C I T JAIPUR vs. SMT NIRMALA DEVI CHORDIA

PDF · subscribers
ITA/182/2015HC RajasthanRJHC02060879201506 December 20165 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was correct in allowing the assessee's appeal and quashing the order passed by the CIT under Section 263. The Court agreed with the Tribunal's view that the powers under Section 263 cannot be exercised merely for want of inquiry in a particular manner. The Tribunal had found that the assessee had filed a return of income, and the proceedings under Section 148 were avoidable. It noted that the record and submissions during the assessment proceedings did not indicate a lack of proper inquiries or verification by the AO. The Tribunal concluded that the AO's order, though concise, arrived at proper findings reflecting a reasonable discharge of assessment and could not be held as erroneous. The Tribunal relied on case laws such as CIT vs. Sun Beam Auto Ltd., Malabar Industrial Co. Ltd. vs. CIT, and CIT vs. Max India Ltd. to support its view that Section 263 cannot be invoked if reasonable inquiries were conducted with application of mind. The High Court affirmed that in this case, proper inquiry was made by the AO during the Section 148 proceedings, and therefore, the powers of revision under Section 263 could not be exercised. The questions were answered in favour of the assessee and against the Department.

What were the facts?

The Revenue (Principal Commissioner of Income Tax-I) appealed against an order of the Income Tax Appellate Tribunal (ITAT) which had set aside an order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961. The assessment year in question is 2006-07. The Assessing Officer (AO) had issued a notice under Section 148 on March 25, 2013, based on information that the assessee invested Rs. 68,00,000/- in NABARD bonds without filing a return. The assessee responded by stating that a return for AY 2006-07 was filed on July 25, 2006, which could be treated as a response to the Section 148 notice. The AO issued a notice under Section 143(2) and conducted inquiries, including issuing letters under Section 133(6) to companies whose shares were transferred by the assessee for Rs. 67,99,500/-. The AO accepted the returned income of Rs. 11,31,647/-. The CIT invoked Section 263, holding the AO's order to be erroneous and prejudicial to the revenue, citing disproportionate share values and the NABARD investment.

What were the issues?

1. Whether the Commissioner of Income Tax erred in passing an order under Section 263 of the Income Tax Act, 1961, holding the assessment order passed by the Assessing Officer as erroneous and prejudicial to the interest of the revenue? The Revenue contended that the share values showed a disproportionate increase, suggesting that the income invested in NABARD bonds was disproportionate and its higher value was shown. They relied on: Gee Vee Enterprises Vs. Additional Commissioner Income Tax (1975), Commissioner of Income Tax, Central-I Vs. Maithan International (2015), and Commissioner of Income Tax Vs. Emery Stone Mfg. Co. (1995). The Assessee contended that share certificates and the assessment order were produced, proving that the transactions were undertaken much prior to the purchase of NABARD shares. They argued that the presumption that NABARD shares were procured from undisclosed income was duly rebutted by producing documents. The assessee also argued that the notice under Section 148 was issued on March 25, 2013, and a reply was filed stating that due tax had been paid. The Tribunal's view, supported by the assessee, was that Section 263 proceedings cannot be invoked where reasonable inquiries were conducted with application of mind, and there is a difference between lack of enquiry and a different perception about the level of enquiry.

Which sections of the Income-tax Act were involved?

Section 263,Section 148,Section 143(2),Section 133(6)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 182 / 2015 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Smt. Nirmala Devi Chordia, 1631, Sonthiwalon Ka Rasta, Jaipur. ----Respondent/Assessee __________________________________________ For Appellant : Mr. Anuroop Singhi For Respondent : Mr. Siddharth Ranka __________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA

Judgment Per Hon’ble Jhaveri, J. 06/12/2016 By way of this appeal, the department has challenged the order of the Tribunal where by the Tribunal has allowed the appeal of the assessee, set aside the order passed by the CIT, Jaipur-I under Section 263 of the Income Tax Act. The case of the assessee is that a notice under Section 148 of the Income Tax Act was issued on 25.03.2013 after obtaining due permission from the higher authorities. The notice under Section 148 was issued as there was information with the department that the assessee had invested Rs. 68,00,000/- in Bonds of National Bank for Agriculture & Rural Development during the year under consideration and had not (2 of 5 ) [ITA-182/2015] filed return of income. The notice was served on the assessee on 28.03.2013. In response thereof Sh. N.K. Baid, Advocate, appeared and filed his reply that the assessee had already filed her return of income for the Assessment Year 2006-07 on 25.07.2006 which may be treated as return filed in response to notice under Section 148. On 03.09.2013, notice under Section 143(2) was issued. In response Sh. N.K. Baid, Advocate and A/R attended from time to time and furnished the requisite documents. To verify the source of the amount invested in the Bonds of NABARD, the Assessing Officer issued letters under Section 133(6) to the companies whose shares were transferred by the assessee for a consideration of Rs. 67,99,500/-. The reply verifying the transaction was received on 11.02.2014, and nothing adverse was found. The case was discussed and after discussion, the returned income as declared by the assessee at Rs. 11,31,647/- was accepted. Counsel for the appellant has contended that the share value which was shown as multifold to the following extent:- Name of the Company Total no. of shares sold Date of purchase Purchase price per share (Rs.) Date of sale Sale price per share (Rs.) Sale considerati on (Rs.) M/S Sudharma Constructio n (P) Ltd. 150 3.1.89 100 20.5.05 17000 2550000 M/s Precious Constructio n (P) Ltd. 1260 240 3.1.89 1.12.02 10 10 20.5.05 1700 2550000

(3 of 5 ) [ITA-182/2015] M/s Goodluck Constructio ns (P) Ltd. 150 3.1.89 100 20.5.05 11330 1699500 Total 1800 6799500 Thus, the value of shares has arisen as disproportionate, therefore, the order under Section 263 of the Act came to be passed on 13.01.2015. The main apprehension and presumption was that the amount of Rs. 68,00,000/- invested Income Tax- (1975) 99 ITR 375 (Delhi)

2.

Commissioner of Income Tax, Central-I Vs. Maithan International- (2015) 375 ITR 123 (Cal)

3.

Co.- (1995) 213 ITR 843 (Rajasthan)

Counsel for the respondent has contended that the share certificate and the assessment order was produced and it was proved that the transaction, which have been undertaken, were done, much prior to the purchase of shares of NABARD and notice under Section 148 of the Act was issued on 25.03.2013 and a reply to the said notice was filed and it was stated that the due tax has been paid. The presumption that the NABARD

(4 of 5 ) [ITA-182/2015] shares were procured from undisclosed income, was duly rebutted by producing documents.

We have heard Mr. Singhi for the appellant and Mr. Ranka for the Department. The Tribunal while considering the case of the Department in para 2.11 has rightly held as under:- “2.11 We have heard the rival contentions and perused the materials available on record. We find from the record that the assessee had already filed the return of income despite that she has been wrongly accused of not filing the same; this assessee’s contentions. We are of view that 263 proceedings cannot be invoked where reasonalbe inquiries are conducted with application of mind; there is conspicuous difference between the cases of lack of enquiry and perception about the level of enquiry. In this case it emerges that ld. CIT carried a different perception about the manner of enquiry which ought to have been conducted by the AO; however it is not sufficient to hold the assessment order as erroneous and thereby prejudicial to the interest of revenue. The plethora of case laws cited by the assessee do not support such type of exercise of power under Section 263 of the Act.

Hence 263 order holding the AO’s order as erroneous cannot be sustained merely because the ld. CIT holds different plausible view about manner of inquiry. Consequently, we are unable to uphold the impugned order under Section 263 of the Act passed by the ld. CIT which is quashed. Thus the appeal of the assessee is allowed.”

(5 of 5 ) [ITA-182/2015] The Tribunal has held that the case under Section 263 of the Act is not made out and we are in complete agreement with the view taken by the Tribunal. Powers of Section 263 cannot be exercised for want of enquiry in a particular manner. In the present case during the proceedings of 148 proper enquiry was made by the AO, hence powers of revision cannot be exercised. The questions are answered in favour of the assessee and against the Department.

The appeal is dismissed.

(DINESH MEHTA)J. (K.S. JHAVERI)J. bblm

More judgments on Section 263

All 13,616 judgments and leading authorities on Section 263 →

Recent GST High Court judgments

Search GST case law →