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Facts
The assessee's original assessment for AY 2014-15 was completed under Section 143(3) on 29.12.2016, invoking Section 50C for property sales and denying Section 54F deduction. The CIT(A) later allowed the Section 54F deduction. Subsequently, the assessment was reopened under Section 147 for an addition under Section 56(2)(vii)(b) regarding an undervaluation of a newly acquired asset and an order under Section 147 read with Section 144B was passed on 30.03.2022. The Principal Commissioner of Income Tax (PCIT) then initiated revisionary proceedings under Section 263, setting aside the reassessment order, citing that the original Section 50C issues related to enhanced building values were not properly addressed in the reassessment order.
Held
The Tribunal found that the issue of Section 50C was already deliberated and concluded in the original assessment under Section 143(3) and was not the subject matter of the subsequent reassessment under Section 147, which focused on Section 56(2)(vii)(b). Therefore, the PCIT erred in invoking Section 263 to revise an issue that was time-barred for the original assessment and not covered by the reassessment. The PCIT's order under Section 263 was deemed to be without merit, procedurally infirm, and barred by limitation.
Key Issues
Whether the PCIT's revisionary order under Section 263, setting aside a reassessment order, was valid when it addressed issues (Section 50C) not covered by the reassessment proceedings and for which the limitation period for revision of the original assessment had already expired.
Sections Cited
263, 147, 148, 143(3), 144B, 50C, 54F, 56(2)(vii)(b)
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI, HON’BLE & SHRI S. R. RAGHUNATHA, HON’BLE
आयकर अपीलीय अिधकरण, ‘सी’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी मनु कुमार िग�र, �याियक सद�य एवं �ी एस. आर. रघुनाथा, लेखा सद�य के सम� BEFORE SHRI MANU KUMAR GIRI, HON’BLE JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1935/Chny/2024 िनधा�रण वष� / Assessment Year: 2014-15 Sundarakrishnan, Principal Commissioner of No. 15, 5th Main Road, v. Income Tax, Kasturba Nagar, Coimbatore -1. Adyar – 600 020. [PAN: ARBPS-4782-R] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri. Y. Sridhar, FCA ��यथ� क� ओर से/Respondent by : Shri. R. Clement Ramesh Kumar, CIT सुनवाई क� तारीख/Date of Hearing : 04.02.2025 घोषणा क� तारीख/Date of Pronouncement : 11.02.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal by the assessee is filed against the order of the Principal Commissioner of Income Tax, Coimbatore-1, for the assessment year 2014-15, vide order dated 07.03.2024.
At the outset, we find that there is a delay of 73 days in appeal filed by the assessee, for which petition for condonation of delay along with reasons stating that the assessee was unable to track the revisionary order which caused the delay in filing of appeal. After considering the petition filed by the :-2-: ITA. No: 1935/Chny/2024 assessee and also hearing both the parties, we find that there is a reasonable cause for the assessee in not filing appeal on or before the due date prescribed under the law due to not aware of passing the order u/s.263 of the Act and thus, in the interests of justice, we condone delay in filing of appeal and admit appeal filed by the assessee for adjudication.
The assessee has raised the following grounds of appeal:
1. That the Order of the Ld. Pr. CIT passed u/s.263 is erroneous on the procedural aspects involved in the case and provisions of Law as well and hence requires to be quashed.
2. That the Ld. Pr. CIT erred in failing to appreciate that order passed u/s.143(3) r.w.s. 147 and 144B on 30.03.2022, is not erroneous when the issue of invoking the provisions of sec.50C was not a subject matter of deliberation in the impugned order set-aside u/s.263.
3. That the Ld. Pr. CIT erred in failing to appreciate that the time limit to revise the order passed u/s.143(3) on 29.12.2016, which dealt the issue of enforcing the provisions of sec.50C, ended on 31.03.2019, and the order passed by the Pr. CIT on 07.03.2024 is barred by limitation.
4. That the Ld. Pr. CIT erred in ignoring the principles enunciated by various Courts, that the original assessment order cannot be revised in the pretense of revising the subsequent reassessment order.
5. That the appellant craves, leave to add, alter, amend or vary and/or withdraw any or all of the aforesaid grounds of Appeal or at time of hearing of the above appeal.”
The Assessee is an individual had filed the Return of Income for A.Y. 2014-15 on 20.01.2015 admitting a taxable
:-3-: ITA. No: 1935/Chny/2024 income of Rs.7,24,870/-, in which the income from long term capital loss was computed at Rs.7,28,987/- by treating the actual sale consideration received on transfer of two immovable properties. i. In the computation of total income, the sale consideration in respect of Property No.1 sold on 01.10.2013 was taken at Rs.17,89,000/- and in respect of the other property sold on 01.12.2013, the actual consideration of Rs.38,15,000/- was adopted to compute the Long term capital loss. ii. The Return of Income was taken up for scrutiny and subsequently the order u/s.143(3) of the Act was passed on 29.12.2016 by the ACIT, Circle-2(1), Salem arriving at a taxable income of Rs.86,36,104/-. iii. The assessing officer, during the course of assessment proceedings had substituted the guideline value of the property sold to be Rs.1,04,04,000/- and Rs.32,85,000/- for property no.1 and 2 respectively, invoking the provisions of Sec.5OC and arrived at a LTCG of Rs.80,29,330/- iv. In respect of Property No.1, the actual sale consideration of Rs.17,85,000/- was substituted by the deemed value of :-4-: ITA. No: 1935/Chny/2024 consideration as per the provisions of Sec.50C to be Rs.32,85,000/- v. In respect of Property No. 2, the actual sale consideration of Rs.38,15,000/- was substituted by the deemed value of consideration as per the provisions of Sec.50C to be Rs.1,04,40,000/- vi. The short-term capital gain reported by the assessee of Rs.1,18,110/- was not modified and after set-off of the same against LTCG, the taxable LTCG was determined at Rs.79,11,230/- vii. During the course of the assessment proceedings, consequent to the enhancement in arriving at the LTCG, the assessee had submitted that even subsequent to the enhancement, the taxable LTCG will continue to remain at Rs. Nil, since the assessee was eligible for deduction u/s.54F. viii. The assessing officer did not accept the claim of deduction u/s.54F and thus retained the taxable LTCG to be Rs.79,11,230/- and accordingly, the assessed income was enhanced to Rs.86,36,104/- as against the returned income of Rs.7,24,874/-.
:-5-: ITA. No: 1935/Chny/2024 ix. Aggrieved by the said addition, which had rejected the claim of deduction u/s.54F, the assessee had preferred an appeal and the Ld.CIT(A), Salem vide Order in 17 dated 25.02.2019, allowed the appeal of the assessee and granted deduction u/s.54F of the Act. x. Accordingly, the taxable income got restored to the returned income of Rs.7,24,870/-. xi. Subsequently, it came to the notice of the Department that in respect of the newly acquired asset, which formed the basis for the claim of deduction u/s.54F, the cost of land is Rs.1,02,00,000/- while the value as per the Stamp Valuation Authority was Rs.1,08,00,000/-. xii. Accordingly, to enforce the taxation principle as per Sec.56(2)(vii)(b), the assessment was reopened and subsequently the Order u/s.147 r.w.s 144B was passed on 30.03.2022, enhancing the taxable income further by the differential sum of Rs.6,00,000/-. xiii. There were certain errors in the computation of income adopted in the order passed on 30.03.2022 which was rectified by the order dated 10.05.2023 and thereby the total income was recomputed at Rs.13,24,874/- (returned
:-6-: ITA. No: 1935/Chny/2024 income of Rs. 7,24,874/- added to Rs.6,00,000/- - u/s.56(2)(vii)(b) of the Act) xiv. This order u/s.147 r.w.s 144B of the Act, according to the Pr. CIT, Coimbatore - 1 was erroneous, in as much as prejudicial to the interests of revenue because the value of building in respect of both the properties was subsequently enhanced by the Stamp Valuation Authority which was omitted to be considered in the order u/s.143(3) r.w.s 147 and 144B dated 30.03.2022. xv. According to the ld. Pr. CIT, the enhanced value of building in property no.1 is Rs.10,53,213/- and that of Property No.2 is Rs.1,46,898/-. Therefore, according to the ld.Pr.CIT, LTCG to the extent of Rs.12,00,111/- was omitted to be added in the order u/s.143(3) r.w.s. 147 and 144B dated 30.03.2022 by invoking the provisions of Section 50C and despite the objection from the AR of the assessee, the ld.Pr.CIT went ahead to pass an erroneous revisionary order u/s.263, setting aside the order passed on 30.03.2022 to be redone, taking into consideration the above issues which according to the ld.Pr.CIT is discrepant. xvi. Despite the objection from the AR of the assessee, that the order dated 30.03.2022 is not erroneous on the issue of :-7-: ITA. No: 1935/Chny/2024 Sec.50C having been considered in the original assessment order passed u/s.143(3) of the Act dated 29.12.2016, the ld.Pr.CIT went ahead to pass an erroneous revisionary order u/s.263, setting aside the order passed on 30.03.2022 to be redone, taking into consideration the above issues which according to the Pr. CIT is discrepant. Aggrieved by the order of the ld.PCIT the assessee is before us.
The ld.AR for the assessee stated that the order of the ld.PCIT, Coimbatore u/s.263 which is erroneous which attempts to revise an order which is not erroneous. The ld.AR buttressed his argument stating that even if the error in computing the taxable LTCG and the shortfall of Rs.12,00,111/- requires correction, this impugned error has not occurred in the order u/s.147 r.w.s.144B dated 30.03.2022 but the same is in the order u/s.143(3) passed on 29.12.2016 by the ACIT, Circle- 2(1), Salem.
5.1 The ld.AR stated that as could be comprehended from the above narrative, it is clear that the order u/s.147 r.w.s. 144B dated 30.03.2022, did not contain any error with regard to this computation of LTCG u/s.50C of the Act, but was :-8-: ITA. No: 1935/Chny/2024 confined to invoking of the provisions of section 56(2)(vii)(b), that too, in respect of the asset newly acquired and does not pertain to the assets transferred resulting in LTCG. This process of applying the provisions of Section 56(2)(vii)(b) did not comprise any error. Therefore, the solitary intrigue in this appeal is whether the alleged error while invoking the provisions of Sec.50C of the Act, subsists in the original assessment order u/s.143(3) or in the subsequent reassessment order u/s.147 of the Act.
5.2 The ld.AR submitted that the issue of enforcing the provisions of Section 50C was deliberated in the order u/s.143(3) dated 29.12.2016 is proven from the contents of Para Nos. 4.2 and 4.3 of the said order. The action on part of the AO to invoke the provisions of Section 50C is already undertaken and if the same is found to be erroneous and calls for revision u/s.263, the same should have been accomplished on or before 31.03.2019. That the ld.PCIT, categorized the order u/s.147 r.w.s.144B dated 30.03.2022 to be erroneous and prejudicial to the interests of Revenue, only on the solitary aspect of Section 50C, is substantiated by the contents of para 4 of the impugned order.
:-9-: ITA. No: 1935/Chny/2024 5.3 Therefore, the ld.AR submitted that the ld.PCIT, Coimbatore, in the guise of revising the order u/s.147 r.w.s. 144B dated 30.03.2022, has actually revised the u/s.143(3) dated 29.12.2016, since the time limit to undertake such revision expired on 31.03.2019, had by no authority under the statute, can it be undertaken on 07.03.2024. The subsequent reassessment order is not erroneous on the aspect of applying the provisions of Section 50C, when the same was not the subject matter of this proceedings and hence revising this order is outside the scope of Section 263, more particularly on the aspect of Section 50C.
5.4 From the detailing made above, the ld.AR submitted that it can be easily deciphered that the order u/s.263 of the Act dated 07.03.2024, by the ld.PCIT, Coimbatore -1, is bereft of merits and laden with procedural infirmities. Therefore, ld.AR prayed to quash the unlawful order, which is also barred by limitation, and bring a closure to the never-ending saga of repeated assessments of a case, which is decade old. Under such circumstances, the ld.AR submitted that when the revisionary order has been framed without adhering to the principles laid down by the Hon'ble Supreme Court in the case
:-10-: ITA. No: 1935/Chny/2024 Alagendran Finance ltd Vs.CIT [2007] 162 Taxman 465 (SC), it does not possess locus standi and may be pleased to nullify the same and thus render justice.
Per contra, ld.DR relied on the order of the ld.PCIT, who has held as under : The facts of the instant case have been carefully perused. The reopened Scrutiny assessment in the assessee's case was handled by the National Faceless Assessment Centre and the reason for which the case was reopened u/s 147 of the Act, was that during theE.Y.2016-17 relevant to the A.Y.2017-18, the assessee had purchased property for a consideration Rs.1.02.00.000/- and registered for the said sum whereas the stamp duty value of the property purchased was Rs.1,08,00,000/-. Therefore, having heard the assessee. the FAO made an addition of Rs.6 lakhs by invoking the provisions of section 56(2)(vii)(b) of the Act vide the impugned order dated 30-03-2022. However, perusal of the records of the assessee reveal that the assessee had sold two more properties in the same financial year relevant to the instant assessment year and the details of which are 1) The assessee had sold a property (Land & Building) for a consideration of Rs.38,15,000/- and the stamp duty value of the property was Rs.1,04,40,000/- (RS.1,01,25,000 for Land & Rs.3,15,000/- for Building). The Sub-Registrar subsequently valued the building at Rs.13,68,213/- as against the value of Rs.3,15,000/- stated in the sale deed. During the assessment proceedings completed u/s.143(3) of the Act, the value of land & building was taken as Rs. 1,04,40,000/- by applying the provisions of section 50C of IT Act, 1961.However, the enhanced value of building of Rs.10,53,213/- (Rs.13,68,213 - Rs.3,15,000) was not considered during the assessment u/s 143(3) & 147 r.w.sec. 144B of the IT Act dated 30-03-2022. (2)Similarly, the assessee had sold yet another property (Land & Building) for a consideration of Rs.17,85,000/- and the stamp duty value of the property was Rs.32,85,000/-,(Rs.30,00,000/- for Land & Rs.2,85,000/- for Building). The Sub-Registrar subsequently valued the building at Rs.4,31,898/- as against the value of Rs.2,85,000/- stated in the sale deed. During the assessment u/s 143(3) of the Act, the value of land & building was taken as Rs.32,85,000/- by applying the provisions of section 50C of 1T Act, 1961. However, the enhanced value of building of Rs.1,46,898/- (Rs.4,31,898 – Rs.2,85,000) was not considered
:-11-: ITA. No: 1935/Chny/2024 during the assessment u/s 143(3) & 147 r.w.sec.144B of the IT Act dated 30-03-2022. Thus, it is evident from the aforesaid facts that the reopened scrutiny assessment order has failed to consider the enhanced value arrived at by the Stamp Duty Authorities to the extent of Rs.10,53,213 in respect of property (1) and Rs.1,46,898 in respect of property (2) as described hereinabove. The provisions of section 50C of the Act was omitted by the FAO while framing the reopened scrutiny assessment order, thereby rendering the same as erroneous in so far as the same is prejudicial to the interest of revenue and I hold it accordingly.”
We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities. It is admitted fact that for the assessment year 2014-15, the AO had completed the scrutiny assessment and passed an order u/s.143(3) of the Act on 29.12.2016 and made certain additions under the head long term capital gain based on the guideline values of the immovable properties sold by the assessee u/s.50C of the Act and also denied the deduction claimed u/s.54F of the Act. The relevant para of the Assessment order is reproduced below as observed by the AO: “4.2 During the course of assessment proceedings it is noticed that the guideline values of the properties sold were Rs.1,04,40,000/- and Rs.32,85,000/- for Property No.1 and Property No.2 respectively. So, it was proposed to adopt the guideline value u/s 50C for the purpose of working out the long term capital gains. 4.3. In response to the above the authorized representative filed a revised computation statement by re-working long term capital gains as per section 50C and arrived long term capital at Rs.74,81,607/- and claimed entire long term capital gains as exemption u/s 54F. In support of his claim, on 17.11.2016, the :-12-: ITA. No: 1935/Chny/2024 AR of the assessee has furnished a copy of sale deed· dated 03.10.2013 for having purchased a land measuring 7200 sq ft for Rs.1,08.00,000/-, copy of a plan and a certificate dated 16.12.2015 issued by the competent authority for having completed the construction. As per plan there is a swimming pool and one building consists of ground and first floor. Ground floor consists of a Hall and a Kitchen, first floor consists of a Bed Room and a Toilet. The assessee also spent ·about Rs.11,71,573/- for the construction of swimming pool and the building. 4.4. To verify the veracity of the facts, Inspector of this office was deputed for spot verification, on 16.12.2016.”
7.1 Further, the denial of deduction u/s.54F was challenged by the assessee before the ld.CIT(A) and the same was allowed by the ld.CIT(A) in his order dated 25.02.2019 vide ITA No.215/2016-17. Later, the assessment was reopened by the AO based on the information that the value of the immovable property purchased by the assessee to claim the deduction u/s.54F of the Act was under reported by Rs.6.00 Laksh (Stamp duty value Rs.1.08 crores – Market value shown Rs.1.02 Crores) u/s.56(2)(vii)(b) of the Act. The AO concluded the assessment U/s.147 r.w.s.144B of the Act by making an addition of Rs.6.00 Lakhs u/s.56(2)(vii)(b) of the Act, as the assessee did not respond to the statutory notices issued.
7.2 Subsequently, the Ld.PCIT exercised the revisionary power u/s.263 of the Act considering the order of reassessment
:-13-: ITA. No: 1935/Chny/2024 as erroneous and prejudicial to the interest of revenue for the following reason: “On verification of records, it is seen that the assessee had sold a property (Land & Building) for a consideration of Rs.38,15,000/- vide Doc. No. 5544/13 dated 06.08.2013. On perusal of the sale deed, it was observed that the stamp duty of the Was Rs.1,04,40,000/-(Land : Rs.1,01,25,000 & Building Rs.3,15,000). The Sub Registrar subsequently valued the building at Rs.13,68,213/- property stated as against Rs.3,15,000/-. While completing the assessment u/s 147 of the IT Act, 1961, the Assessing officer omitted to consider the difference value of Rs.10,53,213/- (1368213-315000) of the value of building. The assessee had sold another property (Land & Building) for a consideration of Rs.17,85,000/- vide doc. No.5543/13 dated 06.08.2013. On perusal of the sale deed, it was observed that the stamp duty of the property stated was Rs.32,85,000/- (Land : Rs.30,00,000/- & Building Rs.2,85,000). The Sub Registrar subsequently valued the building at Rs.4,31,898/- as against Rs.2,85,000/-. While completing the assessment u/s 147 of the IT Act, 1961, the Assessing officer omitted to consider the difference value of. Rs.1,46,898/-(4,31,898-2,85,000) of the value of building.”
7.3 Accordingly, the ld.PCIT brushing aside the submissions of the assessee passed an order dated 07.03.2024 by setting aside the order u/s.147 of the Act of the AO to consider the enhanced value of building in respect of two properties sold by the assessee.
7.4 We note that the ld.PCIT has raked up the issue which is not covered in the proceedings and subsequent order u/s.147 of the Act passed by the AO for the impugned A.Y.2014-15. The :-14-: ITA. No: 1935/Chny/2024 issue of Section 50C of the two immovable properties sold during the relevant A.Y. has been raised and concluded the assessment by the AO during the proceedings u/s.143(3) of the Act for the assessment year on 19.02.2019.
7.5 It is admitted fact that the issue is not covered by the order U/s.147 of the Act for the impugned assessment year and hence barred by limitation. Since, the reopening of assessment was carried out to look into issue of deduction claimed u/s.54F of the Act and accordingly the reassessment order U/s.147 r.w.s.144B of the Act was passed on 30.03.2022 by making an addition of Rs.6.00 Lakhs u/s.56(2)(vii)(b) of the Act, as the assessee did not respond to the statutory notices issued. This fact is not disputed by the ld.CIT, DR. We note that the reliance placed by the ld.AR on the following decisions of Hon'ble Supreme Court and other Hon’ble courts in support of their arguments to quash the order of the Ld. PCIT as it is time barred are applicable to the present facts of the case: - CIT Vs. Alagendran Finance Limited (162 Taxmann 465) – (SC), - CIT Vs. IDBI Ltd (152 taxmann.com 591) - (SC) and - Indira Industries (95 Taxmann.com 103) – Madras High court.
:-15-: ITA. No: 1935/Chny/2024 7.6 In view of the above, we are of the considered view that the ld.PCIT has grossly erred in treating the issues which are not covered in the order under section 147 of the Act as erroneous and prejudicial to the interest of the revenue for the both the A.Y. 2014-15.
7.7 Therefore, in the facts and circumstances of the case and relying on the decisions of Hon'ble Supreme Court and other Hon’ble courts(Supra), we are inclined to quash the order of the ld.PCIT u/s.263 of the Act and allow the grounds of appeal raised by the assessee.