The Surat Bench of the Income Tax Appellate Tribunal (ITAT) upheld the Principal Commissioner of Income Tax (PCIT)’s invocation of Section 263 of the Income Tax Act, 1961, after finding that the Assessing Officer (AO) had erroneously taxed the entire Stamp Valuation Authority (SVA) value under Section 56(2)(x) without considering the purchase price of the property as unexplained investment under Section 69.
Kamaluddin Popatlal Surani, the assessee, engaged in the retail trade of onions and potatoes under Altaf Traders, filed his return of income for Assessment Year (AY) 2017-18 on 31.07.2018, declaring an income of Rs. 3,45,749.
The case was reopened after it was found that the assessee had purchased immovable property for Rs. 33,18,000 on 24.07.2017, whereas the Stamp Valuation Authority (SVA) determined its fair market value (FMV) at Rs. 48,11,989, creating a difference of Rs. 14,93,939.
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The Assessing Officer (AO), in his reassessment order dated 25.03.2022, added the entire Rs. 48,11,989 under Section 56(2)(x) of the Act and initiated penalties under Section 271AAC(1) and Section 272A(1)(b).
The PCIT observed that the AO had failed to apply Section 69A for treating the purchase price of Rs. 33,18,000 as an unexplained investment. The PCIT held that the AO’s order was erroneous and prejudicial to the revenue’s interest, leading to the invocation of Section 263.
The assessee challenged the PCIT’s revision on multiple grounds, including that the AO had already made an addition of the full SVA value under Section 56(2)(x), and revising it under Section 263 was unjustified.
The assessee argued that the property was booked in 2011, and payments were made in installments through cheques between 09.11.2011 to 15.09.2020, proving that no payments were made during AY 2017-18. The assessee’s counsel argued that the first appeal before CIT(A) was already pending, and PCIT could not invoke Section 263 on the same matter.
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The two-member bench comprising Pawan Singh (Judicial Member) and Bijayananda Pruseth (Accountant Member) agreed that PCIT was correct in invoking Section 263 because the AO’s order was erroneous.
The tribunal observed inconsistencies in payment records and property details, necessitating further inquiry to determine the actual year of taxability of the investment and whether payments were correctly recorded and attributable to AY 2017-18. The tribunal remanded the matter back to PCIT, directing a thorough verification of the year of purchase, and payment timeline. The appeal was partly allowed for statistical purposes.
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