The Income Tax Appeal Tribunal of the Court of Delhi ruled that the fulfillment of the twin conditions is mandatory for invoking u/s 263 jurisdiction.
The assessed, Gurbakshish Singh Batra is an individual and has filed his tax return declaring the total income at Rs.44,86,160/-. After reviewing the assessee’s response to the statutory notice, the AO passed u/s Order 143(3) determining the assessee’s total income at Rs.45,50,550/- adding Rs. 64,386/- on interest account u/s 244A of the Act.
Prof. Le CIT, after reviewing the files, came to the conclusion that the order placed by the AO is wrong and prejudicial to the interests of the tax authorities since the AO did not investigate and verify that he should have done in asset transfer. The PCIT initiated u/s 263 proceedings and the assessment is rescinded with management conducting a new assessment after conducting appropriate investigations taking into account the facts and matters upon which the matter was selected for a limited review. Injured by this order of the PCIT, the notary appealed to the Tribunal.
The appellant argued that the PCIT does not have absolute authority to initiate u/s 263 review proceedings in a case where the AO has conducted a proper and reasonable investigation into the matter at issue. Since the AO in this case, after a thorough examination of the matter at hand, has come to the conclusion that it is not necessary to substitute the value of the stamp duty for the calculation of the plus- valuation on the sale of assets, the PCIT’s action in treating the valuation order as erroneous or prejudicial to adopt a plausible view is arbitrary and merely based on presumption and conjecture.
The Court observed that Prof. CIT, disregarding the strict restrictions imposed on the assessee, erred in imposing the provisions of Section 50C by substituting the value of the stamp duty in place of the consideration of the sale received by the assessee. Similarly, not being consistent with the facts of the case, jurisdiction u/s 263 could not have been invoked. Further find that, the appraise in this case did not sell the leasehold rights by means of a bill of sale and that the rights were only transferred by means of an unregistered agreement of sale and that there is therefore no transfer of tenancy rights pursuant to the provisions of section 54 of the Transfer of Property Act, 1882 read with 2(47) of the Income Tax Act, 1961. As the provisions of Section 50C will only come into play if the transfer is valid under the provisions of the Income Tax Act and since the assessee has transferred the rights to the lease in violation of the conditions specified in the deed of lease, there is no case of exigibility resulting from an inadmissible transfer of the rights to the lease. It is the settled proposition of law that in order to invoke the provisions of Article 263 of the Computer Law, the two conditions, namely, (a) the order must be erroneous and (b) it must be detrimental to the interest of the tax authorities must be satisfied.
The Coram of Sri RK Panda, Accounting Member and Sri NK Choudhry, Judicial Member ruled that “the AO has conducted a proper investigation and adopted a plausible opinion, therefore, the order cannot be considered erroneous, therefore, in the absence of compliance with the twin conditions, the PCIT is not justified in ordering invoke jurisdiction u/s 263 of the Computer Act , 1961. We therefore set aside the proceedings under section 263 brought by ld. PCIT and the reasons raised by the assessee are admitted”.
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