PCIT Precluded From Initiating Proceedings Based On Document Not Forming Part Of Any Proceedings: ITAT
Mariya Paliwala
23 Oct 2023 6:30 AM GMT
The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the basis to initiate the proceedings under Section 263 of the Income Tax Act by the PCIT is misplaced as it was based on the document, which was not forming part of any proceedings.The bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) has observed that the report from the Departmental...
The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the basis to initiate the proceedings under Section 263 of the Income Tax Act by the PCIT is misplaced as it was based on the document, which was not forming part of any proceedings.
The bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) has observed that the report from the Departmental Valuer (DVO) was received by the AO after the assessment order passed, which evidences that the report was not available or part of the assessment records. Accordingly, based on the documents that were not part of the assessment records, the PCIT is precluded from initiating the proceedings under Section 263.
The appellant/assessee is in the business of real estate. The assessee sold a part of the land. The corresponding cost of the part of the land sold by the assessee was Rs. 23,83,588.00, which was valued by the registered valuer as of April 1, 1981, at Rs. 71,98,971, which was indexed at Rs. 2,64,55,981 only. Thus, the assessee, in effect, has disclosed long-term capital gains amounting to Rs. 2,52,02,906 only.
However, the PCIT, on examination of the records of the assessment proceedings, found that the DVO has valued such land at Rs. 9,26,771.00 only, and the indexed cost stands at Rs. 94,90,132, whereas the assessee has claimed an indexed cost of Rs. 2,64,55,981, which is in excess of Rs. 1,69,65,849 only.
The PCIT was of the view that the income of the assessee has been under-assessed on account of the error in taking the wrong value of the property. Thus, the PCIT concluded that the assessment framed by the AO is erroneous insofar as it is judicial to the interest of revenue on account of the non-examination of the necessary facts. Accordingly, the PCIT directed the AO to frame the assessment afresh as per the provisions of the law and after giving the opportunity to the assessee.
The assessee contended that the valuation report of the DVO was received by the AO on January 3, 2018, whereas the assessment was framed on December 29, 2017. Thus, there is no ambiguity about the fact that the valuation report from the DVO was not available at the time of assessment. The report of the DVO was not part of the records of the assessment, and therefore no credence can be given to such a report.
The department contended that the object of the provisions of Section 263 is to ensure that there should not be any loss to revenue on account of the error committed by the AO. There is an error in the order of the assessment that is causing prejudice to the interest of revenue, as discernible from the DVO report.
The court held that the commissioner under Section 263 may call for the assessment records and examine them. On examination of the assessment records, if the PCIT finds any error in the order of the AO causing prejudice to the interest of revenue, then he can initiate the proceedings under the provisions of Section 263.
Counsel For Appellant: Hem Chhajed
Counsel For Respondent: Sudhendu Das
Case Title: M/s. Visu Casement Pvt. Ltd. Versus PCIT
Case No.: ITA No. 306/AHD/2020
