SHREE LAXMI ENTERPRISES, MUMBAI V. PRINCIPLE COMMISSIONER OF INCOME TAX -41, MUMBAI

ITA 1265/MUM/2023

AI Insights

Shree Laxmi Enterprises appealed against the revision order passed by the PCIT-41, Mumbai, which challenged the validity of the revision order concerning the assessment year 2018-19. The PCIT had noted discrepancies in the stamp duty value and the agreement value of properties sold, which were not examined by the Assessing Officer, and also questioned the unsecured loans taken from a company whose registration was cancelled. The Tribunal examined the applicability of section 43CA of the Income Tax Act regarding the valuation differences and the implications of the loans from a now-cancelled company, ultimately deciding that while the PCIT's concerns about the property valuations were valid, the issues related to the loans did not prejudice the revenue for the year in question.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136539 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 18-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 11-04-2023
• Other Referred Cases: Welfare Properties Pvt. Ltd. Vs. DCIT, Grasim Industries Ltd. V CIT, Malabar Industrial Co. Ltd. v. CIT, CIT v. Max India Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA S. MAHAJAN
• Keywords: Sale consideration of property below Jantri Value; Set aside
• Section: 263; 43CA; 143(3); 142(1); 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “G” Bench, Mumbai. Before Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary (JM) I.T.A. No. 1265/Mum/2023 (A.Y. 2018-19) Shree Laxmi Enterprises 1107, ATL Corporate Park Saki Vihar Road, Powai Mumbai-400 072. PAN : AAZFS1341M Vs. PCIT-41 541, Kautilya Bhavan C-41 to C-43, G Block Bandra Kurla Complex Bandra East Mumbai- 400 051. (Appellant) (Respondent) Assessee by Dr. K. Shivaram & Shri Shashi Bekal Department by Shri Virabhadra S. Mahajan Date of Hearing 19.06.2023 Date of Pronouncement 08.08.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the revision order dated 29.3.2023 passed by learned PCIT-41, Mumbai and it relates to A.Y. 2018- 19. The assessee is challenging the validity of the revision order passed by learned PCIT. 2. Facts relating to the case are stated in brief. The assessee is engaged in the business of construction and development of the property. During the year under consideration, the main source of income was from its construction business. The assessment in the hands of the assessee was completed by the Assessing Officer under section 143(3) on 26.3.2021. Upon examination of the record, learned PCIT noticed that the AO has not examined following issues:- (a) there was difference between the Stamp duty value (mentioned as “market value” by PCIT) and the Agreement value in respect of eight Shree Laxmi Enterprises 2 flats sold by the assessee during the year under consideration. The said difference worked out to Rs. 13,74,706/-. The above said amount was required to be assessed as income of the assessee in terms of section 43CA of the I.T. Act. (b) The assessee has taken unsecured loan from a company whose registration has been cancelled by MCA. Hence the learned PCIT took the view that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of revenue. Accordingly, he initiated revision proceedings under section 263 of the Act. 3. With regard to the first issue, the assessee submitted that the difference between the stamp duty value and the agreement value in respect of seven properties is less than the 10% and hence as per the proviso inserted by the Finance Act, 2020, the difference need not be assessed as income of the assessee under section 43CA of the Act. With regard to the remaining property, it was submitted that the advance was received in 2013 itself and hence the agreement value should be compared with the stamp duty value prevailing in 2013. With regard to the loan taken from the company whose registration has been cancelled by MCA, the assessee did not furnish any explanation. 4. The Learned PCIT noticed that the proviso to section 43CA, which provides for not making any addition if the difference between the sale consideration and stamp duty value does not exceed 5% of the consideration was inserted w.e.f. 1.4.2019. The above said concession of 5% was increased to 10% w.e.f. 1.4.2021. Accordingly, the Ld PCIT held that the above said proviso will not be applicable to AY 2018-19, i.e., the year under consideration, since the above said concession was inserted in the statute w.e.f 1.4.2019 only. In this regard, the learned PCIT placed his reliance on Shree Laxmi Enterprises 3 the decision rendered by the Mumbai Bench of the ITAT in the case of Welfare Properties Pvt. Ltd. Vs. DCIT (2020) 113 taxman.com 156. With regard to the claim of the assessee that it has received advance amount in the year 2013 itself in respect of remaining flat, the learned PCIT noticed that the assessee has not furnished any supporting documentary evidence to prove the existence of any agreement entered between both the parties. 5. Accordingly, learned PCIT rejected the above said explanation of the assessee. Accordingly, learned PCIT set aside the assessment order and directed the Assessing Officer to pass a fresh order after considering the above said issues. Aggrieved by the order so passed by Ld PCIT, the assessee has filed this appeal. 6. We have heard rival contentions and perused the record. The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be “erroneous in so far as it is prejudicial to the interests of the Revenue”. This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted”. The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression “prejudicial to the interests of the Revenue”, the Supreme Court held, it is of wide import and is not Shree Laxmi Enterprises 4 confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : “The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.” The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282.” The principles laid down by the courts are that the Learned CIT cannot invoke his powers of revision under section 263 if the Assessing Officer has conducted enquiries and applied his mind and has taken a possible view of the matter. If there was any enquiry and a possible view is taken, it would not give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It is also settled proposition that if an issue is debatable one, then the same will also be outside the scope of revision proceedings. 7. We noticed that the Ld PCIT has revised the assessment order passed for AY 2018-19 on two issues. The first issue relates to the addition to be made u/s 43CA of the Act in respect of the difference between the Stamp duty Value and the Sale agreement value. With regard to this issue, the Ld A.R Shree Laxmi Enterprises 5 submitted that the AO has called for various details regarding the project and the assessee has also submitted the same. It was further submitted that the difference between both the values are less than 10% in respect of 7 flats. With regard to the remaining flat, it was submitted that the assessee has received advance in the year 2013 itself and hence the Sale agreement value should be compared with the Stamp duty value prevailing in the year 2013. 8. We notice that the AO has called for the details of the project executed by the assessee, but failed to examine the sale value of flats in terms of sec.43CA of the Act. We further notice that the Ld PCIT has specifically observed that the proviso to sec.43CA permitting difference of 10% did not exist in the year relevant to AY 2018-19, i.e., it is the view of the Ld PCIT that the amendment brought in sec. 43CA with effect from AY 2019-20 will not apply to the year under consideration. With regard to the claim that the advance amount was received in respect of one property in the year 2013 itself, it is the view of Ld PCIT that the assessee has failed to furnish copy of Agreement for sale entered by the assessee with the concerned buyer. We notice that it is not the case here that the above said contentions of the assessee have been examined by the AO and a particular view was taken by him. In the absence of application of mind by the AO on the issue of applicability of provisions of sec.43CA, we are of the view that the Ld PCIT was justified in initiating revision proceedings on the said issue. 9. With regard to the second issue of loan taken by the assessee, it is the submission of Ld A.R that the assessee has not taken loan from any company, which is struck off by ROC. He submitted that the AO, vide his notice u/s 142(1) dated 05-01-2021 has specifically asked the assessee to furnish details of loans taken or loans repaid in the name of a company whose registration has been cancelled by ROC. The Ld A.R submitted that the assessee furnished full details of opening balance of loans taken from various entities, fresh loans taken, loans repaid during the year and the Shree Laxmi Enterprises 6 closing balance of loans. He submitted that a company named M/s Anurodh Exports P Ltd was struck off by the ROC. However, the assessee had taken loan from the above said company, when it was alive and the said loan was taken in the earlier year. He further submitted that the assessee has repaid the loan during the year under consideration, but the said repayment will not give rise to any tax incidence. 10. We notice that the AO has asked a specific query on the second issue and the assessee has furnished reply. It is noticed that the loan was taken from M/s Anurodh Exports P Ltd in an earlier year and hence the taxability, if any, of the above said loan will arise in the earlier year only and not during the year under consideration. As submitted by Ld D.R, the repayment of above said loan, even if the above said company is struck off, will not give rise to any tax incidence, meaning thereby no prejudice is cause to the revenue for the year under consideration on account of these transactions. Accordingly, we are of the view that the order passed by Ld PCIT on this second issue is liable to set aside. We order accordingly. 11. In the result, the appeal filed by the assessee is partly allowed. Pronounced in the open court on 8.8.2023. Sd/- Sd/- (Rahul Chaudhary) (B.R. Baskaran) Judicial Member Accountant Member Mumbai.; Dated : 08/08/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. Shree Laxmi Enterprises 7 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai