2024 (2) TMI 863 - AT - Income Tax

Revision u/s 263 - as per CIT by not considering the physical transfer of leasehold property right registered by a sale deed during the year under consideration and consequently by not determining the undisclosed income arising from capital gain of assessee, the scrutiny assessment order apparently has become erroneous in so far as it is prejudicial to the interest of revenue HELD THAT - We find that the assessee was quite aware of the proceeding before the ld. PCIT with reference to the dates 27.09.2019 and also 23.10.2019. The explanation(2) to section 263 provides that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner , (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. The above explanation squarely applicable to the facts of the case and hence, we decline to interfere with the order of the ld. PCIT passed u/s. 263. Appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Initiation of proceedings under section 263 of the Income Tax Act.
2. Alleged lack of opportunity of being heard to the appellant.
3. Determination of the original assessment order as erroneous and prejudicial to the interest of the revenue.
4. Verification and taxation of the transaction by the Assessing Officer (AO).

Summary of Judgment:

1. Initiation of Proceedings under Section 263:
The assessee contested that the Principal Commissioner of Income Tax (Pr. CIT) erred in initiating proceedings under section 263 of the Income Tax Act, claiming the order passed was "bad in law and uncalled for." The Pr. CIT initiated these proceedings on the grounds that the AO failed to verify facts related to the sale of property during the assessment.

2. Lack of Opportunity of Being Heard:
The assessee argued that the Pr. CIT passed the order without giving due opportunity for a hearing. The appellant claimed not to have received any alleged email for re-fixing the matter and highlighted that their request to inspect assessment records was pending. The Pr. CIT issued a show cause notice on 19/09/2019 and communicated a hearing date via email on 15/10/2019, which the appellant claimed not to have received. The order was passed ex-parte on 18/11/2019 without further notice.

3. Original Assessment Order as Erroneous:
The Pr. CIT held that the original assessment order passed under section 143(3) was erroneous and prejudicial to the revenue's interest. The AO failed to consider the physical transfer of property rights and the capital gains arising from the transaction. The Pr. CIT directed the AO to re-verify the issue and determine the taxable income under capital gains.

4. Verification and Taxation of the Transaction:
The AO initially accepted the assessee's claim that the transaction was not taxable in the year under consideration due to non-receipt of full payment. However, the Pr. CIT found that the registered sale deed indicated a complete transfer of property rights and full consideration received, thus requiring the recognition of capital gains. The Pr. CIT concluded that the AO's failure to verify these facts rendered the assessment order erroneous and prejudicial to the revenue.

Determination:
The Tribunal upheld the Pr. CIT's order, stating that the explanation to section 263 was applicable. The order passed by the AO was deemed erroneous and prejudicial to the interests of the revenue due to lack of necessary inquiries and verification. The appeal of the assessee was dismissed.

Conclusion:
The Tribunal concluded that the Pr. CIT's invocation of section 263 was justified, and the AO's failure to verify the transaction and recognize capital gains warranted the revision of the assessment order. The appeal was dismissed, affirming the Pr. CIT's directives for re-verification and taxation of the transaction.