAI KAHOR,RAJKOT vs. THE PR. COMMISSIONER OF INCOME-TAX, RAJKOT-1, RAJKOT, RAJKOT

ITA 347/RJT/2025Status: DisposedITAT Rajkot12 October 2026AY 2016-175 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the PCIT was justified in invoking Section 263 of the Income Tax Act, 1961. It was undisputed that the assessee purchased an immovable property for Rs.7,65,765/-, while the stamp duty value was Rs.38,50,000/-. This difference of Rs.30,84,235/- was substantially in excess of the threshold under Section 56(2)(vii)(b), necessitating examination. The assessment order dated 10.02.2023 did not reveal any inquiry or verification by the AO regarding this transaction or the applicability of Section 56(2)(vii)(b). The AO failed to make the requisite inquiry and verification on an issue with potential tax implications, thus falling within the ambit of Explanation 2(a) to Section 263(1). The Tribunal rejected the assessee's contention that the PCIT merely substituted his opinion, as there was no material to show the AO had consciously examined the issue. The PCIT's direction to the AO to make necessary inquiries and pass a fresh assessment order was within the scope of Section 263 powers. Therefore, the assessment order was deemed erroneous and prejudicial to the revenue, and the PCIT's order was upheld.

What were the facts?

The assessee, Smt. Kailashbai Manubhai Kahor, appealed against an order passed by the Principal Commissioner of Income Tax (PCIT), Rajkot-1, for Assessment Year 2016-17. The assessee had initially failed to file a return of income, leading to a reopening of the case under Section 147. The Assessing Officer (AO) completed the assessment on 10.02.2023, accepting the returned income of Rs.2,64,610/-. Subsequently, the PCIT initiated proceedings under Section 263, noting that the assessee had purchased an immovable property for Rs.7,65,765/-. The stamp duty value, based on a 4.9% rate, was Rs.38,50,000/-. The PCIT believed the difference attracted Section 56(2)(vii)(b) and that the AO had failed to conduct proper inquiry.

What were the issues?

1. Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking the provisions of Section 263 of the Income Tax Act, 1961, by holding that the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the revenue, specifically concerning the applicability of Section 56(2)(vii)(b) to the purchase of an immovable property? (Question of law and fact, concerning Section 263 and Section 56(2)(vii)(b)). Assessee's contention: The PCIT was not justified in invoking Section 263. The assessment order was neither erroneous nor prejudicial to the revenue. The order passed under Section 263 should be quashed, and the AO's assessment order should be restored. Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 139,Section 147,Section 148,Section 144B,Section 56(2)(vii)(b),Section 263(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAJKOT “DB” BENCH, RAJKOT

Before: DR. B.R.R. KUMAR, VICE-SHRI SONJOY SARMA

For Appellant: Shri Mehul Ranpura, AR
For Respondent: Shri R V Arun Prasad, CIT-DR
Hearing: 28.07.2026Pronounced: 12.10.2026

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:

- The captioned appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (hereinafter referred to as “the Ld. PCIT”), Rajkot-1 vide order dated 20.03.2025 relevant to Assessment Year 2016-17. 2. The assessee has raised the following grounds of appeal:

1.

The grounds of appeal mentioned hereunder are without prejudice to one another.

2.

The order passed by Pr. Commissioner of Income-tax, Rajkot-1, Rajkot [hereinafter referred as to the “PCIT”] is bad in law, invalid and required to be quashed, the same may kindly be quashed. 3. the Ld. PCIT erred in law

The order continues below.

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