2022 (3) TMI 380 - AT - Income Tax

Revision u/s 263 by CIT - whether the Assessing Officer carried out enquiry or verification on the issue of applicability of provisions of section 56(2)(vii)(b) in respect of purchase of lands during the course of assessment proceedings or not? - HELD THAT - In the present case, no doubt, the AO had examined the issue of applicability of section 56(2)(vii)(b) in respect of purchase of subject-lands, but merely accepted the valuation report furnished by the appellant without adhering to the provisions of section 50C - AO without going into the correctness of the valuation report merely accepted the valuation report furnished by the appellant. When the assessee objects the value as per the stamp duty valuation purpose, the only option available with the Assessing Officer is to refer the matter to the DVO as stipulated u/s 50C of the Act. In-fact, the Hon ble Jurisdictional High Court in the case of CIT vs. Prabhu Steel IndustriesLtd., 2013 (7) TMI 204 - BOMBAY HIGH COURT has clearly held that where the assessee objects the value adopted for stamp duty purpose, the only course available with the Assessing Officer is to refer the matter to the DVO. In the present case, the Assessing Officer without complying with the requirements of law had simply accepted the valuation report as furnished by the appellant. The Assessing Officer not following the mandatory provisions of law would render the assessment order erroneous which is amenable to the jurisdiction u/s 263 Without delving into the issue whether the agricultural lands come within the purview of section 56(2)(vii)(b), suffice to hold that the decision of the Co-ordinate Bench of this Tribunal in the case Mubarak Gafur Korabu 2019 (4) TMI 1877 - ITAT PUNE and the decision of Jaipur Bench of the Tribunal in the case of Yogesh Maheshwari 2021 (1) TMI 832 - ITAT JAIPUR do not come to the rescue of the assessee. In the light of the above discussion, we are of the considered opinion that the ld. PCIT was justified in assuming the jurisdiction u/s 263 of the Act by setting aside the assessment order. Thus, the issue raised in the grounds of appeal stands dismissed.

Summary

Issues:
- Whether the assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interests of revenue.
- Whether the lands purchased by the assessee are agricultural lands and fall outside the purview of section 56(2)(vii)(b) of the Act.

Analysis:

1. Issue 1 - Assessment Order under Section 143(3):
The appellant challenged the order of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961, arguing that the assessment order passed by the Assessing Officer was not erroneous or prejudicial to revenue. The PCIT found the assessment order erroneous as the Assessing Officer accepted a valuation report for a property at a lower value than the stamp duty value, resulting in income not being taxed. The PCIT held that the Assessing Officer failed to refer the matter to the DVO or conduct proper verification, making the order erroneous. The appellant contended that the Assessing Officer applied due diligence and relied on case law to support their position. However, the ITAT found that the Assessing Officer did not adhere to the provisions of section 50C and failed to verify the valuation report properly, rendering the assessment order erroneous and subject to revision under section 263.

2. Issue 2 - Classification of Lands as Agricultural:
The appellant argued that the lands purchased were agricultural and thus not subject to section 56(2)(vii)(b) of the Act. The PCIT and CIT-DR contended that the lands were not agricultural but open lands, falling under the purview of the Act. The ITAT noted that the appellant did not raise the agricultural land classification issue during the original assessment or revision proceedings. The ITAT emphasized that revision proceedings are adversarial and issues concluded in the original assessment cannot be raised again. Despite arguments citing case law, the ITAT held that the lands were not agricultural and upheld the PCIT's decision to set aside the assessment order under section 263.

In conclusion, the ITAT dismissed the appellant's appeal, upholding the PCIT's decision to set aside the assessment order and directing the Assessing Officer to re-do the assessment after proper verification and compliance with the law. The ITAT emphasized the importance of following statutory provisions and conducting thorough assessments to ensure accurate taxation and compliance with the Income Tax Act.