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Income Tax Appellate Tribunal, JAIPUR BENCHES ‘A’ JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 211/JP/2020
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘A’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 211/JP/2020 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke Atul Kochar Principal Commissioner of Vs. 157, 158, Near Parnami Temple Income Tax-2, Jaipur Raja Park, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. ADRPK6952H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rajeev Sogani (CA) jktLo dh vksj ls@ Revenue by : Sh. Amrish Bedi (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 01/02/2021 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18/03/2021 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. Pr. CIT-2, Jaipur dated 31.01.2020 u/s 263 of the Act pertaining to Assessment Year 2015-16 wherein the assessee has taken the following grounds of appeal as under:
1. In the facts and circumstances of the case and in law, the ld. PCIT has erred in exercising the revisionary powers by passing the order u/s 263 of the Income Tax Act, 1961 setting aside the order passed u/s 143(3) dated 22.12.2017. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief
2 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur may please be granted by quashing the revision order of ld. PCIT passed u/s 263. 2. In the facts and circumstances of the case and in law, ld. PCIT has erred in invoking the provisions of Explanation 2(a) to section 263 of the Income Tax Act, 1961. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the revision order of ld. PCIT passed u/s 263.”
Briefly stated, the facts of the case are that the assessee filed his return of income on 08/10/2015 declaring total income of Rs. 1,37,644/-. The case of the assessee was selected for limited scrutiny for the purposes of verifying the deduction claimed under the head “capital gains” and pursuant to issuance of notice u/s 143(2) dated 20.09.2016 and notice u/s 142(1) alongwith questionnaire dated 19.01.2017 and after calling for the requisite details/information from the assessee, the returned income of the assessee was accepted and the assessment was completed u/s 143(3) vide order dated 22.12.2017. Subsequently, the assessment records were called for and examined by the ld. Pr. CIT and a show cause u/s 263 was issued for the reasons that the Assessing Officer has not examined whether the parcel of land sold as well as parcel of land subsequently purchased were being used for agricultural purposes for claiming deduction u/s 54B of the Act and secondly, the expenditure incurred on improvement of the land sold was not verified by the Assessing Officer. Further, the Assessing officer has not examined the nature of investment made in new house for the purposes of claiming deduction u/s 54F of the Act. In response to the show-cause, the assessee filed his submissions and after taking into consideration the submission so filed by the assessee though not agreeing to the same, invoking jurisdiction u/s 263, the order
3 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur passed by the AO was held by the ld Pr CIT as erroneous in so far as prejudicial to the interest of Revenue and the matter was set aside to the file of the Assessing Officer to taking into account all the relevant facts and decide the aforesaid issues relating to computation of long term capital gains after giving necessary opportunity to the assessee. Against the said order and the findings of the ld. Pr. CIT, the assessee is in appeal before us.
During the course of hearing, the ld. AR submitted that the assessee has claimed deductions u/s 54B and 54F amounting to Rs. 1,57,98,799/- which was allowed by the ld. AO after due examination and the returned income was accepted. It was submitted that the Assessing Officer has called for complete details in respect of all the issues which are alleged in the show cause notice as not been examined by the Assessing Officer. The questionnaires were issued by the Assessing Officer vide notices dated 20.09.2016 and 19.01.2017. In response, the assessee filed necessary submission along with documentary evidence vide submissions dated 09.02.2017 and 04.12.2017. It was further submitted that during the proceedings before the ld. Pr. CIT, it was reiterated that the issues raised in the show cause notice were duly examined by the Assessing Officer during the assessment proceedings and all the relevant facts related thereto were on record and our reference was drawn to the submission filed before the ld. Pr. CIT vide submissions dated 03.01.2020, 08.01.2020 and 10.01.2020. It was submitted that the ld. Pr. CIT has not found any fault in respect of the submissions that the issues were duly examined by the Assessing Officer. Further, supporting documents filed before the Assessing Officer during the course of assessment proceedings, have also not been found lacking, in any manner by the ld. Pr. CIT. It was submitted that in the present case, the Assessing Officer was conducting limited
4 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur scrutiny and not complete scrutiny. It was not the case that a large number of complicated issues were involved or a large number of documents were placed on record, rendering it probable that the Assessing Officer had missed some facts. It was submitted that benefits contained in section 54B and 54F are beneficial provisions and they need to be construed liberally. Reliance was placed on the Hon’ble Supreme Court decision in case of Bajaj Tempo Ltd. vs. CIT [1992] 196 ITR 188 (SC), Hon’ble Karnataka High Court decision in case of CIT vs. Sambandam Udaykumar 345 ITR 389 (Kar.) and in case of Shri Navin Jolly vs. ITO [2020] 117 taxmann.com 323 (Kar.). It was submitted that the adequate enquiries have been conducted by the Assessing Officer. The ld Pr. CIT has not made out any case of no enquiry. Once enquiries are admitted to have been conducted, the extent of such enquiries has to be left to the wisdom of the Assessing Officer. It was submitted that provision of section 263 nowhere allows the ld Pr. CIT to challenge the judicial wisdom of Assessing Officer or to replace his wisdom in the guise of revision unless the view taken by the Assessing Officer is not at all sustainable in law. It was submitted that extent of enquiry can be stretched to any level by forcing the Assessing Officer to go through the assessment process against and again – this proposition is not authorized by the law and in support, reliance was placed on the decision of the Hon’ble Rajasthan High Court in the case of CIT vs. Ganpat Ram Vishnoi 296 ITR 292 (Raj.). It was further submitted that the ld. Pr. CIT has erred in assuming revisionary jurisdiction u/s 263 by merely referring to Clause (a) to Explanation 2 to Section 263, introduced by Finance Act, 2015. It was submitted that said Explanation 2 to section 263 inserted vide Finance Act, 2015, cannot be said to have overridden the law, as laid down by Hon’ble Supreme Court and different High Courts with respect to provisions of Section 263, and also the basic requirements of Sub-Section
5 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur (1) of Section 263. In this regard, reliance was placed on the Co-ordinate Bench decisions in case of Torrent Pharmaceuticals Ltd. [2018] 173 ITD 130 (Ahd) and Shri Narayan Tatu Rane vs ITO Ward 27(1) (ITA No. 2690/Mum/2016 dated 6.05.2016). It was accordingly submitted that the order so passed by the ld. Pr. CIT deserve to be set aside and the order of the AO should be sustained.
Per contra, the ld. CIT/DR drawn our reference to the findings of the ld. Pr.CIT and submitted that during the year under consideration, the assessee has sold two pieces of agriculture land. It was submitted that in respect of 0.72 hectares of land sold in Khasra No. 10, the assessee has claimed cost of improvement being boundary wall amounting to Rs. 6,40,530/- and in respect of 0.68 hectares of land sold in Kasra No. 34 (0.66 hectares in Kasra No. 34 & 0.02 hectares in Kasra No. 34/489), the assessee has claimed cost of improvement in terms of boundary wall of Rs. 6,04,945/-, cost of well Rs 55,000/-, cost of boring Rs. 1,57,000/- and cost of 260 sq ft building of Rs. 1,04,000/-. It was submitted that all the expenditure have been claimed to have been incurred in F.Y 1988-89 and thereafter, after indexation, the same has been claimed as deduction while computing capital gains by the assessee. It was submitted that in support of the cost of improvement/construction, the assessee has submitted valuation report dated 10.11.2017, however, no documentary evidence in the form of bills/vouchers etc. are furnished by the assessee. Further, our reference was drawn to the sale agreement dated 20.11.2014 which was registered on 10.12.2014 wherein it has been mentioned that the agricultural land sold was situated on the main road and there was no temporary or permanent construction thereon. It was further submitted that though the assessee has submitted Girdawari reports for Kasra No. 34 for the year 2012 to 2015, no agricultural activity is mentioned in respect
6 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur of 0.02 Hectares of land in Kasra no. 34/489 in the last two years prior to the sale of the land. Therefore, it cannot be concluded that the said lands were used for agricultural purposes. It was further submitted that while allowing deduction u/s 54B of the Act, the Assessing Officer has also not verified whether the lands purchased for the purposes of claiming deduction u/s 54B were in fact agricultural lands and were used for agricultural purposes as per the Revenue records. Regarding claim of deduction u/s 54F, it was submitted that though the amount has been invested by the assessee in the capital gain account scheme, the AO has not carried out verification in terms of satisfaction of other conditions stipulated in section 54F. In support of his contentions, reliance was placed on the Hon’ble Allahabad High Court decision in case of CIT vs Bhagwan Das [2005] 142 Taxman 1 (All) and Pune Benches decision in case of Hindumal Balmukund Investment Co. Pvt. Ltd vs PCIT (ITA No. 562/PUN/2019 dated 3.08.2020). The ld. CIT/DR accordingly supported the order passed by the ld. Pr.CIT and it was submitted that there is no infirmity in the said order of ld. Pr. CIT and the same may be confirmed and the appeal of the assessee should be dismissed.
We have heard the rival contentions and perused the assessment order passed by the AO under section 143(3), show cause notice as well as the impugned order passed under section 263 of the Act by the ld. Pr.CIT besides other material available on record. It is noted that the case of the assessee was selected for limited scrutiny through CASS for the purposes of verifying the deduction claimed under the head “capital gains” as apparent from the assessment order passed u/s 143(3) and which also finds mention in the impugned order passed u/s 263 of the Act. Pursuant to selection of case for limited scrutiny, notice u/s 143(2) was issued on 20.09.2016 and thereafter, notice u/s 142(1) alongwith questionnaire was issued on 19.01.2017 specifically calling for information and documents relating to claim of large deduction while computing capital gains. In response, the assessee attended the proceedings and furnished the requisite information/documents in support of his claim of deduction. In his submissions dated 09.02.2017, the assessee submitted the following documents: 3.1 Copy of Sale Deed dated 03.02.2015 entered into with Pandey Exports amounting to Rs. 1,60,00,000/-.
3.2 Copy of Sale deed dated 20.11.2014 entered into with Mr. Deepak Maheshwari amounting to Rs. 1,05,00,000/-.
3.3 Copy of Agreement dated 19.03.2015 w.r.t. purchase of agricultural land at Khasra No. 3177 Rakba 0.31/2 Hectare at Khonagorian, Jaipur amounting to Rs. 1,00,21,000/-
3.4 Copy of Agreement dated 28.02.2015 w.r.t purchase of agricultural land at Khasra No. 1251, 1332, 1339/1, 1338, 1332/4, 1339/2, 1340/3, 1346/20, 1512/484, total Rakba 18.07 Bigha at village Luhara, Tehsil Newai (Tonk) amounting to Rs. 40,00,000/-.
3.5 Copy of Agreement dated 28.08.2015 w.r.t purchase of agricultural land at Khasra No. 1251/3 Rakba 1.08 Bigha at village Luhara, Tehsil Newai (Tonk) amounting to Rs. 10,00,000/-.
3.6 Copy of purchase deed of land sold. (purchased from Smt. Tara Devi) 3.7 Copy of purchase deed of land sold. (purchased from Smt. Sarita Devi) 3.8 Copy of Bank Statements. 3.9 Copy of Computation of income
8 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur 6. Thereafter, in his submission dated 04.12.2017, the assessee submitted copy of valuation report and copy of Khasra Girdawari reports. These submissions along with the aforesaid documents were examined by the Assessing officer and the claim of assessee towards cost of improvement and deductions claimed u/s 54B and 54F was allowed and the returned income was accepted and the assessment was completed u/s 143(3) vide order dated 22.12.2017.
There is thus no dispute that the Assessing officer has conducted the enquiry on the matter for which the case was selected for scrutiny and the details and records produced before him were examined and after satisfying himself, the Assessing officer finally concluded that the assessee has rightly computed and declared its income from capital gains and the returned income was accepted. Therefore, the question of lack of enquiry does not arise when the Assessing officer has taken up the scrutiny and issued the notice under section 142(1) along with a questionnaire calling for all the details relevant to the acquisition of the agriculture land being sold as well as subsequent agriculture land purchased as well as of cost of improvement. It is also not in dispute that the assessee produced the relevant details and evidences and specifically the sale and purchase documents for disposing off and subsequent acquiring the agricultural land, Girdawari reports evidencing the carrying on of agricultural operations as well as the valuation report towards the cost of improvement and the amount invested in Capital Gain Account Scheme. The ld. PCIT has also not doubted the facts as brought on record by the assessee and considered by the AO while passing the assessment order.
9 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur 8. There is no quarrel on the point that lack of enquiry renders the order of the AO as erroneous so far as it is prejudicial to the interests of the Revenue. However, it is manifest from the record that this is not a case of lack of enquiry on the part of the AO but the AO after satisfying himself about the claim of deduction under section 54B and 54F consequent upon the examination and verification of the concerned details and evidences produced by the assessee, allowed the claim of the assessee.
9. Further, even in case there is an inadequate enquiry on the part of the AO, the ld. PCIT can give a concluding finding while passing the revision order after considering the complete record as well as conducting the necessary enquiry. In this case the assessee has contended before the ld. PCIT that the claim of deduction under section 54B and 54F as well as cost of improvement has been rightly allowed by the AO and the crux of the argument of the assessee has been reproduced by the ld. PCIT in para 3 of the impugned order. Since the ld. PCIT was not agreeing with the view of the AO regarding the claim of deduction, he was required to give a concluding finding on the issue, on the contrary, the ld. PCIT has remitted the issue to the AO. Thus while passing the revision order, the ld. PCIT himself was not sure about the correctness of the claim and has remanded the matter to the record of the AO for passing a fresh order. Hence he has not given a concluding finding whether the order of the AO allowing the claim of deduction after conducting an enquiry is absolutely against the provisions of law. Once it is not a case of lack of enquiry on the part of the AO, the said order cannot be held to be erroneous unless the ld. PCIT holds and records the reason why it is erroneous. The pre- condition for invoking the jurisdiction under section 263 is that the ld. PCIT must come to the conclusion that the order of the AO is erroneous
10 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur and is unsustainable in law. When the order passed by the AO is not erroneous for want of an enquiry, then it is incumbent upon the ld. PCIT to give a concluding finding and reasons that the order is not sustainable in law. An identical issue was considered by the Hon’ble Jurisdictional High Court in case of CIT vs. Ganpat Ram Vishnoi 296 ITR 292 (Raj.) wherein the Hon’ble High Court was pleased to held as under: “ 7. In this connection, it would be relevant to refer to the material which was relied by the Tribunal to set aside the order of the CIT. The Tribunal noticed that as per the record of the proceedings; on 16-10-1995, the Assessing Officer required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, which the Assessing Officer desired to enquire into. The assessee has produced desired information by 15-11-1995. There-after, the case was adjourned to 22-11-1996 and 1-12-1995. On 5-12-1995, the Assessing Officer studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid and the case was adjourned to 19-1- 1996. On 19-1-1996, the Assessing Officer again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adjourned for 23-1-1996. On 23-1-1996, the case was discussed and finalised. After that, assessment was completed by passing assessment order. These matters clearly indicate that the Assessing Officer particularly made reference to the matters, which the CIT has opined were not inquired.
11 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur Thus, according to the Tribunal, the foundation to exercise power under section 263 of the Income-tax Act, was not existing.
We are of the opinion in the aforesaid circumstances on the finding reached by the Assessing Officer, no question of law really arises for consideration in this appeal.
It is true that in a given case not holding of any enquiry, which is relevant for assessment may indicate non-application of mind by Assessing Officer or furnish the ground for taking action under section 263 by the CIT. In this connection, reference may be made in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 831 (SC), wherein the CIT opined that the ITO has passed the order of "nil" assessment without application of mind. The High Court accepted this part of the assertion made by the CIT in his order that the ITO has failed to apply his mind to the case in all perspectives and the order passed by him was erroneous. The High Court has also found that the assessment order was passed without application of mind. The High Court rightly held that the exercise of jurisdiction by the CIT under section 263(1) was justified.
10. From the record of the proceedings, in the present case, no presumption can be drawn that the Assessing Officer had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the Assessing Officer was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction under section 263 of the Income-tax Act.
12 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur 11. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something.
The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable. Consequently, the appeal fails and is hereby dismissed.”
Thus the Hon’ble High Court has held that the ld. CIT can cancel the order of the AO and require the concerned AO to pass a fresh order in accordance with the law after holding a detailed enquiry. But when the 13 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of assessment, but the same is apparent from the record of the proceedings, the invocation of jurisdiction by the ld. CIT was unsustainable.
A similar view has been taken by the Hon’ble Delhi High Court in case of ITO vs. D.G. Housing Projects Ltd. reported in 343 ITR 329 wherein the Hon’ble High Court was pleased to held as under :- “18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, [2000] 243 ITR 83 / 109 Taxman 66 (SC), had observed that the phrase 'prejudicial to the interest of 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 interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue.”
The Hon’ble High Court has laid out a fine distinction between the orders where no enquiry has been made by the AO from the order based on 14 Atul Kochar, Jaipur Vs. Pr. CIT-2, Jaipur inadequate enquiry. Therefore, where the AO has made an enquiry and taken a possible/permissible view, then the said order cannot be treated as erroneous and prejudicial to the interests of the Revenue unless the view taken by the AO is unsustainable in law.
The Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT reported in 243 ITR 83 (SC) has held that an order of ITO cannot be treated as prejudicial to the interests of the Revenue if the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue or two views are possible and the ITO has taken one view with which the ld. CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. Once the AO has taken a possible view on the issue of allowability of deduction under section 54B and 54F, then the ld. PCIT is not permitted to invoke the provisions of section 263 merely because he does not agree with the view of the AO. Hence in the facts and circumstances of the case as well as the foregoing discussion about the settled principles of law laid down by the Courts, we hold that the impugned order passed by the ld. PCIT is not sustainable and the same is liable to be set aside.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 18/03/2021.