2023 (4) TMI 145 - AT - Income Tax

Revision us 263 by CIT - addition of income of the assessee as income from other sources u/s. 56(2)(vii)(b) - Whether AO order erroneous and prejudicial to the interest of the revenue? - As per CIT AO has failed to make adequate and proper enquiries to ascertain the true nature and period of transfer for purchase of property and the second one relating to applicability of Section 56(2)(vii)(b) when the agreement to purchase the property was executed in the FY 2007-08 though the registry of the conveyance deed was executed in FY 2014-15 - HELD THAT - It is important to note that the assessment was under limited scrutiny on the issue of purchase of property as stated above. AO had enquired into the transaction of purchase of property by the assessee and necessary details and explanations and corroborative evidence are placed on record. Ld. Pr. CIT while invoking his power u/s. 263 of the Act observed that AO did not make proper enquiry. It is not clear as to what in the opinion of Ld. Pr. CIT is proper enquiry . By using such expression, it principally suggests that Ld. AO did conduct an enquiry. However, in the opinion of Ld. Pr. CIT, the enquiry was not proper for which nothing is stated in clear terms as to how and why the enquiry was not proper. Further, we note that reference has been made to two separate clauses to Explanation (2) to Section 263 which dealt with two different situations. It leads us to believe about the indecisiveness on the part of the Ld. Pr. CIT. Applicability of Section 56(2)(vii)(b)(ii) - As in this case, there was a valid and lawful agreement entered by the parties long back in A.Y. 2008-09 only, when the subject property was transferred and substantial obligations were discharged. The law contained in Section 56(2)(vii)(b) as stood at that point of time, did not contemplate a situation of a receipt of property by the buyer without inadequate consideration. Hence, we are of considered view that ld. Pr.CIT erred in applying the said provision. Because of the mere fact that the flat was registered in the year 2014 falling in A.Y. 2015-16, the amended provision of Section 56(2)(vii)(b)(ii) cannot be applied. Hence, we are not in agreement with the view taken by the ld. Pr.CIT holding the applicability of Section 56(2)(vii)(b)(ii) in the facts and circumstances of the case and therefore we hold that the assessment order, subjected to revision u/s 263, is not erroneous and prejudicial to the interest of the revenue. Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment involves the challenge against the revision order passed under section 263 of the Income-tax Act, 1961 regarding the assessment order for AY 2015-16.

Grounds of appeal and Additional Ground:
The assessee challenged the invocation of revisionary proceeding under section 263 of the Act and the subsequent order passed. An additional ground was raised contending that the exercise of power under section 263 was beyond the purview of the Assessing Officer as the case was selected for limited scrutiny only for the issue of "purchase of property."

Assessment and Revision Order:
The assessee filed the return of income reporting a total income. The case was selected for limited scrutiny based on the issue of "purchase of property." The assessment was completed by accepting the returned income. The Principal CIT found an omission in assessing the differential amount under section 56(2)(vii)(b) of the Act. The assessee provided detailed explanations, but the Principal CIT directed a fresh assessment order, leading to the appeal before the Tribunal.

Contentions and Analysis:
The key issue was the applicability of Section 56(2)(vii)(b) concerning the purchase transaction of the property. The Tribunal noted that the law was introduced after the execution of the agreement for purchase of the property. The pre-amended law did not cover situations where property was received with inadequate consideration. The Tribunal held that the Principal CIT erred in applying the provision retrospectively and quashed the revision order under section 263.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the assessment order was not erroneous and prejudicial to the revenue's interest. The impugned order under section 263 was quashed based on the analysis of the applicability of Section 56(2)(vii)(b) in the case.

Separate Judgment:
No separate judgment was delivered by the judges in this case.