CIT Revision notice u/s 263 quashed as the Assessing Officer rightly taken DVO value of property sold as actual sale price instead of price mentioned in MoU found during search.
In a recent judgment, Hon’ble Gujarat High Court quashed notice u/s 263 holding that in case it is found that the view adopted by the Assessing Officer is a plausible view taken after considering the relevant material on record, the Commissioner in exercise of revisionary power u/s 263 can not substitute his opinion with that of the Assessing Officer.
ABCAUS Case Law Citation:
5165 (2026) (06) abacus.in HC
In the instant case, the Petitioner assessee had challenged the notices issued by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961 (the Act) seeking to revise completed assessment under Section 143(3) of the Act.
A search and seizure action under Section 132 of the Act was carried out in the case of a Land Broker & Financier Group and from the mobile phone of the one searched party images of one Memorandum of Understanding (MoU) regarding sale of land was found and seized.
On being asked, it was explained that although he was the broker for the said transaction but it eventually did not go through due to Title Disputes. The Officer thereafter investigated the data in public domain and gathered information that the said land was eventually sold to the Petitioner.
The Assessing Officer, thereafter, issued notice under Section 153C of the Act to the petitioner to carry out assessment. In the said Assessment Proceedings, the Assessing Officer referred the matter to Departmental Valuation Officer (DVO) to determine the market Price of the land sold.
Based on DVO report, the AO held the sale consideration for the sale of land was much higher than as per the registered sale deed. The Assessing Officer passed assessment order under Section 153C by making the addition.
While the appeal against the order of the AO was pending the PCIT issued the impugned notice under Section 263 of the Act primarily on two grounds. First, that that the Assessing Officer had erred in using the Valuation Report by the DVO, ignoring the incriminating material found during the search i.e. MoU mentioning the value of the land at much more than DVO valuation and that the Assessing Officer did not record his satisfaction in respect of the proceedings under Section 271D of the Act and he did not initiate such proceedings in the Assessment Order since the Assessee had violated the provisions of Section 269SS of the Act by accepting cash.
The Hon’ble High Court observed that under the provisions of section 271D the Assessing Officer is authorized or has the jurisdiction to impose the penalty only on or after 1st Day of April, 2025 and hence, when the Assessment Order was passed on 19.06.2023, the Assessing Officer could not have passed any order or to even initiate proceedings against the assessee for violation of provision of Section 269SS of the Act and thereby imposing the penalty under Section 271D of the Act. Thus, the PCIT had manifestly erred in not examining the provision of Section 269SS read with Section 271D of the Act.
Regarding the observation of the PCIT with respect to the price as per MoU, the Hon’ble High Court observed that the MoU, which was recovered during the search proceedings, mentioned the name of another person to whom the sale did not fructify. Ultimately it was sold to the appellant after a period of 2 years.
The Hon’ble High Court noted that Assessing Officer had perfunctorily referred the valuation of the land to DVO who has considered the entire material on record, which included circumstantial evidence, sworn statement of searched party and the DVO’s report. The Assessing Officer was conscious of the fact that the value of the land shown in the MoU was much more whereas the sale deed with Petitioner mentioned about the valuation of the land at much less. It was not the case of the PCIT that Assessing Officer had blindly put faith on the statement of the petitioner made. On the contrary, by examining the facts and on the comparison of value of land from MoU and the sale-deed, the Assessing Officer called for the report from the DVO who ultimately valued the land and thereby, the Assessing Officer made an addition at the ends of the petitioner.
Referring to a judgment of a Co-ordinate Bench, the Hon’ble High Court observed that it is settled precedent that though the Commissioner can certainly invoke the powers under Section 263 of the Act, if he or she is of the opinion that the Assessing Officer has passed an order which is erroneous and prejudicial to the interest of the revenue, however such powers are to be exercised sparingly in those case where the Assessing Officer had perfunctorily made the inquiry bereft of any discussion and in case though the inquiry is made, the view taken by the Assessing Officer is erroneous, however, in case it is found that the view adopted by the Assessing Officer is a plausible view taken after considering the relevant material on record, the Commissioner would not substitute his opinion with that of the Assessing Officer.
The Hon’ble High Court opined that in the present case, it cannot be said that the view expressed by the Assessing Officer by referring the valuation of land to DVO and thereby considering the valuation of land on the Valuation Report of the DVO, and making the additions is erroneous. We find that the Assessing Officer has taken a plausible view looking to the facts which were before him and hence, in such circumstances, the Commissioner ought not have to invoke the power under Section 263 of the Act.
As a result, the impugned show-cause notices were quashed and set aside.
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