ITAT Quashes Income Tax Addition In Respect Of Immovable Property Warranting Revision By The PCIT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the income tax addition in respect of immovable property, warranting revision by the PCIT.

The bench of Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) has observed that AO, after making adequate inquiries, proceeded to make an addition for alleged money receipts on a protective basis in the hands of the assessee. When adequate inquiries were made, they could not be subjected to revision by the PCIT under Section 263 merely because the PCIT had a different view on the issue.

The assessee/appellant filed a letter to the AO stating that M/s RNB Mercantile Pvt. Ltd. had filed a settlement application before the Settlement Commission in which the money transactions in the subject property were duly offered by the company before the Settlement Commission.

The AO did not take cognizance and proceeded to treat the money receipts as undisclosed income of the assessee on a protective basis, with the observation that they would be reviewed based on the outcome of the settlement petition. Finally, the Interim Board for Settlement disposed of the settlement application and passed an order in the hands of M/s RNB Mercantile Pvt. Ltd.

Before passing the order, the PCIT stated in its Rule 9 Report that the capital gain had to be assessed in the hands of the assessees as they are the registered owners of the property.

The department's argument was rejected by the Settlement Commission. The Settlement Commission categorically held that the subject mentioned land has formed part of the assets of M/s RNB Mercantile Pvt. Ltd. since its date of purchase, and hence the capital gains shall be assessable only in the hands of the company and not in the hands of assessees.

Based on the order of the Settlement Commission, the CIT (A) deleted the protective addition made by the AO in the hands of the assessee. The PCIT, by invoking the revision jurisdiction under Section 263, is seeking to tax the very same sum in the hands of the assessee on a substantive basis.

The PCIT had passed a revision order by treating the order passed by the AO as erroneous and prejudicial to the interests of the Revenue on the ground that the undisclosed income from the sale of property ought to have been assessed on a substantive basis in the hands of the assessee instead of on a protective basis.

The tribunal ruled that once a matter has been considered and decided by the CIT (A), in terms of the provisions of Explanation 1(c) to Section 263, the very same issue cannot be the subject matter of any consideration at all by the PCIT in the revision proceedings, either on a substantive or a protective basis. The revision order under Section 263 deserves to be quashed.

Case Title: Vikram Bajaj Versus PCIT

Case No.: ITA No.552/Del/2021

Date: 27.07.2023

Counsel For Appellant: Sumit Lalchandani

Counsel For Respondent: Prakash Nath Barnwa

Click Here To Read The Order