Commissioner of Income-tax, Ward-3, Tirunelveli v. Padmavathi
[Citation -2020-LL-1006-44]

Citation 2020-LL-1006-44
Appellant Name Commissioner of Income-tax, Ward-3, Tirunelveli
Respondent Name Padmavathi
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 06/10/2020
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags computer aided scrutiny selection • prejudicial to the interest • erroneous and prejudicial • purchase consideration • valuation of property • deeming provision • fair market value • scope of enquiry • lack of enquiry • guideline value • time barred • stamp duty
Bot Summary: Whether on the facts and in the circumstance of the case the Income Tax Appellate Tribunal was right in concluding that while completing the assessment under limited scrutiny the Assessing Officer cannot look beyond the issue for which the case was selected for scrutiny without noting that the CBD instruction No.20/2015 has exception clause in 3(d) to convert the same into a complete scrutiny 3. Without prejudice to the said submission, the assessee contended that the guideline value be automatically taken as deemed purchase consideration and the assessing officer has to refer to the valuation officer under Section 50(C)(2) of the Act and since the assessment was getting time barred, the assessing officer, stepped into the shoes of the valuation officer, made enquiry and ascertained that the guideline value was not fair market value of the property and the actual consideration paid by the assessee represented the fair market value. The revenue would contend that the finding rendered by the Tribunal with regard to the scope of limited scrutiny and the role of the assessing officer in a limited scrutiny is incorrect and such finding has been rendered by the Tribunal without taking note of the instruction issued by Central Board of Direct Taxes, for brevity 'CBDT' in instruction No.20/2015 dated 29.12.2015. Drawing our attention to the said instruction, it is submitted that during the course of assessment proceedings in limited scrutiny cases, if it comes to the notice of the assessing officer that there is potential escapement of income exceeding Rs.5 Lakhs for metro charges, the monetary limit shall be Rs.10 Lakhs requiring substantial verification on any other issue the case may be taken up for 'complete scrutiny', with the approval of the PCIT / CIT concern. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial year - one is 'Limited Scrutiny' and other is 'complete Scrutiny'. The procedure for handling 'Limited scrutiny' cases shall be as under: a. In 'Limited scrutiny' cases, the reasons / issues shall be forthwith communicated to the assessee concerned. d. During the course of assessment proceedings in 'Limited Scrutiny' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. Five lakhs requiring substantial verification on any other issue(s) the case may be taken up for 'complete Scrutiny' with the approval of the Pr.CIT/CIT concerned.


TCA.No.350 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.10.2020 CORAM: HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE Mrs.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.350 of 2020 Commissioner of Income Tax, Ward - 3, Tirunelveli .. Appellant Vs. Smt.Padmavathi .. Respondent Tax Case Appeal filed under Section 260A of Income Tax Act, 1961, against order made in ITA No.1306/Chny/2019 dated 02.12.2019 passed by Income Tax Appellate Tribunal, 'C' Bench, Chennai for Assessment Year 2014-2015. For Appellant : Mr.M.Swaminathan Senior Standing Counsel Assisted by Ms.V.Pushpa Junior Standing Counsel For Respondent : Mr.G.Baskar 1/14 http://www.judis.nic.in TCA.No.350 of 2020 JUDGMENT [Judgment of Court was delivered by T.S.SIVAGNANAM, J.] This appeal, at instance of revenue filed under Section 260A of Income Tax Act, 1961 (the 'Act' for brevity), is directed against order passed by Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai in ITA No.1306/Chny/2019 dated 02.12.2019 for Assessment Year 2014-2015. 2. following Substantial Questions of Law were raised for consideration: 1. Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in coming to conclusion that in limited scrutiny case, CIT cannot exercise power of revision u/s. 263 of Income Tax Act to look in to any other issue which Assessing officer himself could not look? 2. Whether on facts and in circumstance of case Income tax Appellate Tribunal was right in holding that invoking of Section 56(2)(vii)(b) of Income Tax Act 1961 is beyond purview of Assessing officer when reason for limited scrutiny is 'purchase of property' and same issue is very much related to purchase of property? 2/14 http://www.judis.nic.in TCA.No.350 of 2020 3. Whether on facts and in circumstance of case Income Tax Appellate Tribunal was right in concluding that while completing assessment under limited scrutiny Assessing Officer cannot look beyond issue for which case was selected for scrutiny without noting that CBD instruction No.20/2015 has exception clause in 3(d) to convert same into complete scrutiny?" 3. assessee is individual and partner in firm under name and style of Sri Ram Associates. She filed her return of income on 27.10.2015 admitting total income of Rs.2,58,110/-. return was processed under Section 143(1) of Act. Subsequently, case was selected under Computer Aided Scrutiny Selection [for brevity 'CASS'] 'Limited Scrutiny' with regard to purchase of property by assessee. assessing officer after hearing assessee, verifying source of funds completed assessment by order dated 28.12.2016 under Section 143(3) of Act and made addition of Rs.8,00,000/-. 4. Principal Commissioner of Income Tax, Madurai [for brevity 'PCIT'] invoked his power under Section 263 of Act, issued show cause notice dated 26.10.2018 to assessee for reason that assessee had purchased immovable property by sale deed registered as 3/14 http://www.judis.nic.in TCA.No.350 of 2020 document no.7165 of 2013 on file of Sub-Registrar, Thirumangalam for consideration of Rs.41,50,000/-, whereas, guideline value fixed by State Government was Rs.77,19,000/- and there is difference of Rs.35,69,000/- which was not properly enquired into by assessing officer and not considered during course of assessment. For such reason, assessing officer proposed to invoke his powers under Section 263 of Act. 5. assessee submitted her reply dated 11.01.2019 and also appeared in-person through her Authorised Representative, Chartered accountant. In explanation, assessee pointed out that even going by averments in show cause notice shows that assessing officer did make enquiry, but PCIT was of opinion that assessing officer did not make proper enquiry and contended that there is difference between lack of enquiry and indeaquate enquiry and in this regard, referred to decision of High Court of Delhi in C.I.T. V. Anil Kumar Sharma reported in [2011] 335 ITR Page 83. 6. Further, assessee contended that assessing officer has clearly recorded guideline value and sale consideration in 4/14 http://www.judis.nic.in TCA.No.350 of 2020 assessment order, which proves that he conducted necessary enquiry, as deemed fit by him. Therefore, assessee contended that there was no reason to invoke power under Section 263 of Act, when there was enquiry and on ground that enquiry was inadequate. Without prejudice to said submission, assessee contended that guideline value be automatically taken as deemed purchase consideration and assessing officer has to refer to valuation officer under Section 50(C)(2) of Act and since assessment was getting time barred, assessing officer, stepped into shoes of valuation officer, made enquiry and ascertained that guideline value was not fair market value of property and actual consideration paid by assessee represented fair market value. Therefore, it was contended that there was no occasion for PCIT to invoke power under Section 263 of Act. assessee placed reliance on decision of Agra Tribunal in case of Income Tax officer, 1(3) Vs. Ramesh Chandra Kulshresth and others ITA No.228/Agra/ 2018. 7. PCIT considered explanation and held that in first place request has to be made by assessee for valuation of property and nothing is discernible from records that assesee made any request, 5/14 http://www.judis.nic.in TCA.No.350 of 2020 which needs to any inference that assessing officer did apply his mind to fair market value and consequential taxability of investment as 'unexplained investment' under Section 56(2)(vii)(b)(ii) of Act. 8. PCIT further held that though assessing officer verified source of funds, he failed to apply said provision, namely, Section 56(2)(vii)(b)(ii) of Act. Thus, PCIT rejected explanation given by assessee and set aside assessment and referred back same to assessing officer to redo assessment. assessee challenged said order dated 18.03.2019 passed under Section 263 of Act by filing appeal before Tribunal. Tribunal held that value adopted for stamp duty purposes is taken as 'deemed consideration' under Section 56(2)(vii)b of Act and this is only deeming provision and there is no occasion for assessee to explain source for deemed consideration. Further, Tribunal held that since assessment was under limited scrutiny, it would be beyond powers of assessing officer to look into any other issue, which has come to his notice clearing course of assessment and also faulted PCIT for invoking his power under Section 263 of Act. Challenging said order, Revenue is before us by way of this appeal. 6/14 http://www.judis.nic.in TCA.No.350 of 2020 9. We have heard Mr.M.Swaminathan, learned senior standing counsel assisted by Ms.V.Pushpa, learned junior standing counsel for appellant / revenue and Mr.G.Baskar, learned counsel, accepting notice on behalf of respondent / assessee. 10. We take up substantial question of law No.3 for consideration at first instance. revenue would contend that finding rendered by Tribunal with regard to scope of limited scrutiny and role of assessing officer in limited scrutiny is incorrect and such finding has been rendered by Tribunal without taking note of instruction issued by Central Board of Direct Taxes, [for brevity 'CBDT'] in instruction No.20/2015 dated 29.12.2015. Drawing our attention to said instruction, it is submitted that during course of assessment proceedings in limited scrutiny cases, if it comes to notice of assessing officer that there is potential escapement of income exceeding Rs.5 Lakhs [for metro charges, monetary limit shall be Rs.10 Lakhs] requiring substantial verification on any other issue, then, case may be taken up for 'complete scrutiny', with approval of PCIT / CIT concern. In such cases, procedure stipulated in paragraph no.3.a.b.c. of instructions, would not apply. For better appreciation, relevant 7/14 http://www.judis.nic.in TCA.No.350 of 2020 portion of instruction is quoted herein below: '3. As far as returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in current Financial year - one is 'Limited Scrutiny' and other is 'complete Scrutiny'. assessees concerned have duly been intimated about their cases falling either in 'Limited scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of Income-tax Act, 1961 ('Act'). procedure for handling 'Limited scrutiny' cases shall be as under: a. In 'Limited scrutiny' cases, reasons / issues shall be forthwith communicated to assessee concerned. b. Questionnaire under section 142(1) of Act in 'Limited Scrutiny' cases shall remain confined only to specific reasons / issues for which case has been picked up for scrutiny. Further, scope of enquiry shall be restricted to 'Limited Scrutiny' issues. c. These cases shall be completed expeditiously in limited number of hearings. d. During course of assessment proceedings in 'Limited Scrutiny' cases, if it comes to notice of Assessing Officer that there is potential escapement of income exceeding Rs. Five lakhs (for metro charges, monetary limit shall be Rs.Ten lakhs) requiring substantial verification on any other issue(s), then, case may be taken up for 'complete Scrutiny' with approval of Pr.CIT/CIT concerned. 8/14 http://www.judis.nic.in TCA.No.350 of 2020 However, such approval shall be accorded by Pr.CIT/CIT in writing after being satisfied about merits of issue(s) necessitating 'Complete Scrutiny' in that particula case. Such cases shall be monitored by Range Head concerned. procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For present purpose, 'Metro Charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad).' 11. It is further submitted that Tribunal in subsequent decision, authored by very same Hon'ble Member took note of circular and decided case against assessee in ITA No.1498/Chny/2019 in case of M/s Sahayamatha Salterns Private Limited, Tuticorin Vs. Deputy Commissioner of Income Tax, Circle I, Tuticorin dated 11.12.2019. Therefore, it is submitted that Substantial Question of Law no.3 has to be answered in favour of revenue. 12. Mr.G.Baskar, learned counsel appearing for respondent / assessee submitted that revenue is right in submitting that in case of Sahayamatha Salterns Private Limited, Tribunal noted instruction No. 20/2015 dated 29.12.2015 and decided matter against assessee. However, assessee has filed appeal before this Court in 9/14 http://www.judis.nic.in TCA.No.350 of 2020 TCA No.158 of 2020 and appeal has been admitted to consider substantial question of law, which has been framed almost on similar lines, as substantial question of law no.3 above. 13. We note that Tribunal did not consider effect of instruction no.20/2015, which had been considered in case of Sahayamatha Salterns Private Limited, which issue is now pending before Division Bench of this Court by way of Tax Case Appeal, therefore, we are of view that Revenue can agitate said question in said tax case appeal and it would suffice to vacate observations made by Tribunal in impugned order to extent with regard to scope of 'limited scrutiny assessments'. 14. Accordingly, that portion of order and observations made in paragraph no.7 of impugned order are set aside and substantial question no.3 is left open to be agitated by Revenue in TCA No.158 of 2020. 15. substantial question nos.1 and 2 are interconnected namely, power of PCIT under Section 263 of Act and whether he could have 10/14 http://www.judis.nic.in TCA.No.350 of 2020 set aside assessment on ground that assessing officer did not invoke Section 56(2)(vii)b(ii). reading of assessment order shows that case was selected for limited scrutiny only on this aspect regarding sale consideration paid by assessee for purchase of immovable property and source of funds. assessing officer has noted that sale consideration paid by assessee was Rs.41,50,000/- and she has paid stamp duty and other expenses of Rs.5,75,000/-. source of funds was verified and assessing officer was satisfied with same. PCIT while invoking his power under Section 263 of Act, faults assessing officer on ground that he did not make proper enquiry. It is not clear as to what in opinion of PCIT is 'proper enquiry'. By using such expression, it presupposes that assessing officer did conduct enquiry. However, in opinion of PCIT, enquiry was not proper in absence of not clearly stating as to why in opinion of PCIT, enquiry was not proper, we have to necessarily hold that invocation of power under Section 263 of Act was not justified. 16. only reason for setting aside scrutiny assessment was on ground that guide line value of property, at relevant time, was higher than sale consideration reflected in registered 11/14 http://www.judis.nic.in TCA.No.350 of 2020 document. question would be as to what is effect of guideline value fixed by State Government. There are long line of decisions of Hon'ble Supreme Court holding that guideline value is only indicator and same is fixed by State Government for purposes of calculating stamp duty on deal of conveyance. Therefore, merely because guideline was higher than sale consideration shown in deed of conveyance, cannot be sole reason for holding that assessment is erroneous and prejudicial to interest of revenue. 17. assessing officer in his limited scrutiny, has verified source of funds, noted sale consideration paid, expenses incurred for stamp duty and other charges. Furthermore, assessee in their reply dated 11.01.2019 to show cause notice dated 26.10.2018 issued by PCIT has specifically stated that assessment was getting time barred, assessing officer took upon himself role of valuation officer under Section 50(C)(2) and found that guideline value was not actual fair market value of property and actual consideration paid was fair market value and therefore, he did not choose to make any addition under Section 50(C) of Act. 12/14 http://www.judis.nic.in TCA.No.350 of 2020 18. PCIT, has not dealt with this specific objection, but, would fault assessing officer for not invoking Section 56(2)(vii)(b)(ii) merely on ground that market value was higher. As point out earlier, guideline value is only indicator and that will always not represent fair market value of property and therefore, invocation of power under Section 263 of Act by PCIT is not sustainable in law. In result, present appeal is dismissed and substantial question of law nos.1 and 2 are answered against revenue and substantial question of law no.3 is left open to revenue to agitate same in TCA No.158 of 2020. No costs. [T.S.S.J.,] [V.B.S.J.,] 06.10.2020 Internet: Yes Speaking Judgment / Non speaking Judgment To Income Tax Appellate Tribunal, 'C' Bench, Chennai ssd 13/14 http://www.judis.nic.in TCA.No.350 of 2020 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J ssd Tax Case Appeal No.350 of 2020 06.10.2020 14/14 http://www.judis.nic.in Commissioner of Income-tax, Ward-3, Tirunelveli v. Padmavathi
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