2022 (7) TMI 1150 - AT - Income Tax

Revision u/s 263 - Addition u/s 56(2)(x)(b)(A) - difference in the purchase price of property as per the consideration recorded in the sale deed and value fixed as per guideline of sub registrar of the registration department to be added as per the provisions of section 56(2)(viib)(ii) - HELD THAT - We noted that the Co-ordinate bench of this Tribunal, Mumbai Bench in the case of Maria Fernandes Cheryl 2021 (1) TMI 620 - ITAT MUMBAI has considered this issue in detail and further considered the Finance Act, 2018 inserting second proviso to section 50C of the Act, whereby the tolerance limit of 5% was introduced and similarly in the provisions of section 56(2)(x)(b)(A) tolerance limit of 5% is increased, which was increased subsequently by the Finance Act, 2020 to 10%. Hon ble Supreme Court in the case of C.B. Gautum 1992 (11) TMI 1 - SUPREME COURT held the provisions of chapter XX-C can be resorted to only where there is a significant under valuation of the property to the extent of 15% or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15% or more. It is pertinent to note that although the observations of Supreme Court that pre-requisite for passing the order of compulsory acquisition of property by Central Government, viz., where, in an agreement to sell an immovable property in an urban area, there is significant under valuation of the property by 15% is not incorporated in the amended provision of section 269UD of the Act but the law declared by Supreme Court is the law of the land in view of Article 141 of the constitution and the Central Government while resorting to compulsory acquisition of immovable property had adhered to test laid by Hon ble Supreme Court. Hon ble Supreme Court finally laid down the principle that where there is a significant under valuation of the property to the extent of 15% or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15% or more, in that case only the provisions of chapter XX-C can be resorted to. As in the present case before us, the issue is whether assessment framed by the AO is erroneous and prejudicial to the interest of Revenue for the reason that there is difference of Rs.25 lakhs between the guideline value as per stamp valuation which is Rs.3.50 crores. However, as per registered sale deed the actual consideration is Rs.3.25 crores. The assessee has disclosed the investment as per consideration declared in sale deed at Rs.3.25 crores but the PCIT was of the view that the difference of Rs.25 lakhs in view of the guideline value fixed by Stamp Valuation Authority at Rs.3.50 crores is to be accepted and added to the return of income of the assessee. We are of the view that this is highly debatable issue and even the tolerance limit of 10% is to be considered or not is again a debate. Once there is a debate, the order cannot be held as erroneous in view of the decision in the case of Malabar Industrial Co. Ltd., 2000 (2) TMI 10 - SUPREME COURT . Appeal of assessee allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of PCIT's assumption of jurisdiction under Section 263 of the Income Tax Act.
3. Addition of Rs. 25 lakhs to the assessee's income based on the difference between the sale deed value and the stamp duty value.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was barred by a limitation of 509 days. The order of the PCIT dated 17.03.2020 was received by the assessee on the same day, but the appeal was filed only on 07.10.2021. The assessee attributed the delay to the Covid-19 pandemic. The Tribunal noted that the Hon'ble Supreme Court, in Miscellaneous Application No.665 of 2021, had directed that delays during the period from 15.03.2020 to 14.03.2021 be condoned, and extended this condonation up to 28.02.2022 in Miscellaneous Application No.21 of 2022. Based on these directions, the Tribunal condoned the delay and admitted the appeal for adjudication.

2. Validity of PCIT's Assumption of Jurisdiction under Section 263:
The core issue was whether the PCIT correctly assumed jurisdiction under Section 263 of the Income Tax Act, which allows for the revision of an assessment order if it is erroneous and prejudicial to the interests of the revenue. The PCIT noticed a discrepancy of Rs. 25 lakhs between the purchase price of a property as per the sale deed (Rs. 3.25 crores) and the value fixed by the Stamp Valuation Authority (Rs. 3.50 crores). The PCIT directed the Assessing Officer (AO) to add this difference to the assessee's income under Section 56(2)(viib)(ii).

3. Addition of Rs. 25 Lakhs to the Assessee's Income:
The assessee argued that the difference in valuation was marginal (7.69%) and should be ignored based on the amended provisions of Section 56(2)(x)(b)(A), which allows a tolerance limit of up to 10%. The assessee cited various judicial precedents and legislative amendments to support the claim that such amendments are curative and should apply retrospectively. The Tribunal considered these arguments and noted that the issue of whether the tolerance limit of 10% should be applied retroactively is highly debatable.

The Tribunal referred to several decisions, including the case of Maria Fernandes Cheryl vs. ITO, where it was held that the tolerance limit amendments are curative and should be applied retrospectively. The Tribunal also noted the Supreme Court's decision in C.B. Gautum vs. Union of India, which held that significant undervaluation (15% or more) is required to invoke certain provisions, emphasizing that minor discrepancies should not lead to adverse tax consequences.

The Tribunal concluded that the AO's original assessment, which did not add the Rs. 25 lakhs difference, was a possible and reasonable view. Since the issue was debatable and the AO had taken one of the possible views, the PCIT's revision under Section 263 was not justified. The Tribunal quashed the revision proceedings and allowed the assessee's appeal.

Conclusion:
The Tribunal condoned the delay in filing the appeal, quashed the revision proceedings initiated by the PCIT under Section 263, and allowed the appeal, concluding that the AO's original assessment was not erroneous or prejudicial to the interests of the revenue. The judgment emphasized the importance of considering legislative amendments and judicial precedents in determining the applicability of tax provisions.