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2022 (7) TMI 733 - AT - Income TaxRevision u/s 263 by CIT - sale of impugned land measuring 10.162 acres below the stamp duty value in contravention of the provision of the Act (Section 50C) were left unverified - sale under SARFEASI Act - Return was selected for scrutiny under CASS and, accordingly, statutory notices were issued and served upon the assessee - HELD THAT - PCIT was unaware of the relevant provisions of SARFEASI Act, 2002. We are of the considered view that before issuing notice u/s. 263 of the Act and before assuming jurisdiction thereupon, the PCIT ought to have gone through the underlying facts of the case in hand. If the PCIT had gone through the records of the assessee, he would have come to know that the accumulated losses of the assessee were more than the paid up capital and free reserves, the assessee company became a sick company as per the provisions of Sick Industrial Companies Act SICA and was referred to the Board of Industrial and Financial Reconstruction BIFR u/s. 15(1) of the SICA Special Provisions Act declaring the company as a sick industrial company. In 2006, the assessee company sought permission for disposal of surplus land of 11.02 acres from the Government of India to redeem the mounting financial burden and also to generate funds needed for its revival.The Government of India gave permission in Assessment Year 2006 for the sale of land, but the sale of land could not be completed in Assessment Year 2006-07 due to State Government's intervention for buy-back. Since the assessee company could not pay bank dues as demanded by the State Bank of India and other bankers, SBI, on behalf of consortium of banks, issued a notice dated 18.04.2009 to the company u/s. 13(3) of SARFEASI Act requiring the company to discharge its full dues and attached the assets including the freehold surplus land mortgaged to the extent of 11.02 acres. A conspectus understanding of the underlying facts clearly show that sale/transfer of land is effected by SBI under the SARFEASI Act and it has to be understood clearly that the assessee company has not sold/transferred the land of its own. It is known to everyone that SBI is a bank created by the Act of Parliament who has taken possession of the land of the assessee company and the action of the SBI is akin to compulsory acquisition of land by the Government under SURFEASI Act to recover dues of consortium of banks. Facts on record clearly show that in spite of several attempts, SBI could not sell the land at the stamp duty value of Rs. 387.64 crores. Therefore, under the given circumstances, it can be safely concluded that the price realized by SBI is fair market value of land as on the date of sale - a specific query was raised by the Assessing Officer for a specific reason for which return was selected for scrutiny assessment and specific reply was given by the assessee. Where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. We are of the considered view that in none of the two cases relied upon by the ld. DR, there was a sale under SARFEASI Act by secured lender.As mentioned elsewhere, in the case in hand, sale was under SURFEASI Act and sale was not by the assessee. Considering the facts of the case in totality from all possible angles, we are of the considered view that the order framed u/s. 263 of the Act deserves to be set aside in light of the peculiar facts of the case in hand. We, accordingly, set aside the order of the PCIT and restore that of the Assessing Officer dated 18.12.2016 framed u/s. 143(3) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income-tax Act, 1961. 2. Verification of sale of land below stamp duty value. 3. Application of Section 50C of the Income-tax Act. 4. Assessment of capital gains. 5. Validity of the assessment order under Section 143(3). Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income-tax Act, 1961: The primary grievance of the assessee was that the Principal Commissioner of Income Tax (PCIT) erred in assuming jurisdiction under Section 263 of the Income-tax Act, 1961, by holding that the assessment order framed by the Assessing Officer (AO) under Section 143(3) was erroneous and prejudicial to the interest of the Revenue. The Tribunal emphasized that the PCIT must be satisfied with the twin conditions: the order should be erroneous and prejudicial to the interests of the Revenue. The Tribunal cited the Supreme Court's judgment in Malabar Industrial Co. Ltd. and the Bombay High Court's judgment in Gabriel India Ltd., which clarified that an order cannot be termed erroneous unless it is not in accordance with the law. 2. Verification of Sale of Land Below Stamp Duty Value: The PCIT issued a notice stating that the sale of land by the assessee to M/s. VGN Developers Pvt. Ltd. was below the stamp duty value, which was not verified by the AO. The Tribunal noted that the land sale was conducted by SBI under the SARFAESI Act, not by the assessee itself. The Tribunal highlighted that SBI, acting on behalf of a consortium of banks, took possession of the land and sold it after multiple failed attempts to sell at the stamp duty value. 3. Application of Section 50C of the Income-tax Act: The PCIT argued that the stamp duty value should have been considered for computing capital gains, resulting in an under-assessment of income. However, the Tribunal found that the sale conducted by SBI under the SARFAESI Act was akin to compulsory acquisition, and the price realized was deemed the fair market value. The Tribunal referenced the assessee's detailed response to AO's query on capital gains, which included the sale conducted under the SARFAESI Act. 4. Assessment of Capital Gains: The Tribunal reviewed the AO's assessment, which included specific queries about capital gains and the assessee's detailed responses. The Tribunal concluded that the AO had made necessary inquiries and was satisfied with the explanations provided by the assessee. The Tribunal emphasized that the AO's decision cannot be deemed erroneous simply because the PCIT disagreed with the conclusion. 5. Validity of the Assessment Order under Section 143(3): The Tribunal reiterated that where two possible views exist, and the AO has taken one of the views, no action under Section 263 can be taken. The Tribunal cited the Delhi High Court's judgment in CIT vs. Sunbeam Auto, which distinguished between lack of inquiry and inadequate inquiry, stating that the latter does not justify revision under Section 263. The Tribunal found that the AO had conducted a proper inquiry and the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. Conclusion: The Tribunal set aside the order of the PCIT and restored the assessment order dated 18.12.2016 framed under Section 143(3) of the Act, concluding that the conditions for invoking Section 263 were not met. The appeal of the assessee was allowed.
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