2022 (4) TMI 743 - AT - Income Tax

Revision u/s 263 by CIT - wrongful Capital gain computation - non-consideration of difference in sale value shown in registered document, when compared to guideline value fixed by the authorities for stamp duty purpose in computing long term capital gain - case of the assessee was selected for scrutiny under CASS for verification of deduction claimed under capital gains - HELD THAT - Principal CIT erred in invoking jurisdiction u/s.263 of the Act, to revise assessment order passed by the Assessing Officer u/s.143(3) of the Act dated 27.09.2017, because very purpose of scrutiny assessment in the present case was to examine long term capital gain computed by the assessee and exemption claimed thereon. In the assessment proceedings, the Assessing Officer had called upon various details, including statement of long term capital gain computed by the assessee along with relevant evidences and after considering various evidences filed by the assessee has accepted long term capital gain computed by the assessee. From the above, it is very clear that the issue considered by the Principal CIT for revision of assessment order has been already examined by the Assessing Officer and has taken a view and thus, we are of the considered view that the Principal CIT cannot substitute his view and held that assessment order passed by the Assessing Officer is erroneous and insofar as it is prejudicial to the interests of revenue. According to the Principal CIT, there is difference between sale value shown in registered document, when compared to guideline value of property. If you compare difference arrived at by the Principal CIT, it is less than specified percentage allowed under the Act, in terms of provisions of section 50C(3) and 55A(b)(i) of the Act. Even assuming for a moment, the Assessing Officer has not considered the above issue, but definitely it cannot be said that said issue is prejudicial to the interests of the revenue, because even if, the Assessing Officer has considered the issue the A.O. cannot make any addition, because difference in value shown in sale deed, when compared to guideline value is less than specified percent. Therefore, in our considered view on this issue, the Principal CIT cannot revise the assessment order. As regards, cost of improvement claimed by the assessee, including expenses incurred on fencing, bore well, leveling of plot and building, it was the case of the PCIT that although, the assessee claimed various expenditure, but the Assessing Officer had not examined the claim. We do not find any merit in findings of the Principal CIT for simple reason that very purpose of limited scrutiny assessment was to examine long term capital gain computed by the assessee. From the assessment order, it is very clear that the Assessing Officer has called for various details and accepted long term capital gain computed by the assessee. Therefore, we are of the considered view that the Principal CIT has erred in coming to the conclusion that the Assessing Officer has not examined cost of improvement claimed by the assessee. Cost of acquisition considered by the assessee by adopting fair market value of the property as on 01.04.1981 - We find that the assessee has considered certain value of the property as on 01.4.1981, whereas the Principal CIT has considered value as on 01.04.2003. There may be various reasons for difference in value of property. We find that unless the Principal CIT brings on record any conclusive evidence to prove that value adopted by the assessee is incorrect, the Principal CIT cannot presume that value adopted by the assessee is incorrect by considering value on different rate. Further, the very purpose of scrutiny assessment in the present case was to examine computation of long term capital gain. The Assessing Officer had considered the issue and called for various details and accepted claim of the assessee . Therefore, we are of the considered view that the Principal CIT has erred in revising the assessment order on this issue also - Decided in favour of assessee.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of revision order under Section 263 of the Income Tax Act, 1961.
3. Examination of long-term capital gain computation.
4. Difference in sale value and guideline value for stamp duty purposes.
5. Examination of cost of improvement claims.
6. Adoption of fair market value as on 01.04.1981 versus 01.04.2003.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal filed by the assessee was time-barred by 41 days. The delay was attributed to the lockdown imposed due to the Covid-19 pandemic. The Tribunal noted that the Hon’ble Supreme Court in suo motu Writ Petition No.3 of 2020 had extended the limitation period for all proceedings before courts and tribunals across the country. The Tribunal, considering the reasons provided and in the interest of natural justice, condoned the delay and admitted the appeal for adjudication.

2. Validity of Revision Order under Section 263 of the Income Tax Act, 1961:
The Principal Commissioner of Income Tax (PCIT) invoked Section 263, claiming the assessment order was erroneous and prejudicial to the interests of revenue. The Tribunal emphasized that for Section 263 to be invoked, the order must be both erroneous and prejudicial to the revenue. The Tribunal found that the Assessing Officer (AO) had examined the long-term capital gain computation and the exemption claimed by the assessee during the scrutiny assessment. Therefore, the PCIT's substitution of his view was not justified.

3. Examination of Long-Term Capital Gain Computation:
The main purpose of the scrutiny assessment was to examine the long-term capital gain computation. The AO had called for various details and accepted the computation provided by the assessee. The Tribunal concluded that the AO had duly examined the issues raised by the PCIT, and thus, the assessment order was not erroneous.

4. Difference in Sale Value and Guideline Value for Stamp Duty Purposes:
The PCIT noted a difference between the sale value shown in the registered document and the guideline value for stamp duty purposes. However, the Tribunal observed that the difference was less than the specified percentage allowed under Section 50C(3) of the Act. Even if the AO had not considered this issue, it would not have resulted in any addition, as the difference was within permissible limits. Therefore, this issue was not prejudicial to the interests of the revenue.

5. Examination of Cost of Improvement Claims:
The PCIT claimed that the AO had not thoroughly examined the cost of improvement claims, including expenses on fencing, bore well, leveling, and building. The Tribunal found that the AO had indeed called for various details and accepted the long-term capital gain computation after due consideration. Thus, the PCIT's conclusion that the AO had not examined the cost of improvement was unfounded.

6. Adoption of Fair Market Value as on 01.04.1981 versus 01.04.2003:
The assessee had adopted the fair market value of the property as on 01.04.1981, whereas the PCIT considered the value as on 01.04.2003. The Tribunal noted that unless the PCIT provided conclusive evidence proving the value adopted by the assessee was incorrect, the PCIT could not presume the value was wrong. The AO had considered and accepted the fair market value during the scrutiny assessment. Therefore, the PCIT's revision on this ground was also erroneous.

Conclusion:
The Tribunal quashed the order passed by the PCIT under Section 263 of the Income Tax Act, 1961, and allowed the appeal filed by the assessee. The Tribunal emphasized that the AO had duly examined the issues during the scrutiny assessment, and the PCIT's revision was not justified. The order was pronounced in the open court on 13th April 2022.

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