2023 (7) TMI 602 - AT - Income Tax

Revision u/s 263 - wrongful Capital gain computation - non-consideration of the sale value of the property as per Section 50C and wrong allowance of indexation of cost of acquisition of the property by AO - HELD THAT - On perusal of the original assessment order passed by AO is a very cryptic order without any details and discussion on any of the enquiries made by the AO. AO simply accepted the returned income filed by the assessee as the assessed total income. As further seen from the assessment order the case was selected for complete scrutiny for the reason of no capital gains with respect to sale consideration and also less sale consideration reported in Form 26QB by the assessee. Assessment Order does not describe whatever the kinds of enquiries made and how he is satisfied with the returned income made by the assessee. When the Ld. PCIT proposed to revise this Assessment Order on two counts namely non-consideration of the sale value of the property as per Section 50C and the second issue namely wrong allowance of indexation of cost of acquisition of the property by issuing the show- cause notice. After considering the detailed reply filed by the assessee and the revised Long Term Capital Loss by the assessee the Ld. PCIT has fairly dropped the revision proceedings on the application of Section 50C in the computation of capital gain. Regarding the second limb of the notice namely non- application of cost inflation indexed by the assessee. PCIT has clearly brought out from the registered Sale Deed dated 25.06.2016 that a sum was paid by the assessee as early as 18.03.2010 by various cheques numbers drawn of Bank of Baroda all dated 18.03.2010 and is adjusted against the sale consideration. However, remaining balance amount was paid by two cheques drawn on HDFC Bank dated 22.07.2016 to the assessee. It is further seen from the Registered Sale Deed that the above amount was given at the time of Banakhat. However, the assessee claims the same sum as loan transaction which is an independent transaction between the same parties is not proved by the assessee with proper documentation and evidences. In the absence of the same, we do not find any merits in the arguments of the assessee. As further seen from the Revision Order the assessee has not made the claim of Stamp Duty expenses which is also been directed by the Ld. PCIT to be allowed, after due verification by the AO, during the fresh assessment proceedings. Thus, it could be seen that the Revision Order passed by the Ld. PCIT is a well judicious order and also giving proper opportunity to the assessee de novo proceedings. For the above reasons, we do not find any in infirmity in the order passed by the Ld. PCIT and therefore, the grounds raised by the assessee does not found any merits and therefore, the same are rejected. Appeal filed by the assessee dismissed.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Assessment order being erroneous and prejudicial to the interest of revenue.
3. Allowance of indexation to the cost of acquisition of property.
4. Application of Section 50C of the Income Tax Act.
5. Deduction of Stamp Duty and registration expenses.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The appeal was filed by the assessee against the revision order dated 31.03.2022 passed by the Principal Commissioner of Income Tax-3, Ahmedabad under Section 263 of the Income Tax Act, 1961. The assessee contended that the Principal Commissioner erred in assuming jurisdiction under Section 263.

2. Assessment order being erroneous and prejudicial to the interest of revenue:
The Principal Commissioner of Income Tax (PCIT) reviewed the assessment order and found it to be erroneous and prejudicial to the interest of revenue. The PCIT noted that the Assessing Officer (AO) failed to make necessary inquiries and verification regarding the sale of immovable property and the reported Long Term Capital Loss (LTCL). The PCIT cited the Supreme Court judgment in the case of Malabar Industrial Co. Ltd. vs. CIT, emphasizing that both conditions of the order being erroneous and prejudicial to the interest of revenue must be satisfied to invoke Section 263.

3. Allowance of indexation to the cost of acquisition of property:
The PCIT observed that the assessee received an advance of Rs. 3,51,30,000/- in the same financial year as the purchase of the property, which disqualified the assessee from claiming indexation benefits under Section 48 of the Act. The PCIT concluded that the AO did not properly verify this issue during the original assessment, making the assessment order erroneous and prejudicial to the revenue.

4. Application of Section 50C of the Income Tax Act:
The PCIT initially questioned the application of Section 50C regarding the valuation of the property. However, after reviewing the assessee's revised working of the LTCL, which considered the Jantry Value, the PCIT dropped the proceedings related to this issue, acknowledging that the revised LTCL had no tax effect on the total taxable income.

5. Deduction of Stamp Duty and registration expenses:
The PCIT noted that the assessee did not claim any stamp duty or registration expenses in the original return but did so during the assessment proceedings. The PCIT directed the AO to verify and allow the deduction of Rs. 20,72,820/- for stamp duty and registration expenses in the fresh assessment proceedings.

Conclusion:
The PCIT concluded that the AO's failure to consider the allowance of indexation cost of acquisition without proper verification rendered the assessment order erroneous and prejudicial to the interest of revenue. The PCIT invoked Section 263 to set aside the assessment order and directed the AO to conduct fresh assessment proceedings with proper inquiries and verification, offering the assessee an opportunity to present their case.

Final Judgment:
The appeal filed by the assessee was dismissed, and the PCIT's revision order was upheld as judicious and providing proper opportunity for de novo proceedings. The order was pronounced on 02.12.2022 at Ahmedabad.