2024 (7) TMI 783 - AT - Income Tax

Revision u/s 263 - escaped long-term capital gain - assessment orders u/s 153A were passed without making necessary inquiry, verification, investigation on the issue - CIT made reference to section 50C - as per CIT valuation of the Stamp Duty Authority ought to be deemed as full sale consideration for the purpose of computing long-term capital gain, thus the assessment order is erroneous, which has caused prejudice to the interest of revenue - whether scope of assessment u/s 153A could be enhanced to include re-computation of long-term capital gain qua those assessments, which are unabated? HELD THAT - PCIT findings are not in consonance with the proposition of law laid down in the case of Abhisar Buildwell (P) Ltd. 2023 (4) TMI 1056 - SUPREME COURT - Had the assessees have not disclosed long-term capital gain in their regular returns of income and then a discovery of this factum was unearthed during the course of search. The situation would be different. PCIT has not made reference to any seized material found during the course of search. He is of the view that the subject matter of a regular assessment, which would have taken under section 143(3) after issuance of a notice u/s 143(2) ought to have been considered in this search assessment under section 153A, but this proposition harbored by the ld. PCIT is contrary to the position of law laid down by the Hon ble Supreme Court. As pertinent to note that section 48 of the Income Tax Act contemplates mode of computation of long-term capital gain. The expression full value of the consideration is to be deemed equivalent to the amount on which stamp duty was paid. This deeming fiction is provided under section 50C of the Income Tax Act. Sub-clause (2) of section 50C further authorizes the ld. Assessing Officer that in case, an assessee disputes about deeming of the full sale consideration equivalent to the amount on which stamp duty was paid, then, he would make a reference to the DVO for determining the fair market value. Now this exercise was required to be conducted in a regular assessment under section 143(3), but that assessment attained finality. The factum of transfer of capital asset was brought to the notice of the revenue by all these assessees, therefore, it is not a new discovery of fact during the course of search, which can authorize the AO to carry out the exercise contemplated in section 50C of the Income Tax Act. PCIT has misread and misconstrued the position of law laid down by the judgment of the Hon ble Supreme Court. This issue does not fall within the ambit of assessment under section 153A of the Income Tax Act. For buttressing our finding, we have made reference to the assessment orders. AO has duly observed that neither there was any incriminating material nor there is any adverse mentioned in the appraisal report for taking this action. AO has recorded a categorical finding that no incriminating material was found during the course of search. Therefore, no addition could be made and if no addition could be made, how ld. Pr. CIT could enlarge the scope of assessment by exercising the powers under section 263 of the Income Tax Act. The issue in dispute is squarely covered by the decision of Abhisar Buildwell (P) Ltd. (supra) as well as PCIT -vs.- Jay Ambey Aromatics 2023 (11) TMI 1051 - SC ORDER . Therefore, orders of ld. Pr. CIT in each case of the appellant are not sustainable. Assessee appeal allowed.

Issues Involved:
1. Legality of the Principal Commissioner of Income Tax (Pr. CIT) taking cognizance under section 263 of the Income Tax Act.
2. Validity of setting aside the assessment orders for de novo assessments.
3. Interpretation and application of section 50C of the Income Tax Act.
4. Examination of whether assessments under section 153A can include re-computation of long-term capital gains for unabated assessments.

Detailed Analysis:

1. Legality of the Pr. CIT Taking Cognizance Under Section 263:
The core issue revolves around whether the Pr. CIT was justified in invoking section 263 of the Income Tax Act to set aside the assessment orders dated 14th September 2021, 21st September 2021, and 30th September 2021, for the respective assesses. The Pr. CIT argued that the assessment orders were erroneous and prejudicial to the interest of the revenue because they did not consider the deemed sale consideration as per section 50C of the Income Tax Act.

2. Validity of Setting Aside the Assessment Orders for De Novo Assessments:
The Pr. CIT found that the assesses had sold lands resulting in long-term capital gains and that the sale consideration was less than the value determined by the Stamp Duty Valuation Authority. The Pr. CIT believed that, under section 50C, the full sale value should be deemed equivalent to the stamp duty valuation, thus making the assessment orders erroneous and prejudicial to the interest of the revenue. Consequently, the Pr. CIT set aside the assessment orders and directed de novo assessments.

3. Interpretation and Application of Section 50C:
The Pr. CIT observed that the assesses had sold properties at a consideration lower than the stamp duty valuation, which should be the deemed full sale consideration for computing long-term capital gains under section 50C. The Pr. CIT calculated the alleged escaped long-term capital gains for each assessee based on the difference between the actual sale consideration and the stamp duty valuation.

4. Examination of Whether Assessments Under Section 153A Can Include Re-computation of Long-term Capital Gains for Unabated Assessments:
The Tribunal examined whether the scope of assessment under section 153A could be expanded to include re-computation of long-term capital gains for assessments that had already attained finality. The Tribunal noted that the assessments were completed without any incriminating material found during the search, and the returns had been accepted under section 143(1).

The Tribunal referred to the Supreme Court's judgment in the case of Pr. CIT, Central -3 vs. Abhisar Buildwell (P) Ltd. and other relevant judgments, which held that no addition could be made under section 153A in the absence of incriminating material. The Tribunal concluded that the Pr. CIT's assumption that the assessment orders were erroneous was not tenable because the assessments had already attained finality and no incriminating material was found during the search.

The Tribunal also emphasized that section 50C's deeming provision regarding the full sale consideration should have been applied during the regular assessment under section 143(3), which had already attained finality. The Tribunal found that the Pr. CIT had misinterpreted the law by attempting to include this issue in the scope of section 153A assessments.

Conclusion:
The Tribunal quashed the orders of the Pr. CIT in each case, stating that the Pr. CIT's actions were not sustainable under the law. The Tribunal allowed the appeals of the assesses, concluding that the assessments under section 153A could not include re-computation of long-term capital gains for unabated assessments without any incriminating material found during the search. The Tribunal's decision was pronounced in the open court on 11/07/2024.

← Previous Next →