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Before: Shri A. Mohan Alankamony & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax – Chennai 5, Chennai dated 22.02.2017 relevant to the assessment year 2012-13 passed under section 263 of the Income Tax Act, 1961 [“Act” in short]. The only effective ground raised in the appeal of the assessee is that the ld. PCIT has erred in invoking the provisions of section 263 of the Act to direct the Assessing Officer to revise the assessment order passed under section 143(3) of the Act.
It was the submission of the ld. Counsel for the assessee that the ld. PCIT erred in passing the revisionary order under section 263 of the Act under the pretext that the order of the Assessing Officer is erroneous to the extent that it did not consider the provisions of section 50C of the Act. The ld. Counsel vehemently argued that to invoke the provisions of section 263 of the Act, the twin conditions are to be satisfied viz., (a) that the order of the Assessing Officer sought to be revised is erroneous and (b) that it is prejudicial to the interest of the Revenue. It was argued that in the present case, both the conditions are not satisfied cumulatively and hence invoking section 263 of the Act is invalid.
Per contra, the ld. DR submitted that as per the provisions of section 50C of the Act, when the guideline value of the property is higher, the same should have been adopted by the Assessing Officer for computing taxable long term capital gains, which was not done. Thus, the order passed by the Assessing Officer under section 143(3) of the Act is erroneous. Further, it was submitted that the exchequer is deprived by the corresponding liability to tax computed @20% on the capital gain of ₹. 88,81,900/-, the order of the Assessing Officer is prejudicial to the interests of the Revenue. Thus, the ld. PCIT rightly and legally invoked the provisions of section 263 of the Act and directed the Assessing Officer to do the assessment afresh.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The assessee is an individual, deriving income from salary and capital gains and field the return of income on 27.08.2012 admitting a total income of ₹.2,40,260/-. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Act on 07.01.2015 at an assessed income of ₹.46,08,540/-. During the Financial Year 2011-12, the assessee sold 2.03 acres of vacant land at Seethapathy Street, Madhavaram Village, Madhavaram Taluk, Tiruvallur District to Shri Shanmugadurai, registered vide Document No.1931/2012 dated 29.03.2012. As per the contents of the registered sale deed, the consideration received is stated to be ₹.2,65,53,000/-. The Assessing Officer computed the taxable LTCG of ₹.39,11,634/- adopting the sale consideration for the purpose of computation of Long Term Capital Gains to be ₹.2,65,53,000/-. On verification of the copy of the sale deed of the impugned registered document, the ld. PCIT noticed vide Notings of SRO in page No.22 entered on 10.05.2012, deficit stamp duty of ₹.7,10,712/- and deficit registration charges of ₹.88,819/- were levied and collected. As Registration fees is collected @1% of the value of the property the Notings of the SRO clearly establishes the fact that the guideline value of the property as per the records of the stamp Valuation Authority was ₹.88,81,900/- over and above the documented value of ₹.2,65,53,000/-.
4.1 The ld. PCIT further observed that as per the provisions of section 50C of the Act, when the Guideline value of the property is higher, the same has to be adopted. Accordingly the Assessing Officer while computing the taxable LTCG ought to have incorporated the value of sale consideration to be ₹.3,54,34,900/- instead of ₹.2,65,53,000/-. Since the Assessing Officer has adopted a value which is lesser to the guideline value by ₹.88,81,900/-, the order passed under section 143(3) of the Act is erroneous. Since the exchequer is deprived by the corresponding liability to tax computed @20% on the Capital Gain of ₹.88,81,900/-, the action of the Assessing Officer is prejudicial to the interests of Revenue, as well. Accordingly, a show cause notice under section 263 of the Act was issued to the assessee on 21.12.2016 and the same was duly served on the assessee on 28.12.2016. There has been no response to this notice, even after passage of a month's time and therefore, the ld. PCIT presumed that the assessee has no submissions to offer to the show cause notice issued under section 263 of the Act. Accordingly, the ld. PCIT proceeded to conclude based on the merits of the case and facts available on record. After carefully examining the contents of the assessment record for the assessment year 2012-13, the order sheet Notings, etc., the ld. PCIT observed that the Assessing Officer, during the assessment proceedings, failed to verify the guideline value of the property. The entire assessment proceedings were focused only on checking the correctness of the indexed cost of acquisition of asset. As per explanation 2 sub-clause (a) to section 263 of the Act, an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of Revenue, if it is found that the order is passed without making inquiries or verification which should have been made. Thus, by following various case law and in exercise of the powers conferred under section 263 of the Act, the ld. PCIT set aside the assessment order passed under section 143(3) of the Act and directed the Assessing Officer to redo the assessment afresh.
4.2 It is an admitted fact that as per the provisions of section 50C of the Act, when the guideline value of the property is higher, the same should have been adopted for computing taxable long term capital gains, which was not done by the Assessing Officer. Thus, the order passed by the Assessing Officer under section 143(3) of the Act is erroneous. Further, the exchequer is deprived by the corresponding liability to tax computed @ 20% on the capital gain of ₹. 88,81,900/-, the order of the Assessing Officer is also prejudicial to the interests of the Revenue. Thus, it is apparent that the assessment order is erroneous and also prejudicial to the interests of Revenue warranting revision under section 263 of the Act. Under the above facts and circumstances, we are of the considered opinion that the ld. PCIT has rightly and legally invoked the provisions of section 263 of the Act and directed the Assessing Officer to do the assessment afresh. Thus, in view of the provisions of section 50C of the Act, the Assessing Officer is required to adopt guideline value of the property for computation of long term capital gains than the sale consideration. We concur with the order passed under section 263 of the Act and accordingly, the ground raised by the assessee stands dismissed.
In the result, the appeal filed by the assessee is dismissed. Order pronounced on the 07th June, 2018 at Chennai.