2021 (2) TMI 219 - AT - Income Tax

Revision u/s 263 - purchase of two industrial plots of land - addition as Income from other sources u/s 56(2)(vii)(b)(ii) - Order passed u/s 143(3) has been rightly set aside by CIT with directions to properly examine the issue relating to applicability of provisions of section 56(2)(vii)(b)(ii)HELD THAT - We find that the subject matter of examination by the Assessing Officer was limited to the expenses which have been incurred in relation to these industrial plots however as far as the applicability of provisions of section 56(2)(vii)(b)(ii) of the Act is concerned, there is no material available on record that the Assessing Officer has carried out any inquiry/examination and sought any explanation from the assessee. Where the matter relating to applicability of provisions of section 56(2)(vii)(b)(ii) of the Act has not been examined by the AO and not subject matter of assessment order, there is no question of application of theory of merger with that of the order of the ld CIT(A) as so contended by the ld AR. We therefore find that it is a clear case where the applicability of provisions of section 56(2)(vii)(b)(ii) of the Act which are applicable for the impugned assessment year i.e. A.Y 2015- 16 has escaped the attention of the Assessing Officer which renders the order so passed as erroneous and prejudicial to the interest of the Revenue Applicability of provisions of section 56(2)(vii)(b)(ii) - All that proviso talks about is that where there is an agreement to sell which has been executed prior to the date of registration, in such cases, the stamp duty value as on the date of agreement may be taken instead of date of registration of the property provided that whole of the consideration or a part thereof has been paid by any mode other than cash on or before date of agreement. Therefore, the fact that the proviso is applicable in the instant case does not take the impugned transactions of purchase of industrial plot of lands out of the applicability of provisions of section 56(2)(vii)(b)(ii) of the Act as so contended by the ld. AR. All that it provides is that it shifts the determination of stamp duty value as on the date of agreement rather than the date of registration of the sale deed. Therefore, the contention so advanced by the ld. AR cannot be accepted. We are therefore of the considered view that it is a case where the provisions of section 56(2)(vii)(b)(ii) of the Act read with proviso thereof has not been examined by the Assessing Officer and which undisputedly applies for the impugned assessment year. Therefore, we do not find any infirmity in the exercise of justification by the ld. Pr. CIT u/s 263 - Decided against assessee.

Summary

Issues Involved:
1. Invocation of Section 263 by the Principal Commissioner of Income Tax (PCIT).
2. Applicability of Section 56(2)(vii)(b)(ii) regarding the difference between stamp duty value and actual consideration paid.

Issue-wise Detailed Analysis:

1. Invocation of Section 263 by the Principal Commissioner of Income Tax (PCIT):

The appellant contended that the PCIT erred in invoking Section 263 of the Income Tax Act, 1961. The appellant argued that the Assessing Officer (AO) had already verified and decided the issue concerning the purchase of property during the scrutiny assessment under CASS. The AO had made necessary inquiries and disallowed certain expenses related to the property purchase, which was partly upheld by the CIT(A). The appellant claimed that the PCIT’s action was arbitrary and without proper verification, thus making the assessment order erroneous and prejudicial to the interest of the Revenue.

The Tribunal examined the provisions of Section 263 and the doctrine of merger, which states that once an issue is decided in appeal, it merges with the appellate order, and the PCIT cannot revise it. The Tribunal found that the AO had examined the expenses related to the property but did not consider the applicability of Section 56(2)(vii)(b)(ii). Therefore, the PCIT was within his rights to invoke Section 263 as the AO’s order was erroneous and prejudicial to the Revenue.

2. Applicability of Section 56(2)(vii)(b)(ii):

The appellant argued that the provisions of Section 56(2)(vii)(b)(ii) were not applicable as the agreements to sell were executed, and part of the consideration was paid through account payee cheques before the date of registration. The appellant relied on the proviso to Section 56(2)(vii)(b)(ii), which states that if the date of agreement and registration are different, the stamp duty value on the date of the agreement should be considered, provided the consideration is paid by modes other than cash before the agreement date.

The Tribunal analyzed the proviso and concluded that it only shifts the determination of stamp duty value to the date of the agreement rather than the registration date. It does not exempt the transaction from the applicability of Section 56(2)(vii)(b)(ii). The Tribunal found that the AO did not examine the applicability of this section, making the assessment order erroneous and prejudicial to the Revenue.

Conclusion:

The Tribunal upheld the PCIT’s invocation of Section 263, stating that the AO failed to examine the applicability of Section 56(2)(vii)(b)(ii), which applies to the assessment year in question. The Tribunal dismissed the appeal of the assessee, affirming the PCIT’s order for a fresh examination of the issue. The decision emphasized that the AO’s lack of inquiry into the relevant provisions rendered the original assessment order erroneous and prejudicial to the interest of the Revenue.