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Facts
The assessee purchased additional property area for Rs. 43,07,559, while the stamp duty value was Rs. 46,52,548. The difference was Rs. 3,54,979. The Assessing Officer (AO) made no addition, considering the difference to be within the 10% tolerance limit. The Principal Commissioner of Income Tax (PCIT) invoked Section 263, deeming the AO's order erroneous and prejudicial to revenue.
Held
The Tribunal held that the AO had taken a plausible view by accepting the assessee's return, especially since the difference between stamp duty value and actual consideration (8.14%) was within the 10% tolerance limit. The Tribunal also noted that the PCIT did not provide sufficient material to justify the revision and that the tolerance limit introduced by the Finance Act, 2020, was applied retrospectively by coordinate benches.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise the assessment order when the difference between stamp duty value and consideration was within the tolerance limit and the AO had applied their mind.
Sections Cited
263, 56(2)(x), 143(3)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI RAHUL CHAUDHARY, JM
O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Principle Commissioner of Income Tax, Mumbai-8 [for short 'the PCIT] dated 30.03.2023 passed under section 263 of the Income Tax Act, 1961 (the Act) for the AY 2018- 19. The assessee has raised the following grounds of appeal:
“1. The order passed by the learned Principle Commissioner of Income-tax, Mumbai-8 under section 263 of the Income Tax Act, 1961 is illegal, bad in law and unsustainable in law.
Rajshri Pictures Pvt. Ltd. 2. The impugned order passed by the learned Principle Commissioner of Income- tax Mumbai 8 is required to be quashed in as much as the show cause notice referred to the provisions of section 56 (2)(ix) of the Act but the impugned order was passed invoking the provisions of section 56(2)(x) of the Act.
The learned Principle Commissioner of Income-tax Mumbai - 8 committed a gross error of law and fact in not appreciating that the appellants case clearly falls within the amended tolerance band limit of 10% prescribed by the proviso to section 56 (2)(x) of the Act and consequently there is no ground to invoke the provisions of section 263 and pass an order under that section.
4. The learned Principle Commissioner of Income-tax Mumbai -8 grossly erred in not appreciating that the assessing officer had called for the details with regard to impugned issue and being satisfied with the reply given & submissions made by the appellant made no addition and therefore there is no justification to invoke the provisions of section 263 of the Act.” 2. The assessee is a private limited company and filed a return of income for AY 2018-19 on 29.09.2018 declaring a total income of Rs. 2,49,630/-. The assessee's case was selected for limited scrutiny for mismatch in stamp duty value and actual transaction value in relation to transaction in property. The assessment was completed under section 143(3) of the Act accepting the income returned by the assessee. On verification of records the PCIT noticed that the assessee has purchased additional area of 226.96 sq.ft., in the flat No.501 from the builder vide a separate agreement dated 15.07.2017 for a consideration of Rs. 43,07,559/-. The PCIT further noticed that stamp duty valued of the said additional area was Rs. 46,52,548/-. Since the Assessing Officer (AO) did not make any addition under section 56(2)(x) towards the difference amount of Rs. 3,54,979/- the PCIT held that the order of the AO to this extent is erroneous and prejudicial to the interest of the revenue and accordingly issued a notice under section 263 of the Act to the assessee. The assessee submitted before the PCIT that all the relevant details pertaining to the property transactions were furnished before the AO and that the Rajshri Pictures Pvt. Ltd. AO after verification of details has accepted the income returned by the assessee. The assessee further submitted that the difference between the stamp duty value and the actual consideration is within the tolerance limit of 10% and therefore the AO with proper application of mind did not make any addition towards the difference amount under section 56(2)(x) of the Act. The PCIT did not accept the submissions of the assessee and held that the addition under section 56(2)(x) should have been made and therefore set-aside the order of the AO passed under section 143(3) of the Act.
3. There is a delay of 343 days in filing the appeal before the Tribunal. The assessee filed an affidavit along with a petition for condonation of delay. The ld. AR with regard to condonation submitted that the assessee was under the bonafide belief that the order giving effect under section 143(3) r.w.s. 263 is what needs to be appeal against and hence waited for the AO to pass such order. The ld. AR further submitted that during the consultation with the tax counsel with regard to appeal against order under section 143(3) r.w.s. 263 the counsel advised that the revision order passed under section 263 is appealable order and the assessee was advised to prefer appeal against the said order before the Hon'ble Tribunal. The ld. AR also submitted that the assessee accordingly filed the appeal with the delay of 343 days and prayed that the delay may be condoned considering the facts and circumstances of the case. The ld. DR on the other hand vehemently opposed to the condonation of delay.
Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167
Rajshri Pictures Pvt. Ltd. ITR 471) (SC) we condone the delay of 343 days in filing the appeal and admit the appeal for adjudication.
On merits the ld. AR submitted that the PCIT has held the order to be erroneous and prejudicial to the interest of the revenue for the reason that the AO did not make any addition under section 56(2)(x) of the Act. The ld. AR further submitted that all the relevant details pertaining to the issue were submitted before the AO and in this regard drew our attention to the notices issued under section 142(1) and the reply submitted before the AO (page 8 to 19 of the PB). The ld. AR also submitted that the AO has verified all the details submitted and took a conscious decision after application of mind to accept the income returned by the assessee. The ld. AR submitted that the difference between the stamp duty value and the actual consideration is 8.14% which is less than the 10% tolerance limit as allowed by the statute and therefore the AO has taken a view in favour of the assessee by not making any addition. The ld. AR therefore argued that the order of the AO cannot be held to be erroneous or prejudicial to the interest of the revenue on this ground. The ld. AR relied on the decision of the co-ordinate bench in the case of Rajpal Mehra (HUF) Vs. ACIT (ITA No. 2817/Mum/2023 dated 17.01.2024) to submit that though the tolerance limit of 10% was introduced by the Finance Act, 2020, the Tribunal in the above case have held that the said amendment is to be applied retrospectively. The ld. AR accordingly submitted that there no error prejudicial to the interest of the revenue in the order passed by the AO.
The ld. DR on the other hand submitted that the 10% tolerance limit came into effect from 01.04.2021 and therefore for the year under consideration the difference between the stamp duty value and the actual consideration which more
Rajshri Pictures Pvt. Ltd. than 5% in assessee's case should have been added under section 56(2)(x) of the Act. Since the AO did not make a addition, the PCIT has correctly invoked section 263 of the Act.
We heard the parties and perused the material on record. The case of the assessee was selected for limited scrutiny for the reason that the stamp duty value and actual transaction value are different. We notice that the AO during the course of hearing has called for various details pertaining to the impugned transaction and that the assessee has submitted the relevant details. The PCIT has exercised the powers under section 263 for the reason that the AO failed to make an addition under section 56(2)(x) towards the difference between the stamp duty value and the actual consideration. We notice in assessee's case that the case was selected for the specific reason that there is difference between the purchase value and stamp duty, and that the assessee has submitted the necessary details as called for by the AO during the course assessment with regard to the purchase of additional space. Accordingly we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case and that even if the PCIT has drawn certain adverse inferences from the records, yet it can seen that the issue of whether the addition should be made under section 56(2)(x) when the difference is within the tolerance band of 10% is debatable in nature. Further, as noticed earlier, the PCIT has not brought any material on record by making enquiries or verifications to substantiate his inferences and not shown that the view taken by AO is not sustainable in law. Thus, we are of the view that the PCIT has passed the impugned revision orders under section 263 of the Act with the objective of substituting his views with that of the AO and therefore the PCIT was not justified in law in holding that the impugned assessment orders were erroneous.
Rajshri Pictures Pvt. Ltd.
Further for Invoking power under section 263 the twin conditions of the order being erroneous and prejudicial to the interest of the revenue should be satisfied. In the given case the difference the stamp duty value and the actual consideration amounting to Rs. 3,54,979/- works out to 8.14% of the consideration amount. The co-ordinate bench has been consistently holding that the tolerance limit of 10% which is introduced by the Finance Act, 2020 is applicable retrospectively. Therefore, in our considered view on merits there is no error in the order of the AO in accepting the income returned by the assessee. In view of these discussions we hold that the order under section 263 passed by the PCIT is not sustainable and liable to be quashed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29-07-2024. Sd/- Sd/- (RAHUL CHAUDHARY) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Assessee 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,