PCIT Vs Ayyappa Roller Flour Mills Ltd (Kerala High Court)
In a significant ruling, the Kerala High Court has dismissed an Income Tax Appeal filed by the Revenue, upholding the decision of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The court held that an assessment completed based on a Departmental Valuation Officer’s (DVO) report cannot be revised under Section 263 of the Income Tax Act, 1961, merely due to subsequent administrative doubts or a lack of concrete material demonstrating that the original assessment was erroneous and prejudicial to the Revenue’s interests.
The case, PCIT Vs Ayyappa Roller Flour Mills Ltd. (ITA No.634/Coch/2022), pertained to the assessment year 2011-2012 and involved the computation of capital gains from the sale of land by Ayyappa Roller Flour Mills Ltd. The assessee had entered into a sale agreement and transferred possession of 179.88 cents of land on November 10, 2010, although the sale deed was executed later, on September 28, 2011. The Assessing Officer initially completed the capital gains assessment for the financial year 2011-2012 by invoking Section 2(47) of the Income Tax Act read with Section 53A of the Transfer of Property Act, arriving at a figure of Rs. 38,84,99,952/-.
The assessment underwent several rounds of appeals and remands. Initially, the First Appellate Authority directed the cost of acquisition to be determined based on the fair market value as of April 1, 1981. This led to a revised capital gains figure of Rs. 38,09,53,320/-. Subsequently, the First Appellate Authority further directed the land value to be fixed at Rs. 50,000 per cent, remitting the matter back to the Assessing Officer. The Revenue challenged this before the Appellate Tribunal, which ultimately directed that the fair market value be ascertained through a report from the Departmental Valuation Officer (DVO).
