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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MANISH BORAD
अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE
BEFORE SHRI MANISH BORAD,ACCOUNTANT MEMBER AND MIS MADHUMITA ROY, JUDICIAL MEMBER
ITA No.626/Ind/2019 Assessment Year:2014-15 Shri Krishna Mohan Pr. CIT Choursiya(Prop. of M/s Laxmi Ujjain MP बनाम/ Auto Parts) Vs. Ward No.14, Bus Stand, Kurawar Rajgarh(M.P.) (Appellant) (Respondent ) P.A. No.AEMPC3634G
Appellant by Shri S.N. Agrawal, CA Revenue by Shri S.B. Prasad, CIT
Date of Hearing: 07.04.2021 Date of Pronouncement: 25.05.2021 आदेश / O R D E R PER MANISH BORAD, A.M: By way of this appeal, the appellant has challenged the assumption of jurisdiction u/s 263 of the Income Tax Act 1961( hereinafter referred to as ‘The Act’ for short) by Ld. Pr. CIT, Ujjain
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vide order dated 27.03.2019.The assessee has raised following grounds of appeal:- “1.That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer under section 143(3) of the Act by invoking the provisions of section 263 of the Act even when the order as passed by the assessing officer was neither erroneous nor prejudicial to the interests of the revenue. 2. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer by invoking the provision of section 263 of the Act even when the order was passed by the assessing officer under section 143(3) of the Act after conducting necessary enquiries and after due application of mind. 3. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer by invoking the provision of section 263 of the Act even when the order was passed by the assessing officer under section 143(3) of the Act was merge with the order of the Ld. CIT(A) dated 01.09.2017 and therefore the said order as passed by the assessing officer was not in existence at the time of passing of revisional order 4. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer by invoking the provision of section 263 of the Act on account of investment as made by the appellant in Sai Dham Colony by treating it as unexplained investment without properly appreciating the facts of the case. 5. The appellant reserves his right to add, alter and modify the grounds of appeal as taken by him.
Briefly stated facts as culled out from the records are that the assessee is an individual and filed return of income for A.Y. 2014- 15 on 28.11.2014 declaring total income of Rs.3,83,280/-. The case of the appellant was selected for limited scrutiny through CASS and notice dated 31-08-2015 under section 143(2) was issued for the assessment year 2014-15 and duly served upon the appellant for the following reasons:-
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S.No Reason for selection of the case in scrutiny 1 Substantial increase in capital in a year 2 Sale consideration of the property in ITR is less than sale consideration of property reported in ITR
The case of the appellant was subsequently converted into complete scrutiny vide approval letter dated 06-12-2016 from the Pr. Commissioner of Income Tax, Ujjain. Consequently an assessment order dated 28-12- 2016 was passed under section 143[3] of the Act assessing the total income of the appellant at Rs. 1,22,27,288/- by adding an amount of Rs. 1,18,43,978/- to total income of the appellant as under: S.No Nature of addition Amount [Rs] 1 On account of Long term capital gain on sale of land 88,78,365 2 On account of long-term capital gain on compulsory acquisition 9,25,047 of land 3 On account of compulsory acquisition of House 3,42,358 4 On account of unexplained credit u/s 68 of the Income Tax Act, 12,86,090 1961 5 On account of net profit being estimated at 8% 4,12,148 Total 1,18,43,978
The assessee then preferred an appeal before the Ld CIT [A], Ujjain against the assessment order as passed under section 143[3] of the Income-Tax Act, 1961. The Ld CIT [A] vide his order dated 01-09-2017 decided the appeal against the assessee and confirmed the entire additions as made by the assessing officer. The assessee has therefore preferred an appeal before the Hon’ble Bench against the order of the Ld CIT (A)- Ujjain which is still pending to be decided. In the meantime Ld. Pr. CIT invoke the provisions of section 263 of the Act and issued show cause notice dated 19.03.2019.
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In reply to the above show cause notice assessee made detail submissions and also filed various documents to show that during the course of assessment proceedings Ld. AO has specifically raised query about the sale consideration of Rs.91 lacs being not offered to tax and has finally made the addition also to the income declared by the assessee. Further, the source of investment of Rs.65,26,500/- in Sai Dham Colony was from sale consideration of Rs.91 lacs. All these information were provided in the audited financial statement which were placed before the assessing officer who made detailed enquiry and made proper application of mind and assessment completed after making various additions. Ld. Pr. CIT was however, not convinced and was of the view that the Ld. AO should have examined this issue of investment in Sai Dham Colony in detail. In order to ascertain the true state of the facts, the assessment order was held to be erroneous and prejudicial to the interest of Revenue by Ld. Pr. CIT and set aside to ld. AO with necessary direction as mentioned in the impugned order.
Aggrieved, assessee is now in appeal before the Tribunal challenging the assumption of jurisdiction of Ld. Pr. CIT u/s 263 of the Act and setting aside the assessment order and directing the Assessing Officer to examine for the issue of investment of Rs.65,26,500/- in Sai Dham Colony.
Ld. counsel for the assessee vehemently argued referring various documents and submissions filed before Ld. AO and also before the Ld. Pr. CIT in the form of paper book running
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from pages 1 to 90 which inter alia includes written synopsis from pages 69 to 71 and also various judgments on which reliance has been placed. Ld. counsel for the assessee also took us through the audited financial statements to show that in the balance sheet under the head capital account proceeds of sale of agricultural land of Rs.91 lacs is shown and on the asset side investment in Sai Dham Colony at Rs.65,26,500/- has been shown. Attention was also drawn to the assessment order wherein Ld. AO has dealt with the issue of sale consideration of Rs.91 lacs in detail and after giving benefit of Indexed cost of acquisition has made an addition of Rs.88,78,365/-. On the strength of these facts it was contended that complete enquiry was made by the Ld. AO and since it is not a case of no enquiry. Ld. Pr. CIT erred in assuming jurisdiction u/s 263 of the Act on wrong assumption of facts.
Per contra Ld. Departmental Representative (DR) vehemently argued referring to the finding of Ld. Pr. CIT and also placed reliance on the following judgments: No. Malabar Industrial Co. Ltd. Vis Commissioner of Income 243 ITR 83 (SC) 1 Tax Smt. Taradevi Aggrawal V/s Commissioner oflncome Tax 2. 88 ITR 323 (SC) Rampyaridevi Saraogi V/s Commissioner of Income Tax 67 ITR 84 3 (SC) Commissioner of Income Tax V/s Nagesh Knitwears Pvt. 345 ITR 135 4 Ltd (Delhi HC)
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Gee Vee Enterprises V/s Addl. Commissioner oflncome 99 ITR 375 (Delhi HC) 5 Tax Bhushan Steel Ltd. V/s Asstt. Commissioner oflncome IT AT A Bench Delhi 6 Tax
Commissioner of Income-tax v.Deepak Kumar Garg 299 ITR 435 (Madhya 7. Pradesh)
Commissioner of Income-tax v. Mahavar Traders 220 ITR 167 (Madhya 8. Pradesh) 9. Smt. Renu Gupta v. Commissioner oflncome-tax 301 ITR 45 (Rajasthan) 10. PT. Lashkari Ram v. Commissioner of Income-tax 272 ITR 309 (Allahabad) Commissioner of Income-tax, Patiala v. Himachal Pradesh 186 Taxman 105 (Himachal 11. Financial Corpn. Pradesh) Commissioner of income tax V/s Prafulla C.Pant And 176 Taxman 184 12 Dharam Veer JJ (Uttrakhand) Mofussil Warehouse & Trading Co.Ltd.V/s Commissioner 238 ITR 867 (Madras) 13 Of Income tax Durgalal & Co. Vis Commissioner Oflncome tax 14 220 ITR 456(Delhi) Commissioner Oflncome tax Vis Active Traders (P) Ltd. 15 214 ITR583 (Calcutta) Addl.Commissioner Of Income tax Vis Mukur 111 ITR 312 (Gujarat) 16 Corporation
We have heard rival contentions and perused the records placed before us and carefully gone through submissions made by both the sides and the decisions referred and relied by both the parties. Through this appeal assessee has challenged the action of Ld. Pr. CIT invoking the provisions
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of section 263 of the Act and holding the assessment order dated 28.12.2016 as erroneous and prejudicial to the interest of Revenue alleging that ld. AO has not examined the issue of investment of Rs.65,26,500/- in Sai Dham Colony in detail.
The provision of section 263 reads as follows: 263. Revision of orders prejudicial to revenue 1 (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 2 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, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 3 Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub- section,-of the Commissioner under this sub- section shall extend 1 and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] (2) 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 of the Appellate 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.
Powers u/s. 263 of the Act can be exercised by the Ld. Pr. Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the 7
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Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Ld. Pr. Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay).
This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:-
"Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 11. And the Hon'ble High Court, after considering the facts, held as under:-
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"6. It can thus be seen that though final order of assessment was silent on this aspect, the Assessing Officer had carried out inquiries about the nature of sale of land and about the validity of the assessee's claim of deduction under section 54F of the Act. Learned counsel for the Revenue however submitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise to a long term capital gain. Looking to the tenor of queries by the Assessing Office and details . A.Y. 2009-10 supplied by the assessee, we are unable to accept such a condition. In that view of the matter, the observation of the Tribunal that the Assessing Officer having made inquiries and when two views are possible, revisional powers could not be exercised, called for no interference. Since with respect to computation and assertions of other aspects of deduction under section 54Fofthe Act, the Tribunal has remanded the proceedings, nothing stated in this order would affect either side in considerations of such claim. 7. No question of law arises. Tax Appeals are dismissed." 12. We find the Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under:
"63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: "We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to : (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as 9
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it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee."
Since in the instant case the A.O after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O, he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed."
On examining the facts of the instant appeal in the light of the judgments referred above and the settled position of law we find
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that there are two transactions which are involved in this appeal. First is sale consideration of Rs.91 lacs received by the assessee from sale of land and secondly, investment of Rs.65,26,500/- made in Sai Dham Colony. Ongoing through the audited balance sheet of the assessee which has been filed before both the lower authorities, we find that under the head capital account proceed for sale of agricultural land at Rs.91 lacs is disclosed. On the asset side under the head sundry debtors amount of Rs.65,26,500/- is shown to be receivable from Sai Dham Colony. Case of the assessee was selected for scrutiny through CASS for the following two reasons; S.No Reason for selection of the case in scrutiny 1 Substantial increase in capital in a year 2 Sale consideration of the property in ITR is less than sale consideration of property reported in ITR
Ld. AO called for various details to examine these issues and also the case of the assessee was converted into complete scrutiny vide approval letter of Ld. Pr. CIT, Ujjain dated 06.12.2016. During the assessment proceeding assessee was asked to reply as to why the sale consideration of Rs.91 lacs is not offered to tax. Detailed submissions were filed to show that the land was an agricultural land and the gain was exempted from taxes. However, Ld. AO was not satisfied. After giving detail finding he came to the conclusion that the land sold was not agricultural land and thus falls under the definition of capital asset and gain from sale thereof in subject to long term capital gain. Benefit of indexed cost of acquisition was
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given to assessee at Rs.2,21,635/- and the remaining sum of Rs.8878365/- was added to the income of assessee. All the above stated facts with regard to sale consideration of Rs.91 lacs clearly states that detailed enquiry was conducted by the Ld. AO with regard to this issue.
As regards, the investment in Sai Dham Colony at Rs.65,26,500/- is concerned it is true that it was shown under the head of sundry creditors even when there was no sale of any goods to this concern but as accepted by the assessee that it was inadvertently shown under the head of sundry but actually is an investment made during the year. Audited balance sheet was very much available before the assessing officer and he has already examined one of the item of balance sheet of Rs.91, lacs shown in the capital gain. It cannot be assumed that he has not gone through the other items of balance sheet. Even otherwise the balance sheet consist of two sides viz. liabilities and assets and it is the consolidated picture of financial position of the concern at the year end. Source of funds are on liabilities side and application of fund on assets side and the items appearing in the balance Sheet are the closing balance of ledger accounts in which entries are passed for cash/cheque/journal entry.
As far as, the investment in Sai Dham Colony is concerned prima facie the source of the investment appears to be from sale consideration of Rs.91 lacs received during the year and this view is supported by the transactions appearing in the bank statement 12
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wherein fund flow from sale consideration of land and fund out flow to Sai Dham Colony is claimed to have happened on nearby dates during the year.
Therefore, in our considered view Ld. AO has made proper application of mind and conducted detailed enquiry with regard to the issues mentioned in the show cause notice. Also Ld. Pr. CIT has not made any further enquiry into this aspect and going through the finding in para 3.2 of the impugned order it seems that the content of show cause notice has mostly been repeated in the finding. Though, the assessee had claimed in the submissions that the source of investment in Sai Dham Colony is from sale consideration of Rs.91 lacs received from sale of land. Ld. Pr. CIT made no effort to further call any more information which he was required to do as provided u/s 263 of the Act.
We, therefore, under the facts and circumstances of the case and in the light of settled judicial precedence and decisions referred hereinabove, are of the considered view that the issues raised in the show cause notice have been examined by the Ld. AO, who took one of the plausible view permissible in law and have also made various additions before completing the assessment and therefore, the order of the Ld. AO can neither be held to be erroneous nor prejudicial to the interest of revenue. We accordingly quash the order of Ld. Pr. CIT u/s 263 of the Act dated 27.03.2019 and restore that of the Ld. AO dated 28.12.2016.
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In result, grounds raised by the assessee are allowed and appeal filed by the assessee in ITANo. 626/Ind/2019 is decided in favour of the assessee and against the revenue. Order was pronounced as per Rule 34 of the I.T.A.T. Rules 1963 on 25. 05. 2021
Sd/- Sd/- (MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore; �दनांक Dated : 25/ 05/2021 Patel/PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order
Assistant Registrar, Indore