SHRI HARISH KUMAR JASORIA,ALWAR vs. PR.CIT, , ALWAR

The ld. AR submitted that assessee is an individual and for the year under appeal has filed his return of income declaring total income at Rs. 10,02,280/-. The case of assessee was selected for scrutiny under CASS under limited scrutiny and one of the reasons was to examine the issue of purchases of property by the assessee during the year under appeal. Various query letters / show cause notice were issued by the Ld. AO from time to time and after due enquiries and verifications into the matter and also after considering the provisions of Act, the assessment was completed u/s 143(3) of the Act vide dated 26.12.2017 at total income of Rs. 13,80,060/- by making certain additions/ disallowance including the excess cost claimed in purchase of property. Against this order, assessee

Regarding Ground Nos. 1 and 2, it was submitted that both these grounds of appeal relate to the action of Ld. CIT(Admn.) in passing the impugned revision order u/s 263 of the Act arbitrarily and without appreciating the fact that the ld. AO has already made all the necessary enquiry in this regard and after due application of mind on the applicable provisions of law, has not made any addition on this score. Both the grounds of appeal, being interrelated are dealt with together for the sake of convenience.

To begin with, attention of the Bench was invited to the fact that case of assessee was selected for scrutiny assessment under CASS for 4 Harish Kumar Jasoria, Alwar Vs. Pr. CIT, Alwar following reasons as has been noted by ld. CIT (Admn) on page 1 of order appealed against: (i) Sales turnover mismatch (ii) Purchase of property and (iii) Mismatch in income/capital gain on sale of land or building

It would not be out of place to mention here that during the course of assessment proceedings, no discrepancy whatsoever was found so far as reasons at serial no. (1) and (iii) are concerned. Accordingly, focus of enquiries made during assessment was on serial no. (ii), i.e. Purchase of Property. During the course of assessment proceeding ld. AO after obtaining all the information with respect to the purchases of both the industrial plots has made necessary enquires and reached to the conclusion that assessee has claimed certain expenses towards the cost which he failed to justify and according same were disallowed. Assessee preferred appeal against such order before the ld. CIT(A) who has partly allowed the grounds taken by the assessee on this issue vide order dt. 26.9.2018 after thorough analysis of the facts. After the order of ld. CIT(A), the CIT(Adm.) has invoked the provisions of section 263 and issued the first notice on 5.4.2019 alleging the assessment order as erroneous.

In this regard, attention is invited to the provision of explanation (c) to sub-section of section 263 which reads as under: Revision of orders prejudicial to Revenue. 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 interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify,

In view of above provisions contained in Section 263 of the IT Act, it is apparent that the Principal Commissioner or Commissioner may call for and examine the record of any proceedings under the IT Act, and if he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue and he may pass an order revising the same.

Provisions embedded in explanation (c) to sub section (1) of section 263 find support form Doctrine of Merger, according to which, where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and in capable of enforcement in the eye of law. Logic underlying the doctrine of merger is that there cannot be more than one decree or operative orders governing the same subject matter at a given point of time.

In present case, issue for consideration is whether, when an order of the Assessing Officer was subjected to appeal which had concluded with the order passed by the Commissioner (Appeals) for a subject-matter which in the present case is value of purchase of property, will it be still open and available for the Commissioner to exercise his revisional

Therefore, in a scenario where the Commissioner (Appeals) passes an order, the order of the Assessing Officer with respect to the said subject matter merges with the order of the Commissioner (Appeals) and therefore, Commissioner cannot exercise jurisdiction under Section 263 to revise the order of the Assessing Officer on that subject matter.

In this regard reliance is placed on the following case laws: • CIT Vs. Shri Arbuda Mills Ltd. 231 ITR 50 (SC) • CIT Vs. Hindustan Aeronautics Ltd. 157 ITR 315 (Kar.) • CIT Vs. Saraf Bandhu Pvt. Ltd. (Bom.) 216 ITR 833 • Oil India Ltd. Vs. CIT 138 ITR 836 (Cal.) • CIT Vs. Rajput 164 ITR 197 (M.P.) • M/s Dwarka Gems Vs. CIT (ITAT, Jpr) orders dt. 30.04.2010

Without prejudice to above, “On merits” of the issue, details of properties purchased are tabulated for the sake of convenience:

With this background, it is submitted that during the course of assessment, ld.AO sought complete documents/information of above properties purchased, which comprised agreements to sell as well as registered sale deeds and documentary evidences in respect to expenses claimed (over and above sale consideration mentioned in sale deed) for both properties purchased. In fact, at page 2 of Assessment order, ld. AO has observed both the properties were registered at sub registrar II on 28.04.2014 at Rs. 29 lacs each. During the course of hearing, on enquiry, it was explained to ld.AO that no addition was called for in respect of difference between DLC value of properties purchased and sale consideration thereof as the date of agreement and date of registration was different and assessee had received part of sale consideration through account payee cheque prior to the date of agreement to sale of properties

At this juncture, provisions of section 56(2)(vii)(b)(ii) are reproduced for the sake of convenience: “56 (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :— (i)………….. (ii)………….. …………….. …………….. [(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,— (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; 8[(b) any immovable property,— (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand

From perusal of above, it is evident that deeming provisions of section 56(2)(vii) regarding taxability of transfer of immovable property without consideration were brought on the statue book, by Finance (No.2)Act, 2009 w.e.f. 01.10.2009. Subsequently, clause (b) of the section was amended by Finance Act, 2013, w.e.f. 01.04.2014, which provided for taxability of even inadequate consideration in transfer of property.

So far as facts of the present case are concerned, part of the sale consideration was paid through banking channels before the date of agreement (as is evident from table at page 4 of this submission) and thus assessee was outside the purview of deeming provisions of section 56(2)(vii) by virtue of proviso thereof.

It is thus apparent that ld. CIT has relied upon bare section and has not even looked into proviso thereof, which spares assessee of the implication of deemed provisions. Ld. CIT(Admn.) though formed opinion on the basis of amended section, however grossly ignored the proviso thereof, which specifically provides that wherever date of agreement fixing the consideration for transfer of property and date of registration are different, stamp duty value on the date of agreement need to be considered provided full/part of the sale consideration is paid on or before date of agreement by a mode other than cash. Your honours would appreciate that once, deeming provisions are not applicable to the case of assessee, there is no question of order passed by ld. AO being erroneous and action of ld. CIT(Adm.) becomes absolutely against the provisions of the Act.

It is submitted that ld. CIT(Adm.) has framed an opinion by completely ignoring the above factual as well as legal position and wrongly observed that the ld.AO has not made proper investigation and verification and has passed the order on mistaken view of law/erroneous application of provisions of the Act. In this connection, it is submitted that complete evidences pertaining to the purchases of properties were filed during the 12 Harish Kumar Jasoria, Alwar Vs. Pr. CIT, Alwar course of assessment proceedings, which is evident from assessment order itself. It is pertinent to submit before your honours that Ld. CIT(Admn.) has failed to rebut any of the evidences filed by assessee before Ld. AO and also could not rebut the explanations and submissions made before him in proceedings u/s 263 nor has properly and completely applied the provisions of section 56(2)(vii)(b)(ii) of the Act.

It was submitted that the extent of in-depthness of enquiries differ from person’s perception and there cannot be a fixed criteria to decide whether the enquiries made were adequate or not.

In view of the above factual background of the case, it is humbly submitted that essential elements necessitated for invoking section 263 are not fulfilled. The basic ingredients to be fulfilled before invoking section 263 have been explained by the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83 (SC) in the following words: “A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income Tax Officer is erroneous is so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent – if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue – recourse cannot be had to section 263(1) of the Act.”

In fact, ld. CIT(Admn.) has relied upon the decision of Apex Court on the observation that “An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous”. In this regard, it is submitted that ld.AO has duly applied the 13 Harish Kumar Jasoria, Alwar Vs. Pr. CIT, Alwar provisions of law and ld. CIT (Admn.) has not proved the same otherwise and has rather issued directions for revision in a mechanical manner. Similarly other case laws relied upon by ld.CIT(Admn.) are also not applicable to facts of the case.

At this juncture, kind attention of Hon’ble bench is invited to Explanation 2 inserted in section 263 by Finance Act, 2015, w.e.f. 01.06.2015, which has widened the powers of CIT to revise the already completed assessment and has been taken shelter by the ld.CIT (Admn.) in the present case also, which reads as under: Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,—

A perusal of above clarifies that order passed by assessing officer shall be “deemed to be erroneous and prejudicial to the interest of the revenue only if AO has passed such order without making inquiries or verification which should have been made;. Whereas in the instant case, ld. AO has made all the enquiries necessary for completion of assessment.

It is also worthwhile to note here that the phrase “which should have been made” here in no way means that enquiries should have been made in manner as desired by CIT, rather it means that before holding an 14 Harish Kumar Jasoria, Alwar Vs. Pr. CIT, Alwar order to be erroneous, CIT should have conducted necessary enquiries or verification which brings on record certain material in order to show that the finding given by the assessing officer is erroneous. In this regard reliance is placed on the following decisions:

It was further submitted that, the Hon’ble Bombay High Court in the case of CIT Vs. Gabrial India Ltd., reported in 203 ITR 108, has held that, “CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO”. Further, in the case of CIT Vs. Sunbeam Auto Ltd., reported in 227 CTR 133, the Hon’ble Delhi High Court drew a distinction between “Lack of inquiry” and “inadequate enquiry” and held that, ‘in the case of inadequate enquiry, provisions under section 263 cannot be invoked.’ It may however, be noted that the instance case is neither the case of inadequate enquiry nor lack of enquiry during assessment proceedings as it can be seen that due, necessary and most pertinent enquiries to all the issues emerging from the return filed by the assessee were conducted by the Ld. AO. Therefore, in view of such legal position, no action u/s 263 could have been taken.

It is thus submitted that for the sake of clarification and at the cost of repetition it is submitted that twin conditions as laid down u/s 263 i.e. erroneous and prejudicial to the interest of the revenue have to be cumulatively satisfied and in the absence of one of the conditions, (i.e. order passed by ld.AO is not erroneous) not being attracted the other would become nonest for the purposes of revision.

Per contra, the ld. CIT/DR submitted that the case of the assessee was selected for limited scrutiny assessment and one of the reasons for such selection was purchase of property and on perusal of the assessment records, it can be observed that the assessee has purchased two properties situated at G-99 and G-100 MIA Alwar from Sh. Gaurav Khandelwal & Sh. Lokesh Khandelwal for a consideration of Rs. 29 lakhs each whereas the stamp duty value has been assessed by the Sub- Registrar-II, Alwar in respect of these properties were Rs. 36,01,500/- and Rs 36,52,750/- respectively. The ld. CIT observed that the provisions of section 56(1)(vii)(b)(ii) of the Act which were made applicable by the Finance Bill, 2013 w.e.f 01.04.2014 relevant to the impugned assessment year 2015-16 have not been examined and consequentially invoked by the Assessing Officer in the instant case. It was accordingly submitted that it is a clear case of non-application of relevant provisions of law as applicable in respect of issue in hand which has been selected for scrutiny and therefore in absence of proper inquiry and non-application of mind by the Assessing Officer, the assessment order so passed is erroneous as well as prejudicial to the interest of the Revenue. He therefore, submitted that the order passed u/s 143(3) has been rightly set aside by the ld. Pr. CIT with directions to properly examine the issue relating to applicability of provisions of section 56(2)(vii)(b)(ii) of the Act and therefore, no interference is called for in such order passed u/s 263 of the Act.

We have heard the rival submissions and purused the material available on record. The first contention which has been raised by the ld. AR is that the matter relating to purchase of the aforesaid two industrial

The other contention which has been raised is regarding merit of applicability of provisions of section 56(2)(vii)(b)(ii) of the Act in the instant case. It has been contended that by virtue of proviso to the said section, since payments have been made through account payee cheque

In light of the aforesaid discussion, we are therefore of the considered view that it is a case where the provisions of section 56(2)(vii)(b)(ii) of the Act read with proviso thereof has not been examined by the Assessing Officer and which undisputedly applies for the 18 Harish Kumar Jasoria, Alwar Vs. Pr. CIT, Alwar impugned assessment year. Therefore, we do not find any infirmity in the exercise of justification by the ld. Pr. CIT u/s 263 of the Act.

Before parting, we may add that we have gone through the various decisions relied upon by the ld AR and find that the same have been rendered in the peculiar facts and circumstances of the relevant case and the same are distinguishable, hence, does not support the case of the assessee.