2022 (1) TMI 836 - AT - Income Tax

Revision u/s 263 by CIT - Addition as income from other sources as the assessee had purchased the property at a cost less than the market value of the property and the property was received for inadequate consideration - HELD THAT - AO has examined the entire issue during the course of assessment proceedings. It is very clear from the assessment order itself. That apart, the AO has issued a show-cause notice to the assessee and called for explanation. By considering the detailed explanation of the assessee, the AO was of the opinion that where the difference between the actual value and market value is less than 10%, the same is ignorable and does not warrant any taxation. In this case, the Assessing Officer has passed the assessment order after due verification and consideration of detailed written submissions filed by the assessee against the show-cause notice and therefore, we are of the considered opinion that invoking the provisions of section 263 of the Act does not warrant for the reason that the assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. Accordingly, we quash the revision order passed under section 263 of the Act by the ld. PCIT and allow the appeal of the assessee.

Summary

Issues Involved:
Whether the assessment order passed by the Assessing Officer is erroneous or prejudicial to the interest of the Revenue.

Analysis:
The appeal was filed against the order of the Principal Commissioner of Income Tax-6, Chennai for the assessment year 2015-16. The main issue was whether the assessment order was erroneous or prejudicial to the Revenue's interest. The Assessing Officer passed the order under section 143(3) of the Income Tax Act, 1961. The assessee was issued notices under sections 143(2) and 142(1) of the Act. The assessee was questioned about the purchase of a property at a cost lower than the market value. The assessee explained that the purchase price was the market value and requested referral to the Valuation Officer. The Assessing Officer completed the assessment considering the submissions.

Subsequently, the Principal Commissioner of Income Tax issued a notice under section 263 of the Act, deeming the assessment order as erroneous and prejudicial to Revenue's interest. The Commissioner directed a reassessment referring the matter to the Valuation Officer. The assessee appealed to the Tribunal, arguing that referring to the Valuation Officer was unnecessary as the value difference was less than 10%. The Tribunal heard both sides and reviewed the assessment process. It noted that the Assessing Officer had thoroughly examined the issue, issued a show-cause notice, and considered the assessee's detailed explanation. The Tribunal concluded that the assessment order was not erroneous or prejudicial to Revenue's interest. Therefore, it quashed the revision order under section 263 and allowed the assessee's appeal.

In conclusion, the Tribunal found that the assessment order was appropriately conducted by the Assessing Officer, considering all relevant factors and explanations provided by the assessee. The Tribunal held that invoking section 263 was unnecessary as the assessment was not erroneous or prejudicial to Revenue's interest. Consequently, the revision order was quashed, and the appeal of the assessee was allowed.