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Income Tax Appellate Tribunal, ‘H‘ BENCH
Before: SHRI M.BALAGANESH & SHRI RAHUL CHAUDHARYShri Kabir Tripat Oberoi Shri Kapil Tripat Oberoi
आदेश / O R D E R PER M. BALAGANESH (A.M):
These appeals in & 685/Mum/2021 for A.Y.2016-17 preferred by the order against the revision order of the ld. Principal Commissioner of Income Tax-20, Mumbai u/s.263 of the Act dated 25/03/2021 & 23/03/2021 respectively for the A.Y.2016-17.
Identical issues are involved in both these appeals and hence, they are taken up together and disposed of by this common order for the sake of convenience.
The only effective issue involved in both these appeals is as to whether the ld. PCIT was justified in invoking revisionary jurisdiction u/s.263 of the Act in the facts and circumstances of the instant case. The interconnected issue involved therein is as to whether the ld. PCIT was justified in directing the ld. AO to frame the assessment by considering the sale value of the property at Rs.13.99 Crores and accordingly, compute the assessee’s share of capital gain in the facts and circumstances of the instant case.
We have heard rival submissions and perused the materials available on record. With the consent of both the parties, the appeal for the A.Y.2016-17 in Kabir Tripat Oberoi is taken as the lead case and the decision rendered thereon would apply with equal force for for A.Y.2016-17 in the case of Kapil Tripat Oberoi also. The return of income for the A.Y.2016-17 was filed on 28/07/2016 declaring total income at Rs.8,27,910/-. The assessee further filed revised return on 27/12/2016 declaring the same total income of Rs.8,27,910/-. The return was revised as the loss of long term capital asset was not shown in the original return. The assessment was completed u/s.143(3) of the Act on 29/11/2018 accepting the revised return. It is pertinent to note that the return of income was selected under limited scrutiny by CASS to verify whether capital gains / loss is genuine and has been correctly shown in the return of income. In this regard, we find that the assessee had submitted before the ld. AO in the original assessment proceedings that during the year under consideration, he had sold the land in which he is co-owner. The said land was received by him from his father as a gift alongwith co-ownership with his brother Mr. Kapil Tripat Oberoi and mother Mrs. Leena Oberoi. The assessee furnished the details of the said land as under:-
Particulars Details Co-owner of the Property Vendors) 1. Mr. Kabir Oberoi (Assessee) (PAN : AAZPO0999F) 2. Mr. Kapil Oberoi [Brother of Assessee) (PAN : AAZPO0994J) 3. Mrs. Leena Oberoi (Mother of Assessee) (PAN : AAMP09457H) Purchaser of Land M/s Sapphire Clubotel Pvt. Ltd. (PAN: AAWC51134Q) Details of Land Survey No. 70/4 admeasuring H.01 = 48.8 Area situated at Village Tungarli, within the limits of Lonavala Municipal Council, Taluka Maval, Dist. Pune. 7lh September, 1979 Original Date of Purchase Date on which property was 2lst March 2016 received by assessee as a gift Irani his father.
Period of Holding for Gifted As per the explanation (1) given in section 2(42A) of the Property Income tax Act, for the purpose of determination of period of Holding for the transfer of assets covered under Section 49(1), there shall be included the period for which the asset was held by the previous owner Cost of Acquisitions as per Section Cost of acquisition to previous owner who has 49(1) actually acquired the asset as increased by the cost of improvement made subsequently or Fair market value of the property as on 1st April, 1981. Fair Market Value of Property as on 1st April, 1981 (as per Rs.49,78,270/- (value for 1/3rd share is Rs.16,59,423/-) Valuation Report) Sale consideration of whole Rs. 3,50,00,000/- Property 3.1. The sale consideration reported in the sale deed executed by the assessee alongwith other co-owners was Rs.3,50,00,000/-. The assessee arrived at the computation of long term capital loss on sale of this land at Rs.72,79,662/- being his 1/3rd share. The assessee also furnished the copy of sale deed before the ld. AO. The assessee also furnished the valuation report from a registered valuer wherein the fair market value as on 01/04/1981 has been determined for the subject mentioned land. This is relevant in view of the fact that the land was received by the assessee by way of gift from his father alongwith other two co-owners and hence, the fair market value as on 01/04/1981 would become cost of acquisition for the assessee and his co-owners.
3.2. These details were duly examined by the ld. AO in the course of assessment proceedings. The stamp duty value as per Section 50C of the Act for the subject mentioned land was Rs.3,48,06,672/- which was less than the sale consideration reported by the assessee in the sale deed.
Accordingly, the ld. AO did not resort to invoke the provisions of Section 50C of the Act as per law.
3.3. The ld. PCIT observed that the assessee had given the valuation report wherein the fair market value as on 01/04/1981 was determined by the registered valuer. For determining the fair market value as on 01/04/1981, the valuer had determined the value as on the date of valuation at Rs.13.99 Crores and did reverse working to arrive at the value as on 01/04/1981. Based on this valuation report, the ld. PCIT seeks to revise the assessment order framed by the ld. AO by treating it as erroneous and prejudicial to the interest of the Revenue on the ground that the sale consideration should have been considered at Rs.13.99 Crores as against Rs.3.5 Crores. The short question that arises for our consideration is only to resolve the dispute with regard to reckoning the sale consideration value at Rs.3.50 Crores or Rs.13.99 Crores.
3.4. It is not in dispute that the consideration reported by the assessee at Rs.3.50 Crores is more than the value determined u/s.50C of the Act. Once it is so, there is absolutely no requirement for the ld. AO to look into any other provisions of the Act to disturb the said sale consideration. This is very clearly provided in Section 50C of the Act itself. Hence, the ld. PCIT had invoked revision jurisdiction u/s.263 of the Act completely on incorrect application of law. In any case, the ld. AO having examined the details filed by the assessee in the original assessment proceedings in response to specific queries raised by him with regard to computation of capital gains / loss of sale of land, which are enclosed from pages 43-51 of the paper book filed by the assessee, have indeed taken a possible view on the issue and completed the assessment. Once a possible view has been taken, the same cannot be treated as erroneous by the ld. PCIT.
We hold that the decision rendered by the Hon’ble Jurisdictional High Court in the case of Nirav Modi reported in 390 ITR 292 would be directly applicable to the facts of the instant case. We further find that assessee had furnished the following documents before the ld. AO in the original assessment proceedings:- a) Computation of capital gains in the hands of assessee as well as in the hands of the co-owners b) Sale agreement dated 30/03/2016 entered by the assessee for sale of subject mentioned land. c) Valuation report dated 22/07/2016 issued by the valuer. d) Gift deed issued by assessee’s father. e) Response to specific queries raised by the ld. AO in the original assessment proceedings with regard to veracity of the computation of capital gains / loss on sale on land which are enclosed in pages 43-51 of the paper book.
3.5. As stated supra, the ld. AO on examination of the aforesaid documents and after carrying out adequate enquiries in that regard had accepted the stand of the assessee. Hence, it could not be said that there was lack of enquiry on the part of the ld. AO with regard to the issue of capital gains. Moreover, it is pertinent to note that the returns filed by the assessee was selected by CASS under limited scrutiny wherein the veracity of the computation of capital gains / loss were directed to be examined. This has been correctly carried out by the ld. AO. Hence, we hold that the ld. PCIT grossly erred in invoking revision jurisdiction u/s.263 of the Act with regard to this issue.
During the year under consideration, the assessee bought two flats and exemption u/s.54F of the Act was eligible for the assessee but since the assessee had only incurred capital losses on sale of land as detailed in the first ground supra, the assessee chose not to claim exemption u/s.54F of the Act in the return of income. In respect of these two flats (Flat Nos.301 & 504), the ld. PCIT sought to invoke revision jurisdiction u/s.263 of the Act by treating the order of the ld. AO as erroneous and prejudicial to the interest of the Revenue on the ground that rental income on the said flats ought to have been brought to tax by the ld. AO on notional basis. As stated earlier, we find that the return was selected under limited scrutiny only to verify the veracity of computation of capital gains / loss on sale of land. Hence, the ld. AO could not have expanded his scope beyond the issue of capital gains and looked into any other aspect of the issue, without seeking prior permission of the ld. PCIT / CCIT by converting the limited scrutiny into complete scrutiny. Hence, when the ld.AO has carried out his work in accordance with the norm specified by CBDT in the instant case, the ld. PCIT cannot say that the ld. AO had not carried out his job properly. The identical issue had come up for consideration before this Tribunal in the case of M/s. Sonali Hemant Bhavsar vs. PCIT in for A.Y.2015-16 dated 17/05/2019 wherein it was held as under:-
6. After hearing both the parties and perusing the materials before us, we observe from the notice issued under section 143(2) of the Act for limited scrutiny dated 19.09.2016 and find merits in the contentions of the assessee that the said limited scrutiny can not be expanded unless the AO converted it into complete scrutiny with the approval of Ld. Pr. CIT and if the AO after considering the submissions of the assessee does not come to the conclusion of potential escapement the Ld. Pr. CIT can not hold the order to be erroneous on the ground that AO ought to have reached to such conclusion. The case of the assessee is squarely covered by the decision of Kolkata Bench in the case of Sanjeev Kr. Khemka vs. Pr. CIT in A.Y. 2011-12 dated 02.06.2017 wherein the co-ordinate bench of the Tribunal has held as under:
"4. We have heard the rival contentions of the parties and perused the materials on record. The primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the assessee wants to contend that the very initiation of proceedings u/s 143(3) of the Act on the basis of regular scrutiny under the Act was bad in law. The proceedings under section 143(3) of the Act should have been limited to the extent of the information gathered through AIR. Accordingly the proceedings u/s 263 of the Act cannot be expanded beyond the issue raised in AIR. Thus the order u/s 143(3) of the Act beyond the points of AIR is invalid in law and so the same is with the order passed u/s 263 of the Act. It is the further contention of the assessee that in the items which are not subject matter of AIR cannot subject matter of scrutiny. Such matters include salary of the assessee, loans & interest on loans, payment of LIC, Commission & brokerage income etc. It is the case of the assessee that in the assessment order passed u/s 143(3) of the Act, the AO has travelled beyond the points of the AIR on the basis of which the case of scrutiny was selected under CASS module. It is the plea of the assessee that when no addition/disallowance can be made beyond the points mentioned in AIR in the assessment proceedings then same is the case with proceedings initiated u/s 263 of the Act. 4.1 The first aspect which needs to be examined is as to whether the assessee is entitled to challenge the validity of initiation expanded in the proceedings u/s 143(3) of the Act in the present appeals in which he has challenged the validity of expanded order passed u/s 263 of the Act covering the points which are not part of the AIR. The Id. Counsel for the assessee submitted before us that it is open to an assessee in an appeal against the order u/s 263 of the Act which seeks to revise an order passed u/s 143(3) of the Act, to challenge the validity of the expansion of order passed u/s.143(3) of the Act covering the points which are not part of the AIR. In this regard we find that Lucknow Bench of Hon'ble ITAT in the case of Inder Kumar Bachani (HUF) vs ITO
99. ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. Westlife Development Ltd. Vs Principal C.I.T. in have taken a view that when an Assessment order passed u/s 147 of the Act was illegal the Ld.CIT cannot invoke the jurisdiction u/s 263 of the Act against such void or non-est order. In the second decision cited the Hon'ble Mumbai bench of the Tribunal has specifically framed the following questions: "
Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263?
2. Whether the impugned assessment order passed u/s 143(3) dated 24-10 2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order?" On question no. 1 and 3 which is relevant to the present case the Hon'ble Mumbai bench of the Tribunal has taken the view that when the original assessment proceedings are null and void in the eyes of law for want of proper assumption of jurisdiction then such validity can be challenged even in collateral proceedings. The Mumbai bench took the view that the proceedings u/s 147 of the Act are primary proceedings and proceedings u/s 263 of the Act are collateral proceedings and in such collateral proceedings, the validity of initiation of the original proceedings u/s 147 of the Act can be challenged. The Mumbai bench of the Tribunal in this regard has placed reliance on several decisions, the principal decision being that of the Hon'ble Supreme Court in the case of Kiran Singh & Ors. V. Chaman Paswan & Ors. (1955) 1 SCR 117(SC) wherein the Hon'ble Supreme Court observed as follows: "It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." Now coming to the facts of the instant case, we find that the instant case was selected on the basis of AIR Information as evident from the order of AO under section 143(3) of the Act. There is also no whisper in the order of the AO for expanding the scope of limited scrutiny after obtaining the permission from the Administrative CIT. The Id. DR has also failed to bring anything contrary to the argument of the Id. AR. Therefore in our considered view the scrutiny should have been limited only to the information emanating from the AIR. Admittedly, the assessee has claimed to have filed an appeal before Ld. CIT(A) challenging the jurisdiction exceeded by the AO while framing the assessment order u/s 143(3) of the Act. We find that the impugned issue being legal in nature and goes to the root of the matter therefore we are inclined to proceed with this issue first by holding. that, from the above submission and after examining of the records, we find that the Ld. CIT in his impugned order u/s 263 of the Act has exceeded his jurisdiction while holding the order of AO as erroneous in so far prejudicial to the interest of Revenue. In view of the above we hold that the Id. CIT has in his order u/s. 263 of the Act exceeded the jurisdiction by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue on those items which are not emanating from the AIR. Thus, we are inclined to adjudicate only those matters which are emanating from the AIR as discussed above. 4.2 The assessment was framed by AO for the A.Y. 2011-12 under section 143(3) of the Act vide order dated 29.03.2014 after making certain additions/ disallowances to the total income of assessee. Subsequently, Ld. CIT u/s 263 of the Act observed certain errors in the order of AO, therefore, he was of the view tht the order passed by the AO is erroneous in so far as prejudicial to the interest of Revenue on account of no proper enquiry before completing assessment as discussed below: (i) The assessee has deposited in its bank account in HDFC bank Goa for ₹17.56 lakh and out of that there was a withdrawal only for 1.50 lakh but the AO has made the addition only to the extent of 34 lakh on account of unexplained cash credit. Therefore, certain unexplained cash credit of the assessee has been under assessed by the AO. ii) There was another bank account of the assessee in HDFC bank in Goa where total deposits of Rs. 19,31,750/- was made by the assessee but the AO found credited amount of Rs. 5,76,056/- only. Thus, total deposits made in the bank were not brought to tax; (ii) There was transactions of 3 76,225/-through credit card which was not explained and thus the entire amount was liable to be added to the total income of assessee but the AO has added only a sum of 2,98,225/- to the total income of assessee. Thus, there was under assessment of income by ₹78,000/-; (iv) The assessee during the year has sold property for 36 lakh and exemption of ₹19,74,763/- was claimed by assessee u/s. 10(38) of the Act. This fact was not verified by the AO at the time of assessment proceedings. In view of above, the Ld. CIT found the order of AO is erroneous in so far as prejudicial to the interest of Revenue and therefore show-cause notice was issued u/s. 263 of the Act vide dated 13.10.2015 for the clarification of the above transactions. In compliance thereto, the assessee submitted as under: i) The deposit in HDFC bank account No. 03151930000609 was duly reflected in his IT return. Therefore, no cause has happened to the Revenue which is prejudicial to the interest of Revenue. ii) The deposit of ₹19,73,750/- was duly reflected in the IT return and therefore there was no error which is prejudicial to the interest of Revenue. iii) Regarding the credit card payment, the addition on account of undisclosed cash deposit has already been added by the AO and therefore there is no error causing prejudice to the interest of Revenue. iv) There was no sale of the property and therefore no exemption u/s10(38) of the Act was claimed. However the Ld. CIT after considering the submission of assessee has held the order of AO is error and prejudicial to the interest of Revenue by observing as under: "I have carefully considered the issues with specific reference to the relevant assessment records as well as written submission furnished by the A/R. The AO has not taken cognizance of the following issues, despite being apparent from record: (1) Addition of Rs. 4 lakhs only was made against total cash deposit of Rs.17,56,000/- without taking any explanation from the assessee. (2) The balance deposits in another account with HDFC, Porvorim, Goa was not considered in assessment. (3) Interest income from all savings accounts and FDRs was not considered at the time of assessment. (4) Submission of assessee regarding explanation of credit card payment of Rs.3,76,225/-was partly accepted in assessment without proper verification. (5) Although a salaried person, the assessee's bank account reflect huge transactions/transfer entries, which required further investigation. (6) Long term capital gain of Rs.19,74,763/- was not properly verified. (7) Loan transactions and interest on loans required proper verification. (8) Salary was received in cash without TDS, which should have been viewed adversely. (9) LIC premium was paid for a minor but assessee's capital account did not reflect the same. (10) Lastly, the assessee declared income from commission/brokerage in the previous two AYS but no such income was shown in this year. "An incorrect assumption of facts or an incorrect application of law will always make the order passed by the Assessing Officer erroneous. The Assessing Officer has not made proper enquiry before completing assessment regarding above issues. By not checking the above issues and by not making adequate enquiry the Assessing Officer has not assessed the proper income and the order has become erroneous and prejudicial to the interest of the revenue. In view of the above, the order dated 29/03/2014 passed by ACIT, Circle-43, Kolkata is found to be erroneous and prejudicial to the interest of revenue and hence it is set aside with the direction to pass fresh assessment order after examining the evidences and documents in respect of the above issues raised after giving opportunity to the assessee and in accordance with law."
Being aggrieved by this order of Ld. CIT assessee is in appeal before us on the following grounds: "
(1) For that the L'd Pr. Commissioner of Income Tax erred in exercising the power of revision for the purpose of directing the AO to hold another investigation when the order passed by the AO was neither erroneous nor prejudicial to the interest of revenue. (2) For that the Ld Pr.CIT erred and exceeded jurisdiction by giving direction in respect of the matters which are subject matters of appeal before the CIT(A), therefore order passed by Pr. CIT-15 is unlawful, beyond provision of (5) For that on the facts & in the circumstances of the case Ld Pr. CIT was not justified in initiating proceeding u/s. 263. law and therefore liable to be quashed. (3) For that the Ld Pr. CIT had alleged arbitrarily irrelevant matters, factual and untrue position in the show cause notice u/s. 263 and therefore order passed by Pr. CIT-15 Kolkata u/s. 263 is nullity and liable to be quashed. (4) For that Ld Pr. CIT has wrongly assumed the jurisdiction u/s. 263 by wrongly mentioning that deposits in HDFC Goa A/c & HDFC Porvorim Goa A/c were under-assessed by the AO despite these two a/cs were disclosed in the balance sheet and deposits were explained, therefore allegation so made is bad in law and void ab-initio. (6) For that your petitioner craves the right to put additional grounds and/or to alter/amend/modify the present grounds before or at the time of hearing." The Id. AR before us filed two paper books which are running from pages 1 to 27 and 28 to 31. The Id. AR before us submitted that the necessary enquiries were made by the AO at the time of assessment. Thus the order of the AO cannot be held erroneous and prejudicial to the interest of Revenue on account of non enquiry whereas the Id. DR vehemently supported the order of the Id. CIT.
5. We have heard the rival contentions & perused the materials available on record. From the foregoing discussion, we find that order of AO has been treated erroneous and prejudicial to the interest of revenue on the ground that proper enquiry was not made by the AO. Therefore, Ld. CIT held that the order of AO is erroneous and prejudicial to the interest of revenue. However, after examining the order of Authorities Below and other relevant records our observations are as follows: a) deposit of cash of ₹17.56 lakh in HDFC bank a/c No.03151930000609 From the order or AO, we find that the AO at the time of assessment proceedings has applied his mind while determining the undisclosed income from the said bank account for Rs. 4 lacs. Thus the AO after considering the bank statements of the assessee has consciously made the addition of 4 lakh as unexplained cash credit against which assessee claimed to have filed appeal before Ld. CIT(A). Therefore, in our considered view, the allegation of Ld. CIT that proper enquiry was not made by the AO is not true. b) Deposit of cash ₹ 19,31,750/- in HDFC bank A/c 0315100006743 From the order of AO we find that AO has already made the addition of the entire amount as unexplained cash credit. Therefore, the allegation of the Id. CIT-A that the order of AO is erroneous and prejudicial to the interest of Revenue is not true. c) Credit card payment of ₹3,76,225/ From the order of AO, we find that the AO has made the addition of ₹2,78,225/- out of total credit card payment of 3,76,225/-. Therefore, it is clear that AO has applied his mind while framing the assessment proceedings u/s. 143(3) of the Act. Thus, the allegation of the AO in the impugned order or Ld. CIT u/s. 263 of the Act that there was no proper enquiry conducted by AO at the time of assessment proceedings is not true. d) Sale of property for consideration of 36 lakh. On perusal of AIR information which is placed on page 1 of the paper book, we find that no immovable property has been sold by assessee in the year under consideration. Besides the above, there is also no whisper in the assessment order for any addition on account of capital gains. Therefore, we find that the allegation of Ld. CIT that AO has not conducted sufficient enquiry in relation to sale of immovable property is not true. 5.1 In view of the above we find that Ld. CIT has passed impugned order u/s. 263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of revenue on account of inadequate enquiry made by AO while passing order u/s. 143(3) of the Act. However, we find that proper and sufficient enquiries were conducted by the AO at the time of assessment as evident from the order of AO. Therefore it cannot be concluded that no proper enquiry has been conducted by the AO at the time of assessment proceedings. The AO has taken conscious view after considering the facts and circumstances of the case and giving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. M/s. J. Morrison (India) Ltd.(ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under: "By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision." We also rely on the judgment of the Hon'ble Supreme Court in the case of CIT VS. Max India Limited reported in 295 ITR 282 wherein it was held as under:
"When the CIT passed the impugned order under s. 263, two views were inherently possible on the word "profits" occurring in the proviso to s.80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the A.Y. 2011-12 S.K. Khemka Vs. Pr. CIT-15 Kol. Page 12 year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263." In view of the above proposition, and respectfully following principle laid down by the Hon'ble courts and keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly.
In the result, assessee's appeal stands allowed." 4.1 In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in quashing the revision order passed by the ld. PCIT u/s.263 of the Act in the facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee are allowed.
The decision rendered in the case of Kabir Tripat Oberoi- (ITA No.684/Mum/2021 shall apply mutatis mutandis to Kapil Tripat Oberoi (ITA No.684/Mum/2021).
6. In the result, both the appeals of the assessee are allowed.