2024 (6) TMI 728 - AT - Income Tax

Rectification u/s 154 - Income from other sources u/s 56(2)(vii)(b) - difference between the sale consideration and the stamp duty valuation - HELD THAT - We find that the case of the respondent assessee was selected for limited scrutiny for verification of investments made in agricultural lands i.e. movable properties. After detailed scrutiny an assessment order u/s 143(3) of the IT Act was passed accepting the returned income. Later the case was reopened u/s 154 of the IT Act for applying the provisions of section 56(2)(vii)(b) of the IT Act on the transaction of purchase of immovable property by the assessee, as the stamp duty value for the purposes of registration was more than the value of actual consideration paid by the assessee. We find LD CIT(A)/NFAC has also held that the issue of stamp duty valuation is debatable one there is a change of opinion hence the action of the AO cannot be upheld therefore the order passed u/s 154 of the IT Act has been quashed. It is the settled proposition of law that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two options cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record. Appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
The issues involved in this case are the applicability of deeming provisions u/s 56(2)(vii)(b) of the Income Tax Act, the nature of the transaction and genuineness of the claim of exemption made by the assessee u/s 56(2)(vii)(b) of the Act, consideration of relevant judicial precedents and applicable provisions of the Income Tax Act in determining taxability u/s 56(2)(vii)(b) of the Act, and the jurisdiction of the assessing officer to amend the assessment order u/s 154 on debatable issues or where there is a change of opinion.

Summary of Judgment:

Applicability of Deeming Provisions u/s 56(2)(vii)(b):
The appellant filed the return of income declaring total income, which was accepted by the Assessing Officer u/s 143(3) of the Income Tax Act. Later, the Assessing Officer invoked provisions of section 56(2)(vii)(b) based on the difference between the sale consideration and stamp duty valuation of agricultural lands purchased by the appellant. The LD CIT(A)/NFAC allowed the appeal of the assessee, stating that the issue of deeming provisions u/s 56(2)(vii)(b) did not find a place in the assessment order. The LD CIT(A)/NFAC held that the AO cannot bring such deeming income to tax in proceedings u/s 154 which were not discussed in the assessment order. The order passed u/s 154 was quashed, emphasizing that the issue of stamp valuation is debatable, and there is a change of opinion.

Nature of Transaction and Genuineness of Claim:
The appellant contended that the AO should have referred the matter to the DVO regarding stamp duty valuation, which was not done. The appellant claimed that the issue was debatable and could not be rectified u/s 154. The LD CIT(A)/NFAC agreed that the issue of stamp duty valuation was debatable, and there was a change of opinion. The order passed u/s 154 was quashed, as it was held that an error on a debatable point of law is not a mistake apparent from the record.

Jurisdiction of Assessing Officer to Amend Assessment Order:
The assessing officer's action was challenged as being unsustainable in law, and the order passed u/s 154 was quashed. It was argued that there cannot be any rectification u/s 154 on debatable issues or where there is a change of opinion. The LD CIT(A)/NFAC held that the proceedings u/s 154 were bad in law due to being a change of opinion on a concluded issue. The order passed by LD CIT(A)/NFAC was confirmed, and the appeal filed by the Revenue was dismissed.

Conclusion:
The appeal filed by the Revenue challenging the order dated 05.07.2023 passed by LD CIT(A)/NFAC was dismissed, confirming the decision that the assessing officer's action was unsustainable in law regarding the application of deeming provisions u/s 56(2)(vii)(b) and the jurisdiction to amend the assessment order u/s 154 on debatable issues or change of opinion.