SH KELKAR & CO. LTD.,MUMBAI vs. PR. CIT-4, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against revision order dated 24.02.2020 passed by the Ld. Principal Commissioner of Income-tax-4, Mumbai (in short ‘the Ld. PCIT’) for assessment year 2015-16, raising grounds as under:

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and in law, in revising the assessment order passed and in law, in revising the assessment order passed and in law, in revising the assessment order passed us. 143(3) of the Income us. 143(3) of the Income-tax Act, 1961 by exercising tax Act, 1961 by exercising jurisdiction under section 263; jurisdiction under section 263; 2. The Id. PCIT The Id. PCIT - 4 failed to appreciate that proper enquiry proper enquiry and investigation was conducted into the claims made and investigation was conducted into the claims made and investigation was conducted into the claims made while computing income chargeable to tax under the while computing income chargeable to tax under the while computing income chargeable to tax under the head "Capital Gains" and that the said query was head "Capital Gains" and that the said query was head "Capital Gains" and that the said query was raised during the assessment through questionnaire raised during the assessment through questionnaire raised during the assessment through questionnaire under section 142(1); under section 142(1); 3. The learned PCI The learned PCIT - 4, Mumbai erred in setting aside 4, Mumbai erred in setting aside the assessment order passed under section 143(3) and the assessment order passed under section 143(3) and the assessment order passed under section 143(3) and directing a fresh assessment in the matter; directing a fresh assessment in the matter; 4. The appellant prays to your Honours to hold that the The appellant prays to your Honours to hold that the The appellant prays to your Honours to hold that the exercise of jurisdiction under section 263 of the Act exercise of jurisdiction under section 263 of the Act exercise of jurisdiction under section 263 of the Act was bad in law was bad in law and therefore, declare the said order and therefore, declare the said order as null and void; as null and void; 2. Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 28.12.2015 return of income for the year under consideration on 28.12.2015 return of income for the year under consideration on 28.12.2015 declaring total income of Rs.43,18,43,795/ declaring total income of Rs.43,18,43,795/-. In the return of In the return of income, the assessee declared long he assessee declared long-term capital gain on sale of a term capital gain on sale of a land, which was under unauthorized encroachments by hutment land, which was under unauthorized encroachments by hutment land, which was under unauthorized encroachments by hutment dwellers. The return of income filed was selected forscrutiny for dwellers. The return of income filed was selected forscrutiny for dwellers. The return of income filed was selected forscrutiny for various reasons including the reason of low various reasons including the reason of low amount of long amount of long-term capital gain declared as compared to sale consideration of land. declared as compared to sale consideration of land. declared as compared to sale consideration of land. The assessment u/s 143(3) of assessment u/s 143(3) of the Income-tax Act, 1961 (in short‘ tax Act, 1961 (in short‘the Act’) was completed by the Ld. Dy. Commissioner of Income was completed by the Ld. Dy. Commissioner of Income was completed by the Ld. Dy. Commissioner of Income-tax-4, Mumbai (in short ‘the Ld. Assessing Officer’ Mumbai (in short ‘the Ld. Assessing Officer’) on 07.06.2017 ) on 07.06.2017, wherein he accepted the long term capital gain but accepted the long term capital gain but made accepted the long term capital gain but disallowance of expenses u/s 14A r.w.r. 8D of Income-tax Rules disallowance of expenses u/s 14A r.w.r. 8D of Income disallowance of expenses u/s 14A r.w.r. 8D of Income 1962 and disallowance of professional fees for merger and and disallowance of professional fees for merger and and disallowance of professional fees for merger and demerger.

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2.1 Subsequently, the Assessing Officer ( i.e. might be successor ) the Assessing Officer ( i.e. might be successor ) the Assessing Officer ( i.e. might be successor ) observed that against the against thelong-term capital gain of Rs.5,83,10,312/ capital gain of Rs.5,83,10,312/- on sale of land to M/s Reva Properties P Ltd ( i.e. sister concern) , on sale of land to M/s Reva Properties P Ltd ( i.e. sister concern) , on sale of land to M/s Reva Properties P Ltd ( i.e. sister concern) , the assessee claimed the assessee claimed deduction for cost of improvement amounting deduction for cost of improvement amounting to Rs.43,31,00,000, but claim of deduction of improvement , but claim of deduction of improvement was not , but claim of deduction of improvement examined during assessment during assessmentproceedings ignoring proceedings ignoring the facts that said payment was made to said payment was made to M/s Sandhu Homes LLP, M/s Sandhu Homes LLP, later on which was joined by the Directors of the Company as partners. The was joined by the Directors of the Company as partner was joined by the Directors of the Company as partner relevant observations s of the Assessing Officer in proposal sent in proposal sent to the Ld. PCIT for revising the assessment order the Ld. PCIT for revising the assessment order are are reproduced as under:

“2. The Assessing Officer observed that during the year 2. The Assessing Officer observed that during the year 2. The Assessing Officer observed that during the year under consideration the assessee sold an immovable under consideration the assessee sold an immovable under consideration the assessee sold an immovable property being urban land at City Survey No.626, property being urban land at City Survey No.626, property being urban land at City Survey No.626, admeasuring 6596 sq. mtr admeasuring 6596 sq. mtrs at Mulund (West), Mumbai s at Mulund (West), Mumbai for a total consideration of Rs.53,49,00,000/ for a total consideration of Rs.53,49,00,000/- -, This property was sold to the sister concern namely M/s. property was sold to the sister concern namely M/s. property was sold to the sister concern namely M/s. Keva Properties P. Ltd vide conveyance deed dated Keva Properties P. Ltd vide conveyance deed dated Keva Properties P. Ltd vide conveyance deed dated 29.09.2014. Perusal of the record further reveals that 29.09.2014. Perusal of the record further reveals that 29.09.2014. Perusal of the record further reveals that the assessee had de the assessee had declared a Long Term Capital Gain clared a Long Term Capital Gain (LTG) of Rs.5,83,10,312/ (LTG) of Rs.5,83,10,312/- on this transaction. Scrutiny on this transaction. Scrutiny of Long Term Capital Gain computation further reveals of Long Term Capital Gain computation further reveals of Long Term Capital Gain computation further reveals that the assessee had claimed J a deduction towards that the assessee had claimed J a deduction towards that the assessee had claimed J a deduction towards Cost of Improvement of Rs.43,31,00,000/ Cost of Improvement of Rs.43,31,00,000/-, TheCost of , TheCost of Improvement was paid to Ms.Sandu Homes LLP and the nt was paid to Ms.Sandu Homes LLP and the nt was paid to Ms.Sandu Homes LLP and the same same same was was was formalised formalised formalised vide vide vide agreement agreement agreement dated dated dated 17.09.2014. During the assessment proceedings the 17.09.2014. During the assessment proceedings the 17.09.2014. During the assessment proceedings the assessee submitted that the land in question was assessee submitted that the land in question was assessee submitted that the land in question was encroached by more than 350 persons and to encroached by more than 350 persons and to encroached by more than 350 persons and to rehabilitate them the cost has rehabilitate them the cost has been worked out as been worked out as under in the agreement dated 17.09.2014. under in the agreement dated 17.09.2014. Land Area 6596 sq.mt Land Area 6596 sq.mt = 70999 sq. ft. 70999 sq. ft. = Land cost of Rs.4600/- per sq. ft. Land cost of Rs.4600/ 32,66,00,000/ 32,66,00,000/- Const. Material Cost Rs.900/- per sq. ft. Const. Material Cost Rs.900/ = 6,39,00,000/ 6,39,00,000/- = Const. Labour Cost Rs.600/- per sq. ft. Const. Labour Cost Rs.600/ 4,26,00,000/ 4,26,00,000/-

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= Total Rehabilitation Cost Total Rehabilitation Cost 43,31,00,000/ 43,31,00,000/- The Assessing Officer further submitted that the above The Assessing Officer further submitted that the above The Assessing Officer further submitted that the above land was declared as slum by the Government of land was declared as slum by the Government of land was declared as slum by the Government of Maharashtra. However, Maharashtra Slum Tribunal set Maharashtra. However, Maharashtra Slum Tribunal set Maharashtra. However, Maharashtra Slum Tribunal set aside the decision of the Government of Maharashtra aside the decision of the Government of Maharashtra aside the decision of the Government of Maharashtra and the same was confirmed by Hon"ble Bombay High and the same was confirmed by Hon"ble Bombay High and the same was confirmed by Hon"ble Bombay High Court. In view of the above facts, the Assessing Officer Court. In view of the above facts, the Assessing Officer Court. In view of the above facts, the Assessing Officer submitted that the encroachments made were declared submitted that the encroachments made were declared submitted that the encroachments made were declared illegal and there is no question of incurring any illegal and there is no question of incurring any illegal and there is no question of incurring any expenses expenses expenses on on on vacating vacating vacating and and and rehabilitating rehabilitating rehabilitating the the the encroachers. It is also'a matter of record that with encroachers. It is also'a matter of record that with encroachers. It is also'a matter of record that with within 10 days of executing the agreement with within 10 days of executing the agreement with within 10 days of executing the agreement with Mis.Sandu Homes LLP, the land in question was Mis.Sandu Homes LLP, the land in question was Mis.Sandu Homes LLP, the land in question was transferred to M/s.Keva Properties P.Ltd. Perusal of the transferred to M/s.Keva Properties P.Ltd. Perusal of the transferred to M/s.Keva Properties P.Ltd. Perusal of the sale deed dated 29.09.2014 also reveals that in the sale deed dated 29.09.2014 also reveals that in the sale deed dated 29.09.2014 also reveals that in the preamble of the deed of Conveyance dated 29.09.2014, preamble of the deed of Conveyance dated 29.09.2014, preamble of the deed of Conveyance dated 29.09.2014, the fact of contract agreement dated 17.09.2014 is he fact of contract agreement dated 17.09.2014 is he fact of contract agreement dated 17.09.2014 is mentioned however, Mis.Sandu Homes LLP neither mentioned however, Mis.Sandu Homes LLP neither mentioned however, Mis.Sandu Homes LLP neither acknowledged nor confirmed the Deed of Conveyance acknowledged nor confirmed the Deed of Conveyance acknowledged nor confirmed the Deed of Conveyance dated29.09.2014. It is also submitted by the Assessing dated29.09.2014. It is also submitted by the Assessing dated29.09.2014. It is also submitted by the Assessing Officer that it is impossible for any entity to get mo Officer that it is impossible for any entity to get mo Officer that it is impossible for any entity to get more than 350 illegal encroachers evicted and rehabilitate than 350 illegal encroachers evicted and rehabilitate than 350 illegal encroachers evicted and rehabilitate within 10 days i.e. between 17.09.2014 to 29.09.2014. within 10 days i.e. between 17.09.2014 to 29.09.2014. within 10 days i.e. between 17.09.2014 to 29.09.2014. It is also interesting to note that neither in the It is also interesting to note that neither in the It is also interesting to note that neither in the agreement deed with MIs. Sandu Homes LLP nor agreement deed with MIs. Sandu Homes LLP nor agreement deed with MIs. Sandu Homes LLP nor Conveyance Deed dated 29.09.2014, the details of Conveyance Deed dated 29.09.2014, the details of Conveyance Deed dated 29.09.2014, the details of encroachers are mentioned nor details of service encroachers are mentioned nor details of service encroachers are mentioned nor details of service rendered byM/s.Sandu Homes LLP is elaborated. It is rendered byM/s.Sandu Homes LLP is elaborated. It is rendered byM/s.Sandu Homes LLP is elaborated. It is also submitted by the Assessing Officer that the also submitted by the Assessing Officer that the also submitted by the Assessing Officer that the Directors of the Assessee company namely Mr. Kedar Directors of the Assessee company namely Mr. Kedar Directors of the Assessee company namely Mr. Kedar Ramesh Vaze and Mr. Ramesh VinayakVaze became Ramesh Vaze and Mr. Ramesh VinayakVaze became Ramesh Vaze and Mr. Ramesh VinayakVaze became partners of M/s. Sandu Homes LLP on 04.10.2016 i.e. of M/s. Sandu Homes LLP on 04.10.2016 i.e. of M/s. Sandu Homes LLP on 04.10.2016 i.e. almost 2 years after the agreement towards eviction& almost 2 years after the agreement towards eviction& almost 2 years after the agreement towards eviction& rehabilitation of encroachers with M/s. Sandu Homes rehabilitation of encroachers with M/s. Sandu Homes rehabilitation of encroachers with M/s. Sandu Homes LLP dated 17.09.2014. The Assessing Officer further LLP dated 17.09.2014. The Assessing Officer further LLP dated 17.09.2014. The Assessing Officer further submitted that there is no evidence in record to submitted that there is no evidence in record to submitted that there is no evidence in record to establish the fact that MIs. Sandu Homes LLP had sh the fact that MIs. Sandu Homes LLP had sh the fact that MIs. Sandu Homes LLP had actually got the land in question vacated and actually actually got the land in question vacated and got the land in question vacated and encroachers were rehabilitated in lieu of payments encroachers were rehabilitated in lieu of payments encroachers were rehabilitated in lieu of payments- made by the assessee company.In view of the above made by the assessee company.In view of the above made by the assessee company.In view of the above facts, the Assessing Officer is of the opinion that facts, the Assessing Officer is of the opinion that facts, the Assessing Officer is of the opinion that payments made payments made to M/s.Sandu Homes LLP does not to M/s.Sandu Homes LLP does not qualify for cost of improvement while computing Long qualify for cost of improvement while computing Long qualify for cost of improvement while computing Long

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Term Capital Gain (LTCG) and income to this extent had Term Capital Gain (LTCG) and income to this extent had Term Capital Gain (LTCG) and income to this extent had escaped assessment,Accordingly, the Assessing Officer escaped assessment,Accordingly, the Assessing Officer escaped assessment,Accordingly, the Assessing Officer vide his letter dated 06.01.2020 moved a proposal to vide his letter dated 06.01.2020 moved a proposal to vide his letter dated 06.01.2020 moved a proposal to revise the assessment order completed us. 143(3) of the e assessment order completed us. 143(3) of the e assessment order completed us. 143(3) of the I.T.Act, 1961 dated 07.06.2017 u/s.263 of the I.T.Act, I.T.Act, 1961 dated 07.06.2017 u/s.263 of the I.T.Act, I.T.Act, 1961 dated 07.06.2017 u/s.263 of the I.T.Act, 1961.” 3. Thereafter, the Ld. PCIT called for the records and after he Ld. PCIT called for the records and after he Ld. PCIT called for the records and after examining the same, he was of the view that the Assessing Officer examining the same, he was of the view that the Assessing Officer examining the same, he was of the view that the Assessing Officer had not carried out had not carried out inquiries on the issue of cost of improvement inquiries on the issue of cost of improvement and therefore issued notice to the assessee u/s 263 of the Act and therefore issued notice to the assessee u/s 263 of the Act and therefore issued notice to the assessee u/s 263 of the Act proposing to revise the assessment order passed by the Assessing proposing to revise the assessment order passed by the Assessing proposing to revise the assessment order passed by the Assessing Officer, being erroneous in so far as prejudicial to the Revenue. , being erroneous in so far as prejudicial to the Revenue. , being erroneous in so far as prejudicial to the Revenue. The assessee objected for such a revision on the ground that issue was jected for such a revision on the ground that issue was jected for such a revision on the ground that issue was thoroughly examined during the assessment proceedings by the thoroughly examined during the assessment proceedings by the thoroughly examined during the assessment proceedings by the Assessing Officer. However, the Ld. PCIT Assessing Officer. However, the Ld. PCIT was of the view that the of the view that the Assessing Officer ha Assessing Officer had not examined detailed description of the not examined detailed description of the duties of the contractor the contractor LLP to whom payment was made of to whom payment was made of Rs.43.31 crores. The PCIT also noted that no detail of the Rs.43.31 crores. The PCIT also noted that no detail of the Rs.43.31 crores. The PCIT also noted that no detail of the encroachers which were proposed to be encroachers which were proposed to be evicted was kept on record. was kept on record. He further noted that issue was to be examined particularly in view He further noted that issue was to be examined particularly in view He further noted that issue was to be examined particularly in view of fact that directors of the assessee company were introduced as ectors of the assessee company were introduced as ectors of the assessee company were introduced as partners of the said contractors namely partners of the said contractors namely ‘M/s Sandhu Sandhu Homes LLP’ after the transaction was completed. In other word, according to after the transaction was completed. In other word, according to after the transaction was completed. In other word, according to him the genuineness of the transaction was doubtful which was not him the genuineness of the transaction was doubtful which was not him the genuineness of the transaction was doubtful which was not enquired by the Assessing Officer. Accordingly, he invoked enquired by the Assessing Officer. Accordingly, he invoked enquired by the Assessing Officer. Accordingly, he invoked Explanation-2 to section 263 of the Act and held the assessment 2 to section 263 of the Act and held the assessment 2 to section 263 of the Act and held the assessment

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order as erroneous in so far as prejudicial to the interest of the rder as erroneous in so far as prejudicial to the interest of the rder as erroneous in so far as prejudicial to the interest of the Revenue observing as under: Revenue observing as under:

“4. I have carefully considered the facts placed on 4. I have carefully considered the facts placed on 4. I have carefully considered the facts placed on record. I have also gone through the assessment record. I have also gone through the assessment record. I have also gone through the assessment records. I have also perused submissions made by the records. I have also perused submissions made by the records. I have also perused submissions made by the assessee. The facts placed on record clearly indicate The facts placed on record clearly indicate The facts placed on record clearly indicate that in the assessee engaged contractor namely that in the assessee engaged contractor namely that in the assessee engaged contractor namely M/s.Sandu Homes LLP on 17.09.2014 to get the land in M/s.Sandu Homes LLP on 17.09.2014 to get the land in M/s.Sandu Homes LLP on 17.09.2014 to get the land in question evicted from encroachers. It is also a matter of question evicted from encroachers. It is also a matter of question evicted from encroachers. It is also a matter of record that the land in question was sold to the sist record that the land in question was sold to the sist record that the land in question was sold to the sister concern M/s.Keva properties P.Ltd on 29.09.2014 for a concern M/s.Keva properties P.Ltd on 29.09.2014 for a concern M/s.Keva properties P.Ltd on 29.09.2014 for a sale consideration of Rs.53.49 Crores. It is also a matter sale consideration of Rs.53.49 Crores. It is also a matter sale consideration of Rs.53.49 Crores. It is also a matter of record that consideration paid to contractor namely of record that consideration paid to contractor namely of record that consideration paid to contractor namely M/s.Sandu Homes LLP of Rs.43.31 Crores were not M/s.Sandu Homes LLP of Rs.43.31 Crores were not M/s.Sandu Homes LLP of Rs.43.31 Crores were not made against any specific service. Th made against any specific service. The payment made e payment made to contractor were broadly worked out under the to contractor were broadly worked out under the to contractor were broadly worked out under the headsLand Cost, Construction Material cost, and headsLand Cost, Construction Material cost, and headsLand Cost, Construction Material cost, and construction Labour cost on per Sq.ft basis. There is construction Labour cost on per Sq.ft basis. There is construction Labour cost on per Sq.ft basis. There is nothing on record to substantiate this working, Perusal nothing on record to substantiate this working, Perusal nothing on record to substantiate this working, Perusal of record further reveals that deta of record further reveals that detailed description of iled description of duties of contractor is neither detailed in the agreement duties of contractor is neither detailed in the agreement duties of contractor is neither detailed in the agreement dated 17.09.2014 nor in the conveyance deed dated dated 17.09.2014 nor in the conveyance deed dated dated 17.09.2014 nor in the conveyance deed dated 29.09.2014. It is also interesting to note that payment of 29.09.2014. It is also interesting to note that payment of 29.09.2014. It is also interesting to note that payment of Rs.43.31 Crores were made to the contractor on Rs.43.31 Crores were made to the contractor on Rs.43.31 Crores were made to the contractor on 29.09.2014 i.e. date o 29.09.2014 i.e. date of conveyance deed. This is in fact f conveyance deed. This is in fact the entire payment of contract agreement, which had the entire payment of contract agreement, which had the entire payment of contract agreement, which had been made in one go without ensuring completion of been made in one go without ensuring completion of been made in one go without ensuring completion of intended eviction and rehabilitation.Perusal of record intended eviction and rehabilitation.Perusal of record intended eviction and rehabilitation.Perusal of record further reveals that there is no evidence on record to further reveals that there is no evidence on record to further reveals that there is no evidence on record to substantiate the services rendered by the contractor. iate the services rendered by the contractor. iate the services rendered by the contractor. The Assessing Officer had also not taken on record the The Assessing Officer had also not taken on record the The Assessing Officer had also not taken on record the details details details of of of encroachers, encroachers, encroachers, eviction eviction eviction of of of which which which had had had statedlycosted Rs.43.31 Crores to the assessee. It is statedlycosted Rs.43.31 Crores to the assessee. It is statedlycosted Rs.43.31 Crores to the assessee. It is also an established fact that the Directors of the also an established fact that the Directors of the also an established fact that the Directors of the assessee company were introduced as partners of the ssee company were introduced as partners of the ssee company were introduced as partners of the Contractor namely M/s.Sandu Homes.LIP after the Contractor namely M/s.Sandu Homes.LIP after the Contractor namely M/s.Sandu Homes.LIP after the transaction was completed. In view of the above facts, I transaction was completed. In view of the above facts, I transaction was completed. In view of the above facts, I am convinced that the Assessing Officer had not made am convinced that the Assessing Officer had not made am convinced that the Assessing Officer had not made enquiries or verification which should have been m enquiries or verification which should have been m enquiries or verification which should have been made. This way this case is wholly and squarely covered with This way this case is wholly and squarely covered with This way this case is wholly and squarely covered with provisions of Sub Clause(a) to Explanation 2 of the provisions of Sub Clause(a) to Explanation 2 of the provisions of Sub Clause(a) to Explanation 2 of the Section 263 of the I.T.Act, 1961.The assessee had Section 263 of the I.T.Act, 1961.The assessee had Section 263 of the I.T.Act, 1961.The assessee had

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placed reliance on various case laws. I have gone placed reliance on various case laws. I have gone placed reliance on various case laws. I have gone through these case laws and noticed that the through these case laws and noticed that these case se case laws pertains to the years 1991, 2002 and 1996. It is a laws pertains to the years 1991, 2002 and 1996. It is a laws pertains to the years 1991, 2002 and 1996. It is a matter of fact that Explanation 2 to Section 263 of the matter of fact that Explanation 2 to Section 263 of the matter of fact that Explanation 2 to Section 263 of the I.T.Act, I.T.Act, I.T.Act, 1961 1961 1961 was was was inserted inserted inserted with with with effect effect effect from from from 01.06.2015.By insertion of this explanation, provision of 01.06.2015.By insertion of this explanation, provision of 01.06.2015.By insertion of this explanation, provision of Section 263 were substantially ame Section 263 were substantially amended and the ratio nded and the ratio of case laws pertaining to the provisions prior to this of case laws pertaining to the provisions prior to this of case laws pertaining to the provisions prior to this amendment will not hold good. Since the case laws amendment will not hold good. Since the case laws amendment will not hold good. Since the case laws relied upon by the assessee pertains to the provisions of relied upon by the assessee pertains to the provisions of relied upon by the assessee pertains to the provisions of Section 263 as it was prior to 01.06.2015 accordingly, Section 263 as it was prior to 01.06.2015 accordingly, Section 263 as it was prior to 01.06.2015 accordingly, the ratio of case the ratio of case laws will not help the assessee. 5. In view of the above facts, I am of the firm view that 5. In view of the above facts, I am of the firm view that 5. In view of the above facts, I am of the firm view that the assessment order completed us.143(3) of the I.T.Act, the assessment order completed us.143(3) of the I.T.Act, the assessment order completed us.143(3) of the I.T.Act, 1961 dated 07.06.2017 is erroneous in so far as it is 1961 dated 07.06.2017 is erroneous in so far as it is 1961 dated 07.06.2017 is erroneous in so far as it is prejudicial to the interest of revenue and accordingly prejudicial to the interest of revenue and accordingly prejudicial to the interest of revenue and accordingly, the same is hereby revised as per the provisions of the same is hereby revised as per the provisions of the same is hereby revised as per the provisions of Section 263 of the I.T.Act, 1961. The assessment order Section 263 of the I.T.Act, 1961. The assessment order Section 263 of the I.T.Act, 1961. The assessment order dated 07.06.2017is set aside to the file of the Assessing dated 07.06.2017is set aside to the file of the Assessing dated 07.06.2017is set aside to the file of the Assessing officer and the Assessing Officer is directed to complete officer and the Assessing Officer is directed to complete officer and the Assessing Officer is directed to complete the assessment and frame the as the assessment and frame the assessment afresh after sessment afresh after getting the cogent evidences on record and decide the getting the cogent evidences on record and decide the getting the cogent evidences on record and decide the issue as per provisions of law. issue as per provisions of law.” 4. Before us, the Ld. Before us, the Ld. Senior Counsel of the assessee filed a Paper Counsel of the assessee filed a Paper book containing pages 1 to book containing pages 1 to 388 on behalf of the assessee. 388 on behalf of the assessee.

4.1 Before us, the Ld Before us, the Ld. Sr. Counsel of the assessee has challenged Counsel of the assessee has challenged validity of the revision order on two validity of the revision order on two counts. Firstly Firstly, according to him, the Ld. PCIT has invoked Explanation the Ld. PCIT has invoked Explanation-2 to section 263 of the 2 to section 263 of the Act without referring the same referring the same in the show cause notice issue the show cause notice issued u/s 263 of the Act, which is in violation of principle of natural justice. , which is in violation of principle of natural justice. , which is in violation of principle of natural justice. The Ld. Counsel relied on the decision of the The Ld. Counsel relied on the decision of the Hon’ble Gujarat High Hon’ble Gujarat High Court in the case of Shreeji Paints Pvt. Ltd. Court in the case of Shreeji Paints Pvt. Ltd.in Appeal No. 828 of Appeal No. 828 of 2019. He also informed that SLP filed by the Revenue against the . He also informed that SLP filed by the Revenue against the . He also informed that SLP filed by the Revenue against the same has been dismissed by the same has been dismissed by the Hon’ble Supreme Court as Hon’ble Supreme Court as

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reported in (2021) 130 taxmann.com 294 (SC).Secondly, reported in (2021) 130 taxmann.com 294 (SC). reported in (2021) 130 taxmann.com 294 (SC). according to the Ld. Counsel according to the Ld. Counsel, the Assessing Officer has carried out the Assessing Officer has carried out inquiries in the matter and after examination and considering the matter and after examination and considering the matter and after examination and considering the submission of the assessee submission of the assessee, he accepted the cost of improvement he accepted the cost of improvement and no addition was made in the assessment order u/s 143(3) of and no addition was made in the assessment order u/s 143(3) of and no addition was made in the assessment order u/s 143(3) of the Act. According to him, the Ld. PCIT is not justified in holding the Act. According to him, the Ld. PCIT is not justified in holding the Act. According to him, the Ld. PCIT is not justified in holding the order erroneous in so far as prejudicial to the interest of the roneous in so far as prejudicial to the interest of the roneous in so far as prejudicial to the interest of the Revenue just because he was having different view based on the Revenue just because he was having different view based on the Revenue just because he was having different view based on the same material. In support of contention, t In support of contention, the Ld. Counsel relied on he Ld. Counsel relied on the decision of the Hon’ble Bombay High Court in the case of CIT v. the decision of the Hon’ble Bombay High Court in the case of the decision of the Hon’ble Bombay High Court in the case of Gabrial India Ltd. 203 ITR 108 Bombay India Ltd. 203 ITR 108 Bombay. He further relied on the . He further relied on the decision of the Hon’ble Bombay High Court in the case of CIT decision of the Hon’ble Bombay High Court in the case of decision of the Hon’ble Bombay High Court in the case of Central (III) v. Nirav Modi 390 ITR 292 Bombay and submitted Central (III) v. Nirav Modi 390 ITR 292 Bombay Central (III) v. Nirav Modi 390 ITR 292 Bombay that the Ld. PCIT is not justified in setting aside the assessment that the Ld. PCIT is not justified in setting aside the assessment that the Ld. PCIT is not justified in setting aside the assessment order where the Assessing Officer had taken where the Assessing Officer had taken a view after making view after making proper inquiry. He also relied on the other decisions of the Tribunal proper inquiry. He also relied on the other decisions of the Tribunal proper inquiry. He also relied on the other decisions of the Tribunal to support that the Assessing Officer has made inquiry in the to support that the Assessing Officer has made inquiry in the to support that the Assessing Officer has made inquiry in the matter. As far as the matter. As far as the instant case is concerned, the Ld. case is concerned, the Ld. Sr. Counsel referred to Paper Book page No. 22 to 23, which is a copy of notice referred to Paper Book page No. 22 to 23, which is a copy of notice referred to Paper Book page No. 22 to 23, which is a copy of notice u/s 142(1) of the Act dated 17.04.2017 issued by the Assessing u/s 142(1) of the Act dated 17.04.2017 issued by the Assessing u/s 142(1) of the Act dated 17.04.2017 issued by the Assessing Officer. He further referred to the reply dated 03.05.2017 filed by Officer. He further referred to the reply dated 03.05.2017 filed by Officer. He further referred to the reply dated 03.05.2017 filed by the assessee justifying the low capital gain with respect to the sale the assessee justifying the low capital gain with res the assessee justifying the low capital gain with res consideration, available on page 24 to 29 of the Paper Book. available on page 24 to 29 of the Paper Book. available on page 24 to 29 of the Paper Book. Further, he referred to reply of the assessee dated 31.05.2017 Further, he referred to reply of the assessee dated 31.05.2017 Further, he referred to reply of the assessee dated 31.05.2017 which is available on page 30 to 32 of the Paper book, justifying the which is available on page 30 to 32 of the Paper book which is available on page 30 to 32 of the Paper book

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expenditure in connection with sale of the la expenditure in connection with sale of the land.During .During the course of hearing order sheet of the assessment folder was filed by the Ld. hearing order sheet of the assessment folder was filed by the Ld. hearing order sheet of the assessment folder was filed by the Ld. DR.Referring to the said order sheet, t .Referring to the said order sheet, the Ld. Sr. Sr.Counsel of the assessee submitted that there is a reference of letter dated assessee submitted that there is a reference of letter dated assessee submitted that there is a reference of letter dated 31.05.2017 filed by the assessee in the s 31.05.2017 filed by the assessee in the said order sheet also aid order sheet also, therefore according to to him, sufficient inquiry has been carried out sufficient inquiry has been carried out by the Assessing Officer and the Ld. PCIT cannot substitute his by the Assessing Officer and the Ld. PCIT cannot substitute his by the Assessing Officer and the Ld. PCIT cannot substitute his view by replacing view of the Assessing Officer on the issue of cost view by replacing view of the Assessing Officer on the issue of cost view by replacing view of the Assessing Officer on the issue of cost of improvement allowed by him. of improvement allowed by him.

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the contractor. The Ld. the contractor. The Ld. DR further opposed the argument of opposed the argument of the Ld. Counsel of doctrine of alternate views available to the Asses doctrine of alternate views available to the Asses doctrine of alternate views available to the Assessing Officer and one view adopted by the Officer and one view adopted by the AO and submitted that same is AO and submitted that same is not applicable as it is a case of no/improper/inadequate inquiry or not applicable as it is a case of no/improper/inadequate inquiry or not applicable as it is a case of no/improper/inadequate inquiry or verification. The Ld. DR in support of his contention relied on the verification. The Ld. DR in support of his contention relied on the verification. The Ld. DR in support of his contention relied on the decision of the ITAT Pune Bench in the case of Jalgaon Peoples’s lgaon Peoples’s decision of the ITAT Pune Bench in the case of Co-op Bank Ltd. v. PCIT op Bank Ltd. v. PCIT-2, Nashik reported in (2021) 127 reported in (2021) 127 taxmann.com 243 (Pune taxmann.com 243 (Pune-Trib.) wherein it is held that if the it is held that if the Assessing Officer has not conducted necessary verification and has Assessing Officer has not conducted necessary verification and has Assessing Officer has not conducted necessary verification and has passed assessment order accepting documents furnished by the passed assessment order accepting documents furnished by the passed assessment order accepting documents furnished by the assessee without analyzing or examining them, the assessment order assessee without analyzing or examining them, the assessment order assessee without analyzing or examining them, the assessment order is bound to be erroneous and prejudici is bound to be erroneous and prejudicial to the interest of the al to the interest of the Revenue. The Ld. DR also relied on the decision of The Ld. DR also relied on the decision of Hon’ble Supreme Hon’ble Supreme Court in the cases Rampyari Devi Saraogi v. Commissioner of Rampyari Devi Saraogi v. Commissioner of Rampyari Devi Saraogi v. Commissioner of Income-tax [1968] 67 ITR 84 (SC) tax [1968] 67 ITR 84 (SC) and Tara Devi Aggarwal v. Tara Devi Aggarwal v. Commissioner of In Commissioner of Income-tax [1973] 88 ITR 323 (SC) (SC).

5.1 Regarding the issue of no mention of Regarding the issue of no mention of Explanation Explanation-2 in the show cause notice, the Ld show cause notice, the Ld. DR submitted that Explanation . DR submitted that Explanation-2 to 263 is part of the section 263 and therefore, there is part of the section 263 and therefore, there was no requirement of separately specifying separately specifying or invoking of Explanation or invoking of Explanation-2 in the show cause notice proposing cause notice proposing for revision of the assessment order. revision of the assessment order. He submitted that once the main section is quoted and such section is submitted that once the main section is quoted and such section is submitted that once the main section is quoted and such section is invoked to initiate any proceedings, the sub invoked to initiate any proceedings, the sub-section or clauses or section or clauses or explanation might not be required to mention explanation might not be required to mention as there is irrefutable as there is irrefutable presumption that main section includes the sub presumption that main section includes the sub-section or clauses section or clauses

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or explanation or proviso to the main section. or explanation or proviso to the main section. According to him, it is According to him, it is not the case that particular issue of revision has not been not the case that particular issue of revision has not been not the case that particular issue of revision has not been confronted to the assessee confronted to the assessee but added in the final revision d in the final revision without raising in show cause notice, raising in show cause notice, for which the assessee could the assessee could claim violation of the principle of natural justice. violation of the principle of natural justice.

“6. Furnish justification with Furnish justification with evidence in connection evidence in connection with grounds for selection of your case in scrutiny which with grounds for selection of your case in scrutiny which with grounds for selection of your case in scrutiny which are as under: are as under:

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a. Low capital gain with respect to sale Low capital gain with respect to sale Low capital gain with respect to sale consideration (higher of AR and IT) consideration (higher of AR and IT) b. Large Large Large deduction deduction deduction claimed claimed claimed u/s u/s u/s 35, 35, 35, 35(2AA), 35(2AA), 35(2AA), 35[2AB). 35[2AB). c. High ratio of refund to TDS. High ratio of refund to TDS. d. Large Large other expenses claimed in the Profit & Loss other expenses claimed in the Profit & Loss a/c. e. Large any other deduction claimed in sch. BP Large any other deduction claimed in sch. BP Large any other deduction claimed in sch. BP creating a loss without any income in Profit & creating a loss without any income in Profit & creating a loss without any income in Profit & Loss a/c. Loss a/c. f. Large out ward remittances to a non Large out ward remittances to a non-resident not resident not being a company, or to a foreign company (Form being a company, or to a foreign company (Form being a company, or to a foreign company (Form 15CA) 15CA) g. Depreciation claimed at higher rates/higher reciation claimed at higher rates/higher reciation claimed at higher rates/higher additional depreciation claimed. additional depreciation claimed. h. Large loans/advances to sister concern(s) (Form Large loans/advances to sister concern(s) (Form Large loans/advances to sister concern(s) (Form 3CD). i. Loan/Advance to a substantial share holder u/s Loan/Advance to a substantial share holder u/s Loan/Advance to a substantial share holder u/s 2(22)(e) (Deemed dividend (Form 3C0). 2(22)(e) (Deemed dividend (Form 3C0). j. Mismatch in amount paid to related persons Mismatch in amount paid to related persons u/s Mismatch in amount paid to related persons 40A(2)(b) reported in Audit Report and ITR 40A(2)(b) reported in Audit Report and ITR k. Sale of property reported in Form 26QB. Sale of property reported in Form 26QB. 6.2 With reference to the notice u/s 142(1) of the Act dated With reference to the notice u/s 142(1) of the Act dated With reference to the notice u/s 142(1) of the Act dated 17.04.2017, the assessee filed reply on 03.05.2017. The reply 17.04.2017, the assessee filed reply on 03.05.2017. The reply 17.04.2017, the assessee filed reply on 03.05.2017. The reply relevant to the reason for selection of the ca relevant to the reason for selection of the case on the ground se on the ground of low capital gain with respect to the sale consideration, filed by the with respect to the sale consideration, filed by the with respect to the sale consideration, filed by the assessee is reproduced as under: assessee is reproduced as under:

“6. Furnish Furnish Furnish justification justification justification with with with evidence evidence evidence in in in connection with grounds for selection of your case connection with grounds for selection of your case connection with grounds for selection of your case in scrutiny which are as under: in scrutiny which are as under: Low capital gain with respect to sale consideration ital gain with respect to sale consideration ital gain with respect to sale consideration (higher of AR and ITR) (higher of AR and ITR) During the year, the assessee company has transferred During the year, the assessee company has transferred During the year, the assessee company has transferred a capital asset, being a plot of land, for a consideration a capital asset, being a plot of land, for a consideration a capital asset, being a plot of land, for a consideration of Rs. 53,49,00,000/ of Rs. 53,49,00,000/-, This land was encroached upon , This land was encroached upon by slum dwellers by wa by slum dwellers by way of 350 hutments / slums for y of 350 hutments / slums for the last several years. Various cases were filed in the last several years. Various cases were filed in the last several years. Various cases were filed in

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courts in order to obtain the possession of the land but courts in order to obtain the possession of the land but courts in order to obtain the possession of the land but in vain. No buyer / developer was ready to purchase in vain. No buyer / developer was ready to purchase in vain. No buyer / developer was ready to purchase the land due to the encumbrances which were existing the land due to the encumbrances which were existing the land due to the encumbrances which were existing on the land. on the land. In order to remove the encumbrance, the In order to remove the encumbrance, the assessee company entered into rehabilitation agreement assessee company entered into rehabilitation agreement assessee company entered into rehabilitation agreement with third party developer for rehabilitation of tenants with third party developer for rehabilitation of tenants with third party developer for rehabilitation of tenants (slum dwellers) so that a peaceful and vacant (slum dwellers) so that a peaceful and vacant (slum dwellers) so that a peaceful and vacant possession of land could be obtained.For the same, the possession of land could be obtained.For the same, the possession of land could be obtained.For the same, the assessee engaged a contractor in connection with which sessee engaged a contractor in connection with which sessee engaged a contractor in connection with which an amount of Rs. 43,31,00,000/ an amount of Rs. 43,31,00,000/- was incurred as was incurred as expenditure. It was only due to removal of the expenditure. It was only due to removal of the expenditure. It was only due to removal of the encumbrances that the assessee company was able to encumbrances that the assessee company was able to encumbrances that the assessee company was able to sell the land for Rs. 53,49,00,000/ the land for Rs. 53,49,00,000/-.” 6.3 Thereafter, the assessment proceedings were adjourned to Thereafter, the assessment proceedings were adjourned to Thereafter, the assessment proceedings were adjourned to 23.05.2017, 26.05.2017 and 23.05.2017, 26.05.2017 and then 31.05.2017. On 31.05.2017, the n 31.05.2017, the assessee filed a reply, reply, which is available on paper book page 30 to which is available on paper book page 30 to 34.In the said reply the assessee the said reply the assessee gave a detailed submission as detailed submission as how the land was sold to M/s Keva Properties Private Limited and how was sold to M/s Keva Properties Private Limited and how was sold to M/s Keva Properties Private Limited and how the contract was given the contract was given “Sandu Homes LLP” who was engaged was engaged for eviction of the encroacher eviction of the encroachers on the land.

6.4 On analysis of the On analysis of the above facts, we find that the Assessing above facts, we find that the Assessing Officer has only issue Officer has only issued a preliminary questionnaire for gathering preliminary questionnaire for gathering the information from the assessee in support of from the assessee in support of reasons reasons for which the case was selected under scrutiny. the case was selected under scrutiny. One of such such reason for the selection of the scrutiny selection of the scrutiny was,Capital gain of Rs.6,74,10,312/ gain of Rs.6,74,10,312/- (i.e. low) shown by the assessee against the sale consideration of he assessee against the sale consideration of he assessee against the sale consideration of Rs.53,49,00,000/-.

6.5 On perusal of the query letter On perusal of the query letter issued by the Assessing Officer, by the Assessing Officer, we find that he has not issued we find that he has not issued even a single query letter justifying single query letter justifying

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or examining the genuineness of the cost of improveme genuineness of the cost of improvement of genuineness of the cost of improveme Rs.43,31,00,000/- claimed by the assessee while computing the claimed by the assessee while computing the claimed by the assessee while computing the long-term capital gain. The Assessing Officer capital gain. The Assessing Officer did his formality of did his formality of informing the reasons to the assessee , on which the case was informing the reasons to the assessee , on which the case was informing the reasons to the assessee , on which the case was selected for scrutiny and thereafter he selected for scrutiny and thereafter he simply placed the simply placed the submissions filed by the assessee on record filed by the assessee on record, , whereas the circumstances of the related party transactions should have alerted circumstances of the related party transactions should have alerted circumstances of the related party transactions should have alerted him for examining or verifying the issue. The Tribunal in the case of him for examining or verifying the issue. The Tribunal in the case of him for examining or verifying the issue. The Tribunal in the case of Jalgaon Peoples’s Co Jalgaon Peoples’s Co-op Bank Ltd. v. PCIT-2, Nashik 2, Nashik(supra) held that wherever it is found by the Commissioner of Income wherever it is found by the Commissioner of Income-tax that the wherever it is found by the Commissioner of Income Assessing Officer has not conducted necessary verification and has Assessing Officer has not conducted necessary verification and has Assessing Officer has not conducted necessary verification and has passed the assessment order passed the assessment order accepting the documents furnished by the documents furnished by the assessee without analyzing or examining them and when no the assessee without analyzing or examining them and the assessee without analyzing or examining them and verification has been conducted by the Assessing Officer in that area verification has been conducted by the Assessing Officer in that area verification has been conducted by the Assessing Officer in that area as highlighted in the order passed u/s 263 of the Act. In such as highlighted in the order passed u/s 263 of the Act. In such as highlighted in the order passed u/s 263 of the Act. In such scenario, the assessment order is bound to the erroneous and scenario, the assessment order is bound to the erroneous and scenario, the assessment order is bound to the erroneous and se of Rampyari prejudicial to the interest of the Revenue. prejudicial to the interest of the Revenue. In the case of Devi Saraogi (supra) Devi Saraogi (supra), the Hon’ble Supreme Court has observed that the Hon’ble Supreme Court has observed that the information filed by the assessee comprising of declaration giving the information filed by the assessee comprising of declaration giving the information filed by the assessee comprising of declaration giving effects regarding initial capital, the ornaments and presents received initial capital, the ornaments and presents received initial capital, the ornaments and presents received at the time of marriage, other gi at the time of marriage, other gifts received from her father fts received from her father-in-law, etc. which should have put any Income etc. which should have put any Income-tax Officer on his guard tax Officer on his guard,but the Income-tax Officer without making any inquiries to satisfy himself tax Officer without making any inquiries to satisfy himself tax Officer without making any inquiries to satisfy himself passed the assessment order which was held to be erroneous in so passed the assessment order which was held to be erroneous in so passed the assessment order which was held to be erroneous in so far as prejudicial to the interest of the Revenue. al to the interest of the Revenue. Similarly, in the case Similarly, in the case

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of Tara Devi Aggarwal (supra), the Hon’ble Supreme Court followed of Tara Devi Aggarwal (supra), the Hon’ble Supreme Court followed of Tara Devi Aggarwal (supra), the Hon’ble Supreme Court followed their finding in the case of Rampyari Devi Saraogi (supra) and their finding in the case of Rampyari Devi Saraogi (supra) and their finding in the case of Rampyari Devi Saraogi (supra) and upheld that the Assessing Officer was not justif upheld that the Assessing Officer was not justified in accepting the in accepting the initial capital sale of the ornaments, the income from business, the initial capital sale of the ornaments, the income from business, the initial capital sale of the ornaments, the income from business, the investment without any inquiry or evidence whatsoever and investment without any inquiry or evidence whatsoever and investment without any inquiry or evidence whatsoever and therefore, the order of the assessment therefore, the order of the assessment was was erroneous and prejudicial to the interest of the Revenue. prejudicial to the interest of the Revenue.

6.6 Before us, the Ld. Cou Before us, the Ld. Counsel of the assessee submitted that nsel of the assessee submitted that M/s Keva Properties P Ltd P Ltd was a common director and it was not a was a common director and it was not a sister’s concern. In our opinion, the issue was regarding the sister’s concern. In our opinion, the issue was regarding the sister’s concern. In our opinion, the issue was regarding the payment made to Sandhu LLP in which clearly the directors of the payment made to Sandhu LLP in which clearly the directors of the payment made to Sandhu LLP in which clearly the directors of the assessee-company had become company had become partner. The issue of genuineness or of genuineness or justification of payment justification of payment ought to have been examined by the ought to have been examined by the Assessing Officer as he is not only Assessing Officer as he is not only an adjudicator an adjudicator but he is also having duty of investigator. In the case of assessee duty of investigator. In the case of assessee, he , he only placed agreement with the agreement with the Sandhu LLP, who has been made , who has been made payment of Rs.43,31,00,000/- without either raising any without either raising any bill or invoice bill or invoice by the said LLP and without and without evidence of even a small fraction fraction of service rendered by said LLP. The Assessing Officer has blindly accepted rendered by said LLP. The Assessing Officer has blindly accepted rendered by said LLP. The Assessing Officer has blindly accepted the said claim of deduction of cost of improvement f deduction of cost of improvement ignoring the fact ignoring the fact that encroachment was was held illegal by the Competent Authority, by the Competent Authority, which was further upheld by the Hon’ble High Court. In such facts which was further upheld by the Hon’ble High Court. In such facts which was further upheld by the Hon’ble High Court. In such facts and circumstances, prima and circumstances, prima-facie, there was no necessity of hiring facie, there was no necessity of hiring agency for eviction of encroachers r eviction of encroachers and assessee was required to and assessee was required to approach low enforcement agencies for approach low enforcement agencies for eviction of such encroacher. of such encroacher.

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In such circumstances, the Assessing Officer was duty bound to In such circumstances, the Assessing Officer was du In such circumstances, the Assessing Officer was du examine the claim of expenditure of Rs.43,31,00,000/- as cost of examine the claim of expenditure of Rs.43,31,00,000/ examine the claim of expenditure of Rs.43,31,00,000/ improvement to the land. ement to the land. Therefore, in our opinion it is in our opinion it is evident that no inquiry has been made by the Assessing Officer on the issue of no inquiry has been made by the Assessing Officer on the issue of no inquiry has been made by the Assessing Officer on the issue of cost of improvement. cost of improvement. In the case of Gabrial India Ltd. (supra) the case of Gabrial India Ltd. (supra), the CIT on perusal of the records was of the opinion that esti on perusal of the records was of the opinion that esti on perusal of the records was of the opinion that estimate made by the Assessing Officer concern was on by the Assessing Officer concern was on lower side and according to and according to the Commissioner should have been the Commissioner should have been on a higher figure a higher figure. The Hon’ble High Court held that order cannot be hold erroneously only because High Court held that order cannot be hold erroneously only because High Court held that order cannot be hold erroneously only because of the reason that assessment order of the reason that assessment order should ha should have been more elaborate in view of L in view of Ld. CIT and the Commissioner c d. CIT and the Commissioner could not have power to re-examining himself at a higher figure. Thus examining himself at a higher figure. Thus examining himself at a higher figure. Thus, the fact of the said case, are entirely different. Similarly, in the case of CIT v. the said case, are entirely different. Similarly, in the case of CIT v. the said case, are entirely different. Similarly, in the case of CIT v. Nirav Modi (supra) also the claim of n Nirav Modi (supra) also the claim of no inquiry was rejected by the o inquiry was rejected by the Hon’ble High Court that for examining application of section 68 of Hon’ble High Court that for examining application of section 68 of Hon’ble High Court that for examining application of section 68 of the Act inquiry of source of the source was not required under the the Act inquiry of source of the source was not required under the the Act inquiry of source of the source was not required under the law and therefore it could not be said the case was of no inquiry. law and therefore it could not be said the case was of no inquiry. law and therefore it could not be said the case was of no inquiry. The facts of instant instant case are clearly different , therefore, ratio of therefore, ratio of said decision cannot be applied in the instant case. said decision cannot be applied in the instant case.

6.7 However, as far as the decision of the Hon’ble Gujarat High However, as far as the decision of the Hon’ble Gujarat High However, as far as the decision of the Hon’ble Gujarat High Court in the case of Shreeji Prints Pvt. Ltd. (supra) Court in the case of (supra) is concerned the Hon’ble High Court after analyzing the decision of the Tribunal the Hon’ble High Court after analyzing the decision of the Tribunal the Hon’ble High Court after analyzing the decision of the Tribunal held that in the show cause notice, the PCIT in the show cause notice, the PCIT has not mentioned has not mentioned for invokingExplanation Explanation -2 of section 263 of the Act and therefore section 263 of the Act and therefore without invoking the said explanation without invoking the said explanation in the show cause notice, show cause notice, the

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revision order of the Ld. CIT(A) was held invalid. The relevant revision order of the Ld. CIT(A) was held invalid. The relevant revision order of the Ld. CIT(A) was held invalid. The relevant finding of the Hon’ble Gujarat High Court is reproduced as under: finding of the Hon’ble Gujarat High Court is reproduced as under: finding of the Hon’ble Gujarat High Court is reproduced as under:

“5 The Tribunal has found that in the order passed by 5 The Tribunal has found that in the order passed by 5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Ac the PCIT, Explanation 2 of section 263 of the Act, 1961 t, 1961 is made applicable. The Tribunal observed that the PCIT is made applicable. The Tribunal observed that the PCIT is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke has not mentioned in the show cause notice to invoke has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. the Explanation 2 of section 263 of the Act 1961. the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order Therefore, by invocation of Explanation in the order Therefore, by invocation of Explanation in the order without confronting the assessee and without confronting the assessee and giving an giving an opportunity of being heard to the assessee is not opportunity of being heard to the assessee is not opportunity of being heard to the assessee is not appropriate and sustainable in law. appropriate and sustainable in law. 6 Thus, the Tribunal has considered in detail the aspect 6 Thus, the Tribunal has considered in detail the aspect 6 Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the of revisional power to be exercised by the PCIT in the of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of fa facts of the case and has given a finding of facts that cts that the Assessing Officer has made inquiries in detail and the Assessing Officer has made inquiries in detail and the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans after applying mind, accepted the genuineness of loans after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid received by the respondent assessee from the aforesaid received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer two companies and such view of the Assessing Officer two companies and such view of the Assessing Officer is a plausible view, and ther is a plausible view, and therefore, the same cannot be efore, the same cannot be said to be erroneous or prejudicial to the interest of the said to be erroneous or prejudicial to the interest of the said to be erroneous or prejudicial to the interest of the Revenue. 7 In view of such finding of facts arrived by the 7 In view of such finding of facts arrived by the 7 In view of such finding of facts arrived by the Tribunal, no questions of law much less of any Tribunal, no questions of law much less of any Tribunal, no questions of law much less of any substantial questions of law arise out of the impugned substantial questions of law arise out of the impugned substantial questions of law arise out of the impugned order passed by the Tribunal. ed by the Tribunal.” 6.8 In the case before us the show cause notice issued by the Ld. In the case before us the show cause notice issued by the Ld. In the case before us the show cause notice issued by the Ld. PCIT is reproduced as under: PCIT is reproduced as under:

“Subject: Show cause notice us 263 of the IT.Act in the Subject: Show cause notice us 263 of the IT.Act in the Subject: Show cause notice us 263 of the IT.Act in the case of MIs. Mis. S H Kelkar And Company Ltd. case of MIs. Mis. S H Kelkar And Company Ltd. (PAN: AAACS9778G ) for A.Y 2015 (PAN: AAACS9778G ) for A.Y 2015-16 - Reg. Please refer to the above. Please refer to the above. 2. In this case, the Return of Income for A.Y. 2015 2. In this case, the Return of Income for A.Y. 2015 2. In this case, the Return of Income for A.Y. 2015-16 was e-filed on 28.11.2015, declaring total income at filed on 28.11.2015, declaring total income at filed on 28.11.2015, declaring total income at Rs.43, 18,43,790/ Rs.43, 18,43,790/-. Subsequently, the case was . Subsequently, the case was

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selected for scrutiny under CASS and the assessment selected for scrutiny under CASS and the assessment selected for scrutiny under CASS and the assessment was completed us 1 was completed us 143(3) of the IT. Act on 07.06.2017 43(3) of the IT. Act on 07.06.2017 determining assessed income at R$.43,74,75,450/ determining assessed income at R$.43,74,75,450/ determining assessed income at R$.43,74,75,450/- after making disallowance of Rs.49,31,256/ after making disallowance of Rs.49,31,256/- us 14A of us 14A of the Act and Rs.7,00,400/ the Act and Rs.7,00,400/- under the head professional under the head professional fees for merger and demerger. fees for merger and demerger. 3.Perusal of case record revealed 3.Perusal of case record revealed that there is an under that there is an under assessment of income of Rs.45,22,30,325/ assessment of income of Rs.45,22,30,325/- on account on account of sale of immovable property to M/s. Keva Properties of sale of immovable property to M/s. Keva Properties of sale of immovable property to M/s. Keva Properties Pvt. Ltd. 4. In view of the above, the assessment order passed 4. In view of the above, the assessment order passed 4. In view of the above, the assessment order passed us. 143(3), of the IT. Act, 1961 dated 07.06.2017 for us. 143(3), of the IT. Act, 1961 dated 07.06.2017 for us. 143(3), of the IT. Act, 1961 dated 07.06.2017 for A.Y. 2015-16 is erroneous in so far as it is prejudicial to 16 is erroneous in so far as it is prejudicial to 16 is erroneous in so far as it is prejudicial to the interest of revenue. I, the Commissioner of Income the interest of revenue. I, the Commissioner of Income the interest of revenue. I, the Commissioner of Income- tax -4, Mumbai, in exercise of the powers conferred on 4, Mumbai, in exercise of the powers conferred on 4, Mumbai, in exercise of the powers conferred on me under the provisions of Section 263 of the I.T.Act, me under the provisions of Section 263 of the I.T.Act, me under the provisions of Section 263 of the I.T.Act, 1961, propose to consider this matter an 1961, propose to consider this matter and pass such d pass such order thereon as the facts and circumstances of the case order thereon as the facts and circumstances of the case order thereon as the facts and circumstances of the case may justify. 5. Before doing so, I hereby give you an opportunity of 5. Before doing so, I hereby give you an opportunity of 5. Before doing so, I hereby give you an opportunity of being heard to explain your stand. If you desire to be being heard to explain your stand. If you desire to be being heard to explain your stand. If you desire to be heard in in in person person person or or or through through through an an an authorized authoriz authoriz representative, you ma representative, you may please attend before me at my y please attend before me at my office at the above mentioned address on 28.01.2020 at office at the above mentioned address on 28.01.2020 at office at the above mentioned address on 28.01.2020 at 3.30 p.m. It is also requested to furnish submissions, if 3.30 p.m. It is also requested to furnish submissions, if 3.30 p.m. It is also requested to furnish submissions, if any, in writing so as to reach this office on or before the any, in writing so as to reach this office on or before the any, in writing so as to reach this office on or before the date mentioned above. date mentioned above. 6. Please note that in the ev 6. Please note that in the event of failure to avail of the ent of failure to avail of the opportunity as aforesaid, the matter will be decided on opportunity as aforesaid, the matter will be decided on opportunity as aforesaid, the matter will be decided on merits on the basis of material available on record. merits on the basis of material available on record. merits on the basis of material available on record.” 6.9 Evidently, there is no mention Evidently, there is no mention of invoking of Explanation Explanation -2 of section 263 of the Act in the show cause notice section 263 of the Act in the show cause notice issued by the Ld. issued by the Ld. PCIT, whereas in the final whereas in the final conclusion, he has he has invoked said Explanation for holding the assessment order as erroneous in so far for holding the assessment order as erroneous in so far for holding the assessment order as erroneous in so far as prejudicial to the Revenue. T as prejudicial to the Revenue. Therefore, respectfully following the respectfully following the finding of the Hon’ble Gujarat High Court of Shreeji Prints Pvt. Ltd. finding of the Hon’ble Gujarat High Court of Shreeji Prints Pvt. Ltd. finding of the Hon’ble Gujarat High Court of Shreeji Prints Pvt. Ltd.

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(supra) order of the Ld. PCIT cannot be sustained and accordingly order of the Ld. PCIT cannot be sustained and accordingly order of the Ld. PCIT cannot be sustained and accordingly same is set aside.

Order pronounced under Rule 34(4) of the ITAT Rules, unced under Rule 34(4) of the ITAT Rules, unced under Rule 34(4) of the ITAT Rules, 1963 on 20/02/2023. 02/2023. Sd/- Sd/- Sd/ (PAVAN KUMAR GADALE PAVAN KUMAR GADALE) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 20/02/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Asst. Registrar Asst. Registrar) ITAT, Mumbai ITAT, Mumbai