2024 (9) TMI 290 - AT - Income Tax

Revision u/s 263 - Relevance of the valuation report received after the assessment - valuation report had not been submitted within the statutory period of six months from the end of the month in which the reference is made under sub-section (1) - HELD THAT - There is no time limit for furnishing of the report by the valuation officer under the above statutory provision. We further deem it appropriate to conclude that once the legislature has not even included the time spent between the date of reference and submission of DVO report in the time limit prescribed for framing of an assessment, such a mutuality contradictory interpretation of section 142A(6) is not sustainable in law. We accordingly reject the assessee s first and foremost substantive argument. PCIT s had not applied his mind once having acted as per the Assessing Officer proposal made for section 263 revision jurisdiction - We note that the assessee s instant second substantive argument also deserves to be rejected as the learned PCIT s revision directions have duly discussed all the relevant facts before reaching to an independent conclusion that the foregoing regular assessment was an erroneous one causing prejudicial to interest of the Revenue. Rejected accordingly. Once the AO had made it clear that the matter shall be examined afresh in section 154 proceedings once the DVO submits his report, the PCIT has erred in law on facts in assuming his section 263 revision jurisdiction - We are of the considered view that the assessee s instant third substantive argument deserves to be declined only as an issue which is subject matter of valuation to be followed by the objection thereto, would hardly be treated as an apparent mistake so as to attract section 154 rectification as per T.S. Balaram ITO vs. Volkart Bros 1971 (8) TMI 3 - SUPREME COURT Rejected accordingly. PCIT (Central), Nagpur did not have jurisdiction in section 263 revision proceedings once the Assessing Officer had framed his assessment at Nashik - We find that the assessee has failed to bring any material in the case file indicating the PCIT (Central), Nagpur lacking jurisdiction as per provisions of the Income Tax Act. We make it clear that till the time contrary is proved, an income-tax authority exercising its jurisdiction in proceedings which are treated as general in nature u/s 136 of the Act, could not be held as lacking jurisdiction on mere conjectures and surmises. We accordingly reject the assessee s instant last argument as well. Decided against assessee.

Issues Involved:
1. Validity of the Section 263 notice.
2. Relevance of the valuation report received after the assessment.
3. Applicability of judicial precedents cited by the assessee.
4. Jurisdiction of the PCIT (Central), Nagpur.

Detailed Analysis:

1. Validity of the Section 263 Notice:
The assessee contended that the Section 263 notice was prima facie bad in law because the Assessing Officer (AO) was aware that the Valuation Report from the District Valuation Officer (DVO) had not been received by the date of the Assessment Order. The assessee argued that the construction cost was assessed based on the books of account, subject to rectification under Section 154 of the Income Tax Act, and therefore, the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. However, the PCIT rejected this argument, citing Explanation 1(b) to Section 263, which defines "record" to include all records available at the time of examination by the Commissioner, not just those available at the time of the assessment order. The PCIT also referenced the Supreme Court decision in CIT v. Shree Manjunathware Packing Products & Camphor Works, which held that the Commissioner could rely on a valuation report received after the assessment order.

2. Relevance of the Valuation Report Received After the Assessment:
The assessee argued that the valuation report, which stated a value of Rs. 3,73,14,000, was not relevant for the assessment year 2018-19, as the actual expenses incurred on building construction up to March 31, 2020, were Rs. 4,07,98,516.88, higher than the valuation report. The PCIT dismissed this argument, stating that the relevant valuation was for the building as of March 31, 2018, which was Rs. 2,12,73,898 as per the assessee's return and Rs. 3,73,14,000 as per the DVO. The PCIT clarified that the value as of March 31, 2020, was not relevant for the assessment year under consideration.

3. Applicability of Judicial Precedents Cited by the Assessee:
The assessee cited decisions from the Karnataka High Court and the Gujarat High Court, arguing that the valuation report should not be considered as it was received after the assessment. The PCIT found these cases inapplicable, as they did not deal with situations where the DVO's report was referred during the assessment proceedings but received afterward. The PCIT emphasized that the facts of the present case were different and upheld the invocation of Section 263.

4. Jurisdiction of the PCIT (Central), Nagpur:
The assessee argued that the PCIT (Central), Nagpur, did not have jurisdiction over the Section 263 revision proceedings since the AO had framed the assessment at Nashik. The Tribunal found no material indicating that the PCIT (Central), Nagpur, lacked jurisdiction. It clarified that unless proven otherwise, an income-tax authority exercising its jurisdiction in general proceedings under Section 136 of the Act could not be deemed to lack jurisdiction based on conjectures and surmises.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the PCIT's revision directions. The Tribunal concluded that the assessment order was erroneous and prejudicial to the interest of the Revenue. The AO was directed to make necessary inquiries and pass a fresh assessment order in accordance with the law, after providing an opportunity of being heard to the assessee. The Tribunal also rejected the assessee's arguments regarding the mandatory nature of the six-month period for the DVO's report, the applicability of judicial precedents, and the jurisdiction of the PCIT (Central), Nagpur. The order was pronounced on August 30, 2024.

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