INCOME TAX ACT, 1961

Section 263 Section 56(2)(vii)(b)(ii)

Revision under section 263 - Erroneous and prejudicial order - Purchase of industrial plots - Applicability of provisions of section 56(2)(vii)(b)(ii)

Assessment of assessee was completed under section 143(3) at total income of Rs. 13,80,060 by making certain additions/disallowances, including the excess cost claimed in purchase of property. Against this order, assessee preferred an appeal before the CIT(A) who partly allowed the appeal of the assessee, however, the addition towards the excess cost claimed in purchase of property was sustained. Thereafter, vide notice, dated 5-4-2019 CIT (Admn.) invoked the provisions of section 263 for the reason that during the year under appeal assessee had purchased property G-99 and G-100, MIA, Alwar for Rs. 29.00 lakhs each, whereas the stamp duty value of the same was Rs. 36,01,500 and Rs. 36,52,750 respectively and therefore, AO should have invoked the provisions of section 56(1)(vii)(b)(ii) [mistakenly mentioned by CIT, since correct section was 56(2)(vii)(b)(ii)] and should made the addition of Rs. 14,54,250 being the difference between the DLC value and actual purchase consideration. Accordingly the CIT(Admin.) had held the assessment order was erroneous and prejudicial to the interest of revenue. Held: In the instant case, AO had made all the enquiries necessary for completion of assessment. The subject-matter of examination by the AO was limited to the expenses which have been incurred in relation to the industrial plots, however, as far as the applicability of provisions of section 56(2)(vii)(b)(ii) was concerned, there was no material available on record that the AO had carried out any inquiry/examination and sought any explanation from the assessee. Where the matter relating to applicability of provisions of section 56(2)(vii)(b)(ii) had not been examined by the AO and not subject-matter of assessment order, there is no question of application of theory of merger with that of the order of the CIT(A) as so contended by the AR. It was a clear case where the applicability of provisions of section 56(2)(vii)(b)(ii) which are applicable for the impugned assessment year, i.e., assessment year 2015-16 had escaped the attention of the AO which renders the order so passed as erroneous and prejudicial to the interest of the revenue. The fact that the proviso is applicable in the instant case, does not take the impugned transactions of purchase of industrial plots of land out of the applicability of provisions of section 56(2)(vii)(b)(ii) as so contended by the AR. All that it provides was that it shifts the determination of stamp duty value as on the date of agreement, rather than the date of registration of the sale deed. Therefore, the contention so advanced by the AR cannot be accepted. Where the provisions of section 56()(vii)(b)(ii) read with proviso thereof had not been examined by the AO and which undisutedly applies for the impugned assessment year. Therefore, there was no infirmity in the exercise of justification by the Pr. CIT under section 263.

Relied:Pr.CIT v. Oil India (2019) 103 Taxmann.com (Gau) : 2019 TaxPub(DT) 1866 (Gau-HC), Narayan Tatu Rane v. ITO ITA No. 2690 & 2691/Mum/16, dated 6-5-2016 : 2016 TaxPub(DT) 2516 (Mum-Trib), Sanjeev Kr. Khemka v. Pr. CIT (Kol-Trib), CIT v. GAbrial India Ltd. (1993) 203 ITR 108 (Bom)) : 1993 TaxPub(DT) 1357 (Bom-HC) and CIT v. Sunbeam Auto Ltd. (2009) 7 CTR 133 (Del) : 2011 TaxPub(DT) 88 (Del-HC). Distinguished: CIT v. Shri Arbuda Mills Ltd. (1998) 231 ITR 50 (SC) : 1998 TaxPub(DT) 57 (SC), CIT v. Hindustan Aeronautics Ltd. (1986)157 ITR 315 (Karn-HC) : 1986 TaxPub(DT) 360 (Karn-HC), CIT v. Saraf Bandhu (P) Ltd. (1995) 216 ITR 833 (Bom-HC) : 1995 TaxPub(DT) 114 (Bom-HC), Oil India Ltd. v. CIT (1982) 138 ITR 836 (Cal-HC) : 1982 TaxPub(DT) 739 (Cal-HC), CIT v. Rajput (1987) 164 ITR 197 (M.P-HC) : 1987 TaxPub(DT) 900 (MP-HC) and Dwarka Gems v. CIT ITA No. 133/JP/09 orders, dated 30-4-2010 and Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxubDt) 17 (SC).

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