2015 (8) TMI 1538 - AT - Income Tax

Revision u/s 263 by CIT - Incorrect calculation of capital gain/loss - FMV determination - valuation of sold property as on 1.4.1981 taken - apparent discrepancy and lack of proper investigations during the assessment proceedings - lack or enquiry v/s inadequate enquiry - HELD THAT - Assessee has not only disclosed the way it had made calculation of capital loss, it had also enclosed all the corroborative evidences together with the return of income - AO had raised a specific query which the assessee had duly replied. In view of this, it cannot be said that the AO has not applied his mind as alleged by CIT that he has not made proper investigation during the assessment proceedings. Assessing Officer was fully aware of the whole matter. Even after passing of the assessment order, he has issued notice under section 133(6) of the Act and also the notice under section 154 of the Act, which were duly replied by the assessee. Even the notice under section 154 of the Act mentions the facts which have been stated in the notice under section 263 of the Act issued by the learned Commissioner of Income Tax later on. In view of these evidences, it cannot be said that this is a case of lack of enquiry/investigation. On the appraisal of the said plethora of evidences, if the Assessing Officer takes a view which is not in consonance with the view of the learned Commissioner of Income Tax, it cannot give the learned Commissioner of Income Tax the jurisdiction under section 263 of the Act. This is certainly not a case of lack of enquiry, at most, it may be a case of inadequate enquiry, which also to our mind, in the facts and circumstances of the case, does not seem correct. There was some mistake in the Valuation Report of Registered Valuer, which the assessee enclosed with the return of income, also does not advance the case of the Department. It is a case in which on the basis of evidences filed by the assessee, the Assessing Officer forms an opinion and then makes the assessment. There is nothing illegal in this. There is no law which says that the Valuation Report has to be drawn in a certain specific fashion. The valuation is an art and any Valuation Officer who is registered by the Government to make such kind of valuation can make his own basis for valuing the property. In the present case, the Valuation has been done by a Registered Valuer, which the Assessing Officer has perused and formed an opinion. No specific procedure has been prescribed under the Statute as to how the Assessing Officer has to react in such situation. As per the assessee, the value taken is in accordance with the report of the Registered Valuer, which the Assessing Officer accepted while the learned Commissioner of Income Tax wanted to substitute the same to the value of some other property purchased by the assessee itself a few months later - Assessing Officer being an Adjudicating Officer has to form an opinion on the basis of evidences, which he has duly done. If the learned Commissioner of Income Tax on the same set of evidence draws different opinion, it being a question of fact, does not give him jurisdiction to revise the same under section 263 - Decided in favour of assessee.

Issues Involved:
1. Legality of the order made under section 263 of the Income Tax Act, 1961.
2. Validity of the jurisdiction of the Commissioner of Income Tax under section 263.
3. Adequacy and propriety of the Assessing Officer's investigation and assessment.
4. Difference in valuation of property for capital gain calculation.
5. Principles of natural justice and procedural fairness.

Issue-wise Detailed Analysis:

1. Legality of the order made under section 263 of the Income Tax Act, 1961:
The appeal challenged the legality of the Commissioner of Income Tax's (CIT) order under section 263 of the Income Tax Act, 1961. The CIT held that the Assessing Officer's (AO) order was erroneous and prejudicial to the interests of the Revenue due to an apparent discrepancy and lack of proper investigations. The Tribunal observed that the AO had applied his mind and conducted an inquiry into the transaction, as evidenced by the documents and correspondences on record. The Tribunal concluded that the AO's order was not erroneous, and thus, the CIT's invocation of section 263 was not justified.

2. Validity of the jurisdiction of the Commissioner of Income Tax under section 263:
The Tribunal examined whether the CIT had valid jurisdiction under section 263. It was noted that for the CIT to assume jurisdiction under section 263, the order must be both erroneous and prejudicial to the Revenue. The Tribunal found that the AO had conducted an inquiry and formed an opinion based on the evidences provided by the assessee, including the Valuation Report from a Registered Valuer. The Tribunal cited the Supreme Court's judgment in Malabar Industrial Co. Ltd. v. CIT, which held that if an AO adopts one of the permissible courses in law, it cannot be treated as erroneous merely because the CIT does not agree with it. Thus, the Tribunal held that the CIT did not have valid jurisdiction under section 263.

3. Adequacy and propriety of the Assessing Officer's investigation and assessment:
The CIT argued that the AO's assessment lacked proper investigation. However, the Tribunal found that the AO had raised specific queries regarding the transaction, which the assessee duly replied to. The AO had referenced the evidences in the assessment order and issued notices under sections 133(6) and 154, indicating that he was fully aware of the transaction and had applied his mind. The Tribunal held that the AO's inquiry, though possibly inadequate in the CIT's view, was sufficient and did not warrant revision under section 263.

4. Difference in valuation of property for capital gain calculation:
The dispute centered around the valuation of the property sold by the assessee for calculating capital gains. The assessee used a valuation from a Registered Valuer, which the AO accepted. The CIT contended that the valuation was not supported by sale instances and proposed a different valuation based on a subsequent purchase by the assessee. The Tribunal held that the AO's acceptance of the Registered Valuer's report was a permissible course of action. The Tribunal emphasized that valuation is an art and there is no specific statutory procedure for the AO to follow in such cases. Therefore, the CIT's disagreement with the AO's valuation did not justify revision under section 263.

5. Principles of natural justice and procedural fairness:
The assessee argued that the CIT's order violated principles of natural justice as the CIT did not allow inspection of the assessment record. The Tribunal did not specifically address this argument in its decision but focused on the broader issue of the AO's inquiry and the CIT's jurisdiction under section 263. The Tribunal's decision to set aside the CIT's order implicitly addressed the concern for procedural fairness by upholding the validity of the AO's assessment process.

Conclusion:
The Tribunal set aside the CIT's order made under section 263, concluding that the AO's assessment was neither erroneous nor prejudicial to the interests of the Revenue. The appeal of the assessee was allowed.

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