H.T.L Ltd Vs Pr. CIT (ITAT Delhi)
Held that in case there are two possible views and the AO has taken one of the possible views, no action to exercise powers of revision can arise.
Facts-
A revision order u/s. 263 was passed against the assessee by observing that the order was passed without complying with the provisions of section 50C of the Income Tax Act, 1961. According to the Pr. CIT, the Provisions of Section 50C of the Act are deeming provisions and mandatory, failure of Assessing Officer to apply provisions of Section 50C would render assessment order erroneous and prejudicial to the interest of the revenue.
Conclusion-
Held that it is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By ‘erroneous’ is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is preferred against the order of the PCIT, New Delhi dated 30.03.2019 framed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as ‘The Act’].
2. The sum and substance of the grievance of the assessee is that the PCIT erred in assuming jurisdiction u/s 263 of the Act by holding that the assessment order framed by the Assessing Officer u/s 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue.
3. The representatives of both the sides were heard at length, the case records carefully perused.
4. Briefly stated, the facts of the case are that the assessee company e-filed its return of income on 26.11.2014 declaring income of Rs. 6,24,10,490/- which was processed u/s 143(1) of the Act. Return was selected for scrutiny under CASS and, accordingly, statutory notices were issued and served upon the assessee.
5. The Assessing Officer framed the assessment order u/s 143(3) of the Act on 08.12.2016 by accepting the returned income. Invoking the powers conferred upon him by provisions of section 263 of the Act, the PCIT, Central -3 issued a notice to the assessee which reads as under:
“Office of the Pr Commissioner of Income Tax
(Central)-3, 325, 3rd Floor, ARA Centre, E-2, Jhandewalan Extn,
New Delhi-110055, t 23593426
F. No: PCIT(C)-3/263/2018-19/30V2- Date: 19.03.2019
To
The Principal Officer M/s. H.T.L Ltd.
8, Commercial Complex,
Masjid Moth, Greater Kailash-II New Delhi-110048
Sir,
Sub: Proceedings u/s 263 of the Income Tax Act, 1961 for the Assessment Year 2014-15- M/s. H.T.L Ltd. (PAN: AAACH5516P) – reg.
On examination of Income-tax records of M/s HTL Limited (PAN: AAACH5516P) for the assessment year 2014-15, it is seen that the ACIT, Central Circle-25, New Delhi has passed an order u/s 143(3) of the IT Act, 1961 on 08.12.2016.
On examination, prima facie, it appeared that while passing the order dated 08.12.2016 u/s 143(3) of the Act, the following issues in respect of sale of impugned land measuring 10.162 acres to M/s VGN Developers Pvt. Ltd, Chennai below the stamp duty value in contravention of the provision of the Act (Section 50C) were left unverified:
(i) On perusal of records, it is observed that the Consortium of banks should not have quoted a reserve price much below the Stamp Duty Value, thus defeating the very purpose of the Section 50C of the Income Tax Act purposely inserted for the purpose.
(ii) The stamp duty value of Rs. 387,64,76,000/- should have been considered for the computation of capital gains instead of Rs 272,29,08,000/- the amount of sale. The mistake resulted in under assessment of income of Rs. 115,35,68,000/-.
(iii) Since the provision of section 56(2}(vii)(a) are only applicable only to the individuals and HUF therefore the differential amount of Rs. 115,35,68,000/- could not be brought to tax in the hands of the buyer company either, consequently the differential amount of Rs. 115,35,68,000/-was neither taxed in the hands of assesse’e company nor in the hands of buying company.
3. In view of the above facts, the assessment order dated 08.12.2016 passed u/s 143(3) of the Income-tax Act, 1961, for the assessment year 2014-15 appears to be erroneous and prejudicial to the interest of the revenue. The assessment is framed without carrying out necessary enquiries, investigation & verification by the A.O rendering the assessment erroneous. Therefore, I propose to invoke the provisions of section 263 of the Income tax Act, 1961. In case you have any objection to the proposed action, you may file your objections before me at 11.00 A.M. on 22-03-2019. If no objections are received by the aforesaid date, it will be presumed that you have nothing to say in this matter and order u/s 263 of the Income tax Act, 1961 will be passed on merits on the basis of material! available on record.
Yours faithfully,
(ANURADHA MISHRA)
Pr. Commissioner of Income Tax,
(Centra!)-3, New Delhi.
5. A perusal of the aforesaid notice clearly shows that the PCIT was unaware of the relevant provisions of SARFEASI Act, 2002. We are of the considered view that before issuing notice u/s 263 of the Act and before assuming jurisdiction thereupon, the PCIT ought to have gone through the underlying facts of the case in hand. If the PCIT had gone through the records of the assessee, he would have come to know that the accumulated losses of the assessee were more than the paid up capital and free reserves, the assessee company became a sick company as per the provisions of Sick Industrial Companies Act [SICA] and was referred to the Board of Industrial and Financial Reconstruction [BIFR] u/s 15(1) of the SICA [Special Provisions] Act declaring the company as a sick industrial company.
6. In 2006, the assessee company sought permission for disposal of surplus land of 11.02 acres from the Government of India to redeem the mounting financial burden and also to generate funds needed for its revival.
7. The Government of India gave permission in Assessment Year 2006 for the sale of land, but the sale of land could not be completed in Assessment Year 2006-07 due to State Government’s intervention for buy-back.
8. Since the assessee company could not pay bank dues as demanded by the State Bank of India and other bankers, SBI, on behalf of consortium of banks, issued a notice dated 18.04.2009 to the company u/s 13(3) of SARFEASI Act requiring the company to discharge its full dues and attached the assets including the freehold surplus land mortgaged to the extent of 11.02 acres.
9. SBI took possession of the land on 29.06.2009. Actual measurement of land came to 10.162 acres. The appellate authority for industrial and financial reconstruction, in its order dated 13.10.2010, abated the proceedings of the assessee company’s reference before BIFR and permitted SBI to proceed with the action initiated under the SURFEASI Act for realization of other dues.
10. Facts on record show that SBI made several attempts to sell the vacant land through e-auction four times, i.e. 17.02.2011, 09.03.2011, 05.11.2012 and 23.01.2013. Copies of advertisement in leading newspapers are placed on record.
11. Finally, SBI in its meeting with consortium of banks decided to sell the said land to any prospective buyer who is willing to pay the reserve price of 250 crores or more on private treaty basis.
12. In response to SBI’s callings, M/s VGN Developers Pvt. Ltd, Chennai responded and offered the price of 272.29 crores to SBI in March 2013 and accordingly, SBI sold the land under SARFEASI Act in June 2013b and issued sale certificate to the assessee company and intimated the assessee company regarding the sale of land and the appropriation of sale proceeds thereof.
13. A conspectus understanding of the underlying facts clearly show that sale/transfer of land is effected by SBI under the SARFEASI Act and it has to be understood clearly that the assessee company has not sold/transferred the land of its own. It is known to everyone that SBI is a bank created by the Act of Parliament who has taken possession of the land of the assessee company and the action of the SBI is akin to compulsory acquisition of land by the Government under SURFEASI Act to recover dues of consortium of banks.
14. Facts on record clearly show that in spite of several attempts, SBI could not sell the land at the stamp duty value of Rs. 387.64 crores. Therefore, under the given circumstances, it can be safely concluded that the price realized by SBI is fair market value of land as on the date of sale.
15. We find that vide notice dated 22.2.2016, the Assessing Officer raised 50 queries. The relevant query for the case in hand reads as under:
“Details with supporting evidence in respect of short term capita l pain / loss and long term capita! gain / loss. ”
16. The assessee replied as under:
“Short Term Capital gain – Nil
LT Capital gain – See computation , however reproduced below
