2022 (1) TMI 893 - AT - Income Tax

Revision u/s 263 by CIT - reopening of assessment u/s 147 on Short assessment of Short Term Capital Gain - AO accepted the assessee's computation without invoking the provision of section 50C - first objection of the assessee that notice u/s. 263 is beyond time - HELD THAT - Objection of the assessee that notice u/s. 263 is beyond time is not sustainable in view of the fact that due to COVID, pandemic time barring dates were extended. This has been duly dealt with by the Ld.CIT in his order. Ld. Counsel of the assessee could not cogently rebut that time barring dates stood extended in view of the pandemic as observed by Ld.CIT. Hence, this objection by the assessee stands dismissed. Merits of the case AO accepted the assessee's computation without invoking the provision of section 50C - assessees has submitted that issue of 50C was not mentioned in the reason for reopening, hence in this assessment order, AO has not dealt with the issue 50C. This submission is not at all sustainable. Section 50C clearly provides that in case of transfer of capital assets being land or building if the value adopted by the assessee is less than the value adopted by the stamp valuation authority difference should be added as income of the assessee u/s. 50C - There is no provision in the act permitting the AO to deviate from that. Hence, the AO not invoking the provision of section 50C, certainly makes the order of AO being erroneous. Hence, invocation of the provision of section 263 of the Ld.CIT is quiet correct - we note that section 50C duly provides that ,if the assessee is not satisfied with the valuation done by Stamp valuation authority, he can object to the same to the AO and in that case AO shall refer this matter to the DVO. This aspect was mentioned by the assessee before the Ld.CIT. CIT has referred to amendment brought in Explanation 2 of section 263. However, we note that it was inserted w.e.f. 01.06.2015 and it has been held by courts that amendment is prospective. However, this is not germane in the context of fact that AO has not invoked the provision of section 50C and has passed an erroneous order prejudicial to the interest of the revenue. We find that no prejudice would be caused to the assessee by the order of the Ld.CIT, wherein, he has directed the AO to make fresh assessment in accordance with law. - Decided against assessee.

Summary

Issues:
1. Validity of revision proceeding under section 263 of the Income Tax Act.
2. Application of section 50C in the assessment order.
3. Consideration of valuation issues in the assessment process.
4. Impact of COVID-19 on time barring dates for legal proceedings.

Issue 1: The validity of the revision proceeding under section 263 was challenged by the assessee on the grounds of time limitation. The assessee argued that the notice issued was beyond the stipulated time frame due to the reassessment order. However, the Commissioner of Income Tax (CIT) extended the time limit for issuing the notice due to the COVID-19 pandemic, dismissing the objection raised by the assessee.

Issue 2: The application of section 50C in the assessment order was a key point of contention. The CIT observed that the assessee had undervalued a property in the return of income, leading to an incorrect calculation of Short Term Capital Gain. The CIT directed the Assessing Officer (AO) to make a fresh assessment, considering the correct valuation as per section 50C, which was not applied in the initial assessment order.

Issue 3: The assessment process was criticized for not addressing the valuation issues properly. The AO did not make inquiries regarding the application of section 50C, resulting in an erroneous assessment that was prejudicial to the revenue's interest. The CIT referred to various legal precedents and directed the AO to conduct a fresh assessment, taking into account all relevant facts and legal provisions.

Issue 4: The impact of the COVID-19 pandemic on time barring dates for legal proceedings was highlighted. The CIT extended the time limit for issuing notices and conducting proceedings in light of the pandemic situation, emphasizing the need for compliance with revised timelines due to the exceptional circumstances.

In conclusion, the Appellate Tribunal upheld the CIT's order directing a fresh assessment by the AO, considering the correct application of section 50C and providing the assessee with an opportunity to be heard. The appeal filed by the assessee was dismissed, emphasizing the importance of following legal provisions and conducting assessments accurately to safeguard the revenue's interests.