JAGJIT SINGH,PANIPAT vs. PR.CIT, KARNAL

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “C”: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.No.2777/Del./2018 Assessment Year 2008-2009 Shri Jagjit Singh, The Pr. Commissioner of Panipat. PAN ABSPC0820H Income Tax, Aayakar C/o. MAP Corporate Legal, vs., Bhavan, Sector-12, C-586, LGF, Defence Karnal, Haryana. Colony, New Delhi 110024. (Appellant) (Respondent) For Assessee : Shri Ashwani Kumar, C.A. For Revenue : Shri S.S. Rana, CIT-D.R. Date of Hearing : 03.10.2019 Date of Pronouncement : 10.10.2019 ORDER PER BHAVNESH SAINI, J.M.

This appeal by assessee has been directed against the order of Ld. Pr. CIT, Karnal, Dated 16th February, 2018 for the assessment year 2008-2009 under section 263 of the Income Tax Act, 1961.

2 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 2. We have heard the Learned Representatives of both the parties and perused the material available on record.

3 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. record and relevant material on record found certain apparent discrepancies and errors. Accordingly, show cause notice under section 263 of the Income-Tax Act was issued to the assessee on 12th December, 2017 as follows :

“2. A perusal of assessment record for the A.Y. 2008- 09 reveals that the assessee, in this case, along with other co-owners had sold land of Rs.2,44,31,875/-, out of which his share amounted to Rs.2,26,88,125/-. Long term capital gain of Rs.1,86,89,931/- was earned by the assesses on the said sale of land. Deduction u/s. 54B of the Act was claimed by the assessee in respect of investment made for purchase of land for Rs.1,89,70,650/- in the name of Smt. Sunita Rani wife, which was allowed by the AO.

A perusal of fund flow statement for sale and 3. purchase of the given lands reveals that the assessee had received payment for sale of land on different dates by cash or by cheques. It is further observed that the land was purchased on 08.01.2007 i.e. prior to the date of sale of land on 03.04.2007. This aspect has not been examined

4 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. by the AO. Further, the land was purchased in the name of the assessee’s wife. Deduction u/s 54B of the Act is, however, allowable only on the purchase of a new asset by the assessee himself in his name, within a period of two years from the sale of land.

5 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 5. It is further noted that the assessee had received advance payment in cash for sale of land in violation of the provisions of section 269SS of The Act. Likewise, he had also paid advance in cash for the purchase of new land. The A.O. has completely overlooked these facts, and, in the process, has failed to examine not only the source of cash payments made by the assessee, but also the applicability of the provisions of section 271D of the Act in the case of the assessee, as well as in the case of Sh. Randhir Singh, from whom the assessee had purchased the land.

6 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 7. In view of the above, it is clear that the AO has passed the order dated 02.03.2016 for the A.Y. 2008-09 without conducting appropriate enquiries. The order thus appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of section 263(1) of the Income Tax Act 1961. The assessee is accordingly required to show cause as to why the action should not be taken in his case in terms of section 263(1) of the Act.

3.1. In response to the aforesaid notice, the assessee filed written submissions which is reproduced in the impugned order and reads as under :

"Reference to your above mentioned notice, it is submitted as under:-

7 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 1) That the assessee, along with his wife Smt. Sunita Devi, sold agricultural land measuring 7 Acre 7 Karnal and I Marla at-village Uchana Distt Karnalin the F.Y 2006-07 for Rs2,44,31,075/- which was registered on 03/04/2007 i.e., F.Y 2007-08.

2) That the assessee has invested the capital gain arising on sale of such land for purchase of agricultural land measuring 8 Acres 2 Kanal at Village Bairsal Tehsil Niiokheri Distt Karnal in the same year in the name of his wife Smt Sunita Devi. While the land sold was in the name of Sh Jagjit Singh and Smt Sunita.Rani, the investment u/s 54B was made in the name of Smt. Sunita Rani alone. The benefit of investment under section 54B may kindly be allowed in view of the following points:-

(i) The agriculture land was purchased by the assessee out of his funds from sale of agricultural land but was registered in the name of his wife to avail the benefit of

8 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. concessional stamp duly available to ladies. Mere registration in the name of spouse does not change the ownership of the land. The assessee continued to remain the beneficial owner of the land purchased.

(ii) That the investment has been made out of the funds same received from transfer of agriculture land by Sh Jagjit Singh. Thus by application of section 27 of the Income Tax Act 1961, Section 4(ii) of the Wealth Tax Act 1957 and section 64 of the Income Tax Act 1961, Jagjit Singh becomes the deemed owner of the land as the money for purchase of land has been passed on without consideration and clubbing provisions are attracted when any asset or income is transferred to spouse without adequate consideration. (iii) That the wife of the assessee has expired and the file of said land has again passed in the hands of the assessee, being the legal heir.

9 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. (iv) The case law quoted by your goodself is not applicable in our case as in that case the land was purchased in the name of son and grandson while in our case the land was purchased in the name of wife where by application of section 27 & section 64 of the Income Tax Act and section 4(ii) of the Wealth Tax Act, the assessee remained the beneficial owner of the land. Further the decision in the case of CIT Ludhiana Vs Gurnam Singh by the same High Court on a later date is in the favour of the assessee.

(v) That the very text of section 54B says “----- and the assessed has, within a period of two years after the date, purchased any other land for being used for agricultural purpose -- -----.” The requirement is that the assessee invest the capital gain arising on sale of agricultural land for purchase of another agricultural land and it is not material in

10 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. whose name the land is Registered. The assessee gets support from decisions of various courts quoted as under :-

(a) Hon'ble Punjab & Haryana High Court 327 ITR 278 in the case of CIT Ludhiana Vs Curnam Singh.

(b) Hon'ble High Court of Delhi 214 Taxman 287 in the case of CIT XII vs Kamal Wahal

(c) Hon’ble High Court of Delhi 342 ITR 38 in the case of CIT Vs Ravinder Kumar Arora.

(d) Hon'ble ITAT Amritsar Bench ITA No 21 (Asr) / 2015 in the case of Dy CIT Vs Jit Singh.

In all the above mentioned cases the Hon’ble Courts have held that the purpose of the section 54, 54B, 54EC and 54F are to ensure that the investment is made in the

11 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. specified assets and it is not material in whose name the land is registered.

(vi) That there is no dispute that the land was out actually purchased of the sale consideration of the agricultural land sold by the assessee and that the same is being used for agriculture purpose by the assessee only.

(vii) That as per section 64(1) of the Income Tax Act 196!, even the capital gain on sale of a capital asset transferred to spouse without adequate consideration is taxable in the hands of the transferor only. Thus the law itself recognize a situation where an asset is transferred/registered in the name of the spouse without adequate consideration and the same has been specifically held to belong to the transferor only.

12 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. In view of the above submissions and judicial findings, investment of capital gains in the name of wife may be accepted.

The second point raised by your goodself is that the assessee purchased the agricultural land before the sale of original land. In this regard it is submitted as under -:

(i) That whole of the sale proceeds of the original land was received prior to the date of purchase of new agricultural land and the possession was also handed over to the buyer. The sale deed could not be registered due to some technical reasons, otherwise the transaction of sale of land was complete in the December 2006 when whole of the consideration was received and possession handed over. Copy of sale deed specifying the cheque numbers

13 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. and amount vide which the sale consideration was, paid and bank statement of the assessee showing receipt of the same are being enclosed as proof of receipt of sale proceeds before the date of purchase of new agricultural land.

(ii) That as per section 2(47) of the Income Tax Act 1961, where the consideration has been received and possession handed over, the transfer is said to be complete. In this case both the conditions are fulfilled and hence the transfer is deemed to be complete before the date of purchase of new land i.e., 08.01.2007.

In view of the above, you are requested to accept the submissions and drop the

14 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. proceedings u/s 263 of the Income Tax Act 1961.

(viii) Your goodself has raised objection regarding acceptance and payment in cash for sale and purchase consideration of agricultural land. In this regard if is submitted that the specified transactions were added in section 269SS and 269T W.E.F 01.06.2015 and hence not applicable in our case.

(ix) As regard the reconciliation of source purchase of agricultural land with reference consideration, the same is explained as under :-

Date Amount Mode of Payment Cash out of withdrawal from August 2006 1471000 bank against cheque of Rs.1704510/- received against sale of land. 29/12/2006 2500000 Cash out of withdrawal from bank account

15 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 06/01/2007 10000000 Account payees cheque no 311176 through Sh Randhir Singh (Co-buyer of the land) 06/01/2007 2500000 Account payees cheque no 311177 through Sh Randhir Singh (Co-buyer of the land) 06/01/2007 1770000/- Cash out of withdrawal from bank account 06/01/2007 729650/- Stamp duty paid in cash out of withdrawal from Bank account. TOTAL 18970650

It is further submitted that the assessee has not made any payment in cash to Sh. Randhir Singh. Cash of Rs 5741000/- was paid directly to the seller of the land and the fact has been confirmed in the sale deed itself wherein it is mentioned that Rs.2,03,00,000/- out of the total sale consideration of Rs.3,64,82,000/- was received through cheque and balance in cash.

16 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. In view of the above submissions, it is most humbly prayed that the proceedings initiated u/s. 263 may kindly be dropped and oblige.”

3.1. Through the supplementary written submissions dated 12.02.2018, the assessee stated as follows: -

“In continuation to my earlier submissions and further information called by your goodself, it is submitted as under:-

(i) That out of the total sale of 7 Acre 7 Kanal and 1 Marie land the share o f asssesse was 1171/1261 and balance 90/1261 share was in the name of his wife late Smt Sunita Devi. Against her share of 90/1261, she received cheque of Rs.17,04,510/- and the same was deposited in her bank account. Payment of Rs.14,71,000/- was made out of withdrawal from this account. However, the assessee is not in possession of the passbook/bank

17 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. statement for the same and neither the bank is able to provide the record of such an old transaction. However the fact that the cheque for Rs.17,04,510/- was received is verifiable from the registered sale deed. The assessee is also ready to furnish an affidavit for the same.

In view of the above you are requested to accept the source of payment and drop the proceedings initiated u/ 263 of the Income Tax Act, 1961.”

3.2. The Ld. Pr. CIT after considering the submissions of the assessee, was not satisfied with the claim of the assessee. The Ld. Pr. CIT noted that assessee’s contention was that it was immaterial in whose name the land was registered. The explanation of assessee was rejected because as per Law the investment should have been made further in agricultural land in the name of assessee only and not in the name of wife of the assessee. The assessee also

18 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. contended that the decision of the Hon’ble Jurisdictional Punjab and Haryana High Court in the case of CIT vs Gurnam Singh 327 ITR 278 (P&H) is the later decision. However, the explanation of assessee was not found acceptable because Ld. Pr. CIT referred to another decision of the Hon’ble Punjab and Haryana High Court delivered on 6th July, 2015 in the case of CIT vs., Dinesh Verma. The Ld. Pr. CIT also referred to decision of the Hon’ble Punjab and Haryana High Court in the case of Jai Narain vs., ITO 306 ITR 335 (P&H) in which it was held that “the new asset which was purchased has to be in the name of the assessee so as to seek exemption under section 54B of the Income Tax Act.” The Ld. Pr. CIT also noted that assessee has not been able to explain the source of payment of Rs.14,71,000/- made by him in August 2006. The Ld. Pr. CIT, therefore, held that reassessment order passed by assessing officer was in a casual and perfunctory manner without exercising due diligence. Therefore, the assessment order was found to be erroneous insofar as it is prejudicial to the interests of Revenue. The reassessment order was set aside with a

19 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. direction to the assessing officer to make the assessment afresh as per Law, by giving reasonable, sufficient opportunity of being heard to the assessee.

20 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. under section 148 of the Income Tax Act, Judgment of jurisdictional Punjab and Haryana High Court in the case of CIT vs Gurnam Singh ((supra),) was in force which is dated 1st April 2008. Therefore, assessing officer has correctly followed the later decision in favour of the assessee. He has submitted that similar view have been taken by the Hon’ble jurisdictional Delhi High Court in the case of CIT vs., Ravinder Kumar Arora [2012] 342 ITR 38 (Del.) and CIT-XII vs. Kamal Wahal [2013] 351 ITR 4 (Del.). He has submitted that Judgment of Hon’ble Punjab & Haryana High Court in the case of Jai Narain vs., ITO ((supra),) is prior to dated 13th August, 2007. He has submitted that since 148 proceedings have been done on the same issue and assessing officer has accepted the explanation of assessee in the light of the Judgment of Hon’ble jurisdictional High Court in the case of Gurnam Singh (supra), therefore, issue have become debatable on which no revisional jurisdiction should have been exercised by the Ld. Pr. CIT. Learned Counsel for the Assessee further submitted that assessee has explained the source of further investment and that it

21 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. was a joint property which was sold by assessee. Therefore, if investment was made in the name of his wife only to save the stamp duty out of the same funds there were no illegality and as such the Ld. Pr. CIT should not have exercised the jurisdiction under section 263 of the Income Tax Act.

22 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. (i) Kamal Kant Kamboj vs. ITO [2017] 397 ITR 240 (P&H) (ii) Jai Narain vs. ITO 306 ITR 335 (P&H) (iii) CIT vs., Dinesh Verma [2015] 233 Taxman 409 (P&H)

5.1. The Ld. D.R. in his written submissions also relied upon Judgment of Hon’ble Supreme Court in the case of Deniel Merchants Pvt., Ltd., vs., ITO, Dated 29th November, 2017 (Appeal No.2396/2017); Malabar Industrial Co. Ltd., vs. CIT [2000] 243 ITR 83 (SC) and Rajmandir Estates (P.) Ltd., vs. PCIT [2017] 245 Taxman 127 (SC) on the proposition that when assessing officer did not make proper enquiry and accepted the returned income, the order have been rightly set aside by the Commissioner.

23 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. vs. ITO (supra), which is dated 13th August, 2007 in which was held as under :

“Held, dismissing the appeal, that the assessee having purchased agricultural land in the name of his son or grandson could not be held entitled for exemption under section 54B of the Act.”

6.1. The Learned Counsel for the Assessee, however, relied upon later decision of the Hon’ble Punjab and Haryana High Court in the case of CIT vs Gurnam Singh (supra), which is Dated 1st April, 2008 in which it was held as under :

“From the impugned order, no substantial question of law arose for consideration as the Tribunal, while recording a pure finding of fact, had dismissed the appeal of the revenue. Undisputedly, the assessee had sold the agricultural land which was being used by him for agricultural purposes. Out of its sale proceeds, the assessee had purchased another

24 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. piece of land (land in question) in his name and in the name of his only son, who was a bachelor and was dependent upon him, for being used for agricultural purposes within the stipulated time. Further, it was not the case of the revenue that from the sale proceeds of the agricultural land earlier owned by the assessee, the land in question was purchased for any other purpose than the agricultural purpose. Undisputedly, the purchased land was being used by the assessee only for agricultural purpose and merely because in the sale deed his only son was also shown as co-owner, it did not make any difference because the purchased land was still being used by the assessee for agricultural purposes. It was not the case of the revenue that the said land was being used exclusively by his son. Thus, a pure finding of fact had been recorded by the Tribunal which did not require any interference. [Para 3]

25 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. Thus, no substantial question of law arose and, therefore, the appeal was to be dismissed. [Para 4].”

6.2. The later decision has virtually overruled the earlier decision of the Hon’ble Punjab and Haryana High Court in the case of Jai Narain vs. ITO (supra) and also relied upon Judgment of the Hon’ble Delhi High Court in the case of CIT vs., Ravinder Kumar Arora [2012] 342 ITR 38 (Del.) in which was held as under :

“The word 'assessee' must be given wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word 'assessee' as that would frustrate the object of granting exemption. [Para 10]

In view of aforesaid discussion the exemption under section 54F is extendable to the assessee for the total consideration paid by him, for the

26 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. purchase of the new asset (the residential property) in the joint name [Para 12] ”

6.3. Learned Counsel for the Assessee also relied upon Judgment of the Hon’ble Delhi High Court in the case of CIT-XII vs., Kamal Wahal [2013] 351 ITR 4 (Del.) in which it was held as under :

“For claiming deduction of capital gains under section 54F, new residential house need not be purchased by assessee in his own name.”

6.4. It is not in dispute that the assessee filed original return of income under Section 139(1) on 27th June, 2008 for the A.Y. 2008 2009 under appeal. The Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra), Dated 1st April 2008 was squarely applicable in favour of the assessee. There were no other decision referred to against the assessee. Therefore, the assessee in the original return of income has correctly claimed exemption under section 54B as per Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court

27 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. in the case of Gurnam Singh (supra), whereby assessee was permitted to make investment on account of capital gains in the name of his wife. It may also be noted here that the property sold was joint property of assessee and his wife. Therefore, there were no illegality in the action of the assessee in making investment in the name of one of the seller out of the same funds which have been received on account of sale of the property. The investment have been made out of the same funds. The assessee further explained that later on wife of assessee has expired, therefore, he being the legal-heir of his wife, become the absolute owner of the property in question and as such it would be deemed to be the investment made in the name of assessee. It may also be noted here that thereafter notice under section 148 of the I.T. Act, have been issued on 13th March, 2015. On this date also, the Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of CIT vs., Gurnam Singh (supra), Dated 1st April, 2008 was in force in favour of assessee. Therefore, on the date of initiation of reassessment proceedings also, the issue was covered in

28 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. favour of the assessee by Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra). Therefore, initiation of reassessment proceedings itself was illegal and bad in law on the same reason that assessee made investment in the name of his wife for availing exemption under section 54B of the Income Tax Act. Thus, the reassessment order itself was invalid and bad in Law. The ITAT, Delhi Bench in the group of cases of Supersonic Technologies Pvt., Ltd., etc., vs., Pr. CIT [2019] 69 (Trib.) 585 (Del.) held that “when reassessment order was invalid, invalid reassessment order cannot be revised by the Commissioner. Revisional Order bad in law and liable to be quashed.” Since on the date of filing of the original return of income and initiation of reassessment proceedings by issuing notice under section 148 of the Income Tax, the Judgment Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra) was in force, which is in favour of the assessee, therefore, there was nothing wrong in claiming the exemption under section 54B of the Income Tax Act by the

29 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. assessee for making investment in agricultural land in the name of his wife out of the same funds. The assessee explained before the Ld. Pr. CIT that the investment have been made out of the same funds which were received on sale of agricultural land. The assessee also pleaded before the Ld. Pr. CIT that whole of the sale proceeds of the original land was received prior to the date of the purchase of new agricultural land and the possession was handed over to the buyer. The assessee also pleaded that the sale deed could not be registered due to some technical reason, otherwise, the transaction of sale of land was complete in December 2006 when whole of the consideration was received and possession handover. Copy of the sale deed specifying the Cheque No. and amount, for which, the sale consideration was paid and bank statement of the assessee, showing the receipt of the same were also filed on record, which have not been disputed by the Ld. Pr. CIT. Therefore, these facts clearly show that assessee made investment out of the sale proceeds of the agricultural land which were received prior to purchasing the new agricultural land. The Ld. Pr. CIT,

30 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. however, referred to the Judgment of the Hon’ble Punjab and Haryana High Court in the case of CIT vs., Dinesh Verma (supra), Dated 6th July, 2015, which was subsequent decision after the filing of the original return of income as well as initiation of the reassessment proceedings under section 148 of the Income Tax Act. Therefore, it would not be applicable to the case of the assessee. It may also be noted here that when there were several decisions of the same High Court available on same propositions, the view in favour of the assessee should have been accepted. Particularly, in this case, when on the date of filing of the original return of income and initiation of reassessment proceedings, the Law declared by the Hon’ble Punjab and Haryana High Court in the case of Gurnam Singh (supra), was in favour of the assessee. Therefore, assessee made a correct claim of exemption under section 54B of the Income Tax Act. When initiation of reassessment proceedings itself is bad in Law as was against the Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court, therefore, the reassessment order could not have been revised by the

31 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. Ld. Pr. CIT. The Ld. D.R. relied upon the Judgment of the Hon’ble Punjab and Haryana High Court also in the case of Kamal Kant Kamboj vs. ITO Dated 24th may 2017 (supra) and as such it would not be applicable to the legal proposition involved in the present appeal. The Ld. D.R. also argued that assessing officer did not make proper enquiry into the aspect and failed to consider the Judgment of the Hon’ble jurisdictional High Court in the case of JaI Narain vs. ITO (supra). However, the assessing officer has correctly followed the decision of the Hon’ble jurisdictional High Court which was in force at that time in the case of Gurnam Singh (supra), therefore, it is not a case of no enquiry. The assessing officer initiated the reassessment proceedings solely on the reason that assessee and his wife has sold the agricultural land and made reinvestment and claimed exemption under section 54B of the Income Tax Act, 1961. Since the issue was covered on the day of initiation of reassessment proceedings by Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra), therefore, there was no need for the

32 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. assessing officer to have mention the detail facts in the reassessment order. The Hon’ble Allahabad High Court in the case of Krishna Cap Box Pvt., Ltd., 372 ITR 310 and Metro & Metro 404 ITR 304 held that “when assessing officer called for details and assessee responded, A.O. however, did not discuss or mention the details in the order, no proceedings under section 263 would lie.” In the present case since reassessment proceedings have been initiated solely on the reason that assessee has availed exemption under section 54B by making investment in the name of his wife and issue was covered in favour of the assessee on the day of filing of the return of income and initiation of reassessment proceedings by Judgment of the Hon’ble jurisdictional High Court in the case of Gurnam Singh (supra), therefore, if the assessing officer has not mentioned the details in the reassessment order, it would not be fatal to the case of the assessee. The above legal proposition is also supported by Judgment of the Hon’ble Delhi High Court reproduced above. The Hon’ble Supreme Court in the

33 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. case of Malabar Industrial Co. Ltd., vs., CIT 243 ITR 83 (SC) held as under : “…….Every loss of revenue as a consequence of an order of the A.O. cannot be treated as prejudicial to the interests of Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of Revenue unless the view taken by the Income-tax Officer is unsustainable in law.”

6.5. Since, in this case, assessing officer has taken one of the view permissible under the Law as per the Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra), therefore, the Ld. Pr. CIT was not justified in invoking the jurisdiction under section 263 of the Income Tax Act.

34 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 6.6. It may also be noted here that in this case after passing of the reassessment order Dated 2nd March, 2016 an audit objection was raised on Dated 17th August, 2016 [PB-27] with regard to irregular exemption under capital gains on the same issue. The audit party has directed that exemption under section 54B is not allowable to the assessee because assessee has not made investment in his own name. The Ld. Pr. CIT on the basis of the audit objection has initiated the revisional proceedings under section 263 of the Income Tax Act. However, such a course was not found approved by Hon’ble Punjab and Haryana High Court in the case of CIT vs., Sohana Woollen Mills [2008] 296 ITR 238 [P&H] in which it was held as under :

“A reference to the provisions of section 263 of the Income-tax Act, 1961, shows that jurisdiction thereunder can be exercised if the Commissioner finds that the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. A mere audit objection and the fact that a different view could be taken, are not enough to

35 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. say that the order of the Assessing Officer was erroneous or prejudicial to the interests of the Revenue. Whether satisfaction of the Commissioner for exercising jurisdiction was called for or not, has to be decided having regard to the given fact situation. The assessee held certain machinery and was in possession of a permit obtained from the Textile Commissioner for the working of 1,200 spindles for the manufacture of woollen worsted yarn. The 1,200 spindles were a part of the machinery to be sold by an agreement dated July 26, 1974. The assessee sold some machinery. In the course of filing the return, the assessee worked out the profit under section 41(2) amounting to Rs.51,067 and capital gains amounting to Rs.55,006 subject to the statutory deduction and returned them in its total income. Besides in Part III of the return, the assessee showed a sum of Rs.1 lakh on account of sale of permit from the Textile Commissioner in respect of

36 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 1200 spindles and marked it as the amount receivable on account of goodwill. The Income-tax Officer accepted the return filed by the assessee. The Commissioner initiated revision proceedings on the basis of an audit objection. The Tribunal set aside the order of revision. On a reference :

Held, that the Tribunal had held that the assessee had disclosed that out of sale consideration, a sum of Rs.1 lakh was to be received for sale of permit. If that was so, there was no error in the view taken by the Assessing Officer and no case was made out for invoking jurisdiction under section 263.”

6.7. Since in this case revisional proceedings have been initiated on mere audit objection and that a different view have been taken by the Ld. Pr. CIT as against the Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra), therefore, it would not be enough to say that the reassessment order

37 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. was erroneous or prejudicial to the interests of the revenue. The contention of the Ld. D.R. is, therefore, have no merit that the assessing officer has not examined this case and that the Order was erroneous insofar as prejudicial to the interests of revenue.

6.8. The Ld. D.R. also contended that the assessing officer has not examined the applicability of provisions of section 271D of the Income Tax Act. Though the Ld. Pr. CIT in the show cause notice has referred to the provisions of section 269SS and 271D of the Income Tax Act for making cash payment, however, the assessee has filed a reply to the same by submitting that the specified transactions were added under section 269SS and 269T w.e.f. 1st June, 2015, hence, these provisions are not applicable to the present case. The Ld. Pr. CIT did not give any finding on the explanation of assessee, therefore, it would amount to accepting the explanation of assessee on this issue, which view also find to be correct that such provisions are not applicable to assessment year under appeal. Therefore, on this issue also the reassessment order was not erroneous

38 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. and prejudicial to the interests of revenue. The Ld. D.R. lastly contended that source of the investment have not been explained. However, the assessee in the written submissions has specifically explained the source of the investment which have not been doubted by the Ld. Pr. CIT. He has merely stated that assessee has not been able to explain the source of payment at Rs.14,71,000/-, but, in the same order, the Ld. Pr. CIT has noted that this amount was withdrawn from the bank account of wife of the assessee for making further investment, therefore, it is contradictory finding of Ld. Pr. CIT. It may also be noted again that agricultural land sold by the assessee was in the joint name with his wife and in case sale consideration have been invested out of the same funds, there was no illegality. Thus, the assessee have been able to explain the source of the same. The last contention of Ld. Pr. CIT had been that the assessment order have been passed in a casual and perfunctory manner. However, such view have not been accepted by the Hon’ble Allahabad High Court in the case of Krishna Cap works Pvt., Ltd., and Metro and Metro (supra).

39 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. 6.9. Considering the above discussion, we are the view that the assessing officer has passed the reassessment order as per Law and as per Judgment of the Hon’ble jurisdictional Punjab and Haryana High Court in the case of Gurnam Singh (supra), by calling the explanation of assessee with regard to exemption claimed under section 54B of the Income Tax Act. The view of the assessing officer was sustainable in Law, therefore, the Ld. Pr. CIT should not have substituted the view of the assessing officer without any just cause. We, therefore, do not find the reassessment order to be erroneous insofar as prejudicial to the interests of revenue. We do not find any justification for Ld. Pr. CIT to invoke the jurisdiction under section 263 of the Income Tax Act on the above reasons. In this view of the matter, we set aside the impugned order under section 263 of the Income-Tax Act and restore the original reassessment order.

40 ITA.No.2777/Del./2018 Shri Jagjit Singh, Panipat. Order pronounced in the open Court.

Sd/- Sd/- (PRASHANT MAHARISHI) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 10th October, 2019 VBP/- Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT “C” Bench 6. Guard File

// BY Order //

Asst. Registrar : ITAT Delhi Benches : Delhi.