2012 (2) TMI 680 - AT - Income Tax

Summary

Issues involved:
The correctness of the order passed by the Commissioner of Income Tax-XII Kolkata u/s 263 r.w.s. 143(3) of the Income Tax Act, 1961 for the assessment year 2006-07.

Issue 1: Correctness of the assessment order

The Assessing Officer finalized the assessment accepting the stated value of a property purchased by the assessee, even though a reference was made to the Departmental Valuation Officer (DVO) for valuation. The DVO's report valued the property significantly higher than the declared value. The Commissioner initiated revision proceedings u/s 263, stating that the assessment order was passed to save time and without proper inquiry into the property's value. The assessee opposed the revision, arguing that the valuation report was an estimation and not binding. The Commissioner set aside the assessment order, directing a fresh assessment. The ITAT held that the purchase price of the property, even if lower than market value, did not render the assessment order erroneous or prejudicial to revenue interests. The ITAT emphasized that there was no statutory provision allowing the AO to substitute purchase price with market value for making additions to income.

Issue 2: Validity of revision proceedings

The Departmental Representative relied on the Calcutta High Court's judgment to support the Commissioner's reliance on the DVO report received after completing the assessment. However, the ITAT found that the revision proceedings were not valid as the DVO's report did not necessitate changes to the assessed income. The ITAT emphasized that the Commissioner must point out errors in the AO's order to invoke powers u/s 263. Additionally, the ITAT rejected the argument that insufficient inquiries rendered the assessment order erroneous, citing that an inquiry into market price should serve a purpose of adding to the assessee's income, which was not the case here. The ITAT concluded that the Commissioner's discretion under section 263 cannot be unfettered and upheld the assessee's grievance, quashing the revision order.

In conclusion, the ITAT allowed the appeal, quashing the revision order and providing relief to the assessee.