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2023 (6) TMI 1416 - AT - Income TaxRevision u/s 263 - verification of application of provisions of section 56(2)(x) -effective date of property transfer.effective date of property transfer - consideration the Assessee had purchased two immovable properties below the Stamp duty value as determined by the Stamp Valuation authorities - effective transfer had taken place in the earlier year or this year? - HELD THAT - We note that property was already purchased in the earlier years (1/2 share in F. Y. 2003-04 and the rest share in F.Y.2010-11) and the entire payments were also made by account payee cheques in these relevant years and possession was taken. The documents executed during the assessment year under consideration, were in the nature of correction of defects of the title of the property. To correct the defect in the title of the property does not mean that assessee has purchased the new property in the year under consideration. We also note that possession of the property was taken in the earlier years and the entire payments were also made in the earlier years and, therefore, effective transfer had taken place in the earlier years, hence the provisions of section 56(2)(x) of the Act are not applicable to the assessee under consideration. We also observe that provisions of section 56(2)(x) of the Act are applicable with effect from 01.04.2017, which are not applicable to the assessee under consideration as the payments by cheques were made by assessee in F.Y. 2003-04 and the possession was also taken in Financial Year (FY) 2003-04 and the documents were also registered in Financial Year (FY) 2003-04, later on, to correct the defect in the title of the property, the assessee has deposited additional stamp duty. Just to correct the defect in the title of the property does not mean that assessee has purchased new property in the year under consideration. Thus, we note that order passed by the assessing officer should not be erroneous. Transfer of property as per the provisions of section 2 (47) of the Act (Purchase of property) had already taken place in the A.Y. 2004-05 by way of full payments by cheques as well as possession thereof. Since the property was already transferred in earlier year, the provisions of section 56(2)(x) of the Act were not invoked by assessing officer while passing order u/s 143(3) of the Act. We also note that assessing officer conducted sufficient enquiry during the assessment proceedings about the issue raised by ld PCIT, by way of issuing notices to the assessee. AO had information regarding purchase of balance share of the said plot and the issue was raised during assessment proceedings, regarding application of provisions of section 56(2)(x) of the Act, however, after considering the reply of the assessee dated 24.06.2020 (page no. 207 208 of the paper book), no addition was made by the assessing officer. Therefore assessment order is not erroneous, as the provisions of section 56(2)(x) were duly considered for the balance 1/2 share of property. So far as the original 1/2 share of the property is concerned, the payment was made by cheques in the A.Y. 2004-05, the same was not required to be looked into. We note that the provisions of section 56(2)(x) of the Act are not applicable in the year under consideration and therefore, order passed by the assessing officer is not prejudicial to the interest of revenue. When the AOadopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . See Apex Court case in Malabar Industries Ltd. 2000 (2) TMI 10 - SUPREME COURT As transfer of property as per the provisions of section 2 (47) of the Act had already taken place in the A.Y. 2004-05 and property in F.Y.2010-11, by way of full payments by cheques as well as possession thereof. The provisions of section 56(2)(x) of the Act are not applicable in the year under consideration. A mere observation that no proper details have been obtained, cannot be sufficient to come to a conclusion that the AO did not make proper and adequate inquiries which he ought to have made - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Applicability of Section 56(2)(x) of the Income Tax Act, 1961. 3. Validity of the assessment order dated 30.07.2020. 4. Examination of defects in the title of the property. 5. Determination of the effective date of property transfer. 6. Adequacy of inquiry conducted by the Assessing Officer. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The assessee challenged the jurisdiction exercised by the Learned Principal Commissioner of Income Tax (Ld. PCIT) under Section 263 of the Income Tax Act, 1961. The Ld. PCIT had set aside the assessment order dated 30.07.2020, stating it was erroneous and prejudicial to the interest of the revenue. The Tribunal noted that for the Ld. PCIT to invoke Section 263, the order must be both erroneous and prejudicial to the revenue. The Tribunal found that the Assessing Officer (AO) had conducted sufficient inquiry and that the order was neither erroneous nor prejudicial to the revenue. 2. Applicability of Section 56(2)(x) of the Income Tax Act, 1961: The Ld. PCIT argued that the provisions of Section 56(2)(x) were applicable as the assessee had purchased properties below the stamp duty value. However, the Tribunal noted that the properties were originally purchased in earlier years (1/2 share in F.Y. 2003-04 and the rest 1/2 in F.Y. 2010-11) and the payments were made by account payee cheques in those years. The Tribunal concluded that Section 56(2)(x), effective from 01.04.2017, did not apply to the assessee since the transactions occurred before this date. 3. Validity of the Assessment Order dated 30.07.2020: The Tribunal examined whether the assessment order dated 30.07.2020, passed under Section 143(3) r.w.s. 143(3A) & 143(3B), was erroneous. The Tribunal found that the AO had adequately inquired into the issues during the assessment proceedings and had accepted the assessee's explanations. Therefore, the assessment order was not erroneous. 4. Examination of Defects in the Title of the Property: The Ld. PCIT contended that the AO failed to examine the nature of defects in the title deed. The Tribunal observed that the documents executed during the assessment year under consideration were in the nature of correcting defects in the title of the property and did not constitute new purchases. The Tribunal held that correcting title defects did not mean a new property purchase, and thus, Section 56(2)(x) was not applicable. 5. Determination of the Effective Date of Property Transfer: The Tribunal noted that the effective transfer of the property had taken place in earlier years when the payments were made, and possession was taken. The Tribunal referred to Section 2(47) of the Act, which defines "transfer" and concluded that the property was transferred in F.Y. 2003-04 and F.Y. 2010-11, respectively. Therefore, the provisions of Section 56(2)(x) were not applicable. 6. Adequacy of Inquiry Conducted by the Assessing Officer: The Ld. PCIT argued that the AO had not conducted adequate inquiries. However, the Tribunal found that the AO had issued notices and obtained necessary details during the assessment proceedings. The Tribunal concluded that the AO had conducted sufficient inquiry and that the assessment order was not based on an incorrect assumption of fact or law. Conclusion: The Tribunal quashed the order passed by the Ld. PCIT under Section 263, holding that the assessment order dated 30.07.2020 was neither erroneous nor prejudicial to the interest of the revenue. The appeal filed by the assessee was allowed. The Tribunal emphasized that correcting defects in the title of the property did not constitute a new purchase, and thus, the provisions of Section 56(2)(x) were not applicable. The Tribunal also noted that the AO had conducted sufficient inquiry during the assessment proceedings.
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