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2018 (6) TMI 966 - AT - Income TaxRevision of orders prejudicial to revenue u/s 263 - valuation of property without considering the report of Valuation Officer u/s 55A - Held that - AO has made inquiry about the fair market value of property as at 01.04.1981, it cannot be said that he has not made any inquiry - thus that does not make the order of the AO erroneous and prejudicial to the interest of revenue. Perhaps that could have given an option to the AO to reopen the proceedings u/s 147 as there was some tangible material - but the revision u/s 263 is not legally sustainable - order of the ld CIT also does not suggest what further inquiry the ld AO should have done - introduction of explanation 2 to section 263 introduced w.e.f. 01.06.2015 also does not come to the help of the revenue because it could not be shown that the order is passed without making enquiries or verification which should have been made - relief granted to the assessee is also after making some enquiry into the claim of the assessee - hence the order passed by the ld CIT u/s 263 is not sustainable and hence, quashed. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Validity of the assessment order passed under Section 143(3)/147. 3. Consideration of valuation reports and their relevance. 4. Adequacy of inquiries conducted by the Assessing Officer (AO). 5. Applicability of amended provisions of Section 55A. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The primary issue was whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking jurisdiction under Section 263 to revise the assessment order. The Pr. CIT held that the assessment order was erroneous and prejudicial to the interest of the revenue due to the AO's failure to conduct detailed inquiries and accept unsubstantiated claims. The Tribunal noted that for Section 263 to apply, the order must be both erroneous and prejudicial to revenue. The Tribunal concluded that the AO had conducted necessary inquiries and the Pr. CIT's invocation of Section 263 was not justified. 2. Validity of the assessment order passed under Section 143(3)/147: The assessment was reopened under Section 147 based on the belief that the assessee had taxable income from the sale of immovable property. The AO, after conducting inquiries, determined the capital gains and made certain additions. The Tribunal found that the AO had made sufficient inquiries and the assessment order was validly passed under Section 143(3) read with Section 147. 3. Consideration of valuation reports and their relevance: The Pr. CIT criticized the AO for not considering the Valuation Officer's report from Meerut. However, the Tribunal highlighted that the valuation report was not part of the assessment records when the AO completed the assessment. The Tribunal emphasized that the AO relied on the Tehsildar's report and the valuation from a government-approved valuer, which were appropriate under the circumstances. 4. Adequacy of inquiries conducted by the Assessing Officer (AO): The Tribunal examined whether the AO conducted adequate inquiries. It was noted that the AO had obtained a report from the Tehsildar regarding the commercial rate of the property as of 01.04.1981 and considered the valuation from a registered valuer. The Tribunal stated that the AO's inquiries were adequate and the Pr. CIT's assertion of inadequate inquiry was unfounded. The Tribunal also referenced several judicial precedents, emphasizing that the AO's inquiries were sufficient and the Pr. CIT's action was merely a change of opinion. 5. Applicability of amended provisions of Section 55A: The Pr. CIT applied the amended provisions of Section 55A, effective from 01.07.2012, to the assessment year 2009-10. The Tribunal clarified that the amendment to Section 55A, which allowed the AO to refer to the Valuation Officer if the value claimed was at variance with the fair market value, was not applicable retrospectively. The Tribunal cited the Bombay High Court's decision in CIT Vs. Puja Prints, which supported the view that the amendment did not apply to earlier assessment years. Conclusion: The Tribunal concluded that the AO had made adequate inquiries and the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Pr. CIT's invocation of Section 263 was quashed, and the appeal of the assessee was allowed. The Tribunal emphasized that the AO's actions were in accordance with the law and the Pr. CIT's order was based on a change of opinion rather than a substantive error in the assessment process.
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