D.K. CONSTRUCTIONS,BHOPAL vs. CENTRAL CIRCLE - 1, BHOPAL, BHOPAL

आदेश / O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by revision-order dated 26.03.2024 passed by learned Pr. Commissioner of Income-Tax, Indore-1 [“PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”] which in turn arises out of assessment-order dated 18.06.2021 passed by learned DCIT, Central-I, Bhopal [“AO”] u/s 143(3) of the act for Assessment-Year [“AY”] 2018-19, the assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36).

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D.K. Constructions, Bhopal ITA No. 316/Ind/2024 – AY 2018-19

assessee-firm filed return of income of relevant AY 2018-19 which was

subjected to scrutiny-assessment and the AO completed assessment u/s

143(3) vide order dated 18.06.2021. Subsequently, Ld. PCIT examined the

record of assessment-proceeding and viewed that the assessment-order

passed by AO is erroneous in so far it is prejudicial to the interest of revenue

which attracts revisionary-jurisdiction u/s 263. Accordingly, the PCIT

issued show-cause notice dated 16.01.2024 and finally passed revision-

order dated 26.03.2024. Aggrieved by such revision-order, the assessee has

come in this appeal before us.

that there is one single issue for which the PCIT undertook revision. The

PCIT has noted that the assessee had purchased an immovable property

from Shri Arun Sabharwal and Smt. Anita Sabharwal at Khasra No. 452/2

comprising 0.110 hectare situated at Village – Hinotiya Alam, RI Circle,

Ratibad, Tehsil – Huzur, Bhopal [“impugned property”] for a consideration

of Rs. 65,12,000/- which was less than the valuation of Rs. 1,02,00,000/-

made by stamps authority, hence the difference of Rs. 36,88,000/- being

shortfall in consideration paid by assessee attracted taxability u/s 56(2)(x)(b)

of the Act. However, neither the assessee has offered the differential amount

as income in terms of section 56(2)(x)(b) nor the AO has conducted any

enquiry qua this issue while passing assessment-order. Therefore, the

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assessment-order passed by AO is rendered erroneous-cum-prejudicial to

the interest of revenue warranting invocation of revision u/s 263.

following contentions to assail the impugned revision-order:

(a) That the assessee is a partnership firm engaged in the business of real

estate and the impugned property purchased by assessee was a part of

stock-in-trade of assessee and not held as ‘capital asset’. The provision

of section 56(2)(x)(b) is not applicable as per the term ‘property’ has

been defined in Explanation to section 56(2)(x) read with Explanation

(d) to section 56(2)(vii) to mean only a ‘capital asset’. It is also clarified

by CBDT in Para No. 13.4 of Circular No. 01/2011 dated

06.04.2011 [F.No. 142/1/2011-SO(TPL)] and also judicially decided

so by ITAT, Jaipur in Satendra Kaushik, ITA No. 392/JP/2019

order dated 23.04.2019; ITAT, Pune in Mubarak Gafur Korabu

Vs. ITO (2019) 55 CCH 0467; ITAT, Jaipur in Yogesh Maheshwari

Vs. DCIT, 125 Taxmann.com 273; ITAT, Jaipur in Prem Chand

Jain Vs. ACIT, ITA No. 98/JP/2019 order dated 08.06.2020, that

the provision of section 56(2)(x)(b) [or corresponding erstwhile

provision of section 56(2)(vii)(b)] is not applicable where the property

purchased by assessee is not a ‘capital asset’ or it is a part of ‘stock-

in-trade’ of assessee.

(b) That the assessee filed tax audit report u/s 44AB of the Act and in

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Column No. 29B of Form 3CD, against the question asking for income

chargeable u/s 56(2)(x), the auditors have reported “No such income

was noted during the audit. The section 56(2)(x) includes capital asset

and it is not applicable to business stock-in-trade.”. The AO has

considered the auditors’ report while framing assessment. Further, the

AO has made addition of Rs. 1,11,00,000/- u/s 56(2)(x)(b) in respect of

one more property purchased by assessee at Khasra No. 204/3 &

203/2/2/1 for a consideration of Rs. 1.5 crore having stamps

valuation of Rs. 2.61 crore as ‘stock-in-trade’ [“another property”].

The assessee has already filed an appeal before CIT(A) contesting the

addition of Rs. 1,11,00,000/- on the very same premise that the

provision of section 56(2)(x) was not applicable to property acquired as

‘stock-in-trade’. The appeal is still pending at the level of CIT(A). This

point, according to Ld. AR, shows two aspects in favour of assessee,

namely (i) the AO has made enquiry in the matter of purchase of

property by assessee during assessment and taken a cautious view for

not making any addition qua the impugned property, (ii) once the

issue of applicability or non-applicability of section 56(2)(x) is pending

before CIT(A) even for another property, the PCIT is barred from

exercising revisionary jurisdiction u/s 263 for impugned property by

virtue of Explanation 1(c) to section 263. Reliance is placed on ITAT,

Indore in Arvind Kumar Singh Vs. PCIT, ITA No. 132 to

135/Ind/2021 order dated 10.11.2022; CIT Vs. Vam Resorts &

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Hotels Ltd. (2019) 418 Taxmman.com 723 (Allahabad); Smt.

Renuka Phillip Vs. ITO (2019) 101 Taxmann.com 119 (Madras);

RNR Devcon Vs. PCIT in ITA No. 459/Ind/2018.

assessment-order of AO. Accordingly, Ld. AR prayed that the revision-order

passed by PCIT is not sustainable and must be quashed and the AO’s

assessment-order must be restored.

contentions to oppose the submissions of Ld. AR:

(a) The AO himself committed a mistake by applying section 56(2)(x)(b) to

another property but not to the impugned property. This is a serious

error in assessment-order rightly identified by PCIT.

(b) The issue pending before CIT(A) is concerning another property

purchased by assessee and not the impugned property with which we

are concerned. Therefore, the Ld. AR’s claim that the revisionary

jurisdiction of PCIT is barred is not valid. The case-laws relied by Ld.

AR are not helpful to assessee.

impugned order as well as the material held on record to which our

attention has been drawn. On a careful consideration, we find that the

assessee has purchased two different properties i.e. ‘impugned property’ and

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‘another property’ as referred and detailed by us in foregoing para. Both

properties were held by assessee as ‘stock-in-trade’ and not ‘capital assets’

and both properties were purchased for a consideration less than the

stamps authority valuation. However, while completing assessment, the AO

has made addition u/s 56(2)(x)(b) for ‘another property’ but not for

‘impugned property’. In fact, the AO is totally silent about ‘impugned

property’ in assessment-order. When it is so, we are in immediate agreement

with Ld. DR for revenue that the order passed by AO is certainly erroneous

for non-consideration of ‘impugned property’ for taxation u/s 56(2)(x)(b)

when there is no difference in two transactions. Hence, the PCIT is very

much justified in invoking revisionary action to assessee’s case.

u/s 56(2)(x)(b) qua ‘another property’ is pending before CIT(A) and therefore

the PCIT is barred from invoking revisionary action in terms of Explanation

1(c) to section 263 is concerned, we re-produce below the said Explanation

1(c) for an immediate reference, which reads as under:

“(c) Where any order referred to in this sub-section and passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.” Thus, the Explanation 1(c) empowers the PCIT to take up revisionary action

to ‘such matter as had not been considered and decided in appeal’.

Undisputably, the appeal filed by assessee before CIT(A) is qua the addition

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made by AO in relation to ‘another property’ and the matter of ‘impugned

property’ is not before CIT(A). Therefore, the Explanation 1(c) very much

empowers the PCIT to take up the issue of ‘impugned property’ for revision.

Hence, we do not find any merit in the claim raised by Ld. AR.

PCIT is very much in accordance with the provision of section 263. We

therefore uphold the same. The assessee fails in this appeal.

has raised an important legal claim that the ‘impugned property’ purchased

by assessee was part of ‘stock-in-trade’ and not a ‘capital asset’, therefore

the provision of section 56(2)(x)(b) is not applicable as per definition of the

term ‘property’ prescribed in Explanation to section 56(2)(x) read with

Explanation (d) to section 56(2)(vii) and also clarified by CBDT in Para No.

13.4 of Circular No. 01/2011 dated 06.04.2011 [F.No. 142/1/2011-

SO(TPL)] and also judicially decided so by ITAT, Jaipur in Satendra

Kaushik, ITA No. 392/JP/2019 order dated 23.04.2019; ITAT, Pune in

Mubarak Gafur Korabu Vs. ITO (2019) 55 CCH 0467; ITAT, Jaipur in

Yogesh Maheshwari Vs. DCIT, 125 Taxmann.com 273; ITAT, Jaipur in

Prem Chand Jain Vs. ACIT, ITA No. 98/JP/2019 order dated

08.06.2020. The assessee may raise this claim before AO during

consequential proceeding before AO pursuant to the revision-order and we

expect the AO to consider such a claim of assessee with a judicious

approach.

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Order pronounced in open court on 30.08.2024

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 30.08.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

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