Safe harbour margins under sections 43CA/50C/56(2) retrospectively applicable from inception as curative amendments; PCIT cannot invoke s.263 for marginal valuation difference (5.24%) where AO took permissible view.

आदेश/ORDER 

Per Avdhesh Kumar Mishra, AM:

This appeal for Assessment Year (‘AY’) 2018-19 filed by the assessee is directed against the order, dated 08.03.2025, passed under section 263 of the Income Tax Act, 1961 (‘Act’) by the Principal Commissioner of Income Tax (Central), Bhopal [‘PCIT(C)’]. Further, the assessee has also file a Stay Application (‘SA’) with request to stay the consequential assessment proceedings initiated in pursuance of the order passed under section 263 of the Act by the Ld. PCIT(C).

2. The appellant assessee vide sole ground, read as “The order passed by the PCIT is bad in law, passed without satisfying the conditions mentioned in explanation 2 of the sec 263”, has challenged the validity of the impugned order.

3. The relevant facts giving rise to this appeal are that the appellant assessee filed his original Income Tax Return (‘ITR’) of the relevant year on 29.12.2018 declaring income of Rs.7,95,750/-. The assessee had bought a property; i.e. the land admeasuring 0.405 Hectare having Khasra No.1291/2 Sakti Tehsil for Rs.18,00,000/-; however, he had paid stamp duty on the market value of Rs.46,33,000/- the said property determined by the Stamp Valuation Authority/Sub Registrar for levying stamp charges. Since, the difference of value adopted by the Stamp Valuation Authority/Sub- Registrar and the actual purchase consideration taxable under section 56(2)(x)(b) of the Act, which was not offered for tax; therefore, the Ld. Assessing Officer (‘AO’) inferring that the escapement of income of Rs.28,33,000/- (Rs.46,33,000/- minus Rs.18,00,000/-) chargeable to tax under section 56(2)(x)(b) of the Act had taken place. Consequentially, the Ld. AO re-opened the assessment under section 148 of the Act. The consequential reassessment was completed accepting the returned income of Rs.7,95,750/- vide order dated 25.03.2023 passed under section 147 of the Act. In another words, the Ld. AO did not make any addition under section 56(2)(x)(b) of the Act in the reassessment order. Thereafter, the case was reviewed by the Ld. PCIT(C), who taking note of the fact that the Ld. AO, on the assessee’s challenge of valuation of the property by the Stamp Valuation Authority/Sub-Registrar proceedings, referred the valuation of the said property to the DVO during the reassessment proceedings. The Valuation Officer valued the property at Rs.18,94,339/- as against the purchase consideration at Rs.18,00,000/-. The difference of Rs.94,339/- (Rs.18,94,339/- minus Rs.18,00,000/-) was not taxed by the Ld. AO in the re-opened assessment as under:

“As per valuation report dated 17/03/2023, the VO has estimated the value as under: -

The VO has estimated the value of land at Rs.18,94,339/- whereas the assessee has declared Rs.18,00,000/-. Thus, difference is Rs.94,339/- which comes to 5.24% in ratio.

8. After considering all facts and submission made by the assessee, the taxable income of the assessee company is determined at Rs.7,95,750/-”

3.1 Vide impugned order, the Ld. PCIT(C) remanded the issue of taxability of the difference of Rs.94,339/- as under:

“4. …….

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The order passed by the AO is erroneous as the safe harbor margin of 10% or 5% is not applicable in this case because the year under consideration is A.Y. 2018-19 whereas safe harbour margin of 10% was introduced vide Finance Act, 2020 applicable from 01.04.2021. Earlier, it was five percent inserted vide Finance Act, 2018 w.e.f. 01.04.2019. Relevant portion of Circular no. 08/2018 dated 26.12.2018 is reproduced as under:

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11. Accordingly, after careful examination of the facts placed on record and th