DNYANESHWAR PANDIT MAHAJAN,,JALGAON vs. PR. COMMISSIONER OF INCOME-TAX-2,, NASHIK

We find that this appeal was filed with a delay of 86 days and the assessee filed an affidavit stating the reasons for delay. On perusal of record and hearing both the parties, we find that the reasons stated by the

The ld. AR submits that the assessee raised two sets of additional ground as 1 and 2 and prayed to take up additional ground No. 2 filed vide letter dated 03-09-2020 and pleaded to ignore the main grounds of appeal forming part of Form No. 36 and additional ground No. 1. On perusal of record and upon hearing, with the consent of both the parties, we proceed to take up additional ground No. 2 as preliminary issue and since it is a legal ground which does not require examination of new facts in the facts and circumstances of the case.

The additional ground No. 2 which is as under : “2] The assessee submits that in the instant case, the reason stated by the ld. Pr. CIT in the Revision Order u/s. 263 for holding the asst. order u/s. 143(3) as erroneous was neither confronted to the assessee in the Show Cause Notice nor in the course of the revision proceedings u/s. 263 and therefore, the revision order u/s. 263 passed without granting an opportunity of being heard to the assessee on the core issue, may be declared as null and void in law.”

The ld. AR submits that the order passed by the Pr. CIT u/s. 263 of the Act is unsustainable under law and argued that Pr. CIT issued show cause notice by holding the order passed by the AO u/s. 143(3) of the Act is erroneous and prejudicial to the interest of revenue as the said assessment was made without applying the proper provision of law and referred to Para No. 2 of the said show cause notice which is at Page No. 2 of the paper book. The ld. AR further submits that the Pr. CIT travelled beyond the show cause notice and held the AO passed assessment order without application of mind and without making proper enquiry which is totally contrary to the point of show cause notice issued u/s. 263 of the Act.

The ld. A.R referred to an order in the case of Synergy Entrepreneur Solutions (P) Ltd. reported in 13 ITR-Trib. 377 at Page No. 24 of the paper book and submits that the issue arose before the Mumbai ITAT Benches as to whether exercise of revision power on the ground other than the ground of revision as set out in the show cause notice, could be held to be sustainable in law. He argued that the Tribunal by placing reliance on the decision of the co-ordinate Bench in the case of Maxpak Investments Ltd., which in turn, by placing reliance in the case of G.K. Kabra reported in 211 ITR 336 (A.P.) held that if the ground of revision is not mentioned in the show cause notice issued u/s 263, that ground cannot be made the basis of the order passed under such section for the simple reason that the assessee would have had no opportunity to meet the point. The ld. AR also submits that the Revenue did not prefer any appeal against the order of Mumbai Tribunal in the cases of Synergy Entrepreneur Solutions (P) Ltd. and Star India Ltd.

Further, he referred to an order in the case of Star India Ltd. Reported in 14 ITR-Trib 106 at Page No. 30 of the paper book and submits that there in that case, the notice was issued on the ground of inadmissibility of deduction and the revision is done on the ground that the matter needs to be examined even as there are no findings about short coming in the proceedings before the A.O. He argued in the present case, the PCIT did not give any finding on the point raised in the show cause notice, but, he directed the A.O. to examine afresh. He argued unless the PCIT points out any defect in the stand of the A.O. it cannot be open to him to exercise the revisionary powers and vehemently canvassed such defect cannot be assumed or inferred.

He further placed reliance in the case of B.S. Sangwan of Delhi Benches at Page No. 40 of the paper book and submits that the CIT started by point in respect of irregularities in the assessment order and concluded the said assessment order was passed without making proper requisite and desired inquiry. The Tribunal held the said view is not permissible in the scheme of law as a revision order can only be passed on the ground on which the assessee has been given a reasonable opportunity of being heard. The ld. AR submits that the Revenue preferred an appeal against the order of Delhi Tribunal before the Hon’ble High Court of Punjab and Haryana, wherein, that the said appeal was dismissed vide order dated 23- 09-2019 by the Hon’ble High Court and referred to Page No. 46 of the paper book.

The ld. DR, Shri Naveen Gupta submits that a show cause notice was issued on the issue involved and opportunity of hearing was given to the assessee. The issue involved in the show cause notice was to treat the profit on sale of land as income from business in place of Capital Gains considered in the assessment order and opportunity to explain the same was given to the assessee. The ld. Pr. CIT in the impugned order u/s. 263 of the Act, after examining the assessment records as well as the submission of the appellant, the assessment order was found erroneous on this issue as the same was decided without application of mind and without making proper enquiries and the order was also found prejudicial to the interest of Revenue. The issue involved was the same on which show cause was given to the assessee and opportunity of being heard was given. The only difference was that, in place of giving directions to the AO to make assessment in a particular manner on this issue, as mentioned in the show cause notice, it was held that proper enquiries were not made and the issue was decided without application of mind by the AO. He

Heard both parties and perused the material on record. We find that in the first page of impugned order, the PCIT prima facie held that the A.O has not examined the issue related to LTCG of Rs. 1,40,24,360/- on sale of plot and the entire activity of transaction of land falls in the ambit of business activity. Further, in para 4, he held that the assessee sold all 47 plots in bulk to M/s. Maitriya Ploters &Structures Pvt. Ltd. that all the activities performed by the assessee along with the joint holder who had the intention to earn profit. Therefore, it transpires from the impugned order that the PCIT opined that the AO should have taxed the assessee under business income but not under LTCG, that is being so, we note that, the PCIT having no definite finding on how the order of the A.O is illegal attracting the revision u/Sec 263, simply, directed the AO to frame assessment de novo. Fact remains admitted, that the PCIT travelled beyond the show cause notice i.e. without giving any definite finding by recording cogent reasons why the order of A.O. is erroneous and prejudicial to the interest of revenue and came to a conclusion that the A.O. would have taxed under business income instead of LTCG as offered by the assessee.

In view of the above, let us examine the case law as relied on by the Sri Sanket Joshi, Ld.AR, in the case of Synergy Enterprenuer Solutions Pvt Ltd (supra), We note that Commissioner therein in the show cause notice observed as to whether the profit or loss from the future trading amounts to speculation gain or loss and in the final conclusion he held that the A.O. shall obtain complete details and conduct necessary inquiries and examine the same. We find the Mumbai Tribunal held that there has been a shift in the stand of Commissioner whether it was a fit case for revision on the ground that the assessee was not entitled for set off of losses or whether it was a case for revision on the ground that the A.O. did not make necessary verification about the transaction. Therefore, it is clear that the Commissioner therein issued a show cause notice on set off of speculation loss against the business profit but without deciding the same directed the A.O. to conduct necessary inquiries. The Mumbai Tribunal in order to come to such a conclusion placed reliance in the case of G.K. Kabra (supra) of the Hon’ble High Court of Andhra Pradesh. Coming to the present case as already discussed above that the PCIT had come to the conclusion on perusal of the assessment record that the A.O. has not examined the issue related to long term capital gain vide para 2 of the impugned order and directed the A.O. to frame the assessment de novo vide para 8 of the impugned order. Therefore, it is clear that the PCIT shifted the stand on whether it was a case for revision on the ground of non-examination in respect of long term capital gain or the A.O. did not make necessary verification about the long term capital gain. Further it was brought to our

Further, the order of Delhi Tribunal in the case of D.S. Sangwam (supra) as relied on by the ld. A.R, we note that the CIT initiated revision proceedings that the A.O. did not make five additions/disallowances, had the said additions/disallowance been made there would have been substantial tax effect the revenue had suffered. We note that the CIT therein started a point in the show cause by observing illegalities and by holding the order of A.O. is erroneous and prejudicial to the interest of revenue for not making five additions/disallowances and revised the order for want of proper requisite and desired enquiries. We find the Delhi Tribunal quashed the order of CIT against which the Revenue preferred an appeal before the Hon’ble High Court of Punjab and Haryana which was dismissed vide order dated 23-9-2019, which is evident from para 46 of the paper book. We note that in the present case also as discussed in the aforementioned paragraphs that the PCIT shifted stand from not giving clear finding on how the A.O. violated the legal provisions in respect of long term capital gain and without there being so, he directed the A.O. to frame the assessment de novo.

Coming to the submissions of Sri Naveen Gupta, Ld CIT-DR with reference to the decision of Hon’ble Supreme Court in the case of Amitabh Bachan supra, wherein, we note that the Hon’ble Supreme Court was pleased to hold that the PCIT is well within the jurisdiction u/s. 263 of the Act to raise an issue which is not raised in the show cause notice, but,

We find in the present case, the PCIT issued a show cause notice for non examination of LTCG, without determining the same, directing the A.O. to conduct de novo assessment i.e. re-examination, is not sustainable under law, therefore, in light of the discussion made by us herein above with the support of decisions relied on and in the facts and circumstances

In the result, the appeal of the assessee is allowed.