Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HONBLE MANISH BORAD
अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE
BEFORE HON'BLE MANISH BORAD,ACCOUNTANT MEMBER AND HON'BLE’ MADHUMITA ROY, JUDICIAL MEMBER
ITA No.625/Ind/2019 Assessment Year:2014-15 Shri Shaligram Barod, Pr. CIT-I, AH/29, HIG, Sukhliya Indore बनाम/ Indore Vs. (Appellant) (Respondent ) P.A. No. AHFPP4068H Appellant by Shri S.N. Agrawal, CA Revenue by Shri S.B. Prasad, CIT-DR
Date of Hearing: 12.04.2021 Date of Pronouncement: 30.04.2021 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-I Indore order dated 29.03.2019.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 assessment order as passed by the ld. AO u/s 143(3) of the Act on 14.12.2016 even when the
Shaligram Borad
said assessment order as passed by him was neither erroneous nor prejudicial to the interest of revenue. The order so passed by the Ld. Pr. CIT and properly appreciating the facts of the assessee submission made before him is wrong and bad in law. 2. That on the facts and in the circumstances of the case and in law the Ld. Pr. CIT erred in setting aside the assessment order as passed by the Ld. AO just to re-verify to the plots relating to the calculation of Income from capital gain on sale of plots and examine which has already been verified… the course of original assessment …. after full application of mind. The order so passed by the Pr. CIT by invoking the provision of section 263 of the Act is therefore illegal and bad in law, the said order requires to be quashed. 3. That on the facts and in the circumstances of the case in the present case the Ld. Pr. CIT erred in setting aside the original assessment passed by the Ld. AO and invoking the provision of section 263 of the Act for examination of issue related to the Capital gain on sale of plot and deduction as claimed by the assessee u/s 54F without properly appreciating the facts of the case and submission made before him. The order as passed by the Ld. Pr. CIT requires to be quashed. 4. The assessee reserve its right to add, alter, modify or amend the grounds of appeal as and when required.
Brief facts of the case as culled out from the records are that the assessee is an individual and filed his return of total income on 29- 11-2014 declaring total income at Rs 11,05,320/- which consists of income from House Property, Business income, Capital gain and Income from Other sources. In the said computation of total income, the appellant has offered long term capital gain of Rs 193656/- from sale of plot of land and the working of the same is shown as under:- S.No Particulars Amount Amount
Sale Consideration of Plot at 29/D/F 97,65,000 Scheme No. 74C Indore
Shaligram Borad
Less Selling Expenses (-) 6,26,353 Net Sale Consideration 91,38,647
Less Investment in New House u/s 54F(1) 43,31,991
Less Investment by way of deposit in Capital Gain Deposit Scheme u/s 54 F(4) utilized 46,13,000 in next year towards construction of house. Total Investment u/s 54 F 89,44,991 89,44,991
Net Income from Long Term Capital Gain 1,93,656
The case of the assessee was selected for limited scrutiny for following terms:
S.No Reason for selection of case in scrutiny 1 Large deduction claimed u/s 54B,54C,54D, 54G, 54GA 2 Sale consideration of the Property in ITR is less than sale consideration of property reported in AIR 3 Mismatch in sales turnover reported in Audit Report and ITR 4 Mismatch in amount paid to related persons u/s 40A(2)(b)
An order u/s 143(3) of the Act was passed by the Ld. Assessing Officer on 14.12.2016 assessing the Total Income of appellant at Rs. 16,21,350/- including the income under the heads Long Term
Shaligram Borad
Capital Gain of Rs. 7,09,689/- as against Rs. 1,93,656/- as declared in the return of total income as filed. The assessing officer while passing the Assessment Order, has restricted the amount of selling expenses to Rs. 1,10,320/- only as against selling expenses as claimed by the assessee at Rs 6,26,353/- and thereby has disallowed an amount of Rs. 5,16,033/- out of total selling expenses for want of supporting documents etc.
Subsequently, a notice under section 263 of the Income Tax Act was issued by the Pr. CIT, Indore for the following three reasons and he was of the opinion that the assessment order as passed by the assessing officer was erroneous and so far as prejudicial to the interest of the revenue. The reasons as recorded by the Pr. CIT are listed as under: 1 Guideline value at the time of sales was of Rs 1,30,20,000/- whereas the appellant has offered the same at Rs 97,65,000/- 2 FDR’s as prepared for Rs 46,13,000/- was on account of capital gain scheme or not was not examined by the assessing officer 3 Deduction as claimed for construction of House was not correct for Rs 43,31,991/-.
The relevant portion of the show cause notice issued u/s 263 of the Act is reproduced as under- 4.1·Two main issues to be examined under limited scrutiny were difference in consideration property sold and large deduction claimed against capital gain income. On perusal 0/ assessment records it is 4
Shaligram Borad
seen that you had entered into an agreement to sale (presented on 3013/~012) a plot of land with M/s Daksha Homes Private Limited (hereinafter referred to in as. "Daksha") for: a reconsideration of Rs.97,65,OOO/- out of which barring a paltry sum 0/ Rs:50001- (to be paid at the time of registry within one month), entire amount was paid on or before the date of the said agreement. The said plot of land was' in-turn sold to two Porwal 'brothers for declared consideration of Rs. 1,30,20, OOO/~ through a, registered deed dated 26th March 2014. In this registered deed you are shown as seller number I & Daksha as seller number 2.You have calculated and declared capital gain on the consideration of Rs.97,60,OOO/~ for assessment Year 20,14.15, against which deduction under section 54F was claimed on account of investment in capital gain account and partly in construction of a new house. 4.2 ·You have, claimed that transfer of the said property took place during the AY 2014-15., however while determining sale consideration, you have adopted the value of sale agreement (l.e. Rs.97,65,0001-.) which was entered into during the AY2012~}3. However, as per sale deed and also as per the stamp duty authorities rate consideration is Rs. 1,30,20,000/-. The AO ought to have taken ';he value 6f sale consideration as .Rs. 1, 30,20,000/. instead of Rs.97, 64. 000/-, 'if capital gain was calculated in the year 2014- 15. " 4.3 You have claimed to have invested Rs.46,13,OOO/~ in capita/gain account on 291} 112014 in the form of FDs with Dena Bank. It is seen that the amount was invested in the form of-4 FD~ all with the maturity of one year however it IS not clear whether such fixed deposits 'are part of capital gain Account scheme. It is further-seen that all the four FDRs were redeemed prematurely and proceeds were' deposited in ~ savings account. The AO has not examined whether such premature redemption is in accordance with Capital Gain Account Scheme 1988 and deduction u/s 54Fwas allowable or not. 4.4 You have also claimed to have invested Rs. 43,31,991/ up to the date of filing of' return in construction of a, new house (apparently AN 28-29). However, on perusal of the balance sheet plated on record that a; on 311312014 there is 'House Account' R's43,76,862/-whereas as on 31.3.2013 the same is at Rs. 41,57,868/~. As on 30.11.2014 there 'are two entries in the balance sheet viz. "New House- Construction “Rs 4331991/- and house account (AH 28-29) Rs. 24,76,2591/-. Hence it is not clear in which house the assessee has made a new investment Further as per the balance sheet there is one more 'ilat account' Rs. 3,30,0001- thus-it is not clear whether the assessee fulfills-the condition of not owning more than one residential house besides the new assets as envisaged in section 54F. The AO has not examined the claim of deduction u/s54F from this angle 5
Shaligram Borad
also. In view of the above. if is noticed that the AO has failed to examine the veracity of deduction as claimed by you amounting to Rs. 43,31,991/- claimed u/s 54F(J) & Rs.46, 13,OOO/- claimed u/s 54F( 4).
The show cause notice was duly replied by the assessee submitting that all the issues mentioned in the show cause notice have been duly examined by the assessing officer, who called for necessary information which were duly supplied and on the basis of which Ld. AO concluded the assessment. However, Ld. Pr. CIT accept for the second issue relating to claim of deduction u/s 54F of the Act in respect of deposit of Rs.46,13,000/- in the capital gain deposit account scheme of which necessary documentary evidences were examined to the satisfaction of Ld. Pr. CIT for the remaining two issues was of the view that the order of the assessing officer is erroneous so far as prejudicial to the interest of revenue as the Ld. AO has not made necessary enquiry and verification, thereby, allowing relief without enquiring into the claim.
Against above finding of Ld. Pr. CIT, assessee is in appeal and Ld. counsel for the assessee has referred to the following written submissions: 2.1] A notice under section 263 of the Income Tax Act was issued by the Pr CIT, Indore for the following three reasons and he was of the opinion that the assessment order as passed by the assessing officer was erroneous and prejudicial to the interest of the revenue. The reasons as recorded by the Pr. CIT are listed as under: - S.No Reason for issuance of the notice under section 263 of the Act 1 Guideline value at the time of sales was of Rs 1,30,20,000/- whereas the appellant has offered the same at Rs 97,65,000/- 6
Shaligram Borad
2 FDR’s as prepared for Rs 46,13,000/- was on account of capital gain scheme or not was not examined by the assessing officer 3 Deduction as claimed for construction of House was not correct for Rs 43,31,991/-.
2.2] The Pr CIT. has therefore passed an order under section 263 of the Act on 29-03-2019 and set- aside the order of the assessing officer on the above three points. 2.3] The appellant during the course of assessment proceeding filed detailed reply, the same is enclosed on Page Nos 96 to 103 and also on Page No 104 of the Compilation. From the documents it is proved that the appellant had filed detailed reply in respect of calculation of capital gain and deduction as claimed under section 54F of the Income Tax Act. The assessing officer after due application of mind after reducing the selling expenses, accepted the contention of the appellant. 2.4] The reason for issuance of the notice under section 263 of the Act and its reply by the appellant is as under:- S.No Reason for issuance of Explanation of the Appellant notice Guideline value as on the The appellant executed date of registry was of Rs registered sale agreement dt 30- 13020000/- but the 03-2012 without possession in appellant had offered sale favour of M/s Daksha Homes P consideration of Rs Limited for Rs 97,60,000/- and 97,65,000/- substantial amount has already been received by the appellant. Rs 37,60,000/- on 30.03.2012 and Rs 6000000/- on 19-12- 2012 totaling to Rs 97,60,000/-. Sales deed was finally executed on 26-03-2014 for Rs 1,30,20,000/- by M/s Daksha Homes P Limited in favour of buyer Shri Sanjay Porwal and Shri Radhey Shyam Porwal Entire sale consideration of Rs 1,30,20,000/- was received by the Seller No 2 viz M/s Daksha Homes P Limited and nothing was received by the appellant The appellant rightly offered sale consideration as agreed between him with M/s Daksha Homes P Limited. The guideline value as
Shaligram Borad
on the date of agreement was also of Rs 97,60,000/-.
The appellant placed reliance on the following direct decisions: - Citation Reference
ACIT vs M/s Balmer ITA No 4361/Mum/2016 dt 20- Lawrie Van Leer Ltd 11-2018 for the Asst Year 2010- 11 Rajaram Patidar ITA No 371/ Ind/ 2015dt 28-09- 2018 for the Asst Year 2010-11
DCIT vs Venkat Reddy (2013) 57 SOT 117 ( Hyd Bench )
Lahiri Promoters vs ACIT ITA No 12/Vizag/ 2009 dt 22- 06-2010
Sanjeev Lal & Anr Vs CIT (2014) 365 ITR 389 (SC) & Anr
Shri Mohd Imran Baig, ITA Nos 1942-1954/ Hyd/ 2014 Hyderabad & Others dt 27-11-2015
Bharathi Dev Anandani ITA No 882/ Bang/ 2014 dt 12- vs ACIT 02-2016
CIT vs Shimbhu Mehra ITA No 373 of 2010 dt 12-10- 2015 [ 236 Taxman 561(All)
ITO vs Modipon Ltd 168 TTJ 480 ( Del)
Hari Mohan Das Tandon 169 ITD 639 ( All) (HUF) vs PCIT
Kundaben Ambhai Shah ITA No 3354/ Ahd/ 2014 dt 30- v. ITO 11-2017
Dharamhi Bhai Sonani 161 ITD 627 [ Ahd ] 8
Shaligram Borad
V.ACIT
The first and second proviso to section 50C(1) of the Income Tax Act was inserted w.e.f 01-04- 2017 but these proviso was inserted to explain date of valuation as applicable as on the date of agreement and not on the date on which registry was actually executed Ms Zubeida Shahanshah ITA No 519/ Lkw/2017 dt 31- 01-2019
Dharmshibhi Sonani Vs [2016] 75 Taxmann.Com 141 [ ACIT, Surat Ahmedabad Bench ] 161 ITD 627 (Ahd ) Hari Mohan Das Tandon 169 ITD 639 (All) (HUF)
M/s Jai Laxmi Developers ITA No 5578/ Del/ 2014 dt (P) Ltd Vs DCIT
Smt Kundanben Ambhai ITA No 3354/ Ahd/ 2014 dt 30- Shah V. ITO 11-2017
Deduction U/s 54F of the The appellant had provided Act in respect of FDR’s complete details of fixed deposit under capital gain under Capital Gain Scheme scheme of Rs 46,13,000/- before the Assessing Officer for Rs 46,13,000/-. The Pr CIT himself in Para 8 on inner page No 13 of the order has accepted that a certificate was also obtained from the Bank and provided to him. In that case there was no justification for issuing of notice under section 263 of the Act on this count also. It is well settled principle of law that the Pr CIT can also make an independent inquiry during the 9
Shaligram Borad
263 proceeding. In this case , the Pr CIT himself accepted that certificate was obtained from the bank and provided to him. In that case there was no justification for issuance of notice under section 263 of the Act on this count Jyoti Foundation [2013]357 ITR 388 (Delhi) DG Housing Project Ltd
Deduction U/s 54F of the The cost of House as on Act for new construction 31.03.2013 was of Rs of house 4157868/- which increased to Rs 43,76,862/-. It was claimed by the appellant that an amount of Rs 218994/- was paid to the Muncipla corporation for sanction of MAP for new house construction The old House cost was therefore Rs 41,57,868/- only, the wife of the appellant contributed an amount of Rs 16,81,609/- against her share in old house. Thus, the cost of house was reduced from Rs 41,57,868/- to Rs 24,76,259/-. The said old house was dismantled by the appellant. New MAP was sanctioned, copy of the sanction letter dt 03-04- 2013 is enclosed on Page No 119 to 122 of the Compilation The expenses as incurred for construction of House was to the tune of Rs 43,31,991/- which also includes Rs 218994/- as paid for sanction of MAP The expenses incurred were for construction of new house after demolition of the old house. Hence, the appellant was rightly eligible to claim deduction under
Shaligram Borad
section 54F of the Act The Ld Pr CIT merely on the basis of amount as reflected in the Balance sheet doubted the genuineness of the construction expenses as incurred which in any case is not justifiable. The appellant for claiming deduction under section 54F of the Act can invest in additional one house in addition to his existing house. In the present case, existing house was demolished and permission was obtained for construction of new house. Hence, the appellant is duly complied with the condition as per section 54F of the Act
3.1] That the first reason as mentioned by the Pr. CIT for issuing the notice u/s 263 to the appellant was as under:- ● That appellant has claimed that transfer of Land took place in A.Y. 2014-15 however while determining the sale consideration, the appellant has adopted the value of Sale Agreement i.e Rs. 97,65,000/- which was entered into during the A.Y. 2012-13 however as per the sale deed and also as per the Stamp duty authorities rate , the consideration is Rs. 1,30,20,000/- The A.O. ought to have taken the value of Sale Consideration as Rs. 1,30,20,000/- instead of Rs. 9765000/- if capital gain was calculated in the year 2014-15.
3.2] It was submitted that during the A.Y. 2012-13 the appellant has entered into a Registered agreement to sell a plot at 29/D/F Scheme No. 74C Indore by way of Power of Attorney (without possession) in favour of Daksha Homes P. Ltd. on 30.03.2012 for a Consideration amounting to Rs. 97,65,000/- as per the prevailing guideline rates for A.Y. 2012-13. 3.3] That during the year under consideration i.e. in the A.Y. 2014- 15, the appellant has handed over the possession of said property to the power of attorney holder M/s Daksha Homes P. Ltd. (PAN No. AADCD2378J) who in turn has finally got the said property registered in favour of Shri Sanjay Porwal and Radhey Shyam Porwal on 26.03.14 for Rs. 1,30,20,000/-
Shaligram Borad
3.4] That out of the total agreed consideration of Rs 97,65,000/- as per the Registered Sale Agreement with the Power of Attorney holder, the appellant has received an amount of Rs. 97,60,000/- in the A.Y. 2012-13 from the said party i.e. M/s Daksha Homes P. Ltd. (PAN No. AADCD2378J) through Account Payee cheques and balance amount of Rs. 5,000/- was received at the time of execution of the registry i.e. in the A.Y. 2014-15.
3.5] Detail of amount as received by the appellant against the sale agreement as executed is as under:- S. Date of Ch No Amo Amount No cheque as unt credited in per [Rs] the bank agreement account [Rs] 1 26-03-2012 359047 20,00,000 19-12-2012 2 26-03-2012 359048 20,00,000 30-03-2012 3 28-03-2012 359050 20,00,000 19-12-2012 4 28-03-2012 359049 20,00,000 19-12-2012 5 30-03-2012 359046 17,60,000 30-03-2012 Total 97,60,000
3.6] That an amount of Rs 20,00,000/- as received vide Ch No 359048 and an amount of Rs 17,60,000/- as received vide Ch No 359046 were credited in the bank account of the appellant as on 30-03- 2012 and balance amount was credited in the bank account of the appellant on 19-12-2012. 3.7] That during the course of original assessment proceedings the appellant has submitted a detailed reply in respect of said transaction and has properly explained the nature of transaction and also furnished duly registered sale agreement (without Possession). The sale agreement was registered and consideration was also received through an account payee cheque. Thus, as per amended proviso of section 50C of the Act the guideline value as on the date of agreement is to be considered as full value of consideration. The appellant is therefore rightly offered sale consideration of Rs 97,65,000/- in his return of total income. 3.8] The Date wise event of Property as sold by the Appellant and which is under question is summarized as under for better understanding:- Date Particulars A.Y. 30.03.2012 Appellant executed registered sale A.Y. agreement (without Possession) of 2012-
Shaligram Borad
Plot on 30.03.2012 for Rs. 13 97,65,000/- in favour of M/s Daksha Homes P. Ltd. (PAN No. AADCD2378J). 26.03.2014 Registration of said Plot was A.Y.20 Concluded by M/s Daksha Homes 14-15 P. Ltd. vide Registered Sale deed dt. 26.03.14 for Rs. 1,30,20,000 in favour of Sanjay Porwal and Radheyshyam Porwal in which the appellant acted as consentor.
3.9] That on perusal of the above chart your honours will appreciate that appellant has properly and correctly considered the Sale Consideration received by him in respect of above transaction at Rs. 97,65,000/- in his return of Total income for the A.Y. 2014-15 while computing Income under the head Capital Gain since he has entered into an agreement to sale (Without Possession) and substantial amount of sale consideration was also received. As per amended proviso to section 50C, if the sale agreement was executed prior to the execution of registry and sale consideration was received through an account payee cheque in that case the guideline value as prevailed as on the date of execution of the sale agreement is to be consideration as full value of consideration. Thus, on the said principle, guideline value as prevailed in the previous year relevant to the Asst Year 2012-13 is to be considered by the assessing officer and not for the Asst Year 2014-15 as actually considered by the Pr CIT in his order as passed under section 263 of the Act. 3.10] That further the seller has also deducted TDS at the time of Registry in the name of M/s Daksha Homes P. Ltd only. The same is claimed by M/s Daksha Homes P. Ltd in its Income Tax Return. Thus, on the excess amount of Rs. 32,55,000/- [ Rs. 1,30,20,000 - Rs. 97,65,000] , M/s Daksha Homes P. Ltd was liable to pay Income tax. That M/s Daksha Homes P. Ltd is regularly assessed to income tax vide PAN No. AADCD2378J . A Copy of Income Tax Return filed by the said company M/s Daksha Homes P. Ltd for the A.Y. 2014-15 along with copy of account of ultimate Buyer in their books of accounts duly reflecting the amount received by them against the sale of said property from the ultimate buyer is also enclosed for your kind reference and is available on pages 174 to 180 of the paper book filed before the Hon’ble Bench. 1. Hon’ble ITAT, Indore Bench in the case of Shri Raja Ram Patidar Vs ITO 1(2), Bhopal [ Appeal No ITA No 371/Ind/ 2015 dt 28-09-2018 for the Asst Year 2010-11 ] 2. That Hon’ble Allahabad high Court in the case of CIT V. Shimbhu Mehra as reported in [2016] 65 taxmann.com 142 (Allahabad)
Shaligram Borad
3.That Hon’ble Delhi Bench of ITAT in the case of ITO V/s Modipon Ltd. as reported in 168 TTJ 480 4. Hon’bleHyderabad Bench of ITAT in the case of Shri Mohd. Imran BaigV/s ITO [ ITA No. 1942/Hyd/2014] 5. 3.12.1] That as per first and second proviso to section 50C(1) of the Income Tax Act as inserted as inserted by the Finance Act, 2016 w.e.f 01-04-2017 read as under: Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account 59[or through such other electronic mode as may be prescribed], on or before the date of the agreement for transfer:
3.12.2] That though the first and second proviso to section 50C(1) of the Income Tax Act was inserted w.e.f 01-04-2017 but these proviso was inserted to explain date of valuation as applicable as on the date of agreement and not on the date on which registry was actually executed. Hence, both these proviso having retrospective effect from the date on which provision of section 50C of the Income Tax act inserted in the Act i.e. w.e.f 01-04-2003. Similar view was expressed in the following decisions: S.No Citation Reference 1 Ms Zubeida ITA No 519/ Lkw/2017 dt 31-01- Shahanshah 2019 2 Dharmshibhi Sonani Vs [2016] 75 Taxmann.Com 141 [ ACIT, Surat Ahmedabad Bench] 161 ITD 627 (Ahd ) 3 Hari Mohan Das Tandon 169 ITD 639 (All) (HUF) 4 M/s Jai Laxmi ITA No 5578/ Del/ 2014 dt Developers (P) Ltd Vs DCIT 5 Smt Kundanben Ambhai ITA No 3354/ Ahd/ 2014 dt 30- Shah V. ITO 11-2017
3.12.3.1] Hon’ble Lucknow Bench of ITAT in the case of Ms Zubeida Shahanshah [ Appeal No ITA No 519/ LKW/ 2017 dt 31-01-2019 ]
Shaligram Borad
3.12.3.2] That Hon’ble Ahmedabad Bench of ITAT in the case of Dharamshi Bhai Sonani [ ITA No 1237/ Ahd/ 2013 dt 30-09-2016] 3.13] That in view of the above it is submitted that appellant has properly shown the amount of Rs 97,65,000/- received by him towards sale consideration as per the Registered Sale Agreement as the Full Consideration Value for Transfer of Capital Asset in A.Y. 2014-15 and not Rs. 1,30,20,000/- which was the Guideline value effective in A.Y. 2014-15 and the Sale value of Rs. 1,30,20,000/- of said property which was also the Guideline value in A.Y. 2014-15 was offered to tax by M/s Daksha Homes P. Ltd. in its return since they were the sellers of property in A.Y. 2014-15 which is correct and proper. 4.1] That the second reason as mentioned by the Pr. CIT for issuing the notice u/s 263 to the appellant is as under: ● The A.O. has not examined whether 4 Fixed Deposits made by the appellant amounting to Rs. 4613000/- in Capital Gain Deposit Scheme on 29.11.2014 is in accordance with Capital Gain Account Scheme 1988 and Deduction u/s 54 F was allowable or not before allowing the same.
4.2] That Appellant during the course of original assessment proceedings had filed the copies of Capital gain scheme FDR made with Dena Bank totaling to Rs. 46,13,000/-. Details of FDR made by the appellant are as under:- FDR No. Date [ Due date for filing of Amoun return extended to 30-11- t [Rs] 2014] SDRE8258986 29.11.2014 1613000 SDRE8258985 29.11.2014 1000000 SDRE8258984 29.11.2014 1000000 SDRE8258983 29.11.2014 1000000 Total 4613000
Copies of Said FDR are enclosed for kind reference and are available on pages 109 to 111 of the paper book filed before the Hon’ble Bench
4.3] That appellant has prepared the said FDR’s under the Capital Gain Deposit Scheme totaling to Rs. 4613000/- on 29.11.2014 which is before the due date of filing of Return for A.Y. 2014-15 on 30.11.2014.
4.4] That against the said amount, the Bank also opened a Saving Account wherein the proceeds of FDR were first transferred from FDR account and then the same were utilized for making payment towards construction of House.
Shaligram Borad
4.5.1] The appellant during the course of original assessment proceeding filed a detailed submission wherein it was properly explained that the amount was first deposited in the capital gain scheme and then utilised the same through the saving bank account of the appellant. Copy of the said submission is enclosed for your kind perusal on Page Nos 96 to 104. 4.5.2] Copy of Saving Bank Account wherein the proceeds of FDR were first transferred from FDR account and then the same were utilized for making payment towards construction of House is also enclosed for kind reference on Page Nos 112 to 118 of the Compilation. On perusal of the same you will find that entire transactions as executed through this account was for construction of house only.
4.5.3] The appellant also obtained a certificate from the Bank duly certifying that the amount was deposited by the appellant in the capital gain scheme account. Copy of the said certificate is enclosed on Page No 109 of the Compilation.
4.6] The Pr CIT himself in the order as passed under section 263 of the Act in Para 8 has duly acknowledge about the submission of the certificate during that proceeding. The Para 8 of the order as passed by the Pr CIT is reproduced as under: -
4.7] That from the above, it is clear that the certificate in respect of capital gain deposit has already been provided to the Pr CIT, during the course of 263 proceeding. Hence, there was no justification for him to passed an order under section 263 of the Act with a direction to re- examine the same facts again. The appellant during the scrutiny assessment provided complete detail of fixed deposit with capital gain scheme and its utilisation. The assessing officer after being satisfied with the explanation of the appellant accepted his contention.In view of the above it is submitted that appellant has properly claimed deduction u/s 54F of the Income Tax Act of Rs. 46,13,000/- in his return. The same may kindly be treated as legal and proper.
Shaligram Borad
5.1] That the third reason as mentioned by the Pr. CIT for issuing the notice u/s 263 to the appellant is as under: ● That appellant has claimed to have invested Rs. 43,31,991/- upto date of filing of return in construction of a new house (apparently AH 28- 29). However on perusal of the balance sheet placed on record it is seen that as on 31.03.2014 there is “ House Account” Rs. 4376862/- whereas as on 31.03.2013 the same is at Rs. 4157868/-. As on 30.11.2014 there are two entries on the balance sheet viz New House Construction Rs. 4331991/- and house account (AH 28-29) Rs. 2476259/-. Hence it is not clear that in which house the appellant has made new investment. That as per the balance sheet there is one more flat account Rs. 330000/- thus it is not clear whether the appellant fulfills the condition of not owning more than one residential house besides the new assets as envisaged in Section 54F. The A.O. has not examined the claim of deduction u/s 54 F from this angle also. In view of the above, it is noticed that the A.O. has failed to examine the veracity of deduction as claimed amounting to Rs. 4331991/- u/s 54F(1) and Rs. 4613000/- claimed u/s 54F(4).
5.2] That from the reason it appears that the Ld. Pr. CIT wanted to verify where the cost of construction of house has been shown by the appellant. That in this respect a statement showing the year-wise details of cost of construction of house as shown by the Appellant in his Balance sheet was filed before him and also available before the assessing officer is as under: - S.No Particulars 31-03-13 31-03-14 30-11-14 1.1 House 4157868 4376862 2476259 1.2 New House 0 0 4331991
5.3] That during the previous year relevant to the Asst Year 2014- 15, an amount of Rs 2,18,994/- was paid by the appellant towards permission fee for construction of the residential house. However, inadvertently the said amount was debited to the cost of old house. The said mistake was rectified and the same was included in the cost of new house during the previous year relevant to the Asst Year 2015-16.
5.4] It is clarified that House No. AH 28 and Plot No. 29 was a joint property owned by the appellant with his wife Smt. Sumitra Barod. That there was house on AH- 28 and Plot no. AH 29 was vacate. That initially the entire payment for construction was made by the appellant and shown as Investment in house in his name. That during the previous year relevant to the Asst Year 2015-16, an amount of Rs 16,81,609/- was received by him from his wife towards her share and therefore the cost to that extent was transferred by the Appellant in the
Shaligram Borad
Books of his wife. For this reason the cost of house reduced from Rs 41,57,868/- to Rs 24,76,259/- in the file of the appellant as on 30.11.2014. 5.5] The said house situated at AH 28 has been demolished by appellant in A.Y. 2014-15 and he has started the construction of a new residential house on and same along with adjoining plot AH29 Sukhliya. The Appellant has also taken permission for construction of new house from the Municipal Corporation on AH-28 and AH 29 copy of same are enclosed. It was for this reason that the appellant has shown House (AH-28-29) at Rs. 41,57,868/- as on 31.03.2013. That appellant has demolished the Old house after he got permission for construction in April 2013. That later on after 01.04.2014 the appellant has started construction of new house and thereby he has incurred an amount of Rs. 43,31,991/- till 30.11.2014 towards construction of new house. 5.6] The appellant has duly filed the details of all the expenses incurred by him towards House Construction and produced books of accounts before the Ld. A.O. during the original Assessment Proceedings also as to substantiate the Construction Cost incurred by him. The assessing officer after being satisfied with the explanation of the appellant accepted the claim of deduction under section 54F of the Income Tax Act.
5.7] That as per the provisions of Sec. 54F of the Act if an Individual or HUF transfers any L.T. Capital Asset other than a residential house and within a period of one year before or two year after the date on which transfer took place, purchased a new house or has with in a period of three years after that date, constructed a new residential house then it would not be liable to pay tax on such Capital Gain if it fulfills other conditions as mentioned in said section.
5.8] That in the appellant till the date of filing of the return of total income for A.Y. 2014-15 he has invested an amount of Rs 43,31,991/- in the construction of new house and an amount of Rs 46,13,000/-has been deposited by him in the Capital Gain Deposit Scheme Account. Thus, total investment as made by the appellant was to the tune of Rs 89,44,991/-. Thus, the appellant had properly claimed deduction under section 54F of the Income Tax Act.
5.9.1] That as regards one more point raised by Pr. CIT that there is one more flat account Rs. 330000/- thus it is not clear whether the appellant fulfills the condition of not owning more than one residential house besides the new assets as envisaged in Section 54F, it is submitted that said Flat is a old residential Flat situated at Bhopal.
Shaligram Borad
5.9.2] The appellant can invest in the a new residential house in addition to one house, it means after considering the new house, the appellant can hold two houses. Thus, as per provision of Sec. 54F the appellant was eligible to claim deduction u/s 54F of the Act in case of construction of a new house property.
5.10] That in view of the above after considering the facts of the case and detailed submission as filed along with Balance sheet wherein these facts were properly disclosed the appellant submits that the deduction as claimed by him under section 54F of the Act was legal and proper. The Ld. A.O. after considering all the aspects has properly allowed the deduction u/s 54F. Thus, the assessment order as passed by the assessing officer was neither erroneous nor prejudicial to the interest of revenue. Hence, the order as passed by the Ld. Pr. CIT requires to be quashed. 6.1] The language of Provision of section 263 of the Income Tax Act read as under:- 263. (1) The Principal Commissioner or 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 appellant 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. [ Emphasis supplied ] 6.2] That prior to invoking the provision of section 263 of the Income Tax Act, the order in question must be erroneous and also prejudicial to the interest of Revenue. That both these conditions must be simultaneously satisfied. The assessing officer in the present case in hand as allowed the claim of deduction u/s 54 F and therefore he has taken one of the possible views. Thus, the order as passed by the assessing officer was not a erroneous order. Hence, the Ld CIT was not justified in invoking the provision of section 263 of the Income Tax Act.
6.3] In the facts of the present case, the assessing officer conducted due inquiries and accepted the claim of the appellant only after being satisfied with the explanations of the appellant duly supported with the requisite documentary evidences. The assessing officer took a plausible view based on facts and circumstances of the case after due examination of the material placed on record. Hence, order passed by the assessing officer cannot be termed as erroneous so as to warrant the invoking the provisions of section 263 of the Income-Tax Act, 1961.
Shaligram Borad
The order as passed by the Ld Pr. CIT-2, Indore under section 263 of the Income-Tax Act, 1961 is therefore without jurisdiction and deserves to be set-aside. Relevant extracts from few of the judicial precedents that have laid down the scope of section 263 of the Income-Tax Act, 1961 and powers of the commissioner under this section are reproduced hereunder for your ready reference:
6.4.1] The Hon’ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. vs. CIT as reported in [2000] 243 ITR 83 (SC)
6.4.2] The Hon’ble Supreme Court of India in the case of CIT (Central) v. Max India Ltd. as reported in [2007] 295 ITR 282 (SC)
6.4.3] The Hon'ble Jurisdictional High Court in the case of CIT v. Associated Food Products (P.) Ltd. as reported in [2006] 280 ITR 377 (Madhya Pradesh)
6.4.4] The Hon'ble Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. as reported in [2009] 227 CTR 133 (Delhi)
6.4.5] The Hon’ble Delhi High Court in the case of DIT v. Jyoti Foundation as reported in [2013] 357 ITR 388 (Delhi) 6.4.6] The Hon’ble Supreme Court of India in the case of Pr CIT-2 v. Shree Gayatri Associates as reported in [2019] 106 taxmann.com 31 (SC) dismissed the SLP filed by the Department against the order of the Hon’ble Gujarat High Court. The Hon’ble Gujarat High Court in the case of Pr. CIT-2 v. Shree Gayatri Associates as reported in [2019] 106 taxmann.com 30 (Guj.)
6.4.7] The Hon’ble Supreme Court of India in the case of Pr CIT-8 v. Sumatichand Tolamal Gouti as reported in [2019] 111 taxmann.com 287 (SC) dismissed the SLP filed by the Department against the order of the Hon’ble Bombay High Court. The Hon’ble Bombay High Court in the case of Pr. CIT-8 v. Sumatichand Tolamal Gouti as reported in [2019] 111 taxmann.com 286 (Bombay)
6.4.8] The Hon’ble Supreme Court of India in the case of CIT v. Amitabh Bachchan as reported in [2016] 69 taxmann.com 170 (SC)
6.4.9] The Hon’ble ITAT Kolkata Bench ‘C’ in the case of Patron Vinimay Pvt. Ltd. Vs. ITO [ITA No. 1614/Kol/2019] vide order dated 31-12-2019.
Shaligram Borad
6.4.10] The Hon’ble ITAT Pune Bench ‘B’ in the case of Rajesh Chandrakant Shah (HUF) v. Pr. CIT-6 as reported in [2019] 102 taxmann.com 428 (Pune - Trib.) 6.4.11] The Hon’ble ITAT Ahmedabad Bench ‘C’ in the case of Jay Agriculture & Horticulture Pvt. Ltd. Vs Pr. CIT-2 [ITA No. 605/Ahd/2015]
Per contra Ld. Departmental Representative (DR) vehemently argued reiterating the finding given by Ld. Pr. CIT in the impugned order and also placed reliance on the following decisions: s. Reported CASE LAW No. Malabar Industrial Co. Ltd. Vis Commissioner of 243 ITR 83 (SC) Income 1 Tax 2. Smt. Taradevi Aggrawa1 Vis Commissioner 88 ITR 323 (SC) Rampyaridevi Saraogi V Is Commissioner of 67 ITR 84 Income Tax 3 (SC) Commissioner of Income Tax Vis Nagesh 345 ITR 135 Knitwears Pvt. Ltd. 4 (Delhi HC) Gee Vee Enterprises Vis Addl. Commissioner of 99 ITR 375 (Delhi HC) Income Tax 5
Bhushan Steel Ltd. Vis Asstt. Commissioner of IT AT A Bench Delhi lncome Tax 6
Commissioner of Income-tax v.Deepak Kumar 299 ITR 435 (Madhya Garg 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) 21
Shaligram Borad
PT. Lashkari Ram v. Commissioner of Income-tax 272 ITR 309 (Allahabad) Commissioner of Income-tax, Patia1a v. Himachal 186 Taxman 105 Pradesh Financial Corpn. (Himachal 11. Pradesh) Commissioner of income tax Vis Prafulla C.Pant 176 Taxman 184 And 12 Dharam Veer JJ (Uttrakhand) Mofussi1 Warehouse & Trading Co.Ltd.V/s 238 ITR 867 (Madras) Commissioner 13 Of Income tax 14 Durga1a1 & Co. Vis Commissioner Oflncome tax 220 ITR 456(De1hi) 15 Commissioner Oflncome tax Vis Active Traders (P) 214 ITR583 (Calcutta) Add1.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 perused with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides.
Though, the assessee has raised various grounds of appeal by the sole grievance of the assessee is against the finding of Ld. Pr. CIT in the order filed u/s 263 of the Act setting aside the assessment order treating it to be erroneous and so far as prejudicial to the interest of revenue.
We observe that the assessee has shown income from long term capital gain from sale of plot No.29/D/F, Scheme No.74C, Sector D, 22
Shaligram Borad
Indore. To arrive at the capital gain liable to tax, assesse has claimed selling expenses, exemption u/s 54F(1) of the Act for investment in new house and exemption u/s 54F(4) towards deposit in capital gain Deposits Scheme. The case of the assessee was assessed u/s 143(3) of the Act after making certain additions/disallowance. Ld. Pr. CIT invoked the provisions u/s 263 of the Act and issued show cause notice mentioning the following three reasons : S.No Reason for issuance of the notice under section 263 of the Act 1 Guideline value at the time of sales was of Rs 1,30,20,000/- whereas the appellant has offered the same at Rs 97,65,000/- 2 FDR’s as prepared for Rs 46,13,000/- was on account of capital gain scheme or not was not examined by the assessing officer 3 Deduction as claimed for construction of House was not correct for Rs 43,31,991/-.
While completing the proceedings u/s 263 of the Act Ld. Pr. CIT was satisfied with the assessee’s claim of deduction u/s 54F(4) of the Act for the deposit in capital gain account scheme at Rs.46,13,000/- as observed in para 8 of the impugned order, accepting that during current proceedings u/s 263 of the Act assessee had duly furnished copy of the certificate from the concerned bank and sample copy of application for withdrawal all amount from the capital gain account scheme. Since the Ld. Pr. CIT is satisfied this issue does not remains live.
Shaligram Borad
Now, we take up the remaining two issues
First issue is with regard to applying of the guideline value on the sale consideration shown by the assessee. We find that the assessee executed registered sale agreement dated 30.03.2012 for the sale of plot of land at Indore to M/s Daksha Homes P. Ltd. for a consideration of Rs.97,60,000/-. Consideration of Rs.37,60,000/- was received on 30.03.2012 and Rs. 60,00,000/- on 19.12.2012. Sale deed was finally executed on 26.03.2014 and consideration was shown at Rs.1,30,20,000/- and the plot was ultimately sold to Shri Sanjay Porwal and Shri Radheyshyam Porwal by M/s Daksha Homes P. Ltd. The entire sale consideration of Rs.1,30,20,000/- was received by M/s Daksha Homes Pvt. Ltd. The guideline value as on the date of registering sale agreement i.e. 30.03.2012 was Rs.97,60,000/-. The assessee has offered the long term capital gain during the A.Y.2014-15 when the sale deed was executed but adopted the sale consideration at Rs.97,65,000/-.
Ld. Pr. CIT in the impugned order has stated that the guideline rate to be adopted by the assessee should be Rs.1,30,20,000/- as the sale deed was executed on 26.03.3014. This aspect has not been examined by the assessing officer.
We observe that almost total consideration as per the sale agreement was received by the assessee during the F.Y.2011-12 and 2012-13. The final consideration as mentioned in the sale deed dated 26.03.2014 was received by M/s. Daksha Homes Pvt. Ltd. Ongoing through various decisions relied on by the Ld. counsel for 24
Shaligram Borad
the assessee, we find that the assessee had rightly shown the sale consideration at Rs.97,65,000/- and even this aspect has been thoroughly examined by the assessing officer during the course of assessment proceedings and in para 4 of the assessment order, Ld. AO has categorically stated as follows: During the assessment year the assessee has sold up piece of land bearing description plot No.29/D/F, Scheme No.74C, Sector D, Indore. The assessee has transacted in the property through a sale agreement (without possession) for an amount of Rs.97,60,000/- dated 27 March 2012 registered on 30.3.2012. This property has ultimately been transferred through a sale agreement between the assessee and the initial buyer Deksh Home Pvt. Ltd. Indore (PAN:AADCD2378J) and shri Sanjay Porwal & Radheshyam Porwal for a sum of Rs.1,30,20,000/- with a sale deed dated 26 March 2014. In computing the capital gains on sale of the asset the assessee has claimed expenses on sale of Rs.6,26,353/-.
Therefore, so far as, this issue relating to applying of the guideline rate as on 30.03.2012 or 26.03.2014 is concerned, we find that the issue has been thoroughly examined by the assessing officer and has taken one of the plausible view in the light of the settled judicial proceedings which thus leave no room for the Pr. CIT to assume jurisdiction u/s 263 of the Act.
As regard the remaining issue of deduction u/s 54F(1) of the Act for the investment in construction of House at Rs.43,31,991/-, we find that the assessee apart from owning one flat also held another house at AH-28 & 29 which was a joint property owned by appellant with his wife Smt. Sumitra Borad. There was a house on AS-28 and AH-29 was vacate. That initially the entire payment for
Shaligram Borad
construction of the original house was made by the appellant duly shown as the investment in the house in the balance sheet. During financial year 2014-15 relevant to A.Y. 2015-16 against the investment of Rs.41,56,868/- the appellant received Rs.16,81,609/- from his wife towards her share. The cost of house was reduced to Rs.24,76,259/-. The said House situated at AH-28 is claimed to be demolished by assessee A.Y.2014-15 and construction of new house started on both plots of land i.e. AH-28 & AH-29 for which necessary permission was taken from Municipal corporation.
We further observe that during the course of assessment proceedings a detailed query letter was issued to the assessee to file various details and in reply to which submissions were filed which also included the details for claim of investment in residential house u/s 54F(1) of the Act. The assessee gave a breakup of the cost of construction which included the following: i. Lease Renewal Housing Bond of Plot 28AH Rs.12,500/- ii. New Construction Rs.2,18,994/- ii. Construction Rs.41,00,497/- Total Rs.43,31,991/-
The assessee also filed the certificate issued by Municipal Corporation Indore, for construction of House, withdrawal makes from Dena Bank under Capital gain account scheme for constructing house.
Ld. DR failed to controvert this fact that all these details were very much available before the assessing officer for examination and
Shaligram Borad
are forming part of the assessment records. Based on these evidences the income disclosed under the head of long term capital gain from sale of plot of land was examined by the assessing officer and was found to be correct except for disallowance of selling expenses at Rs.5,16,033/-.
So going through above discussion, we are of the considered view that it is not a case of no enquiry rather it is a case of complete enquiry by the Learned assessing officer who after calling all the necessary documents examined the transaction of long term capital gain and various deductions claimed under the provisions of law and took one of the view permissible under the law and assessed the income after making certain disallowance.
The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: "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 in 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. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an
Shaligram Borad
incorrect application of law will satisfy the requirement of the order being erroneous ".
The Hon'ble Bombay High Court in the case of Gabriel India Ltd 203 ITR 108 has held as under: “The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub10 section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles". 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the 28
Shaligram Borad
Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. The Income-tax Officer in this case had made enquiries in 29
Shaligram Borad
regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order.”
The Hon'ble Supreme Court in the case of Max India Ltd 295 ITR 282 has held as under: “In our view at the relevant time two views were possible on the word "profits" in the proviso to Section 80HHC(3). It is true that vide the 2005 amendment the law has been clarified with retrospective effect by insertion of the word "loss" in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under Section 263 of the Income Tax Act, 1961, two views on the said word "profits" existed. It is not in dispute that when the order of the Commissioner was passed there were two views on the word "profits" in that section. The problem with Section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of Section 263 particularly when as stated above we have to% take into account the position of law as it stood on the date when the Commissioner passed the order dated March 5,1997, in purported exercise of his powers under Section 263 of the Income Tax Act. 3. For the above reasons, civil appeals filed by the department stand dismissed.” 30
Shaligram Borad
We have given thoughtful consideration to the orders of the authorities below. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the 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 judgment 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
Shaligram Borad
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."
We, therefore, considering the facts of the case in totality and in light of the judicial decisions discussed hereinabove are of the view that Ld. Pr. CIT was not justified in imposing his view upon the assessing officer on wrong appreciation of facts and not considering the fact that issues raised in the show cause notice u/s 263 of the Act were thoroughly examined by Ld. AO and has duly applied his mind taking one of the permissible view under the law. We, therefore, quash the order of Ld. Pr. CIT u/s 263 of the Act dated 29.03.2019 and restore that of the assessing officer dated 14.12.2016 framed u/s 143(3) of the Act.
In result, appeals filed by the assessee in ITANo.625/Ind/2019 is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 30.04.2021.
Sd/- Sd/- (MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore; �दनांक Dated : 30/04/2021 Patel/PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Indore 32