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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHIR PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI S RIFAUR RAHMAN ACCOUNTANT MEMBER ITA No. 1083/Mum/2023 (A.Y: 2018-19) M/s AlliedPhotographics Vs. Pr.CIT-1, India Ltd., 3rd Floor, Room No.330, Kasturi Buildings, 3rd Floor, Jamshedji Tata Road, Aayakar Bhavan, Churchgate, M.K. Road, Mumbai -400020. Mumbai-400020. PAN/GIR No. : AABCA2068A Appellant .. Respondent Appellant by : Mr.Nitish Gandhi.AR Respondent by : Ms.Smiti Samant. DR Date of Hearing 15.06.2023 Date of Pronouncement 02.08.2023 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Pr. Commissioner of Income Tax (Pr.CIT)-1, Mumbai passed u/s 263 of the Act. The assessee has raised the fallowing grounds of appeal.
The Learned PCIT erred on facts, in law and under the circumstances in passing the order u/s 263 of the Income Tax Act, 1961 holding that the assessment order passed by AO/ NFAC u/s 143(3) r.w.s 143(3A) and 143(3B) of the Income Tax Act, 1961 dt. 01.02.2021 is erroneous and in that way
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prejudicial to the interest of revenue and is to be set-aside and fresh order denovo should be passed by the AO.
ii) The Learned PCIT further erred in observing that the impugned agricultural land, being land Aras no. 280 situated in Village Sajari, Kanpur is agricultural land within the meaning of Sec. 2(14) (iii) (a) & (b) of the Income Tax Act, 1961 and hence the gains made on sale of such land of Rs. 1,00,33,307/- is liable to be taxed as Long Term Capital Gains.
iii) The Learned PCIT erred in not furnishing to theappellant the google map of the land which is used by him to conclude that the land under sale is agricultural land and the gain on the same is liable to income tax.
iv) The Learned PCIT further erred in failing to notify as to what is the population of the town Sajari as per last concluded census where the impugned land is situated which is one of the criteria required u/s 2(14)(iii)(a)&(b) of Income Tax Act, 1961 to conclude whether the land under sale is agricultural land or not meaning thereby that whether the gains will be taxable or not.
The appellant respectfully submits that the land under sale situated at Village Sajari, Kanpur is agricultural land and the gains made on sale of such land is exempt from tax, it being agricultural income exempt u/s 10(i) of Income Tax Act, 1961.
V. The Learned PCIT failed to provide the google map to establish that the impugned land is situated within the municipal limits of Kanpur as required by Sec. 2(14)(iii)(a) and therefore the whole exercise carried out by him to bring to tax the Long Term Gain suffers from infirmities and unlawfulness and the whole edifice on which the PCIT has build his case falls like a pack of cards.
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vi) The Learned PCIT erred in law in failing to address the issue of population of the Village Sajari in which the impugned land is situated as one of the conditions to conclude whether the land sold is agricultural land within the meaning of Sec. 2(14)(iii) of Income Tax Act, 1961. It is imperative that one of the condition to arrive at whether the land sold is agricultural or not as per Sec. 2(14)(iii) is to know the population of the Village Sajari in which the land is situated and the other is the location of the Village Sajari from municipal limits and this is not done by PCIT. Hence, the order passed u/s 263 holding that the order passed by AO u/s 143(3) is erroneous in law.
vii) The Learned PCIT failed to address the issue of the size of population of the Village Sajari in which the land is situated because the provision of Sec. 2(14)(iii) (a) & (b), both require to know the population of the Village Sajari before concluding whether the gains on sale of agricultural land is liable to tax or not.
The appellant respectfully submits that the impugned land under sale which gave rise to Long Term Capital Gain is situated in the Village Sajari, Kanpur which has a population of less than 10000 as per the last concluded census and hence sale of such land cannot give rise to taxable Long Term Capital Gains. Hence, the order passed by the PCIT is bad in law and should be quashed.
It is therefore prayed that the order passed u/s 263 of the Income Tax A should be set-aside and the order passed by the AO u/s 143(3) r.w.s 1430 & 143(3B) of Income Tax Act dt. 01.02.2021 should be restored.
The brief facts of the case are that, the assessee company is engaged in the business of trading of photographic chemicals,
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inkjet papers and allied products. The assessee has filed the return of income for the A.Y 2018-19 on 06.10.2018 disclosing a total income of Rs.1,24,34,060/-.Subsequently the case was selected for limited scrutiny assessment under the E assessment Scheme 2019 on the issue of Agricultural income. Further the Assessing Officer (AO) has issued the notice u/s 143(2) and 142(1) of the Act along with questionnaire. In compliance to the notice, the assessee has furnished through ITBA portal, the copy of ITR along with computation of income for the A.Y 2018-19, copy of audited financial statement, copy of tax audit report in form. no. 3CD,&3CEB, Form.No.26AS, bank statement and details in respect of agricultural income with relevant documents. Whereas the AO on perusal of the audited financial statements and the details filed by the assessee including the sale of agricultural land has accepted the returned income and assessed the total income of Rs. 1,24,34,060/- and passed the order u/s 143(3) r.w.s 143(3A) &143(3B) of the Act dated 01.02.2021. 3. Subsequently, the Pr. CIT on perusal of the records and information found that the order passed by the AO under section 143(3) r.w.s 143(3A) & 143(3B) of the Act is erroneous and prejudicial to the interest of the revenue and issued revision notice U/sec 263 of the Act as under:
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In this regard, a hearing in the matter is fixed on 02/03/2023 at 12:30 PMYou are requested to attend person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this officeon or before the said due date, then your personal attendance is not requiredYou also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in
1 The return of income for A.Y2018-19 was I by you on 06/10/2018 declaring total income of Rs.1,24,34,060/-. Subsequently, the case was selected for scrutiny under Limited Scrutiny Category and the assessment proceedings was completed by NaFAC u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the IT Act on 01/02/2021 assessing total income at Rs. 1,24,34,060/-
In this case, one of the reasons for scrutiny selection was to verify the issue of "Agricultural income".
a. On perusal of the record, it is noticed that the assessee had purchased an agricultural land being Aras No. 280, at Village Safar Thesis & District- Kanpur Nagar Uttar Pradesh. It is further seen that the assessee had purchased the land in 2012 for a total consideration at Rs. 43,87,150/- and sold at Rs. 1,44,20,457/- on 06/04/2017 to the Kanpur Development Authority. The assessee have claimed the said land to be agriculture land and have claimed it to be exempt from capital gains as agricultural land is not a capital asset under the IT ActIt is to be noted that the Kanpur Development Authority functions in and around the Kanpur city of Uttar Pradesh.
b. It is pertinent to note that as per section 2(14)(i)(a)&(b) of IT Act, those agricultural lands which are situated within the
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jurisdiction of a municipality or in any area within such distance, not being more than eight kilometers, from the local limits of any municipality are not to be considered as exempt agricultural land for the calculation of capital gains.
c. On verification from the information available on the web on Google map it is found that the said land is situated within the municipal limits of Kanpur Municipal Corporation. Hence, the said land is not exempt from the definition of capital asset as per section 2(14)(i)(a)&(b) of IT Act.
3 In view of the above observations the assessment order passed by the A.O, without proper verification of facts and without correct application of law as required while making assessment. Hence, it is proposed to revise/ set-aside the said order u/s263 of the IT Act, 1961.
Accordingly you are hereby requested to furnish your reply/explanation as to why the said order passed on 01/02/2021 u/s. 143(3) of the IT Act1961 for A.Y2018-19 should not be revise/ set-aside u/s. 263 of the IT Act, 1961Your reply should reach the under signed on or before 02/03/2023. The submission can also be filed online ITBA or through email address: mumbai.pcit1@incometax.gov.in
In compliance to the notice, the assessee has filed the submissions vide letter dated 01.03.2023 as under:
We refer to your Letter No. ITBA/REV/F/REV1/2022- 23/1050203273(1) dt. 28.02.2023 which was received by us on 28.02.2023. We have gone through the same and in this connection we reply as under :-
In the notice, in para 2(b) and 2(c) you've given the reasons for opining that the land sold is not agricultural land within the meaning of section 2(14). However, you've not given the details
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of which you've relied on for coming to such conclusions, like, if the land is within the jurisdiction of municipality or whether the land is situated from the 8 Kms of the local limits of municipality, and based on this the land sold by us is not an agricultural land. Also in clause 2(c) you've referred to Google maps, but the same is not provided by you. Hence by this letter we request you to give the proper details. No sooner we receive the same we will make our detailed submissions. Awaiting to hear from you.
Whereas the Pr.CIT was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the AO observing at page 2 Para 5 to 11 of the order as under:
I have carefully considered the submissions made by the assessee and have also gone through the facts of the case and have perused the relevant assessment records. The submissions of the assessee are not acceptable. Moreover, the assessee has not made any submission after the desired google map was sent showing that the Village Sajari is within Municipal limits of Kanpur. The assessee had purchased the land in 2012 for a total consideration at Rs. 43,87,150/- and sold the land at Rs. 1,44,20,457/- on 06/04/2017 to the Kanpur Development Authority. Kanpur Development Authority also works within the municipal limits of Kanpur. The assessee should have offered the income on sale of land as long term capital gains in it Return of Income. The A.O. during assessment has also not conducted any enquiry in this respect. Hence, the assessment order is not only erroneous but also prejudicial to the interest of revenue.
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As per section 2(14)(i)(a)&(b) of IT Act, those agricultural lands which are situated within the jurisdiction of a municipality or in any area within such distance, not being more than eight kilometers, from the local limits of any municipality are not to be considered as exempt agricultural land for the calculation of capital gains. However, the A.O. during assessment did not conduct any enquiry into the fact whether the said land is agricultural land or not as per section 2(14) of the Act. Hence, the assessment order is not only erroneous but also prejudicial to the interest of revenue.
The land is located in village Sajari, Kanpur. On verification, it is found that the entire village Sajari is within the municipal limits of Kanpur Municipal CorporationThe screen shorts of the Google maps are attached herewithThe above fact has also been verified from the website of Kanpur Municipal Corporation http://kmc.up.nic.in where in it has been found that the PIN code of Sajari is 208015 and post head office is PAC lines is locality in Kanpur city in U.P. State. Further, Sajari is within the ward Sanigawan of the Kanpur Nagar Nigam (Kanpur Municipal Corporation). As the said land is not exempt from the definition of capital asset as per section 2(14)(iii) (a) & (b) of the IT Act the assessee should have offered the income as long term capital gains in his Return of Income. Hence, the assessment order is revenue. not only erroneous but also prejudicial to the interest of
It is noted that during a the A.O. has not made any enquiry in relation to the said sum of Rs. 1,44,20,457/- on account of sale of land and whether the said income is tax exempt on account of the land being agricultural income. Hence, the assessment order is not only erroneous but also prejudicial to the interest of revenue.
As per amended Law, Explanation 2 clause (a) below section 263(1) of the IT Act, any assessment made without conducting requisite enquiry and verification by the A.O. is erroneous in so
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far as it is prejudicial to the interests of revenue. Even under pre-amended Law, SC in the case of Smt. Tara Devi Agarwal (88 ITR 0323) and also Rampyari Devi Saraogi [67 ITR 0084] have held that any assessment completed without necessary enquiries as warranted on facts of the case is erroneous in so far as it is prejudicial to the interests of revenue. 10. Considering the facts in totality and submissions of the assessee, I am of the considered opinion that the A.Oin the instant case has failed to conduct all the necessary enquiries as warranted on facts of the case and as discussed in this order supra. Hence the order passed by the A.O. u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the IT Act dated 01/02/2021 is erroneous and pre judicial to the interest of revenue, accordingly, provisions o Section 263 of the IT Act are invoked.
The A.O. is hereby directed to reframe the assessment order de novo after conducting all the necessary enquiries and verifications as warranted on the facts of the case and also after giving due opportunity of being heard to the assessee before passing the assessment order.
Finally the Pr.CIT has passed order u/s 263 of the Act dated 29.03.2023. Aggrieved by the order of the Pr.CIT, the assessee has filed an appeal before the Hon’ble Tribunal.
At the time of hearing, the Ld. AR submitted that the Pr. CIT has erred in considering the order passed by the AO is erroneous and prejudicial to the interest of the revenue, irrespective of the fact that the assessee has complied with the
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information and the notices through ITBA and the A.O. having verified and examined the facts has accepted the same. The Ld. AR submitted that the assessee has disclosed the sale of agricultural land and the gains are exempt from tax and the AO having considered these facts, has applied his mind and made an enquiry and also complied with the scrutiny guidelines and accepted the transaction of sale of agricultural land and accepted the returned income. Whereas the observations of the Pr. CIT are not correct that, the agricultural land is situated within the limits of municipality and the provisions of section 2(14)(iii)(a)&(b) of the Act are attracted. Further the Pr.CIT has relied on the Google map, which was not provided and also overlooked the issue of size of population of the village sajari, which is less than 10000 as per the last census record and the findings of the Pr.CIT is without merits. The Ld. AR substantiated the submissions with paper book and judicial decisions and prayed for allowing the appeal.
Per Contra, the Ld. DR submitted that the AO has not considered the fact that the said land is situated within the limits of municipality and the provisions of section 2(14)(iii)(a)&(b) of the Act are applied and the A.O has not conducted enquiry. The Ld. DR relied on the order of the Pr.CIT.
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We heard the rival submissions and perused the material on record. The Ld.AR envisaged that the order passed by the Pr.CIT is bad in law as the order revised under revision proceedings passed by the Pr. CIT is not erroneous and not prejudicial to the interest of the revenue. The contentions of the Ld. AR that, the AO has considered the submissions, facts of sale of agricultural land and the method of accounting in the books of account. The Ld. AR referred to the notice issued u/s 143(2) of the Act at page 27 to 30 of the paper book emphasizing that the AO has called for the details in respect of limited scrutiny under CASS to verify the issue of agricultural income. The assessee has also received notice u/s 142(1) of the Act dated 3-1-2020 from the AO placed at page 31 to 33 of the paper book, in particular the AO has called the details as per the annexure and the Ld. AR referred to the details filed through ITBA portal placed at page 34 to 35 of the paper book. Further the assessee has filed details explaining the nature of agricultural income. The AO has again issued the notice u/s 142(1) of the Act dated 20-12-2020 specifically calling for the details at page 38 to 39 and at annexure. Particularly in point- 1 placed at page 39, the AO has called for the details of agriculture lands as under:
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It is seen that you have claimed large agricultural income in ITR. In this regard you are requested to produce details of agricultural lands held by you, crops grown and sale receipts of agricultural produce along with documentary evidences.
Whereas the assessee has filed the details through ITBA portal with the submissions, purchase agreement of agricultural land, working of gain on sale of land, sale agreement and bank statement in lieu of notice u/s 142(1) of the Act placed at 40 to 41 of the paper book. Further the Ld.AR referred to letter dated 29.01.2021 placed at page 42, mentioning that the assessee has earned gains/income of Rs. 1,00,33,309/- on sale of agricultural land and claimed exemption under section 10(1) of Income Tax Act and the assessee has sold only the agricultural land and it is not capital asset within the meaning u/s 2(14)(iii) of the Act as under:
This has reference to the assessment proceedings going-on in our case for above mentioned AY. This also refers to the Notice No.ITBA/AST/F/142(1)/2020- 21/1029101272(1) dt.21.12.2020 issued by you u/s 142(1) of Income Tax Act, 1961. Time and again, we are complying with the issues raised by you in the assessment. We now make further submission in the assessment proceedings as under-
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Regarding Long Term Gains earned on sale of agriculture land of Rs.1,00,33,307/-, we submit that we have claimed the Gains as "exempt" from Income Tax. This is because it is a gain on sale of agriculture land and agriculture income is "exempt" from tax u/s 10(1) of Income Tax Act, 1961. Also, the agriculture land is not a Capital Asset within the meaning of Sec.2(14)(iii) of Income Tax Act1961 thereby provisions of Sec.45 of Income Tax Act, 1961 making Capital Gains on sale of Capital Asset liable to tax is not applicable.
The description of agriculture land sold during the year which is claimed as "exempt" is as per Annexure A enclosed with this submission. The Annexure reveals the - complete details / description of agriculture land sold, the sale price, the details of buyer of the land etc.
The above land was purchased as agriculture land and at the time of sale also it was agriculture land. The land was acquired in the year ending March 2012 for a total consideration of Rs.43,87,150/-. Copy of Purchase Agreement and details showing the total cost of Rs.43,87,150/- is enclosed herewith.
For agriculture activities carried out on the land, we submit that the company follows a policy of giving the land for tilling to local Farmers / Tillers who does all the tilling work including purchases seeds, insecticides etc. waters the land, employs labourer for doing farming etc. on the land and realises their cost and profits by selling the crops grown on the land. The company gets remunerated by the farmer and during the year, the company has earned total agriculture income of Rs.99,000/- which is net agriculture income received by the company. This is also claimed "exempt" u/s 10(1) of Income Tax Act, 1961.
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Since the Farmers/Tillers are all locals, experienced in farming activities, they carry out all the farming activities on our land on their own and the company only gets a part of the profit. Due to this, the company does not / is not required to maintain any records of the cost incurred in growing the crops or for that matter details about the sale of the crops grown on its land. Therefore, the company hires Farmers / Tillers in whom it has confidence even at the cost of receiving lesser shares of agriculture income.
In the context of the agriculture activities carried out by the Farmers / Tillers on our land, we submit that there are no irrigation facilities available on the land and the Farmers / Tillers depends on the natural water supply i.e rain water supply for carrying out farming activities. This aspect can be independently verified from the Sale Deed of the land which says that for growing the crops i.e Prakrutik (rain water) is used. Due to this, limitation, the income earned by the company during the year is only modicum amounting to Rs.99,000/-.
The agriculture land was sold to the Kanpur Development Authority for a total consideration of Rs.1,44,20,457/-. The Stamp Duty Value of the land sold is Rs.53,62,500/-. We enclose the Sale Deed dt.06.04.2017 entered into with Kanpur Development Authority The Sale Deed clearly specifies that the land under sale by us is agriculture land and it also specifies that the water required for farming activities is Prakrutik (rain water).
We have replied to the queries raised to the best of our ability. However, if you still have any query, please let us know. Also, if it is required, then we can do a personal / telephonic hearing on the matter and for that our CA Shri Deepak Goradia is available on Mobile No: 9867545555.
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In the meantime, kindly note the following documents, as mentioned above are enclosed herewith for your immediate perusal and reference.
1) Purchase Deed for purchase of land dt.31.03.2012 showing land purchased as agriculture including work of cost of acquisition of Rs. 43,87,150/-.
2) Copy of Sale Deed for land sold to Kanpur Development Authority for a total consideration of Rs.1,44,20,457/-. The Sale Deed is very descriptive and describes the land and it's nature is that it is a agriculture land (Krishi and that it is dependent on natural water (Prakruti Water) i.e rain water for conducting agriculture activities.
3) The working of gain earned on sale of agriculture land.
We trust, on the basis of the submission made above, your goodselves will be convinced that the land sold giving rise to gains of Rs.1,00,33,307/- was agriculture land and that gains is "exempt from tax. So also, we have earned agriculture income from tilling of land done by Farmers on the land owned by us of Rs.99,000/-. The documents enclosed in support of the transaction of sale clearly supports the claim of the assessee.
Due to this, you will accept our claim of Rs.1,01,32,307/- (Rs.1,00,33,307/- + Rs.99,000/-) claimed as "exempt" under the Income Tax Act, 1961.
If you require any information / clarification, please let us know.
The Ld. AR emphasized that the assessee has sold the agriculture land and claimed exemption U/sec10(1) of the Act. The AO has considered these facts in the assessment
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proceedings and accepted the return of income and it cannot be disturbed. Further the Ld. AR submitted that the Pr. CIT has erred in set aside the order of the AO which does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. The Ld. AR also submitted that explanation (2) to Sec. 263 of the Act are to be considered only when the AO has not applied his mind and no the facts are verified and no enquiry was conducted. The Ld. AR contended that the assessee has complied with the statutory notices and filed reply online through ITBA. The AO dealt on the facts of the disputed issue in the proceedings but there are no observations in the assessment order. Further the Pr.CIT has erred in overlooking the fact that the assessee has filed the written submissions on the disputed issue before the lower authorities and emphasized that AO having satisfied and accepted the returned income and hence the action of the Pr. CIT is not acceptable. Whereas the AO has applied the mind and accepted the assessee’s submissions in the limited scrutiny in respect of sale of agricultural land and the exemption claimed U/sec10(1) of the act. We rely on the decision of the Honble High Court of Bombay in the case of M/S Grasim Industries Ltd Vs CIT (321 ITR 92) considered the law laid down by the Honble Supreme Court on the scope of the revisionary
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proceedings initiated under sec263 of the Act and the observations are read as under:
“Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the 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, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be “erroneous in so far as it is prejudicial to the interests of the Revenue”. This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted”. The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression “prejudicial to the interests of the Revenue”, the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) “The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax
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Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.” The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282.”
Further In the case of Nagesh Knitwears P Ltd (2012)(345 ITR 135), the Hon’ble Delhi High Court has elucidated and explained the scope of the provisions of sec. 263 of the Act and the same has been extracted by the Delhi High court in the case of CIT Vs. Goetze (India) Ltd (361 ITR 505) as under:-
“Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous.
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This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question….” Similar view has been expressed by Hon’ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963).
Considering the ratio of decisions of the Honble Hight courts, it is clear the Pr.CIT before holding the order of the A.O. is erroneous should conduct necessary inquiries. The Ld.AR submitted that the Pr.CIT has not considered the facts that the A.O has called for the information and the assessee has submitted the purchase agreement of agricultural land, working of gain on sale of land, sale agreement and bank statement in lieu of notice u/s 142(1) of the Act and hence
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there cannot be any non application of mind by the A.O. Whereas the observations of the Pr. CIT are not correct that, the agricultural land is situated within the limits of municipality and the provisions of section 2(14)(iii)(a)&(b) of the Act are attracted relying on the Google map, which was not provided and also Pr.CIT has overlooked the issue of size of population of the village sajari, which is less than 10000 as per the last census record of sajari Gaon demonstrated by the Ld.AR placed at page 100 of the paper book. Further if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt with by the A.O. in the order cannot implied that there is no application of mind. We find that the A.O has considered one of the possible views based on the information and it is not necessary that the A.O should put all the discussions/observations in the assessment order, as per explanations (2) to sec 263 of the Act the authority has to invoke provisions only when there is no verification and enquiry conducted by the A.O. Whereas the A.O has applied his mind and verified the facts. The Ld. AR referred to the submissions, financial statements, judicial decisions and explanations filed before the A.O. We find the Hon’ble High
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Court of Bombay in CIT Vs. Gabriel India Ltd.(203 ITR 108) has observed as under:
Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of Rs. 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim - Subsequently, Commissioner, exercising powers under section 263, cancelled order of ITO observing that order of ITO did not contain discussion in regard to allow ability of claim for deduction which indicated non-application of mind and that claim of assessee required examination as to whether expenditure in question was a revenue or capital expenditure and directed ITO to make a fresh assessment on lines indicated by him - Whether under section 263 substitution of judgment of Commissioner for that of ITO is permissible - Held, no - Whether ITO's conclusion can be termed as erroneous simply because Commissioner does not agree with his conclusion - Held, no - Whether ITO's order could be held to be 'erroneous' simply because in his order he did not make an elaborate discussion - Held, no - Whether provisions of section 263 were applicable to instant case and Commissioner was justified in setting aside assessment order - Held,
We Considering the overall facts, circumstances, ratio of the judicial decision and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind and the A.O. has applied one of the possible view. Hence, the action of
ITA Nos. 1083/Mum/2023 M/s Allied Photographics India Ltd. Mumbai. - 22 -
the Pr.CIT cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the grounds of appeal in favour of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 02.08.2023.
Sd/- Sd/- (S RIFAUR RAHMAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 02.08.2023
KRK, PS Copy of the Order forwarded to : The Appellant 1. The Respondent 2. The CIT (Judicial) 3. The PCIT 4. DR, ITAT, Mumbai 5. Guard File 6. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//() 1.
( Asst. Registrar) ITAT, Mumbai