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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: DR. BRR KUMAR & MS. ASTHA CHANDRA
O R D E R PER ASTHA CHANDRA, JM
The appeal filed by the assessee is directed against the order dated 31.03.2021 of the Ld. Principal Commissioner of Income Tax, Delhi-7 (“PCIT”) under section 263 of the Income Tax Act, 1961 (“the Act”) pertaining to Assessment Year (“AY”) 2015-16.
2. The assessee has taken the following grounds of appeal:-
“1. On the facts and circumstances of the case, the order passed by the learned Principal Commissioner of Income Tax, Delhi-7 (Pr. CIT) under Section 263 of the Act is bad, both in the eye of law and on facts.
On the facts and circumstances of the case, the order passed by the learned Pr. CIT cancelling the assessment order passed by the AO, is untenable in the absence of order of the A.O. being erroneous as well as prejudicial to the interest of the Revenue.
3. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the fact that all the issues raised by her in notice under Section 263 were before the AO in proceedings under Section 143(3) and as such the jurisdiction on this issue under Section 263 cannot be assumed. 4. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in rejecting the contention of the appellant that the issue of purchase of property raised by the him were before the AO in proceedings under Section 143(3) and was allowed after application of mind by him as such the same cannot be the matter for reassessment under Section 263 of the Act 5. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the contention of the appellant that the proceeding under Section 263 cannot be used for substituting option of the A.O. by that of the Pr. CIT 6. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in invoking revisionary power under Section 263 of the Act despite the fact that even after thorough examination, no specific findings have been given on the issue how the order is erroneous and prejudicial to the interest of Revenue. 7. On the facts and circumstances of the case, the order passed by the learned Pr. CIT under Section 263 of the Act is bad in law and barred by limitation as the same has been passed beyond the time limit prescribed under the Income Tax Act.”
Briefly stated, the assessee company e-filed its return for AY 2015-16 on 28.09.2015 declaring income of Rs. 10,94,410/-. The case was processed under section 143(1) of the Act. Subsequently, it was selected for limited scrutiny under CASS. Notice under section 143(2) dated 16.03.2016 was issued and saved upon the assessee. Further, notice under section 142(1) along with questionnaire was issued on 13.02.2017. In response thereto, the assesee filed necessary details which were placed on record. After duly verifying the said details furnished, the Ld. Assessing Officer (“AO”) accepted the income returned by the assessee and completed the assessment under section 143(3) of the Act on 28.04.2017.
The Ld. PCIT examined the record of the assessment proceedings and noticed that the details of investment in property are not placed on record; the large increase in sundry creditors in the year as compared to immediate preceding year and genuineness thereof is not ascertained from assessment record; and that the genuineness of Fair Market Value (“FMV”) of property purchased is not ascertainable from the assessment records. He, therefore, issued notice to the assessee to show cause why the assessment be not treated as erroneous and prejudicial to the interest of Revenue.
4.1 The assessee submitted its reply. The Ld. PCIT accepted the explanation of the assessee on the issue of investment in the property and large increase in sundry creditors and their genuineness. However, on the issue of purchase of property for a consideration lower than the stamp duty value, the explanation of the assessee was not acceptable to him in the light of provisions contained in section 56(2)(vii)(b) of the Act. The Ld. PCIT therefore, applying Explanation 2 to section 263 of the Act held the impugned assessment as erroneous and prejudicial to the interest of Revenue; set it aside and directed the Ld. AO to refer the matter to District Valuation Officer (“DVO”) to examine the FMV of the property as on the date of purchase/registration and examine the issue of purchase of property for a consideration lower than the stamp duty value in the light of the provisions of section 56(2)(vii)(b) of the Act.
Aggrieved thereby, the assessee is in appeal before the Tribunal and all the grounds relate thereto.
The Ld. AR drew our attention to the provision of section 56(2)(vii)(b) of the Act and submitted that it applies to “individual” and “HUF” and not to a company. The assessee being a company it is inapplicable to it. Therefore, it cannot be said that the assessment order is erroneous not being inconformity with section 56(2)(vii)(b) as held by the Ld. PCIT. The impugned order of Ld. PCIT is therefore void-ab-initio and invalid in the eyes of law. His direction to the Ld. AO also is, therefore not sustainable.
6.1 The Ld. AR further pointed out that section 56(2)(x) which may be applicable in case of companies was introduced w.e.f. AY 2018-19 but in 3 assessee company’s case AY involved is 2015-16. Therefore, provisions of section 56(2)(x) also cannot be made applicable to the assessee company. Reliance is placed on the decision of Delhi Tribunal in ITO vs. M/s. Sharan Svadha LLP 2022(10)TMI457 decided on 11.10.2022.
6.2 The Ld. AR submitted that the assessment order cannot be held as erroneous when the Ld. AO has examined the issue. Further, there is distinction between “lack of inquiry” and inadequate inquiry”. He also submitted that the fact that the Ld. AO has not made elaborate discussion in assessment order cannot be a basis to invoke revisionary power under section 263 of the Act. Moreover, once a plausible view is taken by the Ld. AO, the Ld. PCIT cannot substitute his view to invoke the revisionary power under section 263 of the Act. In support of the above contentions reliance has been placed on numerous precedents.
6.3 According to the Ld. AR detailed enquiry and verification was made by the Ld. AO before passing the impugned assessment order which was framed after due application of mind. He, therefore, urged that the order passed by the Ld. PCIT under section 263 of the Act is bad in law and deserves to be quashed.
The Ld. DR supported the order of the Ld. PCIT and submitted that the order of the Ld. AO is cryptic. He has not given relevant facts and reasons for coming to the conclusion based on these facts and law.
We have carefully considered the rival submissions and perused the records. The undisputed facts are that the assessee company filed its return which was processed under section 143(1) of the Act. Subsequently, the case was selected for limited scrutiny under CASS. Statutory notice was issued. Questionnaire along with notice under section 142(1) was also issued (Copy at page 21-22 of Paper Book) enclosing therewith copy of AIR/ITS data. Query No. 18 of the questionnaire required the assessee to provide justification along with supporting documents in relation to CASS reasons. The assessee filed replies (copy at page 23-27 of Paper Book). Para 4 7 at page 26 of the Paper Book contained specific reply/justification on issues relating to selection of case for ‘Limited Scrutiny’ accompanied by copy of sale deed dated 17.07.2014, copy of newspaper cutting evidencing lower fair market value than stamp duty value of property at Narela Industrial Complex; copy of assessee’s Valuation Report of property purchased at Narela Industrial Park and copy of comparable sale deed (pages 28-54 of Paper Book). The Ld. AO examined the veracity of the above details/documents during assessment proceedings and after being satisfied passed the assessment order accepting the declared income. The Ld. PCIT however issued notice under section 263 of the Act on the ground that investment details in property were not brought on record, large increase in sundry debtors and genuineness thereof and genuineness of FMV of property were not ascertained and therefore the assessment order was erroneous and prejudicial to the interest of the Revenue. On consideration of assessee’s explanation given before the Ld. PCIT, he was satisfied on the issue of investment in property and large increase in sundry debtors and genuineness thereof. Therefore, he partly set aside the assessment on the issue of purchase of property for a consideration lower than the stamp value and to examine it in the light of provision of section 56(2)(vii)(b) of the Act.
We agree with the contention of the Ld. AR that the provision of section 56(2)(vii)(b) is not applicable to case of a company and that section 56(2)(x) which may apply to case of a company has been inserted by the Finance Act, 2017 w.e.f. 01.04.2017 and is accordingly applicable to AY 2018-19 and onwards whereas the case of the assessee company pertains to AY 2015-16. In this view of the matter, the direction of the Ld. PCIT is not sustainable, being not in accordance with law.
Moreover, the documentary evidence available in the records which the Ld. AO admits to have verified the veracity thereof amply demonstrate that the Ld. AO made the requisite enquiry. If that be so, a mere non- discussion or non-mention thereof in the assessment order could not lead to assumption that the Ld. AO did not apply his mind or that he had not made inquiry on the issue.
We are, therefore of the view that on the facts and in the circumstances of the assessee’s case, assumption of jurisdiction under section 263 of the Act by the Ld. PCIT was not justified. Accordingly, we vacate his order.
In the result, appeal of the assessee is allowed. 12.