GAURAV DUGAR,CHENNAI vs. PCIT-8, CHENNAI

“1. You have purchased and sold lands during the financial year 2013- 14. You have drawn trading account treating the land as opening and closing stock bearing the claim of development expense. The sale value of the land was adopted a per document value instead of stamp duty value. The difference between the stamp duty value and the document value was computed as 83,70,000/- which was not disclosed in the light of provision of section 43CA of the Act.

2. During the FY 2013-14 you have acquired many properties in this regard it is noted that there is variation in documents value and stamp duty value which works out to Rs.11,16,250/-. This value was not treated as income in the light of provision of section 52(2)(vii)(b)(ii) of the Act.

3. You have set off short term capital loss of pertain to the AY 2009-10 against the short term capital gain of Rs. 3,04,581/- for the AY 2014-15 for which no documentary evidence were available on record.” and noted that difference between the stamp duty value compared with registered sale deed, the amount received of Rs.83.73 lakhs was taxable in term of provisions of section 43CA of the Act. Similarly, the Pr.CIT also noted that the assessee has acquired properties during the financial year 2013-14 and total difference in value as per stamp duty compared with sale consideration paid as per registered sale deed was Rs.11,16,250/- and that has to be brought to tax, in view of the provisions of section 56(2)(vii)(b)(ii) of the Act. The assessee replied to the show- cause notice on 11.03.2024, but, the Pr.CIT was not convinced, thus he passed revision order by observing in para 5.1 to 6 as under:-

“5.1 The contention of the AR that the reopened proceedings u/s. 147were dropped by accepting the original assessment order as valid and therefore the question of treating the said order as erroneous and pre-judicial to the interest of revenue does not arise is not acceptable as the AO has not dropped the proceedings but completed the assess met u/s. 147 r.w.s. 144 r.w.s 144(8). The word "Dropped" is never used in reassessment order. It is noted that except objection for reopening of assessment, the assessee has not produced any documentary evidence in support of his claim in the course of reassessment proceedings even after communicating the reason for reopening of assessment proceedings. Therefore, the assessee's ground that reassessment was 'dropped' is not valid.

5.2 The AR has pointed in the course of present proceeding that the AO has issued notice u/s. 143(2) of the Act, wherein the following details were called for. 1.Correct consideration for sale of lands during A.Y. 2014-15 to be ascertained for the applicability of the provisions of Sec. 43CA of the IT Act, 1961

2.Correct consideration for purchase of lands during A.Y. 2014-15 to be ascertained for the applicability of the provisions of Sec. 56(2)(vii)(b)(ii) of the IT Act, 1961 and therefore, submitted that the issue has already been examined.

It is a fact that the assessment was completed u/s. 147 r.w.s. 144 r.w.s. 144(8), accepting the returned income because the assesse has never furnished any details or any evidences with respect to the details called for vide notice u/s. 143(2) dt. 26.08.2021. The primary onus lies on the assessee to discharge the query raised by the AO by furnishing documentary evidences. The assessee failed to do so and therefore, it cannot be regarded as the issue has been considered by the Assesseeing Officer.

5.3 The relied judgment of the jurisdictional, High Court and the Hon'ble Supreme Court verdict is not applicable to the facts available in this case because the issue has never been examined. The AO has not disposed his examination/enquiry as how the provision of section 43CA/56(2)(vii)(b)(ii) has been fulfilled by the assessee. Here it is pertinent to mention that the case of the assesseee was originally selected for limited scrutiny under CASS for examining the high value property transaction as report u/s. 1941A. Therefore, the jurisdiction of the AO was limited to examine the value of transaction which has been declared in the ROI or not. That aspect has already been examined but the AO has failed to examine the other aspects of newly amended provisions of section 43CA and provision of section - 56(2)(vi)(b)(ii) of the Act which come into effect from 01.04.2014. This aspect has never 0een examined and the assessee also not stated at any point of time as how thee, provisions of section are not applicable.

5.4 It is pointed out by the AR that there is variation of Rs. 83,70,000/- mentioned in show cause notice u/s. 263 compared with the net consideration with the stamp duty value adopted by the registrar and accordingly submitted that the land is surrounded by huts and other drawbacks and therefore the stamp duty value adopted for the main area cannot be applied to the impugned land sold. And therefore, if mandatory the matter maybe referred to the Valuation Cell as permitted from this section 50C(2) of the Act and the correct market value of the property may be adopted.lt is a fact that there is variation in stamp duty value and net consideration, and as this issue has never been referred to Valuation Cell to determine the exact value as on date of sale of property/acquisition of the property and therefore the issue is required to be revisited by ascertaining the correct market value as on date of acquisition/sale of the property in the light of provisions of section 43CA and 50C.

6. In view of the above, the issue is remitted back to the file of Assessing Officer to pass a fresh order in the light of provisions of section 43CA and 50C after giving sufficient opportunities to the assessee.”

Aggrieved, now the assessee is in appeal before the Tribunal.

issued u/s.148 of the Act and reasons recorded vide order dated

26.11.2021 for reopening of assessment, wherein two issues were brought within the purview of reopening i.e., the assessee sold lands during the financial year 2013-14 and treating the land as opening and closing stock. The Assessing Officer for the reason to believe noted that sale value of the land adopted and the document i.e., sale deed registered and consideration noted in the document, there is difference of Rs.83.70 Lacs, which escaped assessment in term of provisions of done, that the assessee had acquired many properties and there was variation on document value i.e., stamp duty value and consideration recorded in sale feed for a sum Rs.11,16,250/- and this income has escaped assessment in term of the provisions of section 56(2)(vii)(b)(ii) of the Act. These two items are subject matter of reasons recorded and the Assessing Officer has passed reassessment order u/s.147 r.w.s.

144 r.w.s. 144B of the Act vide order dated 26.03.2023 and accepted the returned income and the relevant reassessment order reads as under:-

“The assessee had filed Return of Income on 26-09-2014 declaring total Income at Rs. 30,39,220/-. The Return was processed u/s. 143(1) of the Income-tax Act, 1961 (the Act). The case was selected for Limited scrutiny under CASS. Order under section 143(3) was passed on 30-05-2016 by accepting the returned income. Subsequently, case was opened for reassessment u/s 147 of the Act by issue of a notice u/s 148 of the Act dated 31-03-2021 and the same was duly served on the assessee. Assessee filed return of income in response to the said notice on 12-04- 2021. The reasons recorded before issue of notice u/s 148 of the Act have been furnished to the assessee on 26-11-2021. The assessee has submitted its objection against the' reopening of assessment vide submission dated 25-01-2021.

The learned counsel for the assessee stated that the Assessing Officer has formed an opinion at least twice, i.e, during the course of original assessment proceedings and subsequently, in reassessment proceedings and the Pr.CIT revising the reassessment order on the very same set of facts, which is bad in law for the reason that the Assessing Officer has come to the conclusion that claim made by the assessee is as per provisions of the Act. The learned counsel for the assessee hence requested for quashing of the revision order passed by Pr.CIT.

The third facet of argument made by the learned counsel for the 7. assessee is that even, the Pr.CIT in his order has not carried out basic exercise that original assessment or reassessment order is erroneous, insofar as prejudicial to the interests of revenue as the twin conditions must be satisfied before the Pr.CIT can exercise the power u/s.263 of the Act. But, either of the condition is absent in the facts and circumstances of the case and hence, the Pr.CIT has wrongly assumed his jurisdiction u/s.263 of the Act, by setting aside the reassessment order in the revision proceedings.

Subsequently, reopening was also on the very same two issues, which are raised by the Pr.CIT in his revision order and the Assessing Officer, opening and closing stock, wherein the assessee has sold the land and there is difference in consideration received and stamp duty valuation and also properties acquired and there is variation in documentary value, but the AO has accepted in the reassessment order and no addition was made on this count. It means, the AO has formed an opinion on these two issues during reassessment proceedings. We have gone through the facts and noted that while making assessment examining accounts, make necessary enquires applies his mind to the facts and circumstances of the case and determined the income offered by accepting accounts or by making some additions by himself or no addition. The Pr.CIT, on perusal of assessment records may be of the opinion that there is difference in documentary transaction i.e., consideration recorded in sale deed and guideline value and value adopted by the stamp duty authorities that he would have to estimate income at figure higher than the one determined by the Assessing Officer. That would not vest the by Pr.CIT with power to re-examine the accounts and re-determine the income at higher figure. It is because, the AO has exercised his quasi-judicial power vested in him, in accordance with law and arrived at a conclusion and such a conclusion cannot be termed as erroneous, insofar as prejudicial to the interests of the revenue, because the Pr.CIT does not feel satisfied with the conclusion. the AO is prejudicial to the interests of the revenue, but that by itself, it does not give power to Pr. CIT for suo motu revision, because first requirement is order is erroneous is absent. In the present case also, the Pr.CIT has not recorded any finding, quo effect that there is any prejudice caused to the revenue or the order is erroneous i.e., reassessment order.

In our view, any and every erroneous order cannot be subject matter of revision, because, second requirement also is to be fulfilled i.e., error in the order, which has not been pointed out by the Pr.CIT. This view has been upheld by the Hon’ble Bombay High Court in the case of CIT Vs Gabriel India Ltd. (1993) 203 ITR 108, wherein the Hon’ble Bombay High Court held that there must be some franchise material on record to show that tax which was lawfully exigible has not been imposed or that by application of the relevant statue on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. Thus there must be material available on record called for by the Pr.CIT to satisfy himself prima-face, that two requisite conditions i.e., erroneous and prejudicial to the interest of the Revenue are present in the order of the AO. Hence, on this first facet, we quash the revision order.

“7.2 Further, as discussed by Hon’ble Madras High Court in the case of CIT vs. Smt. Padmavathi, [2020] 120 taxmann.com 187 (Madras), considering the very issue of revision proceedings u/s.263 of the Act, noted that in case there is some difference between the sale consideration as per sale deed and the guideline value fixed by Stamp Valuation Authority and merely because guideline value was higher than the sale consideration shown in the sale deed, it cannot be sole reason for holding that the assessment is erroneous and prejudicial to the interest of Revenue. Hon’ble Madras High Court in para 16 held as under:-

7.3 In view of the above, in the present case before us, the issue is whether assessment framed by the AO is erroneous and prejudicial to the interest of Revenue for the reason that there is difference of Rs.25 lakhs between the guideline value as per stamp valuation which is Rs.3.50 crores. However, as per registered sale deed the actual consideration is Rs.3.25 crores. The assessee has disclosed the investment as per consideration declared in sale deed at Rs.3.25 crores but the PCIT was of the view that the difference of Rs.25 lakhs in view of the guideline value fixed by Stamp Valuation Authority at Rs.3.50 crores is to be accepted and added to the return of income of the assessee. We are of the view that this is highly debatable issue and even the tolerance limit of 10% is to be considered or not is again a debate. Once there is a debate, the order cannot be held as erroneous in view of the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., vs. CIT, (2000) 243 ITR 83. Hence, we quash the revision proceedings and allow the appeal of assessee.”