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2021 (9) TMI 404 - AT - Income TaxRevision u/s 263 - case was selected for scrutiny under Cass and order u/s 143(3) - income from other sources u/s 56(2)(vii)(b) -assessee had purchased a property jointly with one person in which there was difference in the value as adopted for stamp duty purposes - contention of the assessee had been that since he is carrying on business as a dealer and investor in real estate, the amount paid represents actual consideration paid in normal course of trade and cannot be regarded as gift as contemplated in section 56(2)(vii) - Whether plots of land were in the nature of stock in trade? - HELD THAT - As perused the material placed on record and we find that the assessment order cannot be said to be erroneous or prejudicial to the interest of revenue. The selection of the case was for limited scrutiny and the Ld. PCIT has not shown on what issue the order was erroneous on the issues on which the selection of the case was made. Other issues cannot be considered for setting aside the order. Coordinate Jaipur Bench in SHRI ASHOK AGARWAL HUF AND (VICE-VERSA) 2020 (8) TMI 94 - ITAT JAIPUR on similar issue in the case of real estate dealer had taken a view that for the purpose of section 56(2)(vii)(b) the term capital asset would not include the stock in trade. This is one possible view which if taken cannot be said to be erroneous or prejudicial to the interest of revenue. In these circumstances we hold that the assessment order cannot be set aside, and accordingly the revision order made is quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings initiated under section 263 of the Income Tax Act, 1961. 2. Application of section 56(2)(vii)(b) to include income in the hands of the assessee. 3. Principles of natural justice and adequate opportunity of hearing. 4. Interpretation of statutory provisions and judicial precedents. 5. Scope of limited scrutiny cases and jurisdiction of the Commissioner. Issue 1: Validity of Proceedings under Section 263: The appeal challenged the initiation of proceedings under section 263 by the ld. CIT-I, contending that it was bad in law and on facts. The ld. PCIT observed that the assessment could be subjected to 263 proceedings if there was no proper enquiry by the AO. The PCIT cited decisions from the Delhi and Calcutta High Courts to support the contention that lack of enquiry could render the order erroneous. The PCIT set aside the AO's order to pass a fresh order in accordance with the law. Issue 2: Application of Section 56(2)(vii)(b): The dispute centered on the inclusion of income of ?11,05,000 under section 56(2)(vii)(b) due to a property purchase. The assessee argued that as a real estate dealer, the amount paid was for business purposes and not a gift as per the section. The assessee referred to judicial decisions and circulars to support the argument that the order was not erroneous or prejudicial to the revenue's interest. Issue 3: Principles of Natural Justice: The assessee contended that the order passed lacked principles of natural justice and did not provide adequate hearing opportunities. The appeal highlighted the importance of fair procedures in such proceedings. Issue 4: Interpretation of Statutory Provisions and Precedents: The assessee relied on judicial precedents such as K.P. Varghese v. ITO to argue that statutory provisions, like section 56(2)(vii)(b), must be strictly construed. The assessee emphasized the need for a strict interpretation of deeming fictions and cited a committee's opinion on the provision's validity. Issue 5: Scope of Limited Scrutiny Cases and Jurisdiction: The appeal raised concerns about the jurisdiction of the CIT in invoking section 263 on issues beyond the limited scrutiny assessment. The assessee referenced decisions where the CIT's direction for comprehensive scrutiny assessment in limited scrutiny cases was deemed invalid. In the final judgment, the ITAT Jodhpur held that the assessment order was not erroneous or prejudicial to the revenue's interest. The tribunal noted that the case was selected for limited scrutiny, and the order was found to be correct on the issues for which the case was chosen. The tribunal also considered the view taken by the Jaipur Bench on similar issues involving real estate dealers. Consequently, the revision order was quashed, and the appeal of the assessee was allowed.
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