Provisions of Section 50C were not applicable as land was sold by the secured lenders to recover from dues, SC dismissed the Special Leave Petition.
In a recent judgment, the Hon’ble Supreme Court has dismissed SLP against the decision of Delhi High Court holding that revision u/s 263 for AO not applying provisions of Section 50C was not justified as land was sold by the secured lenders to recover dues.
ABCAUS Case Law Citation:
4192 (2024) (08) abcaus.in SC
In the instant case, the Income Tax Department had challenged the order passed by the Hon’ble High Court in holding that that invoking revision power u/s 263 for AO not applying provisions of Section 50C was not justified as land was sold by the secured lenders to recover dues.
The respondent/assessee had filed its return which was processed under Section 143(1) of the Income Tax Act, 1961 (the Act). The return was picked up for scrutiny. After scrutiny, the Assessing Officer (AO) framed the assessment order under Section 143(3) of the Act.
The Principal Commissioner of Income Tax (PCIT) invoked the provisions of Section 263 of the Act and accordingly, issued a show cause notice to the respondent/assessee. The issue as per the said SCN was that the assessee had sold a land below the value adopted by the concerned authority for levy of stamp duty and therefore, the assessment made was contrary to the provisions of Section 50C of the Act, as this aspect had not been inquired In the instant appeal, the assessee had challenged the order of CIT(A) in confirming.
Ultimately, the PCIT via revisionary order passed u/s 263 of the Act concluded that the assessment order was both erroneous and prejudicial to the interest of revenue. Accordingly, the assessment order was set aside by the PCIT.
Being aggrieved, the respondent/assessee preferred an appeal with the Tribunal. The Tribunal ruled in favour of the respondent/assessee. The ITAT order was assailed by the Revenue before High Court.
The Hon’ble High Court observed that due to financial instability, the respondent/assessee had made a reference with the Board of Industrial and Financial Reconstruction (BIFR). Subsequently the assessee was governed by the SARFAESI Act.
The State Bank of India which was one of the secured lenders of the respondent/assessee, took steps on behalf of the consortium of lenders for recovering the dues, by seeking to auction the subject land. When the SBI was unable to e-auction the subject land, at a meeting held concerning the consortium of lenders, a decision was taken to fix the reserve price of the subject land. It was in this context, that the SBI finally effected sale of the subject land.
Thus, it was observed that it was not the respondent/assessee who effectuated the sale of the subject land. The subject land was sold by the secured lenders to recover from dues owed by the respondent/assessee. It was in these circumstances, that the Tribunal concluded that the PCIT had failed to notice the underlying facts, while invoking his powers under Section 263 of the Act.
The Hon’ble High Court held that the Tribunal correctly appreciated the law on the subject, which was that for invoking powers under Section 263 of the Act, two conditions have to be met, i.e., not only the order should be erroneous, but it should also be prejudicial to the interest of the revenue. However, in the instant case twin conditions were not met. The Tribunal had correctly interdicted the view taken by the PCIT.
Accordingly, the High Court upheld the order of the Tribunal, that the power under Section 263 of the Act was wrongly exercised by the PCIT
Not satisfied with the order of the High Court, the Revenue challeneged it by filing a Special Leave Petition (SLP) before the Hon’ble Supreme Court.
However, the Hon’ble Supreme Court observed that it was not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition was dismissed.
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