2017 (5) TMI 215 - AT - Income Tax

Revision u/s 263 - income under the head income from capital gain wrongly calculated - Held that - It is the case of the assessee that a valuation report was submitted showing year wise construction and that the sale deed also mentions the construction of property. However, the ld. Pr.CIT has given a finding, no such evidence, books of account or balance sheet for the year in which the construction has been made, filed to prove actual construction and its recording in the books of account. The assessee was required to file evidences in support of the construction for making a claim in respect of cost of acquisition of the property by furnishing the evidence of expenditure incurred. However, the assessee has filed a valuation report by a registered valuer enclosed at pages No. 11 and 12 of the paper book. The valuer has reported that cost of construction is calculated as per the standing order of the department of Public Works, Government of Rajasthan. Under these facts, we deem it appropriate to modify the impugned order and direct the Assessing Officer while deciding the issue of cost of property would call for a valuation report from the departmental valuer and also make enquiry with regard to the cost of construction of the property. - Appeal of the assessee allowed for statistical purposes only.

Issues Involved:
Appeal against order under section 263 of the Income Tax Act, 1961 regarding income from capital gain.

Detailed Analysis:

1. Jurisdiction of the Pr. CIT under Section 263:
The appeal was filed against the order dated 09/09/2015 passed by the ld. Pr. CIT, Kota pertaining to the A.Y. 2012-13. The grounds of appeal challenged the jurisdiction of the Pr. CIT under Section 263, arguing that the order was bad in law and contrary to the provisions of law. The appellant contended that the action taken under Section 263 was erroneous and led to under-assessment of income. The Pr. CIT set aside the assessment for re-examination, prompting the appeal.

2. Assessment Order and Pr. CIT's Revision:
The assessment under Section 143(3) was completed on 31/3/2014, following which the Pr. CIT issued a notice under Section 263, questioning the assessment order's correctness regarding income from capital gain. The appellant responded to the notice, but the Pr. CIT revised the order, setting it aside and directing a de novo assessment by the Assessing Officer. The appellant appealed against this revision.

3. Arguments and Counter-Arguments:
The appellant's counsel argued that the Pr. CIT's action was unjustified, emphasizing that the Assessing Officer had conducted an inquiry and considered the issue. In contrast, the CIT DR supported the Pr. CIT's order, stating that the Assessing Officer had not properly examined the issue. The Pr. CIT found discrepancies in the valuation of properties sold by the assessee and directed further scrutiny.

4. Valuation of Properties and Evidence Requirement:
The Pr. CIT observed discrepancies in the valuation of properties sold by the assessee and noted the absence of evidence supporting the cost of construction. The appellant submitted a valuation report, but the Pr. CIT found it insufficient. The Tribunal directed the Assessing Officer to obtain a valuation report from the departmental valuer and investigate the cost of construction to determine the property's acquisition cost.

5. Decision and Outcome:
After considering the contentions of both parties and reviewing the material on record, the Tribunal modified the impugned order. The appeal of the assessee was allowed for statistical purposes only, indicating a partial success in challenging the Pr. CIT's revision under Section 263.

In conclusion, the Tribunal's decision highlighted the importance of proper valuation and evidence in determining the cost of acquisition for properties sold, emphasizing the need for thorough examination by tax authorities to prevent under-assessment of income.

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