2019 (10) TMI 1172 - AT - Income Tax

Revision u/s 263 - addition under the head income from other sources as per provisions of section 56(2)(ii)(b) - Difference of market value of the property was adopted by stamp valuation authority as the assessee had declared sale consideration - HELD THAT - As in the present case, CIT has categorically recorded a finding on fact that on perusal of purchase deed of the property in question, it was noticed that the market value of the property was adopted by stamp valuation authority for ₹ 1,80,53,000/-, whereas the assessee had declared sale consideration at ₹ 1,25,00,000/-. As such difference amount of ₹ 55,53,000/- (₹ 1,80,53,000 (minus) ₹ 1,25,00,000/-) was required to be added back in the total income of the assessee under the head income from other sources as per provisions of section 56(2)(ii)(b) of the Act. But this was not found done in the scrutiny by the A.O. As further observed that the assessee had claimed registration expenses out of saving and capital but the assessee has disclosed business income u/s 44AD of the Act and has not maintained books of accounts. On perusal of return of income pertaining to the assessment year 2014-15, there was no capital account found. Hence, the expenditure incurred on registration amount to ₹ 14,08,345/- remained unproved/unexplained. CIT was of the view that apparently the registration expenditure was paid on undisclosed income and was liable to be taxed which has not been done by the assessee. The facts of the present case would fall where the A.O. did not conduct any enquiry or examined the evidence whatsoever related to the issue under consideration. There was total absence of enquiry or verification. Therefore, we do not see any infirmity into the action of the Ld. CIT for setting aside the assessment order and remitting the assessment to the file of the A.O. with a direction to examine the issues of difference of market value of the property in question and verifying the source of expenditure incurred on registration of the property after affording proper opportunity to the assessee. Assessee has placed on record a valuation report that was not before the authorities below. We therefore, in the interest of justice admit this valuation report as additional evidence and modify the direction of the Ld. CIT to the extent that while framing the assessment, the A.O. would also consider the objection of the assessee regarding adoption of the market value of the property and decide the issue in accordance with law

Summary

Issues Involved:
1. Whether the order passed by the Assessing Officer (A.O.) under section 143(3) of the Income Tax Act, 1961 was erroneous and prejudicial to the interest of the revenue within the meaning of section 263.
2. Whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking section 263 to revise the assessment order.
3. Whether the A.O. conducted adequate enquiry regarding the purchase of property and the source of registration expenses.

Detailed Analysis:

Issue 1: Erroneous and Prejudicial Order under Section 143(3)
The appellant contended that the Pr. CIT-1, Indore erred in holding the assessment order passed under section 143(3) as erroneous and prejudicial to the interest of the revenue. The appellant argued that the A.O. had duly examined the issues during the original assessment proceedings. The A.O. made enquiries related to the purchase of property and the source of registration expenses, and therefore, the assessment order should not be considered erroneous merely because the Pr. CIT wanted the enquiry to be conducted differently.

Issue 2: Justification for Invoking Section 263 by Pr. CIT
The Pr. CIT initiated proceedings under section 263, observing that the A.O. failed to add the difference amount of ?55,53,000/- (between the market value adopted by the Stamp Valuation Authority and the declared value by the assessee) to the total income under the head "Income from other sources" as per section 56(2)(vii)(b). Additionally, the Pr. CIT noted that the registration expenses of ?14,08,345/- were unproved/unexplained, as the assessee did not maintain books of accounts and had no capital account. The Tribunal upheld the Pr. CIT's action, distinguishing the facts from the case of ITO Vs. DG Housing Projects Ltd. (Delhi High Court), where the CIT had not recorded any finding on the sale consideration being higher than declared.

Issue 3: Adequacy of Enquiry by the A.O.
The Tribunal examined whether the A.O. made adequate enquiry regarding the purchase of property and the source of registration expenses. It was found that there was no evidence or query raised by the A.O. regarding the adoption of stamp valuation for determining the sale consideration. The Tribunal concluded that the A.O. did not conduct any enquiry or verification on this issue, leading to a total absence of enquiry. Consequently, the Tribunal found no infirmity in the Pr. CIT's action of setting aside the assessment order and remitting the case back to the A.O. for a fresh examination of the issues.

Conclusion:
The Tribunal dismissed ground Nos. 1 and 2 of the appeal, partly allowed ground No. 3 for statistical purposes, and found ground No. 4 to be general in nature, requiring no separate adjudication. The Tribunal directed the A.O. to consider the additional evidence (valuation report) submitted by the assessee and decide the issue in accordance with the law. The appeal was partly allowed for statistical purposes.