RAMESHWAR RAMGOPAL GOUD,NASHIK vs. PR. COMMISSIONER OF INCOME-TAX,-1, NASHIK

आदेश / ORDER PER R.S.SYAL, VP :

This appeal filed by the assessee is directed against the order dated 19-03-2018 passed by the Principal Commissioner of Income-tax-1, Nashik u/s. 263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2013-14.

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Gut No.901, Anjaneri Shivar, Nashik. Sale consideration, as per

sale deed, was declared at Rs.80.00 lakh. As against that, the

assessee claimed that he actually received a sum of Rs.3.00 crore

against the sale of agricultural land, viz., Rs.80.00 lakh through

cheque; Rs.1.20 crore was retained by the Builder against booking

of two flats by the assessee; and the remaining Rs.1.00 crore was

given to his friend Shri Dalvi. The Assessing Officer (AO)

finalized the assessment by computing long term capital gain

chargeable to tax at Rs.16,78,378/- with reference to the full value

of consideration on transfer of land taken at Rs.80.00 lakh.

Remaining amount of Rs.2,20,00,000/- was taxed as unexplained

cash credit u/s.68 of the Act. This resulted into computation of

total income at Rs.2.38 crore. The ld. Pr. CIT invoked his

jurisdiction u/s.263 of the Act by holding the assessment order to

be erroneous and prejudicial to the interest of the Revenue. It was

concluded in the revisionary order that the entire sale consideration

was liable to be considered for the purpose of computation of

capital gain and further exemption u/s.54F was to be given in

respect of investment in one flat. The assessee is aggrieved by the

revisionary order passed by the ld Pr. CIT.

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material on record. It is seen that the assessment order u/s.143(3)

was passed on 23-03-2016 determining total income at Rs.238.74

crore. This was followed by the notice of demand u/s.156

determining total tax payable by the assessee at Rs.95,57,390/-.

Pursuant to the revisionary order, the AO completed the

assessment on 22-11-2018 determining total income at

Rs.2,96,55,130/- followed by notice of demand u/s.156

determining the total amount of tax payable by the assessee at

Rs.84,26,510/-. In such a concluded assessment, the AO did not

grant any benefit of exemption u/s.54F as against the direction of

the CIT for granting such benefit in respect of one flat purchased

by the assessee. Notwithstanding that, it is seen that the amount of

tax determined pursuant to the revisionary order has been

computed at Rs.84.26 lakh, which is lower than the amount of tax

computed pursuant to the original assessment u/s.143(3) at

Rs.95.57 lakh.

revise an assessment order which is erroneous as well as

prejudicial to the interest of the Revenue. It is trite law that the

revisionary power can be exercised only when the assessment

order passed by the AO is both erroneous as well as prejudicial to

4 ITA No.903/PUN/2018 Rameshwar Ramgopal Goud

the interest of the Revenue. If one of the two conditions is not

satisfied, the power to revise is ousted. Here is a case in which the

assessment order passed pursuant to the revisionary order has

resulted in total tax liability of the assessee at Rs.84.26 lakh, which

is less than the amount of tax originally determined as payable at

Rs.95.57 lakh, which order became subject matter of revision by

the ld. Pr. CIT. In such circumstances, a question arises as to

whether the original assessment order can be considered as not

prejudicial to the interest of the Revenue?

Supreme Court in Malabar Industrial Company Ltd. Vs. CIT

(2000) 243 ITR 83. She emphasized on the meaning of the term

“prejudicial to the interest of the Revenue”. She accentuated on

the observations of the Hon’ble Supreme Court to the effect that

“every loss of Revenue as a consequence of an order of AO cannot

be treated as prejudicial to the interest of the Revenue”. In our

considered opinion, reliance on one line of the judgment, taken out

of context, cannot bring the case of the Revenue any further. An

order can be said to be “prejudicial to the interest of the revenue”

when it suffers loss in terms of tax amount. The Hon’ble

jurisdictional High Court in CIT Vs. Hindustan Lever Ltd. (2012)

343 ITR 161 (Bom.) considered this issue, after taking note of the

5 ITA No.903/PUN/2018 Rameshwar Ramgopal Goud

judgment in the case of Malabar Industrial Company Ltd. (supra).

Their Lordships in Hindustan Lever Ltd. ( supra) held as under :-

“As regards the order being prejudicial to the interests of the Revenue, the judgment in Malabar Industrial Company adverts to the decisions of the Karnataka and Gujarat High Courts and of the view of the Division Bench in Gabriel India, according to which, a loss of tax has been regarded as prejudicial to the interests of the Revenue. The Supreme Court has held that if due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it would certainly be prejudicial to the interests of the Revenue. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue. For instance, where the Assessing Officer adopted one of several courses permissible in law or where two views are possible and the Assessing Officer has adopted one view with which the Commissioner does not agree, it has been held that it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken is unsustainable in law.”

due to erroneous order of the Income-tax Officer, the Revenue is

losing tax lawfully payable by a person, it would be certainly

prejudicial to the interest of the Revenue. A part of the judgment

in Malabar Industrial Company Ltd. (supra) relied on by the ld.

DR has also been considered by the Hon’ble jurisdictional High

Court in which it was seen that “every loss of Revenue as a

consequence of the order of the AO cannot be treated as prejudicial

to the interest of the Revenue”. This was further explained with

the help of an example that where the AO adopted one of several

courses permissible in law or where two views are possible and the

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AO has adopted one with which the CIT does not agree, the order

cannot be treated as erroneous as well as prejudicial to the interest

of the Revenue unless a view taken is unsustainable in law.

Department, by virtue of the revisionary order, is losing tax

lawfully payable by the assessee. That being the position, the

assessment order cannot be considered as prejudicial to the

interests of the Revenue. Since the assessment order does not

suffer from the second infirmity namely “prejudicial to the interest

of the Revenue”, we hold that the revisionary power u/s.263 cannot

be exercised as both the limbs of an order, being, erroneous and

prejudicial to the interest of the Revenue are not cumulatively

satisfied. We, therefore, set-aside the impugned order.

Order pronounced in the Open Court on 06th March, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT

पुणे Pune; �दनांक Dated : 06th March, 2019 सतीश

ITA No.903/PUN/2018 Rameshwar Ramgopal Goud

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The ACIT, Range-1 Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 4. “बी” / DR ‘B’, ITAT, Pune; 5. गाड� फाईल / Guard file.

/ True copy // आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 05-03-2019 Sr.PS 2. Draft placed before author 05-03-2019 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *