The Delhi Bench of Income Tax Appellate Tribunal has held that fulfillment of twin conditions is mandatory for invoking the jurisdiction u/s 263.
The assesse, Gurbakshish Singh Batra is an individual and filed his return of income declaring the total income at Rs.44,86,160/-. After considering the response of assessee to the statutory notice, the AO passed the order u/s 143(3) determining the total income of the assessee at Rs.45,50,550/- by making an addition of Rs.64,386/- on account of Interest u/s 244A of the Act.
The Pr. CIT, after examining the records, came to the conclusion that the order passed by the AO is erroneous and prejudicial to the interests of the Revenue since the AO has not made enquiry and verification which he should have done in respect of transfer of assets. PCIT has initiated proceedings u/s 263 and the Assessment is cancelled with the direction that made assessment afresh after conducting appropriate enquiries keeping in view of the facts and issues on which the case was selected for limited scrutiny. Aggrieved with such order of the PCIT, assesse filed appeal before the Tribunal.
The appellant submitted that the PCIT does not have unfettered powers to initiate revisionary proceedings u/s 263 in a case where the AO has conducted proper and reasonable enquiry on the issue involved. Since the AO, in the instant case, after deeply examining the issue involved has reached to the conclusion that there is no requirement to substitute the stamp duty value for computing capital gain on sale of asset, the action of the PCIT in treating the assessment order as erroneous or prejudicial for taking a plausible view is arbitrary and merely on the basis of presumption and surmises.
The Tribunal observed that the Pr. CIT, without considering the strict restrictions imposed upon on the assessee has erred in imposing the provisions of section 50C by substituting the stamp duty value in place of sale consideration received by the assessee. The same, being not in accordance with the facts of the case, the jurisdiction u/s 263 could not have been invoked. Further find that, the assessee in the instant case has not sold the leasehold rights by way of any sale deed and rights have only been transferred by way of unregistered Agreement to Sell and as such there is no transfer of leasehold rights as per the provisions of section 54 of the Transfer of Property Act, 1882 read with 2(47) of the Income Tax Act, 1961. Since the provisions of section 50C will come into play only if the transfer is valid under the provisions of Income Tax Act and since the assessee has transferred the leasehold rights in breach of conditions specified in the Lease Deed, there is no case of any chargeability arising out of impermissible transfer of leasehold rights. It is the settled proposition of law that for invoking the provisions of section 263 of the IT Act, the twin conditions, namely, (a) the order must be erroneous and (b) it must be prejudicial to the interest of the Revenue must be satisfied.
The Coram of Sri R.K. Panda, Accountant Member and Sri N.K. Choudhry, Judicial Member has held that “the AO has conducted proper enquiry and has taken a plausible view, therefore, the order cannot be held to be erroneous, therefore, in absence of fulfillment of twin conditions, PCIT is not justified in invoking the jurisdiction u/s 263 of the IT Act, 1961. We, therefore, quash the section 263 proceedings initiated by ld. PCIT and the grounds raised by the assessee are allowed”.
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