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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV, VICE- & SHRI WASEEM AHMED
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘A’
BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 994/Ahd/2016 �नधा�रण वष�/Assessment Year: 2011-12 Shri Nandkishore S. Shodhan ITO, Ward-5(2)(3) (HUF) Vs Ahmedabad. D/11-12, Silver Arc Kavi Nanalal Marg Ellisbridge PAN : AADHS 4064 F
अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : Shri Sakar Sharma, AR Revenue by : Shri Virendra Ojha, CIT-DR
सुनवाई क� तार�ख/Date of Hearing : 13/02/2020 घोषणा क� तार�ख /Date of Pronouncement : 19/02/2020 O R D E R PER RAJPAL YADAV, VICE-PRESIDENT: Assessee is before the Tribunal against order of the ld.Pr.CIT-5, Ahmedabad dated 21.3.2016 passed under section 263 of the Income Tax Act, 1961 for the assessment year 2011-12.
Grounds of appeal taken by the assessee are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. In brief, the grievance of the assessee is that the ld.Pr.CIT has erred in taking cognizance under section 263 of the Income tax Act, and thereafter setting aside the assessment order dated
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24.12.2013 passed under section 143(3) for framing fresh assessment and investigating six issues entertained in 263-proceeidng.
Brief facts of the case are that the assessee has filed its return of income on 30.7.2011 declaring total income at Rs.1,87,160/-. The case of the assessee was selected for scrutiny assessment, and assessment order was passed on 24.12.2013 under section 143(3) of the Act. The ld.AO has accepted the returned income shown by the assessee. It is a one page assessment order, which reads as under: “The assessee filed his Return of Income on 30.07.2011 declaring total income of Rs.1,87,160/- vide Ack.No.1031002275. The same has been processed u/s.143 (1) of the Income-tax Act, 1961.
The case of the assessee has been selected for scrutiny through CASS. On selection for scrutiny, notice u/s. 143(2) of the Act was issued on 06.08.2012, which was duly served upon the assessee by post.
Thereafter, notice u/s. 142(1) of the IT. Act along with an Annexure in the form of detailed questionnaire issued on 19.11.2012 which was served upon the assessee by Post.
In response to the above notices, Shri Samir Shah, CA, duly authorized by the assessee, attended office time to time and filed written submissions along with requisite details which were verified on random basis during the course of hearing and copies of necessary /required documents as deemed fit were retained and kept on record. The case was discussed with him in detail.
During the year under consideration the assesse's status is HUF and derived Income from let-out property, business income as Commission from discounting of bills, Share of profit in partnership firm, Short Term Capital Gain on sale of shares and interest and dividend income.
After verification of the details filed by the assessee and discussion held with the AR of the assessee, the total income of the assessee is accepted as returned.
Total Income as per Computation of Income - Rs.1,87,160/-
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On perusal of the record, the ld.Commissioner has found that the assessment order is erroneous as well as prejudicial to the interest of the Revenue because the AO has not conducted any type of inquiry before finalization of assessment, therefore, a show cause notice under section 263 was issued upon the assessee for the following reasons: “It can be seen from the records that during the year under consideration, the Assessee had received interest of Rs.2,65,247/- from Dutta Developers Pvt. Ltd. on which IDS of Rs.26,525/- had also been deducted and credited in the Govt. account. However, in the return of income the Assessee had shown interest income of Rs.1,99,627/- only and REC Bond interest of Rs.67,397/-. The details of interest income were also not available on record. Further, the assessee had not claimed credit for the TDS deducted and deposited in his account by M/s. Dutta Developers Pvt. Ltd. Therefore, it was clear that the assessee had failed to disclose the interest income received from M/s. Dutta Developers Pvt. Ltd. The Assessing Officer failed to examine the taxability of the said income of Rs.2,65,247/-, which made the assessment erroneous and prejudicial to the interests of the Revenue. (ii). During the year under consideration, the Assessee had sold an immovable property for a consideration of Rs.9,21,27,000/- and after claiming indexed cost of acquisition of Rs. 1,75,97,250/- and expenses for sale of Rs.15,24,500/-, the LTCG was worked out at Rs.7,30,05,250/-. Out of the expenses of Rs.15,24,500/- an amount of Rs.15,00,000/- was claimed as "Dastavej" fees paid to Shri Vipin Shantilal Parikh on 06/01/2011. In support of this payment, the assessee had submitted a xerox copy of the receipt. On verification of the receipt it is noticed that no details of cheque No., bank name, etc. are available. Further, complete address/telephone number of the person issuing the receipt was not available. The AO had also failed to call for the details and verify the correctness of the allowability of the entire expenditure as the authenticity of the receipt was doubtful. Therefore, the Asseessee's claim of expenditure of Rs.15,00,000/- for "Dastavej" fees paid to Shri Vipin Shantilal Parikh was wrongly allowed and without any proper verification of the expenditure which made the assessment erroneous and prejudicial to the interests of the Revenue. (iii) In the return of income the Assessee had worked out Long term capital gain of Rs. 7,30,05,250/- during the year against which he had claimed deduction of Rs. 7,36,00,000/- u/s.54/54EC as under :
Net Long term capital gain Rs. 7,30,05,250 Less : Deduction U/S.54/54EC Investment in New House Rs. 4,00,00,000 Capital gain account scheme Rs. 2,36,00,000 REC Bonds Rs. 1.00,00.000 Rs.7.36r00,000 Net Taxable Long term capital gain Rs. NIL (a) It is observed from the record that for claiming deduction u/s.54 of the Act the assessee had claimed investment in New House of Rs. 4,00,00,000/-
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in support of which he had filed an undated Xerox copy of receipt for Rs. 4 Crores in plain paper signed by one Shri Ashok M. Panchal, Director of Manibhadra Securities Services Pvt. Ltd. No details such as address, telephone number, etc. in respect of the said company were available on the said paper. Except this receipt, the assessee had not furnished any proof for the purchase/construction of new house property. Since the AO failed to verify the claim of the Assessee with supporting evidence, his claim in respect of investment in New House of Rs.4,00,00,000/- appeared to have been wrongly allowed which made the assessment erroneous and prejudicial to the interests of the Revenue. (b) From the records it is further noticed that the Assessee had claimed deduction u/s. 54F of the Act of an amount of Rs.2,36,00,000 claimed to have been deposited in the capital gain account scheme. In support of the claim, assessee had furnished xerox copy of the Term Deposit receipt dated 22.03.2011 with Bank of Baroda. From the copy of receipt, it appeared that the Assessee had made fixed deposit (term deposit) on 22/03/2011 for a period of one year and maturity date being on 22/03/2012.
From the provisions of section 54F of the Act, it is clear that for claiming deduction u/s.54F(4) of the Act, the unutilized money is required to be deposited in an account specified for this purpose. Accordingly, the deposit of Rs.2,36,00,000/- made in the "Term Deposit" with Bank of Baroda was not eligible for deduction u/s.54F of the Act. The AO failed to call for the requisite details for claiming the deduction u/s.54F(4) of the Act and had wrongly allowed the claim of deduction u/s.54F of the Act which made the assessment erroneous and prejudicial to the interests of the Revenue. (c) The Assessee had claimed exemption u/s.54EC of the Act of an amount of Rs.1,00,00,000/- being amount invested in REC Bonds in support of which xerox copy of bank's acknowledgement slip was furnished. The AO had failed to call for the copy of the Bond issued by the issuing authority and verify the correctness of the claim made u/s.54EC of the Act which made the assessment erroneous and prejudicial to the interests of the Revenue. (d) From the records, it was noticed that during the financial year under consideration, the following house properties were owned by the Assessee : (i) Devji Saraiya S.Pole, Sankadi Sheri, Ahmedabad (ii) D/ll-12, Silver Arc, Kavi Nanalal Marg, Ellisbridge, Ahmedabad (e) As per the proviso to section 54F(1) of the Act, if the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset; the deduction u/s.54F is not allowable. Therefore, the AO had wrongly allowed deduction u/s. 54F of the Act without verifying the correctness of the claim, which made the assessment erroneous and prejudicial to the interests of the Revenue.”
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After hearing the assessee, the ld.CIT has held that the AO has not conducted any inquiry before accepting the accounting entries as it is. Accordingly, the ld.CIT set aside the assessment order, and directed the AO to frame fresh assessment order and after examination of the record carry out inquiry and verification on the issues set out in the 263 proceedings. The ld.counsel for the assessee contended that the AO had issued notice under section 142 of the Act and the assessee has submitted requisite details to the AO. The assessee has no control over the AO, as to what he could write in the assessment order. But from the record, it could be demonstrated that the assessee has submitted requisite details, and the AO has applied his mind before finalizing the assessment under section 143(3) of the Act. He drew our attention towards copy of show cause notice available on page no.107 and 108 of the paper book.
On the other hand, the ld.CIT-DR submitted that in the questionnaire nothing has been inquired from the assessee. This questionnaire was issued on 19.11.2012. The assessee was supposed to give reply by 24.12.2012. The assessment order was passed on 24.12.2013. There is a lot of gap between the issues of questionnaire vis-a-vis finalization of the assessment order, but in between that period, the proceedings remained dormant, which suggest that the AO has just completed formality of issuance of notice under section 142(1) of the Act.
We have considered rival submissions and gone through the record carefully. Section 263 of the Income Tax Act has direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:
“263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an
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opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120;
(b) “record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner;
(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order
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of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court.
Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.”
On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments
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relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon’ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction.
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(ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 9. Let us take note of questionnaire issued on 19.11.2012 under section 142(1) of the Act. In this questionnaire the ld.AO has called for information as per annexure attached to this questionnaire and copy of which placed on record on page no.108 of the paper book. It reads as under:
“You are requested to submit the following details for financial year 2010-11 relevant to Assessment Year 2011 -12.
Brief note on nature of the business/activities carried on during the under consideration.
A copy of return of income along with computation of income, balance sheet and profit and Loss account and tax Audit Report along with its Annexures, if applicable, for the A.Y. 2011-12 and copy of Balance-Sheet for year ended 31.03.2010.
Full address of all your business premises viz office, go-down, factory show room, shed, etc. which were used for the business activities.
Copy of capital account(s) and explanation for new capital introduced. 4. Please furnish details of all bank account and name of the Branch with / Account Number and shown balance as on 31/03/2011.
Please furnish the details of investment made during the year and its sources.
During the year under consideration if any transactions made by you for any movable/immovable property, sale/purchase please furnish the copy of the same.
Please furnish house hold expenses of your family, if applicable. Sd/- (KT Contractor) Income Tax Officer, Ward-10(3),
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Ahmedabad 10. A perusal of the above questionnaire would indicate that the AO has not asked any question relating to the issue entertained by the ld.Commissioner in 263 proceedings. The ld.counsel for the assessee during the course of hearing drew our attention towards question raised at serial no.6 of the questionnaire but under this question, the AO has only called for a copy of any sale/purchase deed, if done by the assessee. He has not inquired whether any capital gain arose to the assessee; whether he has computed any deduction under section 54C/54E etc. This questionnaire is totally silent. Thus, it gives an impression that the AO has accepted the accounting entry as it is, without making any inquiry. Therefore, to our mind, it is a fit case where the ld.Commissioner has jurisdiction to take cognizance under section 263 of the Income Tax Act. We do not find any error in the order of the ld.Pr.CIT. Accordingly, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed. Pronounced in the Open Court on 19th February, 2020.
Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT Ahmedabad; Dated, 19/02/2020