SMT. RASHMI PAHARIYA,JABALPUR vs. PR.COMMISSIONER OF INCOME TAX-1, JABALPUR

This is an Appeal by the Assessee agitating the revision of her assessment under section 143(3) read with section 147 of the Income Tax Act, 1961 („the Act‟ hereinafter) dated 14/07/2016 for Assessment Year (AY) 2009-10 by the Principal Commissioner of Income Tax (Pr. CIT) vide his order u/s. 263, dated 27/02/2019.

The only issue arising per the instant appeal is the maintainability of the impugned order, whereby the impugned assessment has been held as erroneous and prejudicial to the interests of the Revenue, and set aside to the file of the AO with certain directions.

The brief facts of the case leading to the instant appeal are that the assessment in the assessee‟s, an individual, case was in the first instance completed 1 | P a g e (A.Y. 2009-10) Rashmi Pahariya vs. Pr. CIT u/s. 143(3) at the returned income of Rs. 5,10,900 and agricultural income of Rs. 1,67,200. Subsequently, it was found by the Revenue that the assessee had during the relevant previous year sold land valued at Rs. 30 lacs or more. Notice u/s. 148 was accordingly issued and served on the assessee on 31/03/2016. The assessee responded by stating that the return filed earlier (on 03/11/2009) be treated as the return of income in compliance to the notice u/s.

The AO found that assessee had disclosed the said transaction, reporting it‟s purchase (on 20/03/2006) and sale (05/06/2008) at Rs. 19.60 lacs and Rs. 23 lacs respectively, so that capital gain arising had been duly returned by the assessee. The assessment was accordingly closed, accepting the returned income. The Pr. CIT, on an examination of the record, found that the AO had in the assessment proceedings failed to examine the applicability of sec.50C or made any enquiry in its respect. He, accordingly, invoking clauses (a) & (b) of Explanation 2 to sub-section (1) of s. 263, set aside the impugned assessment, observing as under:- “7. It is clear that the Assessing Officer has not verified or examined the applicability of provisions of section 50C of the Act in this case, particularly so, when the case was reopened for the reason that capital gain arising out of the sale of immovable property chargeable u/s 50C has escaped assessment. In such circumstances, when the case was specifically reopened to examine the applicability of section 50C of the Act on sale of immovable property, passing assessment order without examining and verifying the same has rendered the assessment order passed u/s 147 r.w.s. 143(3) dated 14.7.2016 as erroneous in so far as it was prejudicial to the interest of revenue, in term of clause (a) & (b) of Explanation 2 to sub section (1) of Section 263 of the Act. Accordingly, the same is set-aside. The AO is directed to re-examine the applicability of section 50C of the Act and pass a speaking order in accordance, with the provisions of the Act, after allowing reasonable opportunity of being heard to the assessee.”

We have heard the parties, and perused the material on record. 4.1 It is an admitted fact that there has been no enquiry during the assessment proceedings in respect of the applicability of sec. 50C even as the sole basis for reopening of the assessee‟s case was the sale of land by her in view of the information as to it‟s market value at the relevant time being at Rs.30 lacs or more. The Apex Court has in Malabar Indl. Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC) laid (A.Y. 2009-10) Rashmi Pahariya vs. Pr. CIT down a four-way test for the applicability of sec. 263, i.e., which makes an order vulnerable to revision on the ground of it being erroneous and prejudicial to the interests of the Revenue, i.e., - wrong assumption of facts; - incorrect application of law; - no proper application of mind; and - an omission to observe the principles of natural justice (also see: CIT vs. Jawahar Bhattacharjee [2012] 341 ITR 434 (Gau)(FB)). It is trite law that an absence of enquiry or lack of proper enquiry, i.e., where and to the extent due or warranted under the circumstances, would make an order per se erroneous and prejudicial to the Revenue liable for revision u/s.

Case law in the matter, even by the Apex Court, is legion, even as we may, if only for the sake of completeness of this order, make a reference to some decisions by the Hon'ble jurisdictional High Court, viz. CIT vs. Deepak K. Garg [2008] 299 ITR 435 (MP); CIT v. Mahavar Traders [1996] 220 ITR 167 (MP); H.H. Maharaja Raja Pawar Dewas v. CIT [1982] 138 ITR 518 (MP).