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2013 (2) TMI 548 - AT - Income TaxRevision u/s 263 - erroneous and prejudicial to revenue order - Revised return - assessment proceedings - Receipt of report of DVO u/s 55A after after the completion of assessment u/s 143(3) - held that - where a regular assessment proceedings having been commenced u/s. 143(2) of the Act, there is no need for a summary assessment u/s. 143(1)(a) of the Act. Hon ble Delhi High Court has gone further in the case of CIT Vs. Punjab National Bank 2001 (2) TMI 126 - DELHI HIGH COURT wherein it is held that where an intimation was sent to the assessee u/s. 143(1)(a) of the Act and, thereafter, the AO has issued notice u/s. 143(2) of the Act, any change in the said intimation, if permissible, has to be effected in the assessment order u/s. 143(3) of the Act and not by exercising power u/s. 154 of the Act to rectify such intimation issued u/s. 143(1)(a) of the Act. - It means once action u/s. 143(2) of the Act is initiated, no proceedings u/s. 143(1)(a) of the Act or 154 of the Act can be taken up till 143(3) of the Act is passed. Regarding revised return - held that - assessee while filing revised return has substantially changed/reduced its losses from Rs.1,20,25,795/- to Rs.6,81,683/- on the basis of registered valuer s report, which was filed along with the revised return of income. Hence, we treat the revised return of income filed by assessee as a valid revised return filed within the prescribed time of section 139(5) of the Act. Reference of DVO - held that - the fair market value adopted by DVO at Rs.4,72,370/- is lower than the fair market value adopted by assessee, on the basis of registered valuer s report, at Rs.77,47,750/- and in our view, as held by Hon ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra) cl. (a) of s. 55A of the Act cannot be made applicable because the estimate value proposed by DVO is less than the fair market value disclosed by assessee as on 1.4.1981. Similarly, clause (b) of s. 55A of the Act also cannot be invoked because for invoking cl. (b) of this section is possible only when value claimed by assessee is not supported by an estimate made by registered valuer. Income from House property - held that - complete information before the AO was available at the time of framing of assessment in respect to 11 units of house property at 65, Hari Ram Goenka St., and assessee has disclosed notional value u/s. 23(2) of the Act at NIL in its computation of income and AO while adjudicating this issue has accepted the notional value at NIL from these units. Once the entire information is before the AO, and AO has formed opinion, no revision is possible in respect to assessment framed u/s. 143(3) of the Act. Regarding revision u/s 263 - held that - Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT 2000 (2) TMI 10 - SUPREME COURT , which is applicable to the facts of this case. Hon ble Supreme Court has considered the phrase prejudicial to the interest of the revenue , and interpreted that it has to be read in conjunction with an erroneous order passed by the AO and every loss of revenue as a consequence of an order of AO, it cannot be treated as prejudicial to the interest of revenue. CIT has erred in exercising jurisdiction u/s. 263 of the Act for revising the assessment framed by AO u/s. 143(3) of the Act as the assessment is neither erroneous nor prejudicial to the interest of revenue. - Decided in favor of assessee.
Issues Involved:
1. Validity of the revised return filed by the assessee. 2. Legality of the reference to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act. 3. Computation of Income from House Property. 4. Deletion of disallowance on account of expenses by CIT(A). Detailed Analysis: 1. Validity of the Revised Return Filed by the Assessee: The assessee filed a revised return on 30.03.2006, which was contested by the CIT as not valid under Section 139(5) of the Income Tax Act. The CIT argued that the revised return was filed after the completion of proceedings under Section 143(1) and without any omission on the part of the assessee. However, the Tribunal found that the original return was filed on 01.11.2004 and processed under Section 143(1) on 29.03.2006. A notice under Section 143(2) was issued on 17.08.2005 before the processing under Section 143(1). The Tribunal held that once a notice under Section 143(2) is issued, the assessment should proceed under Section 143(3), rendering the processing under Section 143(1) invalid. Consequently, the revised return filed by the assessee was considered valid as it substantially changed the reported losses based on a registered valuer's report. 2. Legality of the Reference to the DVO under Section 55A: The CIT initiated proceedings under Section 263 based on the DVO's report, which indicated discrepancies in the valuation of the property. The Tribunal examined whether the reference to the DVO was valid under Section 55A. The Tribunal noted that Section 55A allows for reference to the DVO if the value claimed by the assessee is less than the fair market value. However, in this case, the fair market value claimed by the assessee was higher than that estimated by the DVO. The Tribunal referred to the Gujarat High Court's decision in Hiaben Jayantilal Shah, which held that a reference under Section 55A is not valid if the fair market value claimed by the assessee is supported by a registered valuer's report and is higher than the DVO's estimate. Therefore, the Tribunal concluded that the reference to the DVO was not in accordance with the law. 3. Computation of Income from House Property: The CIT directed the AO to compute income from house property for properties from which the assessee had not received any rent. The Tribunal found that the AO had all the necessary information regarding the 11 units of house property and had accepted the notional value at NIL under Section 23(2). The Tribunal held that since the AO had formed an opinion based on the available information, the CIT could not revise the assessment under Section 263. 4. Deletion of Disallowance on Account of Expenses by CIT(A): The AO disallowed certain expenses on the grounds that the assessee's business of share trading was stalled. The CIT(A) deleted the disallowance, noting that the assessee had continued to carry on its business of trading in shares and government securities, despite nominal sales. The Tribunal upheld the CIT(A)'s decision, finding that the assessee had indeed engaged in share trading activities during the relevant financial year. The Tribunal noted that the AO had recorded purchases and sales of shares and debentures, and the business was not discontinued. Consequently, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal. Conclusion: The Tribunal quashed the revision order passed by the CIT under Section 263, holding that the assessment was neither erroneous nor prejudicial to the interest of the revenue. The appeal of the assessee was allowed, and the revenue's appeal and the assessee's cross-objection were dismissed.
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