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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI C.M. GARG, JM & SHRI MANISH BORAD, AM
Per Bench: By way of this appeal, the assessee has challenged the revisionary proceedings initiated u/s 263 of the Income Tax Act 1961 (hereinafter referred to as 'The Act' for short) by the Ld. Pr. CIT-2, Bhubaneswar vide order dated 26.03.2019. 2. This appeal is barred by limitation of 224 days. Ld. AR of the assessee has filed an application along with affidavit for condonation of delay stating the reasons for delay mentioned therein. Ld. DR objected to condone the delay and submitted that no sufficient cause for delay has been stated by the assessee, therefore, delay should not be condoned. In this regard, ld. DR placed reliance on the decision of Ornate Traders (P)
The assessee has raised following grounds of appeal:-
That the order passed by the Learned Pr. Commissioner of Income Tax-2, Bhubaneswar u/s 263 of the LT. Act, 1961 is excessive, arbitrary and bad in law.
That on the fact and circumstances of the case and in law, the revisionary proceeding u/s 263 of the LT.Act,1961 by the Learned Pr. Commissioner of Income Tax-2, Bhubaneswar merely on the basis of finding of the internal audit observations of the internal audit party is bad in law and required to be quashed.
That on the fact and circumstances of the case and in law, the revisionary proceeding u/s 263 of the IT.Act, 1961 is bad in law in absence of any new fact, information, corroborative evidence or materials being made available by the Learned Pr. Commissioner of Income Tax-2, Bhubaneswar, the impugned order u/s 263 of the Act be annulled and quashed.
That the appellant may add, alter, delete or modify any of the grounds at the time of hearing of the matter with the leave of the Hon'ble ITAT.
Brief facts of the case as culled out from the records are that the assessee is an individual filed his return of income for A.Y.2012-2013 on 29.08.2012 declaring total income of Rs.1,82,100/- from civil contract. The case of the assessee was selected for scrutiny u/s.147 of the Act followed by serving of statutory notices along with questionnaire. Thereafter the assessment was completed on 10.11.2016 on total income of Rs.3,41,780/- u/s.143(3)/147 of the Act, making additions of Rs.9,674/- on account of income from other sources and Rs.1,50,000/- on account of income from commission.
Subsequently, Ld. Pr. CIT assuming juri iction u/s 263 of the Act issued following show cause notice:
3 GOVERNMENT OF INDIA OFFICE OF THE PR.COMMISSIONER OF INCOME T AX-2, 2nd FLOOR ,AAYAKAR BHAWAN, RAJASWA VIHAR, BHUBANESWAR - 751 007. F. No.Pr.CIT-2/BBSR/J & T/263/2018-19/4023 Dated, Bhubaneswar the 16th Jan.,2019. To SHRI SANGRAM KESHARI SAMANTARAY, PLOT N0.38, CHINTAMANISWAR AREA, BUDHESWARI, BHUBANESWAR -751006. PAN: BBOPS7915N Sir, Sub: Initiation of proceedings u/s 263 of the I.T.Act,1961 for the Asst. Year 2012-13 - Matter regarding. The assessment in your case for the Assessment Year 2012-13 was completed by the Assessing Officer (here-in-after A.O.) namely ITO, Ward-5(3), Bhubaneswar vide order u/s 143(3)/147 of I.T.Act ,1961 dated 10.11.2016 determining total income at Rs.3,41,780/-. On verification of case record it is observed that you have' purchased immovable property for a consideration of RS.48,48,OOO/- and paid Stamp Duty of Rs.1,60,OOO/- and Registration Fee of Rs.82,400/- totaling Rs.50,90,400/-. With regard to the source of investment in the immovable property, you have claimed to have received advances for sale of land from eight different persons. On the basis of confirmation received, the AO has accepted the source of investment in the immovable property. It is observed from the confirmations received that the persons have not furnished the basic information like PAN, Bank Account No., copy of IT. Returns etc. to establish the creditworthiness of the persons making advance. Most of the persons have admitted that they have given advance in cash but the date of payment has not been provided by them. It is also not verified that whether the persons, who have given advance, were man of means to advance such a huge sum. Hence, the investment in immovable property of Rs.50,90,400/- has been accepted by the AO without conducting due and proper enquiry. In view of the above, the assessment order passed u/s 143(3)/147 of the Income-tax Act,1961 dated 10.11.2016 appears to be erroneous in so far as it is prejudicial to the interest of revenue. Therefore, I propose to revise the assessment order passed under section 143(3)/147 dated 10.11.2016, for the Asstt. Year 2012-13 by invoking provision of section 263 of the I.T.Act,1961. However, before doing so, I deem it proper to allow the assessee an opportunity of being heard which is fixed at 11. 30. A.M. on 29.01.2019- in my office at 2nd Floor, Aayakar Bhawan, Rajhaswa Vihar, Bhubaneswar. You may appear either in person or through your authorized representative to represent your case. If you so desire, you may file your written submission in this regard, which will be considered before passing any order. In case you fail to avail the opportunity of hearing, order will be passed on the basis of facts available in record. Yours faithfully, (Subrat Mishra) Pr. Commissioner of Income-tax-2, Bhubaneswar
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In the above referred show cause notice it was alleged that the assessing officer has accepted the investment made by the assessee in immovable property of Rs.50,90,400/- without conducting due and proper enquiry. The AO has also not verified as to whether the persons, who have given advance, were not man of means to advance such a huge sum. The show cause notice was duly replied by the assessee submitting that the Ld. AO completed assessment by conducting appropriate enquiries and applied his mind. It was also submitted that during the course of assessment proceedings the AO examined all the issues for which no such observation of the issue raised in the show cause notice is appearing in the body of assessment order cannot give rise to take a view that the order of assessing officer is erroneous and prejudicial to the interest of revenue. However, Ld. Pr. CIT was not satisfied with the submissions made by the assessee and concluded to hold the order of the assessing officer as erroneous so for as prejudicial to the interest of revenue as the AO had not made required enquiry/investigation regarding investment made by the assessee in immovable property and accordingly the Pr.CIT set aside the assessment order to the file of AO to redo the assessment after making necessary verification and after giving reasonable opportunity of being heard to the assessee.
Now the assessee is in appeal before this Tribunal.
Ld. counsel for the assessee vehemently argued referring to the following written submission and placing reliance on decisions mentioned herein :-
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No independent application of mind of The Ld. PClT as the issue is based merely on the audit observation and same language has been mentioned in the consequential asst order and 263 order Para 2 of page 2 of Asst order u/s 263/143(3).
AO has verified the source of investment issue in details after considering all the necessary details/documents and taken the view to accept the same which is lawful and cannot be call as inadequate enquiry whereas the Ld. PClT has to verify himself to record the finding that the asst order is erroneous when the assessee stated before the Ld PClT to produce the customers in person (submission of the assessee before the Ld. PCIT at Page 2 of PB) . To support his contentions, ld. counsel for the assessee relied on the following case laws :- i) Nanda Kishore Agarwalla Vs. Pr.CIT, ITA No.212/CTK/2017, order dated 26.04.2018; ii) Surekha Builders & Developers Pvt. Ltd. Vs. Pr.CIT, ITA No.207/CTK/2018, order dated 17.07.2020; iii) 8 (Del); . 388 (Del;); v) ITO Vs. DG Housing Projects ltd. (2012) 343 ITR 329; vi) Aditi Aggarwal Vs. Pr.CIT, ITA No.21/Chd/2021, order dated 20.09.2021; vii) Sh. Jaswinder Singh Vs. CIT-II, ITA No.690/Chd/2010, order dated 09.03.2012; viii) Shri No.932/PUN/2016, order dated 07.03.2019; and ix) Raghunath Exporters Vs. Pr.CIT, ITA No.92/Kol/2017, order dated 10.11.2017. 10. It was also submitted by the ld. AR of the assessee that the AO allowed the claim on being satisfied with the explanation of assessee, on an enquiry made during the course of assessment proceedings. Thus, the decision of Ld. AO cannot be held to be erroneous.
Per Contra, ld. Departmental Representative (DR) took us through the finding of ld. Pr. CIT and submitted that Pr.CIT has rightly set aside
6 the assessment framed by the AO as the persons who have given the advance to the assessee were not man of means to advance such a huge sum and no proper enquiry has been conducted by the AO. It was also submitted by the ld.DR that most of the persons who have given advance to the assessee have admitted that they have given advance in cash but the date of payment has not been provided by them. Ld. DR also submitted that most of the details in support of source of investment were filed for the first time before the ld. Pr.CIT. The assessee had merely filed a list of persons from whom advance/sale consideration had been received which was used for making investment in purchase of immovable property. The AO made no efforts to call for further details to examine the genuineness and correctness of advance/sale consideration received from various parties. Reliance was placed on the judgment of Hon’ble Madhya Pradesh High Court in the case of M.B.Tyres, 11 TAXMANN 208 and the judgment of Hon’ble Himachal Pradesh High Court in the case of Virbhadra Singh (HUF) 86 Taxmann.com 113. Therefore, ld. DR submitted that the order passed by the Pr.CIT deserves to be upheld.
We have heard rival contentions and perused the records placed before us by to the sides and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides.
We would like to reproduce the provisions of Section 263(1) of the Act, which read as under :-
7 Revision of orders prejudicial to revenue.
(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income- tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim;
8 (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the juri ictional High Court or Supreme Court in the case of the assessee or any other person.
It is a settled position of law that powers u/s 263 of the Act can be exercised by the Ld. Pr. Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Ld. Pr. Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay).
This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Shri Kailash Khandelwal Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:-
9 "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT."
And the Hon'ble High Court, after considering the facts, held as under:- "
It can thus be seen that though final order of assessment was silent on this aspect, the Assessing Officer had carried out inquiries about the nature of sale of land and about the validity of the assessee's claim of deduction under section 54F of the Act. Learned counsel for the Revenue however submitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise to a long term capital gain. Looking to the tenor of queries by the Assessing Office and details . A.Y. 2009-10 supplied by the assessee, we are unable to accept such a condition. In that view of the matter, the observation of the Tribunal that the Assessing Officer having made inquiries and when two views are possible, revisional powers could not be exercised, called for no interference. Since with respect to computation and assertions of other aspects of deduction under section 54Fofthe Act, the Tribunal has remanded the proceedings, nothing stated in this order would affect either side in considerations of such claim.
No question of law arises. Tax Appeals are dismissed."
We find the Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible Shri Kailash Khandelwal from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under:
"
We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: "We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to : (i) call for and examine the 10 record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners Shri Kailash Khandelwal who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee."
Since in the instant case the A.O after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O, he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume juri iction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of juri iction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed."
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In the light of the provisions of Section 263 of the Act and the decision relied hereinabove and examining the facts of the case, we find that the ld.AO for completing the assessment u/s.143(3) r.w.s.147 of the Act, dated 10.11.2016 initiated the proceedings, for the specific purpose of verification of the high value transaction, data received from the Sub-