2023 (4) TMI 19 - AT - Income Tax

Revision u/s 263 by CIT - properties received as gift from brother - order was passed by AO without making proper enquiries/verification of applicability of section 50C in respect of properties received as gift from brother and given as gift to brother - HELD THAT - In the present case, where there was transfer of property between the assessee and his brother, the AO should have done more investigation into the facts at the time of assessment on this issue/aspect, which, in our view is missing in the instant set of facts. AO, in a view, should have examined the facts in detail and after due application of mind on the facts should have decided the issue on merits of the applicability of provisions of Section 56(2)(vii)(b) and 50C - from the records, no such investigation was carried out by the AO during the course of assessment proceedings, which, in our view, should have been done in the instant set of facts. AO did not call for the records regarding the transactions/transfer property between the assessee and his brother, and did not investigate into the nature of transaction, which should have been during the course of assessment. We observe that no documents regarding the transfer property were called for or submitted during the course of assessment proceedings. AO did not apply his mind on the applicability of provisions of Section 50C or 56(2)(vii)(b) of the Act in the instant set of facts. We are of the view that says the AO did not carry out the necessary enquiries/verification during the course of original assessment proceedings, we find no infirmity in the observations of the Principal CIT that the assessment order is erroneous and prejudicial to the interests of the Revenue. Principal CIT has not erred in facts and in law in holding that the assessment order is erroneous and prejudicial to the interests of the Revenue. Appeal of the assessee is dismissed.

Summary

Issues:
Assessment order under Section 143(3) of the Income Tax Act, 1961 challenged for being erroneous and prejudicial to the interest of revenue. Interpretation of provisions of Section 50C and Section 56(2)(vii)(b) in the context of property transfers between real brothers.

Detailed Analysis:

Assessment Order Challenge:
The appeal was filed against the order passed by the Ld. Pr. CIT-1, Rajkot for Assessment Year 2017-18. The grounds of appeal raised various issues, including the contention that the assessment order was erroneous and prejudicial to the revenue's interest. The Principal CIT set aside the assessment order under Section 263 of the Act, citing lack of proper inquiries and verifications regarding the applicability of Section 50C and Section 56(2)(vii)(b) in property transactions involving gifts between brothers.

Interpretation of Provisions:
The case involved the transfer of properties between two real brothers through gift deeds. The Principal CIT observed that the AO failed to conduct thorough inquiries into the transactions and ownership details, which are crucial for determining the applicability of Section 56(2)(vii)(b) and Section 50C of the Act. The assessee argued that since the transactions were gifts between real brothers, the provisions of Section 56(2)(vii)(b) did not apply. Additionally, the assessee contended that Section 50C did not apply as no consideration was received or accrued due to the gift transactions. The Tribunal noted the lack of detailed investigation by the AO into the nature of the transactions and the applicability of relevant provisions during the original assessment proceedings.

Judgment:
After considering the arguments and evidence presented, the Tribunal upheld the Principal CIT's decision, stating that the assessment order was indeed erroneous and prejudicial to the revenue's interests. The Tribunal found that the AO had not conducted necessary inquiries or verifications during the original assessment, leading to deficiencies in addressing the applicability of Section 50C and Section 56(2)(vii)(b) in the property transfer transactions. Consequently, the appeal of the assessee was dismissed, affirming the Principal CIT's decision to set aside the assessment order.

In conclusion, the Tribunal's judgment highlighted the importance of thorough investigations and proper application of relevant provisions in assessing transactions involving property transfers, emphasizing the need for detailed scrutiny to ensure accurate determination of tax liabilities and compliance with the Income Tax Act.