2021 (11) TMI 765 - AT - Income Tax

Revision u/s 263 - Reopening of assessment u/s 147 initiated against assessee - as per CIT A.O. failed to make any independent inquiry to verify the fact relating to the purchase of immovable property by the assessee - HELD THAT - The documents placed on record clearly shows that the A.O. made the inquiries in depth and accepted the explanation given by the assessee as well as the co-owner. The assessment framed in the hands of the co-owners namely Smt. Monica Aggarwal W/o Shri Manish Kumar and Smt. Swati Aggarwal W/o Shri Avnish Aggarwal in whose cases also the assessments were reopened under section 147 of the Act and were framed under section 143(3) of the Act vide separate orders dt. 28/12/2018 and 27/12/2018 respectively. Those assessment framed under section 143(3) of the Act in the hands of the co-owners had been accepted. The only objection was taken to the assessment famed in the hands of the assessee under section 263 of the Act which is against the principle of consistency. A.O. after making the proper inquiry relating to the property in question accepted the explanation. Therefore, it cannot be said that the A.O. failed to make the proper inquiries while accepting the explanation given by the assessee. Pr. CIT considered the value mentioned in the agreement to sell which was not acted upon and nothing was brought on record that the amount stated in the agreement was paid for the sale. On the contrary the amount mentioned in the sale deed was paid through Demand Draft and was accepted as correct in the case of another co-owners also by the A.O. while framing the assessment under section 143(3) r.w.s 147 of the Act. Pr. CIT has taken the action merely on the basis of the audit objection while the A.O. made the proper inquiries in depth at the time of framing the assessment under section 143(3) r.w.s 147 of the Act. Therefore the impugned order passed by the Ld. Pr. CIT is not maintainable, accordingly the same deserves to be quashed.Department has accepted the value of the property in the cases of two co-owners while the value of the same property in the hands of the 3rd co-owner i.e; the assessee was doubted. Therefore in view of the principle of consistency also the action taken by the Ld. Pr. CIT was not justified. Pr. CIT was not justified in holding that the assessment order dt. 28/12/2018 passed by the A.O. was erroneous and prejudicial to the interest of the Revenue. Accordingly, the impugned order passed by the Ld. Pr. CIT is quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Exercise of revisionary powers under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT).
2. Alleged violation of principles of natural justice in the passing of the order under Section 263.
3. Validity of the assessment order under Section 143(3) read with Section 147 of the Act.
4. Consistency in the valuation of property among co-owners.
5. Adequacy of inquiries conducted by the Assessing Officer (A.O.).

Issue-wise Detailed Analysis:

1. Exercise of Revisionary Powers under Section 263:
The primary grievance of the assessee was against the revisionary powers exercised by the Pr. CIT under Section 263 of the Income Tax Act, 1961. The Pr. CIT observed that the A.O. completed the assessment without conducting necessary and proper inquiries, rendering the order erroneous and prejudicial to the interest of the Revenue. The Pr. CIT issued a notice under Section 263, highlighting a discrepancy between the registered value of the property and the value as per the agreement to sell, amounting to ?57,42,437, which remained unexplained. The Pr. CIT concluded that the A.O. failed to verify the source of investment in the immovable property and directed the A.O. to re-assess the case after proper inquiry.

2. Alleged Violation of Principles of Natural Justice:
The assessee contended that the Pr. CIT violated the principles of natural justice by passing the order in haste. The first notice appeared in the e-portal on 17/03/2021, fixing the case for 18/03/2021, and the order was passed on 19/03/2021, which provided inadequate time for the assessee to respond. The assessee argued that this inadequate time allowance was contrary to the principles of natural justice, rendering the consequential action of setting aside the assessment order null and void.

3. Validity of the Assessment Order under Section 143(3) read with Section 147:
The A.O. reopened the assessment based on information that the assessee purchased immovable property for ?61,98,800 as per the registered deed, while the agreement to sell valued it at ?1,17,42,437. The A.O. issued notices under Sections 143(2) and 142(1) and conducted inquiries, including obtaining affidavits from the assessee, co-owners, and witnesses. The A.O. accepted the explanation provided by the assessee, concluding that the agreement to sell was not acted upon and the sale deed value was correct. The Pr. CIT, however, held that the A.O. did not conduct proper inquiries, which the tribunal found contrary to the evidence on record.

4. Consistency in the Valuation of Property among Co-owners:
The assessee argued that the proceedings under Section 263 were initiated only against them, while the transaction value was accepted for the other co-owners without any revisionary action. The tribunal noted that the assessments for the co-owners were completed without invoking Section 263, and the value of the property was accepted consistently. The tribunal emphasized the principle of consistency, holding that the valuation of the same property cannot differ among co-owners.

5. Adequacy of Inquiries Conducted by the A.O.:
The tribunal found that the A.O. conducted detailed inquiries, including issuing notices, obtaining affidavits, and verifying the transactions through banking channels. The A.O. also summoned the sellers and obtained affidavits from witnesses. The tribunal concluded that the A.O. made proper inquiries and accepted the explanation provided by the assessee and co-owners. The tribunal held that the Pr. CIT's action under Section 263 was based on audit objections and not on any failure of the A.O. to conduct inquiries.

Conclusion:
The tribunal quashed the order passed by the Pr. CIT under Section 263, holding that the A.O. conducted adequate inquiries and the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The tribunal emphasized the importance of consistency in the valuation of property among co-owners and upheld the principles of natural justice. The appeal of the assessee was allowed.