NARENDRA KANTILAL PATEL,AHMEDABAD vs. THE PR.CIT, CENTRAL, AHMEDABAD

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 03.01.2018 declaring total income of Rs. 28,92,740/-. A search and seizure action u/s. 132 of the Act, was conducted in the case of “Land Broker & Financier Group” on 15.10.2019. In the course of search at the premises of one Shri Suresh R Thakkar certain incriminating materials pertaining to the assessee was found and seized. On the strength of those material, proceeding was initiated in the case of the assessee and notices u/s. 153C of the Act were issued on 04.05.2022 for A.Ys. 2014-15 to A.Y. 2020-21. In the course of assessment proceeding, the AO had made inquiries in respect of the seized materials on the basis of which the proceeding was initiated. Being satisfied with the explanation of the assessee, no addition was made by the AO and the assessment was completed u/s. 153C of the Act on 23.09.2022, at total income of Rs.28,92,740/- as per return. Subsequently, the case record was called for and examined by the Ld. PCIT, who held that the Assessing Officer did not conduct inquiries which were required to be made in the facts of the case and, therefore, the assessment order passed u/s. 153C of the Act was erroneous and pre-judicial to the interest of revenue. The Ld. PCIT, had set aside the assessment order vide the impugned order and directed the Assessing Officer to make a fresh assessment after making proper inquiries in the matter afresh.

Aggrieved with the order of the Ld. PCIT, the assessee is in appeal before us . The following grounds have been taken in this appeal:

In law and in the facts and circumstances of the appellant's case, the Ld. PCIT has grossly erred in not appreciating that in order to Invoke the section 263 of the Act two conditions must be fulfilled viz. the impugned assessment order must be erroneous and that error must be prejudicial to the interest of the revenue. In the appellant's case, the Ld. Assessing Officer has passed the assessment order after analyzing all required details and therefore, there was no error in the impugned assessment order so as to justify action u/s 263 of the Act. In the case of the Appellant, the very assumption of power u/s 263 of the Act by the Ld. PCIT is unjustified and bad in law and therefore, the order passed u/s 263 of the Act deserves to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Id. Assessing Officer based upon the available information and the power vested under the law has carried out adequate and sufficient inquiry and based upon which has finalized his assessment order which is irreversible and as per the relevant judicial precedent and that manifests the mind of a rational and prudent quasi-judicial officer. Thus, the id. PCIT not in accordance with the finding of the Id. Assessing Officer has invoked provisions under section 263 and passed the order. 3. In law and in the facts and circumstances of the appellant's case, the Id. Assessing Officer has made his own set of complete and adequate inquiry as per the law and reached to the conclusion by passing the assessment order. Since the Id. AO has carried out comprehensive inquiries, there is no reason to revise the order under Section 263 of the Act. Therefore, the order should be quashed. 4. In law and in the facts and circumstances of the appellant's case the entire revision proceeding is being initiated on account of the fishing and rowing inquiry the proceeding initiated on fishing rowing inquiry deserves to be quashed. 5. In law and in the facts and circumstance of the appellant's case the entire revision proceeding is being carried out and concluded in the arbitrary manner and thus the proceeding is in violation of principle of natural justice and without carrying out fair trial as imbibed under the law. Hence, the proceeding was being void and bad in law deserves to be quashed. 6. In law and in the facts and circumstances of the appellant's case, the Id. PCIT has erred in setting aside concluded proceeding on factually wrong observation by resulting into miscarriage of justice and violation of the fundamental rights of the taxpayer (Appellant) and thus the entire appeal proceeding is void and bad in law. 7 In law and in the facts and circumstances of the appellant's case, the revision order passed by Id. PCIT is perverse and has reduced the procedure to an empty formality, which has to be deprecated. Therefore, the order passed by PCIT liable to be quashed.

In law and in the facts and circumstances of the appellant's case, the Id. PCIT has arbitrarily expanded the definition of "records" as mentioned in the Clause (b) of Explanation 1 of Section 263 of the Act and relied on the information which pertaining entirely different and not pertaining to the impugned material found from the search person Shri Sureshbhai Thakker. The records cannot include post assessment material or information pertaining to the different transaction and different assessment year. Therefore, the action of Ld. PCIT is beyond jurisdiction and deserves to be quashed. 9. In law and in the facts and circumstances of the appellant's case, the Id. PCIT, in the show cause notice and order, implied that the learned AO, while framing the original assessment, ought to have had the extraordinary ability to foresee future transactions and make the necessary additions in the present. The view of the learned PCIT fails to appreciate the maxim Lex non cogit ad impossibilia and has passed the revision order in violation of basic human laws and taxation laws. Therefore, the order deserves to be quashed. 10. In law and in the facts and circumstances of the appellant's case, the Id. PCIT has failed to appreciate that the alleged transaction relates Sellers and Sun Shilp Construction for non-agriculture land and the Appellant was not a party to the alleged transaction and when the assessment was finalized appellant was not the owner of the agriculture land and post assessment the appellant has purchased the agriculture land from third party. Hence, the id PCIT taking cognizance of the material pertaining to the third-party sets-aside the assessment which is unwarranted and revision order deserves to be quashed. 11. In law and in the facts and circumstances of the appellant's case, the Id PCIT has failed to appreciate that when the impugned alleged material of a Sauda Chitthi found to have never been materialized then no allegation in any manner of on-money can be made when a Sauda Chitthi was not executed and thus the observation of Ld. PCIT is against the settled position of the law and deserves to be quashed. 12. In law and in the facts and circumstances of the appellant's case, the Id. PCIT has failed to appreciate that alleged material was found from the third-party Shri Suresh Thakker being into business of land broker and who has made contradictory statements for each of the three single images and subsequently he has retracted his owns statement taken during the search proceeding and there was also no addition in his case for the impugned deal. Therefore, from the source from which impugned material is found there is no adverse view then how can there be any adverse view on the non-search party which Id. AO has rightly appreciated by making comprehensive humanly possible inquiry and concluded the same, which Id. PCIT did not accepted and arbitrarily set-side which is unjustified and bad in law and therefore, the order passed u/s 263 of the Act deserves to be quashed 13. In law and in the facts and circumstances of the appellant's case, the finding recorded by the Id. PCIT manifest that there is no application of mind and the

Shri Vartik Choksi, the Ld. AR of the assessee submitted that the proceeding u/s 153C of the Act was initiated in the case of the assessee on the basis of certain evidences found in the course of the search at the premises of one Shri Suresh R Thakkar. He explained that the AO had duly made inquiry in respect of those seized documents and the assessee, in the course of assessment proceeding, had submitted a detailed response denying the relevance of those documents with his case. The Ld. AR submitted that the seized documents pertained to sale of land to Sunshilp Construction, a partnership firm, and not to the assessee and that the assessee was not a partner in the said firm. Thus, the land transaction mentioned in the seized document didn’t pertain to the assessee at all. The Ld. AR explained that the AO had recorded statement of the assessee u/s. 131 of the Act and also the statement of the partners of Sunshilp Construction, in the course of assessment proceedings. Having satisfied that the assessee was not at all involved in the transaction recorded in the seized document, the AO did not make

CIT Vs. Kamal Galani (2018) 95 taxmann.com 261 (Guj) 2. CIT Vs. Kamal Galani (2019) 110 taxmann.com 213 (SC)

Per Contra Shri R P Rastogi, the Ld. CIT-DR, supported the order of the Ld. PCIT. He submitted that the order of the AO was cryptic, only accepting the returned income of the assessee and there was no evidence of application of mind by the AO on the issues involved in this case. Therefore, the Ld. PCIT had rightly exercised the revisional jurisdiction u/s. 263 of the Act and set aside the matter for fresh examination of the

We have carefully considered the rival submissions. The PCIT can invoke the provision of section 263 of the Act, if the order of the Assessing Officer is found to be erroneous in so far as it is pre-judicial to the interest of revenue. Thus, the two conditions to be satisfied for invoking the revisional jurisdiction u/s. 263 of the Act are:

In the course of search at the premises of Shri Suresh R Thakkar, a digital data was found and seized. It transpired that Shri Suresh R Thakkar had brokered a deal for transfer of agricultural land owned by Shri Rajesh Brahmbhatt and Smt. Arunaben K Zhaveri bearing survey Nos. 430/4, 430/2, 430/3/1 and 429 situated at Makarba, Ahmedabad. An MoU was signed between the co-owners of the land and M/s Sunshilp Construction, a partnership firm, for transfer of this land for a total consideration of Rs. 61,43,34,672/-. Shri Suresh R Thakkar had stated that this MoU was

The contention of the Ld. PCIT is that no proper inquiry was conducted by the AO in respect of this transaction in the course of assessment. The assessee has brought on record a copy of notice u/s. 142(1) of the Act dated 17.08.2022. It is found that the AO had issued a detailed questionnaire along with notice u/s. 142(1) of the Act dated 17.08.2022 running into nine pages and following specific queries regarding the seized material were raised in the said notice:

It is thus found that the AO had reproduced the contents of the seized documents in the questionnaire and made a detailed inquiry in that respect in the course of assessment proceeding. In response to the questionnaire, the assessee vide letter dated 05.09.2022 had made the following submissions to the query No. 19 pertaining to the seized documents, before the Assessing Officer:

The assessee, in his statement, had reiterated his earlier submission that the land transaction appearing in the seized document did not pertain to him. This fact was also confirmed by Shri Deep N. Patel, a partner of Sunshilp Construction, whose statement u/s. 131 of the Act was separately recorded by the AO in the course of assessment proceeding. The relevant portion of statement of Shri Deep N Patel is reproduced below:

It is thus found that the Assessing Officer had made detailed inquiry in respect of the documents seized from the possession of Shri Suresh R Thakkar and thereafter he was satisfied that the transaction recorded in the said seized document did not pertain to the assessee but it pertained to M/s Sunshilp Construction. Further that the assessee was also not a partner in said firm. In view of theses specific findings, the order of the AO could have been held as erroneous and prejudicial to the interest of revenue, only if these finding was proved wrong by any other evidence. The Ld. PCIT, in his order, has not controverted these findings of the AO in order to treat the assessment order as erroneous and prejudicial to the interest of revenue.

The Ld. PCIT has treated the assessment order as erroneous only for the reason that the Assessing Officer did not conduct the enquiries which were required to be made. However, from the evidences as brought on record and discussed above, it is evident that the Assessing Officer did make enquiries and verified the seized materials, which was not found

The next condition to exercise the jurisdiction u/s. 263 of the Act, is that the order of the AO should be pre-judicial to the interest of revenue. The Ld. PCIT has acknowledged in his order that the MoU dated 31.08.2016 was between Shri Rajesh Brahmbhatt and Sunshilp Construction and that the assessee was not a party to the said MoU. Further that the sale deed was also not executed, as the conversion of agricultural land into non-agricultural land did not materialize and the deal was cancelled vide a separate cancellation agreement dated 28.09.2016. Further, the cheque payments as per the agreement were found recorded in the books of accounts of M/s Sunshilp Construction. Therefore, the cash payments, if any, were required to be considered in the hands of Sunshilp Construction only. There was no material to come to conclusion that the cash payments were made by the assessee. In the course of search no evidence for any on-money payment by the assessee was found and no payment of any on-money by the assessee was acknowledged by the seller of the property as well. As explained, the deal was cancelled and the cheque payments were refunded to M/s

It is evident from the facts as discussed above, that the Assessing Officer had not only properly examined the evidences found in the course of the search but also made further inquiries by recording the statement of the assessee as well as the partners of M/s Sunshilp Construction. Thereafter, the AO being satisfied with the explanation of the assessee, took a conscious decision that no addition was called for in the hands of the assessee on the basis of the seized documents. The Ld. PCIT has not pointed out as to what further specific inquiries was required to be made in the present case, which was not carried out by the Assessing Officer. The Ld. PCIT has merely set aside the order of the AO without spelling out the points of further inquiries to be made by the AO. The order of the assessment cannot be set aside merely to conduct another purposeless and fruitless inquiry. The Ld. PCIT has not pointed out any apparent error of fact or reasoning or of law, which could establish that the order of the AO was erroneous and pre-judicial to the interest of revenue.

It has been held by the Hon'ble Jurisdictional High Court in the case of CIT vs. Kamal Galani (supra) that once the Assessing Officer carried out detailed inquiries, it was not open for the Commissioner to reopen the issue on mere apprehension and surmises. The Explanation-2 to Section 263 of the Act stipulates that the order of the AO will be deemed to be erroneous and prejudicial to the interest of the revenue, if such order is

In view of the above facts, we are of the considered opinion that the present order of the Ld. PCIT is not tenable in law as the foundation to exercise the revisional jurisdiction u/s 263 of the Act is missing in the present case since the order of the AO was neither erroneous nor prejudicial to the interest of revenue. Therefore, the order of the PCIT passed u/s 263 of the Act is quashed and is set aside.

In the result, the appeal preferred by the assessee is allowed.

The facts in these two appeals are identical to ITA No. 1034/Ahd/2025, which we have decided in favour of the assessee. Therefore, the decision taken in ITA No. 1034/Ahd/2025 is applicable mutatis mutandis to the appeals in ITA No. 1035/Ahd/2025 & 1036/Ahd/2025 as well. Accordingly, both the appeals of the assessee are allowed.

In the final result, all the three appeals of the assessee are allowed.