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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI GIRISH AGRAWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal filed by the assessee is arising out of the revision order passed u/s. 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’), by the Principal Commissioner of Income Tax 1, Coimbatore vide order dated 19.02.2020 for the assessment year 2015-16. The assessment was completed by the ACIT, Non-Corporate Circle 2,
2 Coimbatore for the relevant assessment year 2015-16 u/s.143(3)of the Act, vide order dated 22.12.2017.
The only issue in this appeal of assessee is against the revision order passed by PCIT u/s.263 of the Act by failing to appreciate that there could not be any error in the order of AO, when the AO has adopted the value based on DVO. For this, assessee has raised the issue of jurisdiction as well as on merits. The assessee has raised various grounds which we need not to reproduce.
Briefly stated facts are that the assessee is an individual, has filed his return of income for the relevant assessment year 2015-16 on 09.07.2015. Subsequently, the assessee’s case was taken up for scrutiny u/s.143(2) of the Act in regard to assessment of Long Term Capital Gain on sale of property in Sengupta Street, Ramnagar on 30.04.2014 for Rs.2,62,00,000/- (Regd. Value: Rs.2,60,00,000). The AO during the course of assessment proceedings calculated the indexed cost of the property after referring the matter to the DVO as against the indexed cost adopted by the assessee at Rs.1,30,96,945/- including cost of land on 1981 and cost of building on 1981 and further additions on account of construction during 1990-91, 1997-98 & 2005- 06. The DVO has valued the cost components of the sold property as under and accordingly, the Long Term Capital Gain was computed.
3 Land Value (01.04.1981) Rs.576000 Building Construction (1990-91) Rs.399000 Building Construction (1997-98) Rs.315000 Building Construction (2005-06) Rs.717400 3.1 Subsequently, the PCIT on examination of assessment records noticed that the assessment order consists of certain errors which prima-facie is prejudicial to the interest of the Revenue. Therefore, the PCIT issued show cause notice for revision of assessment u/s.263 of the Act to remedy loss of revenue. A show cause notice dated 13.09.2019 was served on the assessee. The PCIT in the notice asked the assessee to explain as to why AO has adopted the indexed cost of property as on 01.04.1981, which is more than four times of highest sale instances on the basis of DVO’s report. The PCIT noted that the DVO has adopted the rate per sq.feet as Rs.1677.85 as against the assessee adopted rate at Rs.750 per sq.feet of the land as per sale deed. According to PCIT, the fixation of value beyond the declaration of assessee is unwarranted and unacceptable.
3.2 The assessee replied to the show cause notice vide letter dated 02.01.2020 and contended that the AO has passed assessment order u/s.143(3) of the Act after making reference to DVO u/s.55A of the Act, which makes the provisions of section 16A(6) of the Wealth Tax Act applicable mandatorily, requiring the AO to proceed to complete the assessment, in conformity with the estimate of the Valuation
4 Officer. But, the PCIT again reiterated that the assessment order passed u/s.143(3) of the Act is erroneous since the value per cent adopted by the DVO was three times more than the prevailing rate of that area, where the impugned land was sold and this is without any basis. According to him, the order passed is erroneous because, the value of DVO is based on exorbitantly higher rates. Hence, he directed the AO to redo the assessment afresh after verification of facts. Aggrieved, assessee came in appeal before the Tribunal.
Before us, the ld.counsel for the assessee Shri R. Vijayaraghavan, took us through the assessment order and the value adopted by the assessee for indexing the cost of property at Rs.1,30,96,945/- whereas he has pointed out the value reported by the DVO as the cost components of the sold property as on 01.04.1981 and during subsequent periods when building was constructed. We have already referred the relevant valuation given in the assessment order and reproduced in the above para 3. The ld.counsel stated that once the AO referred the matter to DVO u/s.55A of the Act, and DVO estimates the cost of construction of any value, whether the AO can deviate from the same in the absence of any reason. The ld.counsel answered that according to him, when there is no reason to deviate from the valuation adopted by DVO and particularly reference made u/s.55A of the Act, the value has to be adopted mandatorily.
On the other hand, the ld.CIT-DR only relied on the revision order and he has not raised any serious objection.
We have heard rival contentions and gone through facts and circumstances of the case. The above facts are admitted that the assessee sold one property on 30.04.2014 for a sum of Rs.2.62 crores. This property was acquired prior to 1981 and hence, the assessee has calculated the indexed cost of property as on 01.04.1981 including the cost of building as on 1981 and further additions during the period 1990-91, 1997-98 & 2005-06. Thereby, the assessee calculated the value at Rs.1,30,96,945/-. The AO referred the matter to DVO and DVO put the total cost at Rs.1,05,95,767/- and computed capital gains accordingly. Now, the question arises whether the AO has any option to change the value which was valued by DVO for the indexation purposes. We noted that the assessment order was passed after taking into consideration the DVO’s report and DVO made this report on reference u/s.55A of the Act, which made the provisions of section 16A(6) of the Wealth Tax Act applicable mandatorily. Hence, the AO has to proceed to complete the assessment in confirmation with the estimation made by the Valuation Officer. However, there can be a debate in this point but in any case this became a debatable issue. Once, there is a debate or doubt, revision proceedings u/s.263 of the 6 Act cannot be initiated because the CIT has to clear cut find out the error that the order is erroneous and loss to revenue i.e., prejudicial to the interest of revenue. In the present case, the order is neither erroneous nor prejudicial to the interest of the Revenue and hence, assessment framed by AO cannot be revised u/s.263 of the Act. Hence, we quash the revision order and allow the appeal of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the court on 3rd March, 2022 at Chennai.