2019 (6) TMI 985 - AT - Income Tax

Revision u/s 263 - AO had failed to examine the applicability of provisions of section 56(2)(vii)(b)(ii) - purchase of shops on less than stamp valuation - HELD THAT - On a perusal of the material available on record, including the impugned assessment order, we find not even a hint of any enquiry conducted by the AO for examining the applicability of the aforesaid provision to the purchase of shops by the assessee. In fact, in the grounds raised in the present appeal, the assessee has not raised any ground with regard to the applicability of section 56(2)(vii)(b)(ii). The only submission made by AO having completed the assessment after conducting necessary enquiry with regard to the purchase of shops, the assessment order cannot be held to erroneous and prejudicial to the interests of Revenue. The facts on record clearly reveal that the AO has completely failed to examine the applicability of section 56(2)(vii)(b)(ii) to the subject transactions. Thus, non examination / non consideration of applicability of the aforesaid provision makes the assessment order not only erroneous but prejudicial to the interests of Revenue. Therefore, in our considered opinion, learned Principal CIT has correctly exercised his power under section 263 to revise the assessment order. We may observe that while setting aside the assessment order CIT has not expressed any opinion with regard to applicability of section 56(2)(vii)(b)(ii). Rather he has directed the AO to make necessary enquiry keeping in view the provision of section 56(2)(vii)(b)(ii). Therefore, it is open for the assessee to make all submissions available to it to demonstrate that the provisions of section 56(2)(vii)(b)(ii) is not applicable to the subject transactions. We further direct the AO to consider the submissions made by the assessee on its own merits and decide the issue after dealing with all the submissions made by the assessee by a well-reasoned and speaking order. - Decided against assessee.

Summary

Issues Involved:
1. Jurisdiction of the Principal Commissioner under section 263 of the Income Tax Act.
2. Examination of the applicability of section 56(2)(vii)(b)(ii) of the Act in the assessment proceedings.
3. Validity of the assessment order passed by the Assessing Officer.

Analysis:
1. Jurisdiction of the Principal Commissioner: The appeal challenged the order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961. The Principal Commissioner exercised his power to revise the assessment order for the assessment year 2014-15. The grounds raised by the assessee primarily questioned the jurisdiction of the Principal Commissioner in assuming jurisdiction and passing the order under section 263. The contention was that the assessment order under section 143(3) was neither erroneous nor prejudicial to the interests of Revenue. The Principal Commissioner found a discrepancy in the valuation of properties purchased by the assessee, leading to the invocation of section 56(2)(vii)(b)(ii) of the Act. Despite the assessee's submissions, the Principal Commissioner held the assessment order to be erroneous and prejudicial to the Revenue's interests, setting it aside for a fresh assessment.

2. Examination of Section 56(2)(vii)(b)(ii) Applicability: The crux of the issue revolved around the applicability of section 56(2)(vii)(b)(ii) of the Act to the transactions involving the purchase of shops by the assessee. The Principal Commissioner observed that the Assessing Officer failed to examine the applicability of this provision during the assessment proceedings. The Tribunal noted that the stamp duty valuation exceeded the declared sale consideration, making the excess amount taxable as the assessee's income. The Tribunal found that the Assessing Officer did not conduct any enquiry into the applicability of this provision, rendering the assessment order erroneous and prejudicial to Revenue's interests. Consequently, the Principal Commissioner's decision to revise the order under section 263 was upheld.

3. Validity of the Assessment Order: The Authorized Representative contended that the Assessing Officer had thoroughly examined the purchase transactions and accepted the details provided by the assessee, hence the assessment order was not erroneous. However, the Departmental Representative argued that the failure to consider section 56(2)(vii)(b)(ii) made the assessment order both erroneous and prejudicial to Revenue. The Tribunal concurred with the Departmental Representative, emphasizing that the non-examination of the provision by the Assessing Officer rendered the assessment order flawed. The Tribunal upheld the Principal Commissioner's decision to set aside the order for a fresh assessment considering the provisions of section 56(2)(vii)(b)(ii) and providing the assessee with an opportunity to present their case.

In conclusion, the Tribunal dismissed the appeal, affirming the Principal Commissioner's exercise of power under section 263 to revise the assessment order due to the failure to examine the applicability of section 56(2)(vii)(b)(ii) during the initial assessment proceedings. The Tribunal directed a fresh assessment to be conducted after considering all relevant submissions and provisions, ensuring a well-reasoned decision.