2023 (3) TMI 919 - AT - Income Tax

Revision u/s 263 - capital gain arising from transfer of immovable property - Reopening of assessment u/s 147 - As per CIT AO committed error in considering the agreement to sell between Mrs. Sangita Gupta and assessee to determine cost of acquisition for purpose of section 48 - HELD THAT - AO had made relevant and sufficient enquiries on the issue and was justified to take into consideration the agreement to sell. In fact Ld. PCIT has committed further error in expanding the scope of inquiry by questioning the source of payment to Smt. Sangita Goel by the wife of assessee. While the reasons to believe for purpose of Section 148(2) of the Act was merely alleged escapement of income under the head of capital gain arising from transfer of immovable property - Thus the order of Ld. PCIT u/s 263 the Act cannot be sustained. Consequently the appeal of assessee is allowed.

Summary

Issues Involved:
1. Cost of acquisition of the property.
2. Verification of the source of repayment of the loan.

Summary:

Issue 1: Cost of Acquisition of the Property
The Principal Commissioner of Income Tax (PCIT) issued a notice u/s 263, questioning the cost of acquisition claimed by the assessee as Rs. 62,40,000/- instead of Rs. 42,12,550/- as per the sale deed. The assessee argued that the property was purchased from Mrs. Sangita Gupta, who paid the builder, M/s. Supertech Construction Pvt. Ltd., and the payment of Rs. 62,40,000/- was made through banking channels. The PCIT, however, was not convinced and directed the Assessing Officer (AO) to re-compute the short-term capital gain based on the sale deed value. The Tribunal noted that the cost of acquisition includes all amounts paid to intermediaries with enforceable interests, not just the sale deed value. The Tribunal concluded that the AO had made sufficient inquiries and was justified in considering the agreement to sell between Mrs. Sangita Gupta and the assessee to determine the cost of acquisition. Therefore, the PCIT's order was set aside.

Issue 2: Verification of Source of Repayment of Loan
The PCIT also questioned the source of repayment of a Rs. 40 lakhs loan from IDBI, which the assessee claimed was repaid by him alone without any contribution from his wife. The Tribunal found that the PCIT had expanded the scope of inquiry beyond the initial reasons for reopening the assessment, which was alleged escapement of income under the head of capital gain. The Tribunal held that the AO had made relevant and sufficient inquiries on this issue as well.

Conclusion:
The Tribunal allowed the assessee's appeal, setting aside the PCIT's order u/s 263, and upheld the AO's original assessment. The Tribunal emphasized that the AO had conducted meaningful investigations and that the PCIT's broader inquiries were unwarranted. The order was pronounced on 20th March 2023.