PCIT Cannot Rely on AI Overview on London Rental Yields to Revise ALV: ITAT quashes Income Tax Revision Against Senior Advocate Mukul Rohatgi [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that the PCIT cannot rely on an AI overview of London rental yields to revise the AnnualLetting Value (ALV) under Section 263. The Tribunal quashed the revision order passed against Senior Advocate Shri Mukul Rohatgi and held that the assessment order was not erroneous or prejudicial to the Revenue.

The assessee was assessed under Section 143(3). Later, the PCIT revised the order under Section 263 on various issues, including low ALV declared for a London property. The assessee had shown ALV of Rs. 3.50 lakhs for seven months as the property was purchased in August 2019.

The PCIT observed that this amount was very low and relied on an AI overview which stated that rental yield in London is around 4% to 6%. On that basis, the PCIT estimated higher ALV and held that the Assessing Officer failed to make proper enquiry.

The assessee’s counsel argued that all details were given during assessment and ALV was declared as per Section 23(1). The assessee’s counsel explained that AI overview is only general data and cannot be used to fix fair rent without proper evidence.

The two-member bench comprising Shri Mahavir Singh (Vice President) and Shri Manish Agarwal (Accountant Member) considered the material placed on record and observed that the PCIT had not brought any specific evidence to show that the ALV declared by the assessee was incorrect.

It observed that the AI overview merely mentioned average rental yields in London and did not provide any legally sustainable basis for determining fair rent under Section 23. The Tribunal pointed out that estimation of ALV must be based on relevant material and proper enquiry, not on general online data.

The tribunal further observed that the assessee had furnished all relevant documents before the Assessing Officer during the scrutiny proceedings and that the Assessing Officer had formed a view after examining the material. It explained that merely because the PCIT had a different opinion on the same set of facts, Section 263 could not be invoked.

The tribunal reiterated that for revision under Section 263, the order must be both erroneous and prejudicial to the interest of the Revenue, and such conclusion must be supported by material on record.

On other issues including mutual funds and penalty under Section 271C, the tribunal observed that the PCIT failed to show how the order was erroneous. Finally, the tribunal quashed the revision order with limited direction to verify cost of one mutual fund. The appeal of the assessee was allowed.

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