T.RADHAKRISHNAN,CHENNAI vs. ITO NON CORPORATE WARD-15(3), CHENNAI

The short issue involved in this appeal is whether the assessment order passed by the Assessing Officer is erroneous or prejudicial to the interest of the Revenue or not. In this case, the assessment order was passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 [“Act” in short] on 26.12.2017. Before completing the assessment, the Assessing Officer has issued notice under section 143(2) of the Act dated 02.08.2017. Subsequently, notice under section 142(1) of the Act dated 16.08.2017 was issued to the assessee in connection with the scrutiny proceedings calling for details. Thereafter, vide letter dated 16.08.2017, the assessee was show-caused to explain as to why the amount of ₹.10,00,000/- should not be taxed under income from other sources as the assessee had purchased the property at a cost of ₹.1,00,00,000/-, which is less than the market value of the property of ₹.1.10 crores and the property was received for inadequate consideration. Accordingly, vide letter dated 18.12.2017, the assessee has gave a detailed reply that the assessee has purchased a flat in Adyar for a consideration of ₹.1,00,00,000/-. It was stated that the above amount represents the market value of the property and the assessee has not paid any amount more than the said consideration stated in the document. The Sub-Registrar, while valuing the property, has taken the current rate for the building and the land. The building was aged more than 29 years and the cost of such building would be very much less. The value adopted by the Sub-Registrar is on the higher side and requested the Assessing Officer to refer the matter to the Valuation Officer under section 50C(2) of the Act. The assessee has submitted that the State Government having considered the guideline value fixed for the land earlier would not represent the market value, which has reduced the guideline value of the land by 1/3rd. It was further submission that if the correct value is adopted, there would not be any difference in the cost of purchase of the property and its fair market value. Alternatively, it was further submitted that the difference between the guideline value and market value is less than 10%. The Assessing Officer, by considering the alternative submissions of the assessee, completed the assessment under section 143(3) of the Act.

Subsequently, by exercising the power conferred under section 263 of the Act, the ld. PCIT has issued a notice to the assessee and passed revision order under section 263 of the Act dated 10.02.2020 on the ground that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue for the reason that the Assessing Officer ought to have been referred the matter to the Valuation Officer as per the request of the assessee and directed to re-do the assessment after referring the case to the Valuation Officer.

Against the revision order, the assessee has preferred further appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the assessee has raised only an alternate plea of referring the matter to the Valuation Officer, which was absolutely not required as, while computing, the difference between the values is less than 10% and prayed for quashing the revision order passed under section 263 of the Act

On the other hand, the ld. DR dutifully relied on the order passed by the ld. PCIT.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. We find that the Assessing Officer has examined the entire issue during the course of assessment proceedings. It is very clear from the assessment order itself. That apart, the Assessing Officer has issued a show-cause notice to the assessee and called for explanation. By considering the detailed explanation of the assessee, the Assessing Officer was of the opinion that where the difference between the actual value and market value is less than 10%, the same is ignorable and does not warrant any taxation.

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