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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश / O R D E R
PER G. MANJUNATHA, AM:
This appeal filed by the assessee is directed against order of the learned Principal Commissioner of Income Tax-1, Coimbatore, dated 13.02.2020 and pertains to assessment year 2015-16.
2. At the outset, the learned A.R for the assessee submitted that appeal filed by the assessee is time barred by 41 days for which necessary petition for condonation of delay along with affidavit explaining reasons for delay has been filed. The AR further submitted that the assessee could not file appeal within the time limit allowed under the Act, mainly due to lock down imposed by the Govt. on account of spread of Covid-19 infections and in view of Hon’ble Supreme Court suo motu Writ Petition No.3 of 2020, if the period of delay is covered within the period specified in the order of the Apex Court , then same needs to be condoned in view of specific problem faced by the public on account of Covid-19 pandemic.
3. The learned AR, on the other hand, fairly agreed that delay may be condoned in the interest of justice.
Having heard both sides and considered reasons given by the learned AR for the assessee, we find that the Hon’ble Supreme Court in suo motu Writ Petition No.3 of 2020, has extended limitation applicable to all proceedings in respect of courts and tribunals across the country on account of spread of Covid-19 infections w.e.f. 15.03.2020, till further orders and said general exemption has been extended from time to time. We further noted that delay noticed by the Registry pertains to the period of general exemption provided by the Hon'ble Supreme Court extending limitation period applicable for all proceedings before Courts and Tribunals and thus, considering facts and circumstances of the case and also in the interest of natural justice, we condone delay in filing appeal filed by the assessee and admitted for adjudication.
The assessee has raised following grounds of appeal:-
“1) The orders of Principal Commissioner of income Tax are opposed to on law and facts of the case.
2) The Principal Commissioner of Income Tax errs on making AN ORDER U/s 263 for making huge additions to the Income returned. 3) The Principal Commissioner of Income Tax ought to have accepted the explanations offered and dropped proceeding ti/s 263. 4) The Principal Commissioner of Income Tax ought to have found that the Assessing officer had made detailed enquiry and recorded the same in his order of assessment. 5) The Principal Commissioner of Income Tax failed to make any enquiry of his own to decide on the applicability of section 263 in this case. 6) The Principal Commissioner of Income Tax has failed to establish as to how the order u/s 143(3) was erroneous and prejudicial in any manner. 7) The Princip.al Commissioner of Income Tax errs in directing the Assessing Officer to make rush fishing and roving enquiry without a proper direction. 8) The Principal Commissioner of Income Tax has no rights or power to make a change of opinion thru provisions of section 263. 9) The department had originally issued a notice U/s 154 which was resisted by the appellant. To overcome that sec 263 has been invoked. This is against law and against the principles of natural justice. 10)For these and other arguments to be submitted at the time of hearing the appellant prays for deletions of the entire addition of Rs. 67,44,512/- and render justice.”
Brief facts of the case are that the assessee is a HUF, filed its return of income for the assessment year 2015-16 on 28.08.2015 declaring total income of Rs.94,65,420/-. The case of the assessee was selected for scrutiny under CASS for verification of deduction claimed under capital gains and the Assessing Officer, after examination of the issues had completed assessment u/s.143(3) of the Income Tax Act, 1961, dated 25.09.2017 and accepted income returned. The Principal CIT has taken up case for revision proceedings and issued show cause notice dated 10.09.2019 u/s.263 of the Income Tax Act, 1961, and called upon the assessee to explain as to why assessment order passed by the Assessing Officer shall not be revised for the reasons stated in his show cause notice.
The Principal CIT has proposed to revise assessment order on the ground that the assessment order passed by the Assessing Officer is erroneous insofar as, it is prejudicial to the interests of revenue on account of non-consideration of difference in sale value shown in registered document, when compared to guideline value fixed by the authorities for stamp duty purpose in computing long term capital gain. The Principal CIT further noted that the assessee has claimed cost of improvement being expenses of fencing, bore well, compound wall and levelling which has not been thoroughly examined by the Assessing Officer. Further, the assessee has adopted fair market value of the property as on 01.04.1981 at Rs.5,500 per cent, whereas Tamil Nadu registration value was Rs.2,380/- per cent as on 01.04.2003. These facts have not been examined by the Assessing Officer which rendered the assessment order as erroneous and prejudicial to the interests of revenue.
In response to the show cause notice, the assessee submitted that assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interests of revenue, because very purpose of limited scrutiny assessment in the present case was to examine computation of long term capital gain and exemption claim of the assessee and thus, it cannot be said that the Assessing Officer has completed assessment without examining the issues questioned by the Principal CIT . The Principal CIT, however, was not convinced with the explanation furnished by the assessee and according to the PCIT, there existed a difference in guideline value of the property and consideration mentioned in sale deed, but the Assessing Officer has failed to examine difference in valuation.
Further, the assessee has claimed various expenses in the nature of cost of improvement, which has not been thoroughly examined. Similarly, the assessee has claimed higher cost of acquisition of property by adopting higher valuation as on 01.04.1981 and this fact has not been examined by the Assessing Officer. The Assessing Officer has completed the assessment without properly examining the issues, which rendered the assessment order erroneous, insofar as it is prejudicial to the interests of revenue and thus, set aside the assessment order passed by the Assessing Officer u/s.143(3) of the Act dated 29.05.2017 and directed the Assessing Officer to redo the assessment afresh, after appreciating facts discussed in 263 proceedings. Aggrieved by the Principal CIT order, the assessee is in appeal before us.
The learned A.R for the assessee submitted that the learned Principal CIT erred in revision of order u/s.263 of the Income Tax Act, 1961, without appreciating fact that very purpose of scrutiny assessment in the present case was to examine long term capital gain computed by the assessee and thus, it cannot be said that the Assessing Officer has passed assessment order without verifying issues questioned by the learned Principal CIT. The learned A.R further submitted that although, the Principal CIT has questioned difference in value of property, but if you consider guideline value of property to sale consideration received for transfer of property, difference is less than 10%, which is permissible as per provisions of section 50C(3) and thus, even assuming for a moment, the Assessing Officer has not examined the issue, but question needs to be considered is whether any prejudice is caused to the revenue or not. Since, the Assessing Officer cannot make any addition when the difference in property is less than specified percent and thus, it cannot be said that there is prejudice to the interest of the revenue. Therefore, he submitted that assessment order passed by the Assessing Officer cannot be treated as erroneous, insofar as it is prejudicial to the interests of revenue to invoke jurisdiction by the Principal CIT.
The learned DR, on the other hand, supporting order of the learned PCIT has filed written submissions on the powers of the Principal CIT u/s.263 of the Act. The relevant contents of written submissions of the Principal CIT are reproduced as under:-
“1. By the insertion of Explanation 2 to the section 263 of the Income Tax Act by the Finance Act, 2015 w.e.f. 01.06.2015, the revisionary powers of Pr. CIT/CIT has been enlarged and an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the PCIT/CIT; (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
In the case of Malabar Industrial Co. v CIT [2000] 243 ITR 83 (SC), the Apex Court has held that if the twin conditions “Erroneous” and “Prejudicial to Revenue” need to be satisfied in order to exercise power u/s 263. It is however pertinent to keep in mind that in the same decision, it was held that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous and prejudicial to the interest of Revenue.
The Hon’ble High Court of Allahabad in the case of Swarup Vegetable Products Vs CIT (187 ITR 412) has held that when the Assessing Officer accepted the assessees claim without making proper enquiries, the Commissioner acting under section 263 was justified in setting aside the assessment order. Similar view has been taken by the Madras High Court in Jai Bharath Tanners (264 ITR 673). The Hon’ble High Court of Madras in the case of Ashok Leyland Ltd Vs CIT (260 ITR 599) has held that when the Assessing Officer was required to examine the claim of the assessee but has failed to do so, the order passed by him was not only erroneous but also prejudicial to the interest of the revenue. Further, the Hon’ble Madras High Court in K. A. Ramaswamy Chettiar vs. CIT (220 ITR 657) has held that when the Officer is expected to make an enquiry of income and if he does not make an enquiry as expected, it is to be a ground to interfere
with the order passed by the Assessing Officer since such an order passed by the officer is erroneous and prejudicial to the interest of revenue. 4. Regarding the powers of the PCIT u/s 263, the Hon’ble HO of Punjab & Haryana in the case of PCIT v Venus Woolen Mills, [2019] 105 taxmann.com 287 (Punjab & Haryana) have held as follows:
The powers of Commissioner under section 263 are very wide. The only limitation on his power is that he must have some material which would enable him to form a prima fade opinion that the order passed by the officer was erroneous in so far as it is prejudicial to the interests of the revenue. Once he concludes on the basis of the material that the order of the Assessing Officer was erroneous and prejudicial to the interests of the revenue, the Commissioner is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct a fresh assessment. The Commissioner is fully competent to adopt any one of the three causes indicated by the said provision. [Para 13] 5. Jurisdictional HC of Madras in the case of M/s. Lakshmi Vilas Bank v JCIT, in TCA No.1370/2008, relied on the decision of the SC in the case of CIT v Amitabh Bachchan (2016) 384 ITR 0200 and held that final order u/s 263 need not be out of the issues raised in the notice as the issue of show cause notice itself is not mandated u/s 263. What is mandatory is that the assessee should have been provided opportunity to express his explanation son the issue.
6. Hon’ble HC of Bombay at Goa in the case of MIs. Vedanta Ltd, vs CIT, in Tax Appeal No.1/2016 with Civil Application No. 17/2016 have dismissed the assessee’s appeal holding that though the matter raised u/s 263 had been considered by the AO in the original order, when the CIT exercising the power u/s 263, has directed the AO to re-do the assessment afresh, considering that the CIT as well as ITAT, have made it clear that adequate opportunity of being heard is required to be extended to assessee in the fresh proceedings, no liberty or clarification is necessary.”
We have heard both the parties, perused material available on record and gone through orders of the authorities below. The Principal CIT had inherent jurisdiction to revise assessment order passed by the Assessing Officer, in case the Principal CIT satisfies that assessment order passed by the Assessing Officer is erroneous, insofar as it is prejudicial to the interests of revenue. In order to invoke jurisdiction u/s.263 of the Act, the Principal CIT must satisfy two conditions, (i) order must be erroneous & (ii) further it must be prejudicial to the interests of revenue. If you examine reasons given by the Principal CIT in light of legal position one can easily come to a conclusion that the Principal CIT erred in invoking jurisdiction u/s.263 of the Act, to revise assessment order passed by the Assessing Officer u/s.143(3) of the Act dated 27.09.2017, because very purpose of scrutiny assessment in the present case was to examine long term capital gain computed by the assessee and exemption claimed thereon. In the assessment proceedings, the Assessing Officer had called upon various details, including statement of long term capital gain computed by the assessee along with relevant evidences and after considering various evidences filed by the assessee has accepted long term capital gain computed by the assessee.
From the above, it is very clear that the issue considered by the Principal CIT for revision of assessment order has been already examined by the Assessing Officer and has taken a view and thus, we are of the considered view that the Principal CIT cannot substitute his view and held that assessment order passed by the Assessing Officer is erroneous and insofar as it is prejudicial to the interests of revenue .
Coming back to the issues questioned by the Principal CIT. The Principal CIT has questioned sale consideration adopted by the Assessing Officer for computation of long term capital gain. According to the Principal CIT, there is difference between sale value shown in registered document, when compared to guideline value of property. If you compare difference arrived at by the Principal CIT, it is less than specified percentage allowed under the Act, in terms of provisions of section 50C(3) and 55A(b)(i) of the Act. Even assuming for a moment, the Assessing Officer has not considered the above issue, but definitely it cannot be said that said issue is prejudicial to the interests of the revenue, because even if, the Assessing Officer has considered the issue the A.O. cannot make any addition, because difference in value shown in sale deed, when compared to guideline value is less than specified percent. Therefore, in our considered view on this issue, the Principal CIT cannot revise the assessment order. As regards, cost of improvement claimed by the assessee, including expenses incurred on fencing, bore well, leveling of plot and building, it was the case of the PCIT that although, the assessee claimed various expenditure, but the Assessing Officer had not examined the claim. We do not find any merit in findings of the Principal CIT for simple reason that very purpose of limited scrutiny assessment was to examine long term capital gain computed by the assessee. From the assessment order, it is very clear that the Assessing Officer has called for various details and accepted long term capital gain computed by the assessee. Therefore, we are of the considered view that the Principal CIT has erred in coming to the conclusion that the Assessing Officer has not examined cost of improvement claimed by the assessee.
Insofar as cost of acquisition considered by the assessee by adopting fair market value of the property as on 01.04.1981, we find that the assessee has considered certain value of the property as on 01.4.1981, whereas the Principal CIT has considered value as on 01.04.2003. There may be various reasons for difference in value of property. We find that unless the Principal CIT brings on record any conclusive evidence to prove that value adopted by the assessee is incorrect, the Principal CIT cannot presume that value adopted by the assessee is incorrect by considering value on different rate.
Further, the very purpose of scrutiny assessment in the present case was to examine computation of long term capital gain. The Assessing Officer had considered the issue and called for various details and accepted claim of the assessee . Therefore, we are of the considered view that the Principal CIT has erred in revising the assessment order on this issue also. Further, the assessee has relied upon decision of the Hon'ble Madras High Court in the case of CIT Vs. Smt. Padmavathi (2020) 120 taxmann.com 187 (Mad). We find that the jurisdictional High Court has considered very same issue in light of revision order passed by the Principal CIT on the issue of difference in value of property when compared to guideline value and held that guideline value is only an indicator and same is fixed by State Government for the purpose of calculating stamp duty and merely because guideline value was higher than sale consideration shown in deed of conveyance, it cannot be sole reason for holding that assessment was erroneous and prejudicial to the interests of revenue. The Hon’ble High Court further noted that where the Commissioner by invoking his power u/s.263 of the Act, faults with Assessing Officer on the ground that he did not make proper enquiry, in absence of any clarity as to why in opinion of Commissioner, enquiry was not proper, invocation of power u/s.263 was not justified.
In this view of the matter and considering facts and circumstances of the case, we are of the considered view that the Principal CIT has erred in revising assessment order passed by the Assessing Officer u/s.143(3) of the Act, dated 25.09.2017 and thus, we quash the order passed by the Principal CIT u/s.263 of the Income Tax Act, 1961.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 13th April , 2022