2023 (12) TMI 535 - AT - Income Tax

Revision u/s 263 - assessee was not a party to the original agreement to sale assessee - As per CIT AO passed his assessment order without examining the applicability of Section 56(2)(x) of the Act for non-examination of the said issue - assessee along with other persons purchased immovable property - assessee is having 7% share in the said sale deed out of ten co-owners - CIT revised the assessment order only by taking view that since the assessee was not the party to the original agreement and no payment / part payment at the time of execution of agreement was given therefore assessee is not eligible for the benefit of first and second proviso to Section 56(2)(x)(b) - Whether if a person who was not a party to the agreement to sale and has not paid any consideration or part consideration by way of cheque other than cash at the time of execution of such agreement can still be eligible for the benefit of first and second proviso of Section 56(2)(x)(b) of the Act.? - HELD THAT - We find that Co-ordinate Benches of Mumbai Tribunal in the case of Sulochana Saijan Modi 2023 (5) TMI 1099 - ITAT MUMBAI while considering almost similar set of facts, wherein part payment of transaction was made by son of the assessee, who was joint holder of the property, the Tribunal accepted the submission for granting benefit of first and second proviso to Section 56(2)(x)(b) - We further find that in the present case, the part sale consideration was paid by Shri Umeshbhai P Patel, Sanjaybhai Tulshibhai Mangukiya and Karamshibhai Khimjibhai Mangukiya. We find that one of the assessee in these appeal that is Rajesh Bhai is the son of Parshottambhai C Patel. And Nayan Bhai is the cousin of Rajesh Bhai. Admittedly part consideration of the transaction was either paid by family members or by close relatives. Therefore, we are also of the considered view that while accepting returned income considered by Assessing Officer has not committed any error. Therefore, the assessment order cannot be branded as erroneous. Thus, twine condition, for invoking Section 263 of the Act are not met out in the present case. This ground of assessee s appeal is allowed.

Summary

Issues Involved:
1. Validity of the Principal Commissioner of Income Tax's (PCIT) order under section 263 of the Income Tax Act.
2. Examination of the applicability of Section 56(2)(x) of the Income Tax Act.
3. Assessment of the payment and agreement conditions under Section 56(2)(x)(b) provisos.

Summary:

Issue 1: Validity of the PCIT's Order under Section 263
The appeals concern the orders of the Principal Commissioner of Income Tax (PCIT), Surat-1, who set aside the assessment orders passed by the National e-Assessment Centre Delhi under section 143(3) r.w.s 143(3A) & 143(3B) of the Income Tax Act, 1961. The PCIT invoked jurisdiction under section 263, deeming the original assessment orders erroneous and prejudicial to the interest of revenue.

Issue 2: Examination of the Applicability of Section 56(2)(x)
The PCIT observed that the assessee, along with others, purchased immovable property valued by the Stamp Valuation Authority at Rs. 19.48 crores against a consideration of Rs. 7.63 crores. The PCIT noted that the assessee had a 7% share and that the difference in valuation attracted Section 56(2)(x) of the Act. The PCIT argued that the assessee was not a party to the original agreement to sale dated 30.08.2010 and did not make any payment by cheque before the agreement date, thus not eligible for the benefits under Section 56(2)(x).

Issue 3: Assessment of Payment and Agreement Conditions
The assessee contended that the purchase was made based on an agreement dated 30.08.2010, and part payment was made by co-owners via cheque, which should allow the benefit under the provisos to Section 56(2)(x)(b). The Tribunal found that the Assessing Officer had examined the issue during the scrutiny assessment and accepted the returned income after considering the details provided. The Tribunal referenced a similar case (Sulochana Saijan Modi Vs. ITO) where the benefit was granted when one of the joint holders made the payment.

Judgment:
The Tribunal held that the Assessing Officer had not committed any error in accepting the returned income, as the part payment by co-owners was considered. The PCIT's order was found to be based on a wrong assumption of facts. The appeals were allowed, and the PCIT's orders were quashed. The Tribunal followed the principle of consistency and granted relief in both appeals.

Conclusion:
The assessee's appeals were allowed, and the orders under section 263 by the PCIT were set aside. The Tribunal emphasized that the assessment orders were not erroneous or prejudicial to the interest of revenue, as the conditions for invoking Section 263 were not met.