MANISHA JUNEJA SAWHNEY,NEW DELHI vs. CIT,INTERNATIONAL TAXATION-3, NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 2828/Del/2018 (Assessment Year: 2013-14) Manisha Juneja Sawhney, Vs. The CIT, W-31, Greater kailash-I, New Delhi International Taxation-3, PAN: BJGPS5452N New Delhi (Appellant) (Respondent)

Assessee by : Shri Ajay Wadhwa, Adv Ms. Bharti Sharma, Adv Revenue by: Ms/ Pramita M. Biswas, CIT DR Date of Hearing 16/01/2019 Date of pronouncement 26/02/2019

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by assessee against order under section 263 of Income tax Act [ Act] dated 29/03/2018 of ld The Commissioner of Income tax , [ International taxation] -3, New Delhi [ The ld CIT] for Assessment Year 2013-14 where in it is held that order passed by The Deputy Commissioner of Income tax, , circle -3 (1)(2), International Taxation, New Delhi [ The ld AO ] is erroneous and prejudicial . The assessee has raised following grounds of appeal:- “1. That on facts and circumstances of case, CIT has wrongly assumed jurisdiction in relation to issue of computation of long term capital gain on alleged ground that order passed by AO u/s 143(3) is erroneous and prejudicial to interest of revenue. 2(i) That issue of long term capital gain was before AO and CIT(A) and as such CIT could not assume jurisdiction u/s 263 as same has merged with order of CIT(A). (ii) That in any case, issue of long term capital gain was considered in detail by AO and addition made by AO were deleted by CIT(A) and as such proceeding u/s 263 are merely based on change of opinion and not in conformity with provisions of section 263 of IT Act, 1961. (iii) That further, observations of Cit are highly arbitrary and not based on proper appreciation of facts. 3. That even subsequent notice was issued in an illegal and arbitrary manner without proper appreciation of acts on record, submission and clarification furnished by appellant and without recording any finding that assessment order is erroneous and prejudicial to interest of revenue in respect of such issues.

appellant, is correct sales consideration. According to learned CIT – A total consideration is to be taken at INR 6 3082378 and not INR 6 3500000/- . he therefore decided this issue also in favour of assessee. With respect to quantum of long-term capital gain learned CIT – A held that net capital gain as returned by appellant is accepted. He also held that figure of deduction under section 54 for purchase of residential house within 2 years of date of transfer is taken at INR 31425000/– as claimed by appellant assessee. 4. Subsequently on examination of record, learned CIT found that order passed by ld AO u/s 143 (3) of act is erroneous and prejudicial to interest of revenue and therefore show cause notice was issued under section 263 on 8/3/2017. The assessee replied show cause notice on 14/3/2017. The assessee submitted that aspect of deduction under section 54 of income tax act as well as computation of capital gain has been subject matter of appeal before learned CIT – A. Therefore, it was stated that assessment order has since merged in appellate order of learned CIT A is in respect of assessment of capital gain and therefore it cannot be revised under section 263 of income tax act. It was further stated that issue of capital gain arising to assessee under collaboration agreement has already been subject matter of appeal and assessment order having merged with order of learned CIT – A , proposed action under section 263 of income tax act is not permissible. The learned CIT further issued a supplementary show cause notice on 12/12/2017 with respect to certain other sources also. The assessee submitted its reply dated 31/1/2018. Based on reply submitted by assessee learned CIT held that assessment order suffers from various defects. Such defects were pointed out in para number 4 of his order. He further held that property, which was transferred by assessee, was not a residential house property but right on a piece of land and hence assessee was not eligible for exemption under section 54 as claimed in return of income. He further held that assessee was also not eligible for deduction under section 54F since he did not satisfy conditions provided under various provisions of that particular section. He further stated that assessee has actually not paid entire amount of INR 16,000,000 as mentioned in purchase date as assessee was having this property with brother of assessee and further it was stated that there is no evidence on record that even 50% of payment was made by assessee actually from her own funds. Therefore, she held that if there factors taken into consideration cost of acquisition of property will reduce substantially and amount of taxable capital gain will also increase accordingly. The learned assessing officer should have verified from income tax return of brother of assessee for relevant assessment year whether any capital gain was declared by him on account of alleged sale of this property to his real sister and if so what is amount of sale consideration declared in said return of income so as to cross verify authenticity of cost of acquisition claimed by Page | 3

assessee in respect of same property. It was further held that AO in his assessment order instead of determining amount of sale consideration on basis of appreciation of correct facts in this manner and assessing amount of capital gain accordingly, increase amount of sale consideration by Rs. 417622/– and that too on estimated basis. Therefore order of learned assessing officer is clearly erroneous. It was further noted by learned CIT that that there are substantial deposits in bank accounts , huge investment in mutual funds and utilisation of heavy amount received from builder in pursuance of collaboration agreement and income earned thereon and source of investment wherefrom interest income was received is also required to be examined as case of assessee was selected for complete scrutiny. It was further noted that there are certain properties owned by assessee, however notional income on basis of annual letting value of a number of properties were not shown. It was further noted that since no income from house property in respect of 2 properties have been declared by assessee in her return of income for assessment year 13 – 14, income to that extent has escaped assessment. It was held that AO had failed to consider this issue, which has resulted in order being erroneous on this count. Therefore, order under section 263 of income tax act was passed on 28/3/2018 setting aside whole assessment completely with direction to learned assessing officer to frame assessment afresh, after granting due opportunity of being heard to assessee and after examining all issues raised in notices under section 263 of income tax act. Against this order, assessee is aggrieved and therefore it has filed an appeal before us. 5. The learned authorised representative vehemently submitted that order passed by learned CIT – A is not sustainable in law for following reasons. a. He submitted that claim of assessee of computation of capital gain under section 54 of income tax as well as computation of chargeability of capital gain has been examined by learned CIT – A in appellate proceedings and therefore assessment order has merged with order of learned CIT – A. Therefore, it is out of purview of provisions of section 263 of income tax act. He submitted that once a particular issue is subject matter of appeal before learned CIT – A Commissioner jurisdiction u/s 263 is ousted. According to him CIT is debarred from revising assessment order with respect to that issue/item/subject matter, even on ground other than ground on which matter has been before learned CIT – A , on which it has been dealt with by learned CIT – A. He further stated that once any aspect of an issue is subject matter of appeal that it is issue and not aspect of issue, which shall be deemed to have been subject matter of appeal. He supported his contention by citing various judicial precedents. Therefore, it was stated that even if appeal before learned CIT – A is Page | 4

only with respect to one or more aspect of issue it is issue as a whole which will be said to be subject matter of appeal and not aspect alone. He therefore submitted that he issue of computation of capital gain and deduction there from was before learned CIT – A and therefore power of learned CIT under section 263 does not exist at all. He also took us through provisions of section 263 of income tax act. b. He further submitted that learned assessing officer has passed an order under section 143 (3) read with section 263 of income tax act vide order dated 29/12/2018 wherein only addition has been made by learned assessing officer on account of computation of capital gain. He submitted that original computation of capital gain was INR 53010040 whereas revised total capital gain computed by learned assessing officer pursuant to order under section 263 of income tax act is only INR 58846668. He further stated that there is no amendment in income from house property of Rs. 445200 shown in original assessment order and income under head other sources shown of INR 323291 in original assessment order which remained unchanged in order passed under section 143 (3) read with section 263 of income tax act. Therefore, he submitted that there is no error in order of learned assessing officer with respect to above two issues. c. With respect to issue of due enquiry he referred to decision of coordinate bench in case of Torrent Pharmaceuticals Ltd vs deputy Commissioner of income tax 164/AHD/2018 for assessment year 2014 – 15. He also placed on record a detailed note of various judicial precedents on issues having merged with order of learned CIT – A in pursuance of clause (c) of explanation 1 of section 263 of income tax act. He further submitted that when assessing officer has taken a possible view there is no reason for Commissioner to invoke jurisdiction under section 263 of income tax act to arrive at a different findings. He further referred to several issues with regard to Lack of enquiry and inadequate enquiry and submitted that learned CIT has failed to show that how order of learned assessing officer has not been passed after carrying out due enquiry. He further stated that elaborate discussion in issue in assessment order is not mandatory requirement of record to show that assessing officer has applied his mind on issues in question. He also referred to amendment made with effect from 1/6/2015 by insertion of explanation to section 263 of income tax act with respect to various enquiries to be conducted by assessing and whether such inquiries are due, enquiries were not. d. He further submitted a chart on issue of revision proceedings u/s 263 of income tax act. This chart shows that what is issue of revision under section 263 of income tax Page | 5

act and how learned CIT – A has considered that issue, how possible view or a possible explanation has been given before learned assessing officer, what are inquiries carried out by learned assessing officer on that aspect. He therefore submitted that even original order passed by learned assessing officer has been passed after making due enquiry and CIT appeal has failed to show what has not been done by learned assessing officer. He submitted that it is minimum for learned CIT to show that what enquiry should have been conducted by assessee which has not been conducted by learned assessing officer and therefore order is erroneous and prejudicial to interest of revenue. If same is not shown order under section 263 does not sustain. 6. The learned Commissioner of income tax Department representative vehemently supported order of learned principal Commissioner of income tax. She referred to para number 5 of order that case of assessee was under complete scrutiny, as AO should scrutinize case completely. It was stated that learned assessing officer only made certain enquiries with respect to issue of capital gain and there are many other issues, which were pointed out by learned CIT, which has come to his notice on examination of records. She therefore stated that order of learned assessing officer has been proved erroneous and prejudicial to interest of revenue on so many counts. It was further stated by her that issues on which learned principal Commissioner of income tax has assumed jurisdiction under section 253 of income tax act has not merged with order of learned CIT – A as both are on different counts. With respect to order passed by learned assessing officer pursuant to order under section 263 of income tax act, she stated that even after examination of learned assessing officer does not find any error in original order, it does not mean that same conclusion has been reached by learned assessing officer after making due enquiry. It was further stated that even learned principal Commissioner of income tax has not directed learned assessing officer to make any addition but has directed only to examine issues involved in income from house property and income from other sources. Therefore, on all three counts with respect to computation of capital gain, income from house property and income from other sources, order of learned assessing officer is found to be erroneous and prejudicial to interest of revenue. She therefore stated that order passed by learned principal Commissioner of income tax is sustained under section 263 of income tax act. 7. We have carefully considered rival contention and perused orders of learned assessing officer as well as order of learned Commissioner of income tax act , which held that order passed by learned assessing officer is prejudicial to interest of revenue and erroneous on computation of capital gain, computation of income from house property and computation of Page | 6

income from other sources. Apparently, in this case original order passed by learned assessing officer has been carried forward by assessee before learned CIT – A who has also passed an order and therefore it is required to be examined whether order of learned assessing officer has merged with order of learned CIT – A or not, if yes, then to what extent. According to provisions of section 263 of income tax act if order is subject matter of appeal which is subjected to revision under section 263 of income tax act, such revision cannot touch “matters which has been considered and decided in such appeal.” Therefore, it is apparent that whatever has been considered and decided in appeal by appellate authorities, such matters cannot be subject to revision under section 263 of income tax act. Rationale behind exclusion of such orders from purview of section 263 of act (revisionary proceedings) is that, if CIT (A) decides issue against revenue, revenue has right to challenge it before higher appellate forum. Therefore, generally revenue cannot have dual power of revision as well as appeal on same issue, as generally they are mutually exclusive. 8. In present case learned CIT has also passed an order under section 263 of income tax act on issue of chargeability of income from house property and consideration of source of investment in mutual fund and bank deposit et cetera. On both cases income determined by learned assessing officer originally prior to order under section 263 of act and assessment order under section 143 (3) of act pursuant to order under section 263 of income tax act is same. Therefore, there is no change in income computed by assessing officer prior to initiation of 263 proceedings and post initiation of 263 proceedings. Hence, it is apparent that there is no error in order of learned assessing officer. Even otherwise, assessee cannot be aggrieved from these two issues, as there is no change, in income of assessee. Therefore, on issue of chargeability of income from house property and income from other sources, order of learned Commissioner of income tax passed under section 263 of income tax act is not sustainable as there is no error at all in order. 9. Therefore now only issue to be decided is whether in computation of capital gain, learned Commissioner of income tax has correctly assumed jurisdiction or not. Admittedly, in assessment proceedings under section 143 (3) of income tax act, learned assessing officer in original order computed total capital gain chargeable to tax in hands of assessee of INR 53010040/– against net capital gain shown by assessee of Rs 52592418/- before claiming deduction/ exemption u/s 54 of Rs 34125000/- offering net capital gain chargeable to tax at Rs. 18467418/- . The assessee preferred an appeal before learned CIT – A wherein he held that appellant is eligible for deduction under section 54 of act, which was denied by learned assessing officer. Therefore claim of deduction out of capital gain u/s 54 of act merged with order of learned CIT – A. Further learned CIT – A held that total consideration received for Page | 7

working of long-term capital gain is INR 6 3082378/– and not INR 6 3500000 was enhanced by learned assessing officer. Therefore, issue of consideration received on sale of capital gain was also considered by CIT appeal and decided issue. Therefore this issue was also merged with order of learned CIT – A. The learned CIT in revision proceedings under section 263 also tinkered with net sale consideration and estimated it at INR 69336628. Therefore, as issue of net sale consideration has already been decided by learned assessing officer and adjudicated by learned CIT – A, it is out of purview of provisions of section 263 of income tax act, since matter has already been considered and decided by appellate authority. There is no dispute on indexed cost of acquisition. Therefore, it is apparent that on computation of capital gain learned CIT was not correct in assuming jurisdiction under section 263 of act as matter was considered and decided by appellate authority. Therefore, on this ground also order of learned CIT passed under section 263 of income tax act is not sustainable. 10. In view of above discussion, we quash order passed by learned CIT u/s 263 of income tax act dated 28/3/2018. 11. Accordingly, appeal of assessee is allowed. Order pronounced in open court on 26/02/2019. -Sd/- -Sd/- (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26/02/2019 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi