LATE MUTHUMALAINADAR KRISHNAVEL, REPRESENTED BY 6 LEGAL HEIRS,TUTICORIN V. PCIT-1, MADURAI

ITA 1018/CHNY/2024

AI Insights

The case involves the legal heirs of the late Shri Muthumalainadar Krishnavel, who appealed against the revisionary order passed by the Pr. CIT, Madurai, under Section 263 of the Income Tax Act for the Assessment Year 2016-17. The Pr. CIT had set aside the re-assessment order made by the AO, which had accepted the returned income without any additions. The Pr. CIT's revision was based on the differential between the purchase value and the guideline value of immovable properties, which was not added as income under Section 56(2)(vii)(b) of the Act. The Tribunal, after considering the submissions and the detailed assessments made by the AO, concluded that the AO had taken a possible view on the issues raised, and thus, the revision by the Pr. CIT was not justified.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472349 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-08-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 12-04-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.CLEMENT RAMESH KUMAR LD
• Assessee Lawyers: S. SRIDHAR LD
• Keywords: Sale consideration of property below Jantri Value; Competent authority; Revision of order; Tangible material
• Section: 148; 143(3); 142(1); 263; 56(2)(vii)(b)

Judgement Text

" आयकर अपीलीय अिधकरण “सी” Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय ŵी महावीर िसंह, उपाȯƗ एवं माननीय ŵी मनोज क ुमार अŤवाल ,लेखा सद˟ क े समƗ। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.1018/Chny/2024 (िनधाŊरण वषŊ / Assessment Year: 2016-17) Smt. K.Indira, Shri K.Muthuvel, Shri Selvakumaran, Shri M.K.Balaji Shri K.Ragupathy, Shri K.Sudhakar All L/Hs of late Shri Muthumalainadar Krishnavel, 15, Melanavaladivillai, Arumuganeri, Tuticorin-628 202. बनाम/ Vs. PCIT-1 Madurai. ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. BCTPK-6952-M (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri S.Sridhar (Advocate)-Ld. AR ŮȑथŎकीओरसे/Respondent by : Shri R.Clement Ramesh Kumar (CIT)-Ld. DR सुनवाईकीतारीख/Date of Hearing : 29-08-2024 घोषणाकीतारीख /Date of Pronouncement : 18-11-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by legal heirs of deceased assessee assails invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax, Madurai-1 (Pr.CIT) for Assessment Year (AY) 2016-17 vide order dated 28-03-2024 in the matter of an assessment framed by Ld. 2 AO u/s 143(3) r.w.s. 147 on 23-09-2021. The grounds of appeal read as under: - 1. The revisional order of the PCIT -1, Madurai dated 28.03.2024 vide DIN & Order No. ITBA/REV /F /REVS/2023-24/1063569965(1) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case. 2. The PCIT erred in assuming jurisdiction u/s 263 of the Act and consequently erred in setting aside the re-assessment order dated 23.09.2021 without assigning proper reasons and justification. 3. The PCIT failed to appreciate that revision order was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 4. The PCIT failed to appreciate that there could not be any scope for setting aside an order of re-assessment passed in assuming incorrect jurisdiction in terms of Section 147 of the Act and ought to have appreciated that in the absence of fresh / tangible material relatable to the income alleged to have escaped assessment, the consequential assumption of jurisdiction under Section 263 of the Act to revise an invalid order of re- assessment order should accordingly be reckoned as bad in law. 5. The PCIT failed to appreciate that the twin conditions prescribed for assuming jurisdiction under Section 263 of the Act were not satisfied concurrently on the facts and in the circumstances of the case and hence ought to have appreciated that the order of revision under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 6. The PCIT failed to appreciate that the findings in the impugned order were wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law and ought to have appreciated that the distinction between the concept of review and the concept of revision under the Act was completely over looked and brushed aside in as much as in this regard, ought to have appreciated that the review of the assessment order completed would be prohibited within the scope of the powers of revision under Section 263 of the Act. 7. The PCIT failed to appreciate that the distinction between lack of enquiry and inadequate enquiry was also over looked before passing the revision order and ought to have appreciated that there could not be any presumption of lack of enquiry on the part of the Assessing Officer much less inadequate enquiry on the facts and in the circumstances of the case there by vitiating the revision order. 8. The PCIT erred in directing the Assessing Officer to add a sum of Rs. 81,64,050/- as income in terms of Section 56(2)(vii)(b) of the Act constituting the difference the purchase value and the guideline value of the immovable property purchased without assigning proper reasons and justification. 9. The PCIT failed to appreciate that the disputed property under consideration had pertained to the property purchased in the capacity of the HUF and ought to have appreciated that the mere absence of such recitals in the purchase deed of the immovable property would not automatically warrant addition to be made in the hands of the appellant in the capacity of individual, thereby vitiating the revision order. 10. The PCIT failed to appreciate that the issue of applicability of Section 56[2)[vii)[b)[ii) of the Act was considered in the re-assessment proceedings and ought to have appreciated that there was no Violation of provisions in Section 56(2)(vii)(b)(ii) of the Act on facts and in circumstances of the case in view of the subsequent reduction in the circle rates, there by vitiating the findings in relation there to. 3 11. The PCIT failed to appreciate that there was complete scrutiny of facts referred to in the revision order while passing the re-assessment order passed by the JAO and hence ought to have appreciated that the decision to direct the JAO to revisit the issue should be reckoned as bad in law. 12. The PCIT failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the Principles of natural justice would be nullity in law. 2. The Ld. AR advanced arguments and submitted that a possible view was taken by Ld. AO on the flagged issues during the course of assessment proceedings. The Ld. CIT-DR, on the other hand, supported the revisionary order. Having heard rival submissions and upon perusal of case record, our adjudication would be as under. Facts leading to Impugned Revision 3.1 Upon perusal of documents on record, it could be seen that the assessee’s regular return of income was treated as invalid since the same was not e-verified. The case was reopened and notice u/s 148 was issued on 13-11-2019. The assessee filed return of income reflecting house property income and income from other sources besides agricultural income. During the course of assessment proceedings, notices u/s 142(1) were issued on 02-02-2021, 03-03-2021, 18-03-2021, and 13-09-2021 calling for various details form the assessee. The assessee objected to reopening which was disposed-off vide separate order dated 30-08-2021. After due consideration of assessee’s submissions, the returned income was accepted by Ld. AO and no further addition was made in the returned income. 3.2 In recorded reasons, it was observed by Ld. AO that the assessee entered into an agreement for purchase of three immovable properties at Chromepet, Chennai.Subsequently, the three properties were purchased for Rs.74.02 Lacs each aggregating in all to Rs.222.07 Lacs. The return 4 of income was treated as invalid for want of e-verification. However, the assessee had e-verified returns of earlier years. It was alleged that the assessee did not have sufficient income considering the income admitted in earlier years. Therefore, it was alleged that there was an escapement of income. 3.3 The assessee opposed the same on the ground that return was duly e-verified and ITR-V was sent to CPC on 03-04-2017. The assessee assailed the reopening of the assessment. Subsequently, notice u/s 143(2) was issued to the assessee on 15-12-2020. The same was duly responded to by the assessee vide its reply dated 26-12-2020 wherein the aforesaid submissions were reiterated. In sum and substance, the assessee stated that the land was purchased for HUF using the funds of HUF. In further notice dated 02-02-2021 (point no.11 & 12), the assessee was required to provide the source of property purchased for Rs.222.07 Lacs along with copy of purchased deed. The assessee was also required to provide documentary evidence in relation to claim of applicability of provisions of Sec. 45(3) as put forth by the assessee in its reply. The assessee, vide its reply dated 10-02-2021, provided the source of purchase of the property and also filed copy of ledger account with partnership firm (M/s Kanna Silk) towards introduction of land as capital and copy of land account as appearing in the books of partnership firm. 3.4 In reply dated 21-09-2021, the assessee specifically addressed the issue of applicability of provisions of Sec.56(2)(vii)(b) and it was stated that the stamp duty value of the property was disputed before Inspector General of Registration and refund was sought. It was submitted that the value so fixed by the stamp duty valuation authority far exceed the fair 5 market value of the property. The assessee pleaded that the provisions of Sec.50C should not be applied and consequently, the proposal to invoke the provisions of Sec.56(2)(vii)(b) should be dropped.Considering all these submissions, the assessment was framed on 23-09-2021 accepting the returned income. 3.5 Subsequently, Ld. Pr. CIT, upon perusal of case records, observed that the assessee purchased the said land jointly with his spouse for Rs.444.14 Lacs as against stamp duty value of Rs.607.42 Lacs and accordingly, there was differential of Rs.163.28 Lacs. The assessee’s share therein (50%) amounting to Rs.81.64 Lacs would be assessable u/s 56(2)(vii)(b). The Ld. AO omitted to make such addition and therefore, the assessment required revision. Accordingly, the six legal heirs of the assessee were show-caused. The four legal heirs opposed the same on the ground that the assessment was framed after detailed enquiries.The property belonged to HUF only as submitted and accepted during the course of regular assessment proceedings. Another submission was that the assessee paid consideration at the rate of Rs.5484/- per sq. ft. whereas the valuation fixed by authority at the time of registration of document was Rs.10000/- per sq.ft. On reference made u/s 47A of Transfer of Property Act, 1888, the competent authority fixed the rate at Rs.7500 per sq. ft. Finally, the state government notified rate of Rs.6700/- per sq. ft. on 09-06-2017. Going by the percentage reduction, the stamp duty valuation as on the date of registration should have been Rs.7500x67%=Rs.5025 per sq. ft. which was much less than the consideration actually paid. The remaining two legal heirs sought exclusion as legal representative of the assessee. 6 3.6 However, Ld. Pr. CIT rejected the aforesaid explanations / submissions and held that the fact that the property was related to HUF could not be accepted. The funds were transferred from individual bank account.The fact that the property was introduced as capital in the books of the firm M/s Kanna Silks in the capacity of HUF would not prove that the property was actually purchased in HUF capacity. The other arguments were also rejected. Finally, Ld. AO was directed to treat the differential of Rs.81.64 Lacs as the income of the assessee u/s 56(2)(vii)(b) and pass fresh assessment order. Aggrieved, the assessee is in further appeal before us. Our findings and adjudication 4. As noted by us in preceding paragraphs, the assessee’s case was specifically reopened to examine the source of purchase of property. During the course of assessment proceedings, the assessee furnished various replies and also furnished documents to establish that the property was purchased on behalf of HUF. A specific query was also raised on the applicability of provisions of Sec.56(2)(vii)(b).The assessee defended the same and brought forward the fact that the valuation of the property was under dispute. The same is also evident from the fact that the stamp duty valuation was substantially reduced by the competent authority and ultimately, the state government fixed lower rates of the property.Considering all these submissions, the assessment was framed on 23-09-2021 accepting the returned income. It could very well be said that a possible view was taken by Ld. AO on the issue as flagged by revisionary authority. Having gone through the reply of the assessee and after having satisfied himself, Ld. AO accepted the claim of the assessee with due application of mind. Considering the given factual matrix, the 7 said view of Ld. AO could be said to be one of the possible views. In such a scenario, Ld. Pr. CIT, 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. We find that the view of Ld. AO was a plausible view. Therefore, revision of the order could not be held to be justified and the impugned order is liable to be quashed. We order so. 5. The appeal stand allowed in terms of our above order. Order pronounced on 18th November, 2024. Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपाȯƗ / VICE PRESIDENT लेखा सद˟ / ACCOUNTANT MEMBER चेɄई Chennai; िदनांक Dated : 18-11-2024 DS आदेश की ŮितिलिपअŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "