2024 (12) TMI 1378 - AT - Income Tax

Revision u/s 263 - Addition u/s 56(2)(vii)(b) - difference in stamp duty value and purchase price of property - HELD THAT - As during the course of assessment proceedings, assessee furnished explanations and documentary evidences to assail the invocation of provisions of Sec.56(2)(vii)(b). AO accepted the claim of the assesses with due application of mind. Considering the given factual matrix, the said view of Ld. AO could be said to be one of the possible views. CIT(A), in our considered opinion, could not have substituted the opinion of Ld. AO with that of his own view unless the view of Ld. AO was shown to the perverse or not in accordance with law. Therefore, revision of the order could not be held to be justified on this score. AO has omitted to consider the addition as made of unaccounted investment u/s 143(3) - The assessee has already preferred a petition u/s 154. Apparently, the demand as raised on account of addition has already been satisfied by the assessee. Therefore, it would suffice on our part to direct Ld. AO to rectify the reassessment order by adopting correct income and by granting applicable deductions / tax credit to the assessee as available to him. Assessee appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following core legal questions:

Whether the invocation of revisionary jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT) was justified in the context of the assessment order framed under Section 143(3) read with Section 144B.
Whether the Assessing Officer (AO) conducted adequate inquiry during the reassessment proceedings, especially concerning the application of Section 56(2)(vii)(b) regarding the alleged escapement of income.
Whether the Pr. CIT had the jurisdiction to question the sufficiency of the AO's inquiry and to invoke Section 263 when the matters were already addressed under Section 147.
Whether the Pr. CIT's invocation of Section 263 concerning an arithmetical error was appropriate, given that the issue could be addressed under Section 154.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Revisionary Jurisdiction under Section 263

Relevant Legal Framework and Precedents: Section 263 empowers the Pr. CIT to revise an assessment order if it is erroneous and prejudicial to the interests of the revenue.
Court's Interpretation and Reasoning: The court noted that the AO had conducted a detailed inquiry into the application of Section 56(2)(vii)(b) and had accepted the assessee's explanations as satisfactory. The AO's decision was deemed a plausible view, and the Pr. CIT could not substitute his opinion unless the AO's view was perverse or not in accordance with law.
Key Evidence and Findings: The AO had reviewed the sale agreement and other documentary evidence provided by the assessee, which supported the conclusion that Section 56(2)(vii)(b) was not applicable.
Application of Law to Facts: The court found that the AO's decision was based on a reasonable interpretation of the facts and the law, and therefore, the Pr. CIT's revision was not justified.
Treatment of Competing Arguments: The assessee argued that the AO's view was one of the possible views, while the Pr. CIT contended that the AO failed to make necessary additions. The court sided with the assessee, emphasizing the AO's discretion in the matter.
Conclusions: The revisionary order under Section 263 was not justified as the AO's view was a plausible one, and the Pr. CIT could not impose his view without demonstrating the AO's error.

Issue 2: Adequacy of Inquiry by AO

Relevant Legal Framework and Precedents: The adequacy of inquiry by the AO is a critical factor in determining the validity of an assessment order.
Court's Interpretation and Reasoning: The court highlighted that the AO had issued notices and reviewed the evidence provided by the assessee, indicating a thorough inquiry process.
Key Evidence and Findings: The AO's acceptance of the assessee's explanations, supported by documentary evidence, demonstrated that a sufficient inquiry was conducted.
Application of Law to Facts: The court found that the AO's inquiry met the required legal standards, and the Pr. CIT's concerns were unfounded.
Treatment of Competing Arguments: The court dismissed the Pr. CIT's argument that the AO failed to conduct a proper inquiry, emphasizing the AO's detailed examination of the case.
Conclusions: The AO conducted an adequate inquiry, and the Pr. CIT's revisionary action was unwarranted.

Issue 3: Jurisdiction of Pr. CIT to Invoke Section 263

Relevant Legal Framework and Precedents: Section 263 provides the Pr. CIT with revisionary powers, but these powers are limited to cases where the assessment order is erroneous and prejudicial to revenue interests.
Court's Interpretation and Reasoning: The court found that the Pr. CIT overstepped his jurisdiction by questioning the sufficiency of the AO's inquiry, which had already been addressed under Section 147.
Key Evidence and Findings: The AO had already dealt with the issues raised by the Pr. CIT during the reassessment proceedings.
Application of Law to Facts: The court concluded that the Pr. CIT's jurisdiction was improperly invoked, as the matters were already considered by the AO.
Treatment of Competing Arguments: The court rejected the Pr. CIT's jurisdictional claim, emphasizing the AO's prior handling of the issues.
Conclusions: The Pr. CIT lacked jurisdiction to invoke Section 263, as the issues were already addressed under Section 147.

Issue 4: Invocation of Section 263 for Arithmetical Error

Relevant Legal Framework and Precedents: Arithmetical errors are typically addressed under Section 154, not Section 263.
Court's Interpretation and Reasoning: The court noted that the issue of arithmetical error should be resolved through rectification under Section 154.
Key Evidence and Findings: The assessee had already filed a petition under Section 154 to address the arithmetical error.
Application of Law to Facts: The court directed the AO to rectify the reassessment order, acknowledging the assessee's compliance with the demand.
Treatment of Competing Arguments: The court found the Pr. CIT's invocation of Section 263 inappropriate for addressing an arithmetical error.
Conclusions: The arithmetical error should be corrected under Section 154, and the Pr. CIT's use of Section 263 was improper.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "In such a scenario, Ld. Pr. CIT(A), in our considered opinion, could not have substituted the opinion of Ld. AO with that of his own view unless the view of Ld. AO was shown to the perverse or not in accordance with law."
Core Principles Established: The AO's discretion in assessment matters is protected unless shown to be erroneous or prejudicial to revenue interests. The Pr. CIT's revisionary powers are limited and cannot be used to impose an alternate view without clear justification.
Final Determinations on Each Issue: The appeal was allowed, with the court finding that the Pr. CIT's invocation of Section 263 was unjustified on all counts. The AO's assessment was upheld, and the arithmetical error was directed to be corrected under Section 154.

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