Prem Singh Raja Vs PCIT (ITAT Chandigarh)
The appeals concerned two revision orders passed under Section 263 of the Income Tax Act for Assessment Years 2015–16 and 2017–18. The assessee had entered into agreements to sell immovable properties to M/s Hemali Resorts Pvt. Ltd., which was authorised to assign its rights. The final sale deeds were executed in favour of M/s APG Intelli Homes Pvt. Ltd. In both years, the consideration stated in the registered sale deeds was higher than the amount received by the assessee. The difference was paid by the purchaser to Hemali Resorts under separate arrangements.
For A.Y. 2015–16, the PCIT held that the reassessment order dated 23 September 2021 was erroneous and prejudicial to the Revenue because the Assessing Officer did not examine the taxability of ₹25,59,41,336 paid directly to the confirming party. Similarly, for A.Y. 2017–18, the PCIT observed that the AO failed to scrutinise capital gains with respect to ₹4,37,58,661 paid to Hemali Resorts, treating such sums as part of the assessee’s consideration. The PCIT invoked Explanation 2(a) to Section 263 on the ground of lack of enquiry.
The assessee submitted that binding agreements to sell were executed with Hemali Resorts, with earnest money of ₹10 crore in A.Y. 2015–16 and ₹5 lakh in A.Y. 2017–18. These agreements conferred enforceable rights and allowed assignment to another purchaser. The assessee received ₹81,05,58,664 and ₹5,81,41,340 respectively through banking channels and with TDS appearing in Form 26AS. The remaining sums were paid directly to Hemali Resorts for its contractual rights and site development obligations. According to the assessee, these amounts were neither received nor receivable by the assessee and had already been subjected to tax in the hands of Hemali Resorts. It was contended that no real income accrued to the assessee and that the conditions for Section 263 — the existence of both an erroneous order and prejudice to Revenue — were not satisfied.
